A natural boom: plant milks flood the market with dairy alternatives

The plant milks market, which was predicted to surpass $16bn this year alone, is thriving thanks to a rapid increase in plant-based alternatives flooding the market. But, with regulatory obfuscation and challenge from traditional dairy, there are still hurdles ahead.

According to market researcher Mintel, in 2017, sales of UK plant-based milk reached £376m, while traditional milk sales rose just over 5%, with almond milk being the biggest seller of alternative milks, accounting for two in every three pints sold.

Michael Oakes, chair of the National Farmers Union national dairy board; said: “When you used to go into a coffee shop, you used to have it with milk or without. Now there are four milk alternatives alongside milk.” 

This increase in demand for alternatives to traditional dairy beverages can be attributed to a number of factors, including increasingly health-conscious consumers, intolerance to lactose and the popularity of vegan diets.

Lu Ann Williams, director of innovation at Innova said, “The dairy alternatives market has seen rising levels of interest in recent years, spurred mainly by consumers increasingly looking for lactose-free, dairy-free and plant-based/vegan options as healthy lifestyle choices, rather than regarding them as simply for those with allergies or intolerances.

“The category has been further boosted by the growing availability and promotion of plant-based options to traditional dairy lines, particularly beverages, but also cultured products such as yogurt, frozen desserts and ice cream, creamers and cheese.” 

Millennial influence: a generation shifts to alternative milks

Many younger consumers are switching to alternative milks because of environmental concerns, with usage of plant-based milks being higher among those under 35, at 27%. In a study of the environmental impact of alternative milks in comparison to dairy, cow’s milk came out as most harmful as the average cow eats around ten kilograms of food to produce just one litre of milk – while also producing a lot of emissions.

An early pioneer in the sector is Swedish alternative milk brand Oatly, which has been in business for more than three decades. Founded by a student of the Swedish professor who first discovered lactose intolerance, Oatly has increased sales from £15m in 2012, when CEO Toni Peterson joined the company, to £102.5m today. Peterson said: “We’ve been here for a while, but it’s not until recently you can see a bigger movement towards plant-based drinks.” 

This year Oatly's growth will be around 80%, thanks to distribution across 20 European countries and the US. Launches in China and Hong Kong – two countries where dairy is relatively unpopular – are expected to boost 2019 growth to 100%. “Everyone’s interested in health and sustainability,” says Peterson.

Big Dairy and the FDA: challenges still remain for entering the public consciousness

In spite of this success, the plant milk industry’s path ahead is not entirely clear. The US Food & Drug Administration (FDA) recently began reviewing whether or not the producers of plant milks should in fact be allowed to call their products ‘milk’ and has issued a request for public comments to assess whether the use of the term could be the source of any kind of confusion or problem. The consideration of whether to new issue new guidance is likely at the behest of lobbying from the dairy industry, which is having to contend with the reality of a steadily growing demand for dairy alternatives.

Given that Rabobank advised dairy producers to diversify into alternatives in May by noting that “global retail sales growth for dairy alternatives has soared at a rate of 8% annually over the last ten years", it should be appreciated that plant milks and their ilk represent a genuine threat to the traditional dairy industry. Furthermore, despite the FDA’s request for comment on the labelling of plant-based products with names that include the names of dairy foods such as 'milk,' 'cultured milk,' 'yoghurt,' and 'cheese', suggesting there may be consumer confusion, a study by the International Food Information Council Foundation found that less than 10% of consumers believed plant-based milks contained cow milk. 

With the impact of the dairy industry on climate change (and the beef market by relation), there is a clear need to reduce consumption of traditional farm animal products and move more broadly towards alternatives. As the narrative is moving against the dairy industry and more towards alternative competitors, it makes sense that Big Dairy would be feeling the heat.

Yet plant milk producers should not grow complacent. Although there is growth on the horizon and consumers do not seem confused by their products, there is still a fair way to go before alternative milks, particularly diversified as they are, are stacking up to the weight of conventional dairy.

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