Dairy Flavors Market: Analysis By Flavor Type (Cheese Flavor, Milk Flavor, Butter Flavor, Cream Flavor And Other Flavors), By Form (Liquid, Powder And Paste), By Nature (Natural And Artificial), By Application, By Region Size, Trends And Forecast To 2028

The global dairy flavor market in 2022 was valued at US$4.12 billion. The market value is expected to reach US$5.67 billion by 2028. The major application areas are bakery and confectionery, dairy and frozen desserts, beverages, soups, sauces, dressings, dips, snacks, ready-to-eat meals, yogurt and more. 

Dairy flavors have become more popular around the world as a result of their ability to improve health and longevity. Due to rising disposable income and improved lifestyle, consumers have started to spend on non-essential goods, including premium and value-added food products like gourmet ice cream, cheese etc., which naturally drives the demand for dairy flavors. Some other factors driving the rise in dairy flavors demand include the rising concern towards health and wellness and widespread application of dairy flavors. Additional trends include the use of artificial intelligence in flavor development, introduction of plant-based flavors, and clean-label and natural flavors promoting health and wellness. With the rise of veganism and lactose intolerance, the market is witnessing a surge in non-dairy alternatives to milk-based flavors, such as plant-based and nut-based flavors like soy milk, almond milk etc. In the coming years, these improvements or trends are expected to significantly stimulate demand for dairy flavors. The global dairy flavor market value is projected to grow at a CAGR of 5.54%, during the forecast period of 2023-2028.

Market Segmentation Analysis:

By Flavor Type: According to the report, the global dairy flavor market is segmented into five segments based on the flavor type: cheese flavor, milk flavor, butter flavor, cream flavor and other flavors. Cheese flavor segment acquired majority of share in the market in 2022 and is the fastest growing segment as well, primarily due its widespread application, and popular use of cheese flavoring on products such as popcorn, potato chips, and other snack foods with powdered coating. Also, growing global interest in diverse cuisines contributes to the demand for different cheese flavors in various dishes. Further, the future trend towards artisanal and specialty cheeses may influence the development of unique and premium cheese flavors and with the rise of plant-based diets, there might be an increased demand for plant-based cheese flavors during the forecasted period.

By Form: The global dairy flavor market is bifurcated into three forms: liquid, powder and paste. Liquid form acquired majority of the market in 2022 primarily because it offers ease of mixing and blending. Since, liquid dairy flavors are often concentrated, and are versatile for incorporation into various food and beverage applications, so the growth of food and beverage industry contribute to the growth of this segment. Also, development of liquid dairy flavors with added functional elements, such as probiotics or health-enhancing ingredients and the trend towards plant-based flavors and clean-label organic flavors will contribute to this segment’s demand during forecasted period. The powdered dairy flavor segment is expected to register fastest growth during the forecasted period due to longer shelf life and ease of storage. Also, growing demand of clean-label powders and instant beverages like tea premix, coffee premix will further contribute to the growth of this segment.

By Nature: The global dairy flavors market can be segmented as: Natural and Artificial. Natural dairy flavors acquired the majority of share in the market in 2022 and is the fastest growing segment as well since natural flavors provide an authentic and true-to-source taste, appealing to consumers seeking genuine dairy experiences. Consumers’ preference for natural and minimally processed products, and introduction of new flavors with more sensational taste are some other factors propelling the growth of natural dairy flavors.

By Application: The global dairy flavor market is bifurcated into six applications: Bakery and confectionery, dairy and frozen desserts, beverages, soups and sauces, dressings and dips and others. Bakery and confectionery acquired the majority of share in the market in 2022 due to a confluence of factors. Products, ranging from cakes and cookies to chocolates, enjoy widespread popularity and are often associated with indulgence and celebration. Dairy flavors, with their rich and versatile profiles, seamlessly enhance the taste and texture of these treats, contributing to their sensory appeal. While, the beverages segment is expected to register the fasted CAGR during forecasted period because of heightened focus on health and wellness, consumers increasingly seek beverages that strike a balance between nutritional value and indulgence, making dairy flavors a key ingredient in meeting this demand. The diversification of dairy-based drinks, including milkshakes, smoothies, and flavored milk, contributes to a dynamic and expanding market.

By Region: The report provides insight into the dairy flavors market based on the geographical operations, namely North America, Europe, Asia Pacific, Latin America and Middle East and Africa. Asia Pacific dairy flavor market held the highest market share in 2022 and is expected to grow at the fastest rate as well. The growth is attributed to economic development, disposable income, and increasing preference for healthy, protein-rich food. The region's abundance of raw materials and growing health awareness are driving the market growth. Consumers are willing to pay higher prices for dairy flavor products in countries like India, China, and Japan.

