The key factor behind growth and innovation in the past year has been the better-for-you segment, chiefly the surge in popularity of a reduced-carbohydrate nutritional lifestyle.

Our State of the Industry analysis this year shows that processors are responding to the increased demand for such products, either with new formulations or new messaging stressing the inherent qualities of existing products. It’s evident that “better for you” is not only better for consumers — it’s been better for processors as well.

The low-carb phenomenon struck at a time when the industry is trying to position itself as a solution to the nation’s obesity crisis, leveraging scientific data showing dairy’s positive impact on weight control. This effort — amid an ongoing push to overcome the soft-drink juggernaut and reclaim a greater share of stomach — appears to have been hampered somewhat, at least on the fluid side, by record-high dairy commodities prices that have hit retail consumers hard in the pocketbook.

But demand for healthier food items also seems to be hitting new highs. Among the categories, frozen desserts look like the winner in the horserace to supplement existing lowfat and no-sugar-added varieties with new products specifically tailored for the low-carb consumer. Cultured processors have followed with a smattering of reduced-carb yogurts, and a handful of fluid products also owe their existence to the diet craze, stepping up to lessen milk’s shortcomings as a low-carb beverage. Cheesemakers, meanwhile, are out to stress the natural low-carb nature of their products, something that until recently they had no need to trumpet.

The obesity struggle also stands to benefit dairy as school systems across the country turn against sugary soft drinks and salty snacks, and toward milk and yogurt as healthier alternatives for lunchrooms and vending machines.

Other trends that are continuing to drive product development include portability, a demand for new and different flavors, and co-branding and licensing.

What follows is a review of the dairy case, complete with sales data for brand leaders. Also included are a global report exploring the world dairy market and an R&D ingredient report.