Danone (QX) (USOTC:DANOY)
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3 Months : From Jan 2020 to Apr 2020
By Annie Gasparro
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 4, 2020).
Food makers are taking a fresh look at coffee creamers, eager to benefit from rising demand for products that hadn't changed much for decades.
Nestlé SA and Danone SA long dominated sales of oil-based creamers in classic flavors such as French vanilla. Now younger coffee drinkers with an affinity for indulgent, customized drinks are stoking demand for new flavors and variety.
Smaller companies are satisfying that demand with creamers made from dairy alternatives including oats and soy. Meanwhile, the biggest brands, Nestlé's Coffee Mate and Danone's International Delight, are generating higher sales with new flavors, such as Funfetti cake and Peeps candy.
Sales of liquid coffee creamers rose about 9% last year, according to market-research firm Nielsen, compared with 2% growth across the food industry overall. Creamer sales have risen at a faster pace than total food sales for the past four years, Nielsen said.
Food makers say they are finding fans among younger consumers reared on sweeter coffee drinks such as Starbucks Corp.'s Frappuccinos.
The younger generation uses creamer products a lot more than their parents did, said Daniel Jhung, president of Nestlé's beverage division. "They don't like black coffee. They like coffee milkshakes."
Suzy Perez, who works for a construction company near Orlando, Fla., said she recently bought a creamer brand called Kitu Super Creamer that contains no sugar but includes added protein and MCT oil, which is said to boost energy.
"I'm trying to be more health conscious and stay away from that extra sugar," she said.
Competition for customers like Ms. Perez is tougher than ever.
"Other brands across the food sector are noticing the growth," said Olivia Sanchez, vice president of marketing for Danone's creamer division. The company added Hershey's, Peeps and Reese's flavors to its International Delight brand to appeal to younger customers craving sweeter drinks.
"They are in it for the flavor, not necessarily for the coffee," Ms. Sanchez said.
Most of Danone's and Nestlé's creamers are made primarily of vegetable oil and sugar. Sales of plant-based creamers rose 30% last year to 8% of the creamer market, according to Nielsen. Sales of fresh-milk creamers and plant-based alternatives are growing even faster.
Anita Jackson, a mother of two boys in Minneapolis, said she recently switched to plant-based creamers because she believes they are healthier. "I still look forward to my light-and-sweet cup of coffee," she said.
Califia Farms, a maker of plant-based milk substitutes, is adding an oat-based creamer and other products this year. Chief Executive Greg Steltenpohl said grocers are allocating more space to these new creamers as sales in the category grow. "Just plain half-and-half won't cut it anymore," he said.
Some dairy companies are adding higher-end creamers, too. Fairlife, a filtered milk brand that Coca-Cola Co. took over this month, said its creamer has 40% less sugar than leading brands.
"We are capitalizing on the trends of more natural and less ingredients, " Fairlife Chief Executive Tim Doelman said.
Chobani LLC, maker of Greek yogurt, has added milk-based creamers to its product line. The company has been looking for new areas of growth as the yogurt aisle has grown more crowded.
"We want to disrupt creamers like we did yogurt 12 years ago," Chobani's President Peter McGuinness said.
Nestlé and Danone are adding creamers that some consumers consider more healthful because of the narrower list of natural ingredients they contain. Nestlé created a brand called Natural Bliss that includes milk-based and plant-based creamers. Danone recently introduced an oat-milk creamer under its dairy-free Silk line and a craft-coffee creamer that is high in protein and low in sugar.
"Consumers want everything," Danone's Ms. Sanchez said. "They want flavor. But other times they want to do better from a health standpoint."
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(END) Dow Jones Newswires
February 04, 2020 02:47 ET (07:47 GMT)
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