The Changing Face of Dairy

Abstract: When an industry has reached maturity, firms operating within the industry can face major changes affecting their operations, on occasion even a holistic change of the entire industry structure. Considering such changes, innovation is identified as a powerful tool to take these changes as chances to stay competitive. As a mature industry in the fast-moving-consumer- goods (FMCG) category, the dairy industry is lately faced with emerging trends originated in shifts in consumer preferences on various levels, such as environmental sustainability, health, and animal welfare. These trends and consumer needs have become accelerators for the increasing growth of plant-based dairy alternatives (PBDA); a call to action for dairy companies due to the increasing loss of their market share to PBDA. Considering the role of innovative activity in business strategy, the purpose of this study is to identify and understand the factors that influence innovation strategies of firms operating in mature industries. Employing a single case study design on the dairy industry, seventeen factors relevant for innovation strategy formulation were identified, obtained from literature and ten qualitative interviews. Based on the analysis, an empirical framework presenting the identified influencing factors is provided as a tool for decision makers in mature industries. The study further contributes three key findings: firstly, consumer-centric innovation strategies seem to prove successful in the FMCG environment of the dairy industry. Secondly, the type of a firm’s ownership structure seems to be critical for innovation success: while cooperative organizations seem to be challenged by innovation, corporate organizations, in contrast, seem to benefit from their ownership structure. As an ownership structure cannot be changed short- term, leadership and organizational culture change can offer a starting point to adjust innovation strategy and increase cooperatives’ agility. Lastly, findings allowed for the assumption that the dairy industry is undergoing a fundamental change in its structure due to the increasing presence of PBDA, which ultimately might lead to the transformation of one of the oldest industries in the food sector.