Better-for-you gets a foothold on dairyBetter-for-you gets a foothold on dairy

The dairy category is on the cusp of a revolution, driven by shifting consumer concerns and a growing demand for healthier, more sustainable and transparent food options. Most supermarket leaders believe the segment is poised for exciting innovations in 2025 that will reflect evolving consumer priorities around these important priorities.

The category remains ubiquitous and driving more trips than ever before, but with less items and spending due to inflation concerns, according to the International Dairy Deli Bakery Association (IDBBA) most recent report on dairy trends. For instance, the dairy department was up approximately 40% in dollars over the last year, though units barely saw positive gains.

“Natural Cheese is what kept units positive,” said Whitney Atkins, vice president of marketing for the IDDBA. “Yogurt, whipped toppings and cottage cheese were also unit drivers.”

Overall, dairy had the best year-on-year dollar growth in perishables mainly due to these price increases and that’s something that should remain true in early 2025 as well.

Better-for-you makes a play in dairy

Amanda Oren, a 20-year grocery strategist and vice president of industry strategy for grocery at RELEX, a retail planning platform, said that non-dairy plant-based alternatives are a significant trend across traditional dairy categories, from milk and yogurt to cheese and creamers.

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“Shoppers are also prioritizing better-for-you dairy options, including reduced-sugar products, along with items containing gut-healthy functional ingredients such as probiotics, vitamins and minerals,” she said. “There’s a clear shift toward balancing taste, health benefits, and ingredient transparency.”

Shipra Pareek, senior account manager for NSF International’s food retail division, noted demand for healthy and functional dairy products is on the rise, with high-protein yogurt, kefir and lactose-free milk seeing positive gains.

“Bioactive proteins are now being used in mainstream dairy products, helping to enhance nutritional value,” she said. “As plant-based items continue to grow in popularity, biotechnology techniques such as precision fermentation are rapidly emerging and being employed in the dairy industry.”

One of the most transformative trends is the rise of regenerative dairy products.

“As consumers become more attuned to the environmental impact of their food choices, the dairy industry is responding with options that emphasize regenerative agriculture practices,” said Katie Macarelli, a spokesperson for Lakewood, Colo.-based Natural Grocers, which has 168 stores in the U.S.

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For instance, milk, yogurt, and cheeses made with regenerative principles—such as improving soil health, promoting biodiversity, and reducing carbon emissions—are capturing attention.  Additionally, A2 dairy products, known for being gentler on digestion, continue to grow in popularity, with offerings like A2 milk and cheeses leading the way.

“Regenerative agriculture is no longer just a buzzword; it’s becoming a tangible movement within the industry,” Macarelli said. “What’s exciting is that brands aren’t stopping at the environmental benefits—they’re also highlighting how these practices contribute to healthier, more nutrient-dense food. This dual focus on personal and planetary health has created a powerful narrative that’s driving innovation.”

Gut health also remains a powerful driver of innovation in dairy.

“Probiotic-rich products like GoodBelly and A2 yogurts are at the forefront, offering functional benefits that support digestive wellness,” Macarelli said. “As consumers increasingly understand the connection between gut health and overall well-being, we anticipate a surge in new products that pair convenience with targeted health benefits in the dairy aisle.”

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Natural Grocers has been pleasantly surprised by what it’s been seeing in recent milk, heavy cream and half and half sales.

Jorge Gonzalez, director of Aurora, Col.-based Ahorra Mucho, a discount supermarket catering to Hispanic shoppers, noted yogurt continues to be a strong trend, with customers drawn to visually appealing options such as layered parfaits and colorful packaging.

“For families, kid-friendly packaging like bear-shaped yogurt containers have proven particularly popular,” he said.

Low-sugar options are also expected to make waves in the year ahead, as consumers are seeking ways to reduce added sugar without compromising on flavor or quality. Dairy brands are responding with low-sugar alternatives across product categories, including flavored yogurts, dairy beverages and frozen desserts.

“At Natural Grocers, we predict that 2025 will be a year of thoughtful, innovative solutions in dairy that prioritize nutrition, sustainability and deliciousness in equal measure,” Macarelli said.

Having a solid packaging strategy

Sustainability is a major driver of dairy sales, with consumers increasingly mindful of the environmental impact of the products they buy and the packaging they come in.  

“Producers are increasingly using sustainability-driven innovation to meet the UN Sustainable Development Goals and consumer demand,” Pareek said. “We are seeing reduced waste programs leveraged when producing dairy products, as well as greater use of eco-friendly packaging. Many dairy companies are focusing on animal welfare, improving conditions on farms and in processing plants to further prioritize animal wellness.”

In fact, one of IDBBA’s big trends for 2025 is “Less is More,” highlighting how sustainability and reducing food waste in the food industry are driving purchasing decisions.

“This focus has spurred innovation, particularly in product differentiation, with brands introducing new formulations and refreshing packaging to stand out,” Oren said.

And when it comes to merchandising, Natural Grocers has leaned into creating an engaging shopping experience that combines value with discovery. For example, it features dairy products and brands in eye-catching displays, offering sampling events, and highlighting new or trending products which have encouraged customers to explore and adopt healthier choices.

As the dairy industry embraces these prevalent trends, 2025 promises to be a pivotal year where health, sustainability, and transparency guide both product development and consumer choices.