New York’s dairy industry is looking for the next big thing in milk products. The New York Dairy Promotion Order Advisory Board partnered with corporate innovation consultancy VentureFuel on MilkLaunch, a new startup competition focusing on accelerating product innovation for milk in the state.
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Product innovation takes into account what a consumer will buy. Within that, VentureFuel founder Fred Schonenberg has identified two big trends: personalization, or finding unique flavor combinations for dietary or global palates, and functional beverages–meaning those that are enriched and fortified, not just with vitamins, but to improve mood or specific functions.
One of the goals of the new program is to activate “would-be” dairy entrepreneurs to bring forward innovative ideas for new milk products, he told Crunchbase News.
“One of the great things going for New York is how diverse it is,” Schonenberg said. “You can bring cultures, flavors and tastes from home, mash that up, mix it with milk and bring it to the U.S. market.”
Entrepreneurs must have submitted an application for MilkLaunch by Sept. 15. The four finalists chosen will each get a $15,000 stipend and will compete for a grand prize. They also have the opportunity to collaborate with entrepreneurial mentors and top food scientists from Cornell University’s Food Processing Development Laboratory and Sensory Evaluation Program to improve their product’s safety, quality, labeling and product marketing practices, Schonenberg said.
“We are building something to help products get to market,” he added. “This isn’t about innovation theater, it is more about: Can we take these companies, accelerate them, go to market and make an impact on the industry?”
What might be a little-known fact for those outside the Empire State is that the dairy industry is the “largest single segment of New York’s agricultural industry.” In fact, it is home to approximately 4,000 dairy farmers, many in the category of small, family-run farms.
“Most big cities used to have small dairies around them, but now they don’t as land has become more expensive. Many people don’t think of New York as an agricultural state, but it is one of the top 10 or five states for agriculture production,” said David Anderson, Ph.D., professor and extension economist for livestock and food product marketing in the Department of Agricultural Economics at Texas A&M University, in an interview.
“Last year was bad for smaller dairy farmers, many of whom went out of production, forced out by low prices,” he added. “If they can foster some new innovation that builds on processing capacity, it may enable them to stay in business and get higher prices for milk.”
Here are some of the dairy trends that have become popular in recent years, according to Anderson:
- Greek yogurt, such as Chobani, which strains out more water and whey to make it thicker;
- Ultra-filtered milk products, such as Fairlife, which produces milk with less lactose and sugar and more protein than regular milk; and
- Whey, a by-product of cheese-making, which has a lot of protein and is used to create high-protein drinks.
“Whey used to be worthless, something that they would throw down the drain,” Anderson said. “As fitness became more important, people started using whey in a lot of high-protein drinks, which has expanded the demand for dairy products, not necessarily just drinking milk.”
Renske Lynde is seeing similar innovation challenges. She is a general partner at 1st Course Capital, a firm that invests in entrepreneurs transforming the food system.
“Dairy is an old industry and is being forced to innovate,” Lynde said. “This is all showing that there are attempts to figure out how to innovate. However, adopting and innovation is a challenge.”
MilkLaunch isn’t the only competition promoting this type of innovation. Real California Milk Snackcelerator—also put on by VentureFuel, but in partnership with the California Milk Advisory Board—seeks to find new snack formulations for consumers.
Others include the National Dairy Council’s New Product Competition and Rabobank’s FoodBytes program, a series of events that connect food industry leaders and investors with startup companies focused on food, agribusiness and technology.
Rise of plant-based ‘milks,’ other beverages
Investors have been active in backing both dairy and plant-based products for some time. Venture and seed backers have put capital into at least 54 companies over the past three years, making dairy or dairy-alternative products, per an analysis of Crunchbase data.
We’ve compiled a list of startups here.
Companies on our funded startup list collectively raised approximately $2.5 billion to date. However, looking at only VC-backed startups paints a limited picture. For example, Impossible Foods raised about half of that total alone. In addition, companies, such as Oatly, producing oat milk, do not appear to be venture- or seed-funded or have not raised any VC-backed capital in the last three years.
Dairy-centric types of innovation competitions are a reaction to a rise in market share by plant-based and other beverage companies that have come on the market and sustainability concerns related to the dairy industry.
Per capita consumption of drinking milk actually started declining more than 40 years ago, according to estimates from the U.S. Department of Agriculture. The number has steadily decreased from 247 pounds per person per year in 1975, to 141 pounds in 2019.
“It started a long time ago when there was an explosion in all kinds of drinks, giving people more choices, even bottled water,” Anderson said. “It’s really a much bigger picture than just the plant-based alternatives. Another trend that works against fluid milk consumption is how we live: we don’t eat cereal as much anymore because we can’t eat it on the way to work. Plus, kids drink a lot of milk at school, but that is not happening this year.”
Although fluid milk is on the decline, consumption of foods made by milk are experiencing the opposite. For example, cheese—with the exception of the cottage variety—yogurt and butter consumption are all growing.
Anderson attributes more pizzas and sandwiches being eaten for the rise in cheese use, while the elimination of trans fats in many foods, including butter, helped regain its popularity. People are even switching back to whole milk versus skim, especially in the organic milk varieties, he said.
In addition to falling consumption, dairy farmers have come under fire over sustainability concerns. Even plant-based drinks are not immune from similar criticism.
Two years ago, Emily Cassidy, who at the time was sustainability science manager at the California Academy of Sciences, explored the water and carbon footprint needed to make soy, almond and cow milk, as well as compared protein sources. She found that cow’s milk used more water and had a more significant carbon footprint than both the almond and soy, but the soy had more protein than the almond beverage.
Despite the sustainability challenges, Lynde said there are ways in which the dairy industry can be sustainable and promote health using innovation, such as robotics and milking equipment.
“From my perspective, the production method is ‘not the cow, but the how,’” Lynde said.
Illustration: Li-Anne Dias