Powdered buttermilk is a lactose-free powdered ingredient made from real buttermilk. It is used as a substitute for conventional liquid buttermilk or as an ingredient in baked goods, dressings, and even ice cream recipes. While powdered buttermilk has the same great benefits as liquid buttermilk (such as its ability to boost flavor and added nutrition), it also has the added benefit of not needing refrigerated.