China is the Asia Pacific’s strongest market for dairy flavor because of availability of ample opportunities for various industries like bakery and confectionery to grow, efficient distribution channels like e-commerce and consumer’s shift towards healthy food options. On the other hand, India stands as one of the fastest-growing markets in Asia-Pacific, where consumers are not willing to compromise on the taste and health factors of the food. The Indian subcontinent has a massive demand for regional and traditional flavors, which is fueling the market growth.

North America is also a major market for dairy flavors, with the US leading the way. The industry has seen growth due to technological advancements, rising demand for healthy food, and research by major players. The demand for cheese is driving the growth, with over 300 cheese varieties produced in the region. According to The US Department of Agriculture (USDA) Economic Research Service (ERS), the North Americans consumed 655 pounds of dairy products in 2020, but consumption has risen to 667 pounds in 2021. Food & beverage industry players like Buds Inc., Dairy Chem Inc., and The Edlong Corporation are focusing on launching new products with dairy flavors, which is expected to drive market growth further.

Global Dairy flavors Market Dynamics:

Growth Drivers: Urbanization and changing lifestyles have led to a surge in the demand for convenient, diverse, and innovative dairy products, resulting in a surge in the dairy flavor market, which includes snacks, ready-to-eat meals, and beverages. This shift in dietary preferences creates opportunities for the development and sale of dairy flavors. Also, urban dwellers often have different dietary habits compared to those in rural areas. The fast-paced urban lifestyle may lead to a higher demand for pre-packaged food items, including flavored dairy products. Further, the market is expected to increase due to rising disposable income, e-commerce growth, rising consumer awareness, wide scope of application, growth in food and beverage industry, etc.

Challenges: Complexity in extraction and processing of dairy flavors can present challenge for the dairy flavor market. Natural dairy-derived flavors are complex due to their sensitivity to chemicals, heat, and variability. Large-scale production faces challenges in maintaining consistent flavor profiles because factors like animal diet, breed, and location also impact flavor profiles. Dairy flavors contain fats and proteins, complicating extraction, and processing. Finding efficient methods without artificial additives and food safety is a complex task. Other challenges that the dairy flavor market faces is fluctuations in availability of raw materials and side effects associated with dairy flavors.

Trends: A major trend gaining pace in dairy flavors market is enzyme-modified dairy flavors. Enzyme-modified ingredients are extracted through an enzymatic process, enhancing the flavor and aroma of dairy products. These flavors, such as cheese, butter, cream, and ghee, have a 15-30 times stronger taste than traditional ingredients. The market for these flavors is expanding due to the increasing demand for dairy-based beverages, particularly in South and East Asia. The intense flavor, creamy texture, and extraordinary mouthfeel of these ingredients make them a key raw material in many products. The growing demand for these flavors is driven by changing lifestyles and a vast population. More trends in the market are believed to augment the growth of dairy flavors market during the forecasted period include use of artificial intelligence in the development of flavors, rising popularity of yogurt, introduction of plant-based and non-dairy dairy flavors, clean label and natural flavors, global and exotic flavors, etc.

Impact Analysis of COVID-19 and Way Forward:

The COVID-19 epidemic had a negative impact on market trends in dairy flavors market. Lockdowns and business closures disrupted supply chains, disrupted production activities, and affected sales. Companies experienced increased costs, limited availability of raw materials, and higher energy prices. The pandemic also reduced eating out frequency, leading to decreased demand of flavors by restaurants.

However, as the situation improved and safety measures were implemented, the market showed signs of recovery. The shift towards e-commerce and direct-to-consumer sales has provided opportunities for dairy flavor manufacturers to reach consumers directly. Innovation in dairy products, sustainability, clean label trends, building resilient supply chains could improve the stability and availability of dairy flavor ingredients, which is expected to drive the recovery and growth of the global dairy flavors market post-COVID-19.

Competitive Landscape and Recent Developments:

Global dairy flavors market is fragmented and competitive.

Key players of global dairy flavors market are:

• Kerry Group
• International Flavors & Fragrances, Inc.
• Jeneil Biotechnology
• Edlong Corporation
• Synergy Flavors
• Bluegrass Ingredients
• Flavorade India
• Butter Buds Inc.
• Flavorjen
• H.E. Stringer Flavours Ltd.
• HL Commodity Foods Ltd.
• Flaverco

The key players are constantly investing in strategic initiatives, such as adoption of new technologies, introducing their services to emerging markets, collaboration, investment, and more, to maintain a competitive edge in this market. For instance, Butter Buds Inc. recently has introduced Butter Buds® Non-Dairy 32X, a water-soluble flavor solution that mimics the taste and texture of butter without the dairy allergen. This solution is ideal for non-dairy foods, catering to over half of American adults who consume dairy alternatives. The solution meets sustainability requirements.