Feeling Smug? Behind Kerry’s launch into hybrid dairy

Plant-based dairy alternatives are commonplace in supermarkets these days. So too are their conventional dairy counterparts. What is much less common, but attracting more and more attention, is a new category aimed at bringing the best of both: hybrid dairy.

Innovators have attempted to build out this nascent sector in recent years, and not all successfully. But now a big-name in dairy is having a crack: Kerry Dairy Consumer Goods – owned by Kerry Dairy Ireland – has developed a range of blended oat and dairy products it’s playfully coined ‘Smug Dairy’.

“The name Smug Dairy, whilst slightly tongue in cheek, stems from the feeling we hope consumers get when they choose and discover this new product,” Victoria Southern, strategy, marketing and innovation director at Kerry Dairy Consumer Foods told FoodNavigator.

Introducing Smug Dairy: From milk to cheese and butter

The range spans milk, cheese, and butter alternatives, with each product containing a different proportion of dairy and plant-based ingredients.

The Smug Dairy Oat & Dairy Blended Block Butter contains 65% dairy and 35% plant-based ingredients; the Spreadable Butter 50% dairy; Cheddar 61% dairy; and Milk 75% dairy.

Spotlight on plant-based ingredients

Zooming in on the plant-based element reveals different ingredients and micronutrients depending on the product. The plant-based ingredients for Smug Dairy Blended Oat & Dairy Milk include oat drink, chicory root fibre, calcium, carbonate, salt, stabiliser, vitamin D2, B2, iodine and vitamin B12.

The Smug Dairy Blended Oat & Dairy Milk contains milk, rapeseed oil, oat drink (water, gluten free oat flour, salt, fava bean protein, vitamin B12), colour, vitamin E, vitamin A and D.

“We take traditional dairy and blend this with oats, and we have worked hard to develop products which are high quality and have tested these products at length with consumers,” explained Southern.

The launch, at least initially, concerns the UK only. But this may change. The marketing and innovation director said the business is excited to be at the ‘forefront’ of a brand-new category for dairy, and is already working on a pipeline of innovation – both in terms of new products and the distribution of the current range, including further geographical expansion opportunities.

Hybrid dairy: A premium offering?

From a price perspective, the Smug Dairy range is a premium product, coming in at a higher price point than conventional dairy (Kerry’s Dairygold spreadable butter sells for €7.91 per kg at Tesco in the Republic of Ireland, whereas Smug Dairy Blended Oat & Dairy Spreadable Butter sells for around £9.34 [€10.87] per kg in the UK).

It’s also priced higher than some other plant-based dairy alternatives. Kerry’s Pure Dairy Free Butter Spread retails for £4.30 (€5.00) per kg in the UK, compared to Smug Dairy Blended Oat & Dairy Spreadable’s £9.34.

Risks and opportunities in the hybrid dairy category

The innovation potential in hybrid dairy is obvious. With very few players operating in the nascent category, it’s wide open for newcomers to take a piece of the plant-based and dairy blend pie.

The Smug Dairy Blended Oat & Dairy Blended Milk product is made with 75% dairy. Image credit: Kerry Dairy Consumer Goods

According to market research firm Mintel, there is considerable consumer interest​ in the category. A handful of surveys conducted by Mintel, in conjunction with either Kantar or Dynata over 2022-23, revealed that 42% of respondents in France agree the concept is appealing; in the Republic of Ireland 56% of cheese users said they would be interested in trying a hybrid cheese; and in Thailand 26% said they would be interested in trying hybrid yoghurt.

But while innovation opportunities abound, market success is not assured. Some earlier examples of hybrid dairy launches are no longer on the market, including Live Real Farms’ products in the US and Triballat Noyal’s Pâquerette & Compagnie​ brand in France.

To have the best chance of succeeding on the market, Mintel recommends brands highlight the inclusion of both ingredients – dairy and plant-based – to appeal to both fans of dairy and flexitarians (or flexi-dairy-ans​).

How is Smug different from those that came before it?

This is the approach Kerry Dairy Consumer Goods has taken with its Smug Dairy line, which very clearly markets its products as ‘blended oat and dairy’.

When asked how the company plans to reach the right consumer (as others’ market withdrawals would suggest they did not) and set itself apart, Southern suggested timing has a part to play.

“This innovative new launch is steeped in consumer research…We know that consumer behaviour towards dairy has evolved significantly in recent years, with one in four people wanting to reduce the amount of dairy in their diet due to health, environmental and ethical concerns, as well as 42% of consumers actively reducing their dairy intake.

“This paves the way for a brand like Smug Dairy to bring real innovation into the dairy category by introducing a ‘have it all’ dairy fit for the future, shaking up the binary status quo of dairy or plant.”

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The spreadable butter alternative is made with 50% dairy. Image credit: Kerry Dairy Consumer Foods

When asked which consumers the Smug Dairy launch is aimed at, either fans of plant-based dairy or traditional dairy, the marketing and innovation lead suggested it’s likely the latter. “We’ve created a dairy that is fit for the future and available to everyone. The product is a win-win solution for dairy lovers looking to make more conscious purchasing decisions in terms of health and sustainability, without compromising on taste.”

To help raise awareness around the new brand, the company is supporting the launch with a £5m (€5.82m) marketing campaign across out of home and audiovisual, TV, PR, influencer partnerships and social media.

But why ​hybrid dairy?

A brief history of this nascent category would suggest hybrid dairy is not an easy win.

PlanetDairy, which recently launched its hybrid cheese brand Audu​, suspects the category struggles to find an audience. In the past, the category has ‘fallen between two stools’, chair and commercial lead Jesper Colding told this publication. “You’re not a dairy product, you’re not a plant product. So who are you really talking to here? We call it the ‘hybrid trap’”.

How a hybrid dairy product is marketed, therefore, is key. Kerry’s approach plays into the environmental and health benefits associated with consuming hybrid dairy over its conventional counterpart, according to Southern.

“Smug Dairy products contain up to 40% less saturated fat than traditional dairy, as well as saving up to 54% CO2e emissions, all without compromising on the delicious taste of dairy.

“With Smug Dairy you can have it all. Delicious taste, delicious feeling: it’s a win-win. Enough to make you feel a little smug, in fact.”

FoodNavigator also wondered whether Kerry’s decision to innovate in hybrid dairy was linked to dairy market volatility in recent times.​ Might the company be looking to sell more dairy ingredients into this new category and help boost a struggling business?

But Southern poured cold water on this suggestion. “Kerry Dairy Consumer Foods is a key division within Kerry Dairy Ireland, home to some of the UK and Ireland’s leading dairy and plant-based brands including Strings & Things snacks, Pure, Dairygold, and Charleville brands.

“Having come together as Kerry Dairy Consumer Foods back in October 2021, our business is going from strength to strength, including record market share positions across a number of our priority brands.”