Premium dairy drinks give biggest competition to plant-based alternatives

By Beth Newhart

- Last updated on GMT

Having so many different categories of both dairy and non-dairy items creates several logistical problems for farmers and processors. Pic: ©Getty Images/happy_lark
Having so many different categories of both dairy and non-dairy items creates several logistical problems for farmers and processors. Pic: ©Getty Images/happy_lark
Plant-based milk alternatives have surged 61% in the last five years and will continue to grow, while cow’s milk differentiates into new products to slow its decline.

CoBank released a report on the recent changes in the dairy industry affected by the popularity of plant-based dairy alternatives. Cow’s milk has seen a decline in sales for several decades. CoBank cites several reasons for this, including cultural shifts, lifestyle changes and consumers switching to plant-based.

“It’s challenged the traditional milk industry to think about ways to differentiate itself and come up with new products. It’s led to a pretty dynamic change for the milk industry overall,”​ Ben Laine, senior economist at CoBank, told DairyReporter.

In response to the competition, new premium dairy beverages have emerged in the market. Variations like organic, grass-fed, ultra-filtered, lactose-free and a2 milk have all put a new twist on traditional cow’s milk. This sometimes comes with a higher price tag and lets the new drinks compete with plant-based beverages.

“People want choices. This gives opportunities to consumers to have many different choices for specific types of milk and dairy products. It gives them an opportunity to tailor to whatever their individual interests are, and they can find a product that matches those needs for them,”​ Laine said.

CoBank expects plant-based dairy alternatives to continue growing in popularity, between 15% and 25% through 2022, with new variations emerging. Soy milk established the category in the 1990s and peaked with $1.2bn in sales in 2008. CoBank found that in 2017 almond milk dominated the category with $1.35bn in sales and 64% of the market share.

Coconut, rice, oat and hemp milk have all done well and found an audience with those looking for more vegan options. According to Laine, “it’s about keeping the consumer’s interest. The new, exciting plant-based beverages coming into the market were good at that.”

Competition for space

However, the expansions of the dairy and dairy-alternative markets don’t come without challenges. Having so many different categories of both dairy and non-dairy items creates several logistical problems for farmers and processors.

“Traditionally, the supply chain was pretty straightforward and pretty wide. Now you’ve got a lot of different products. If you’ve got organic milk and you’ve also got organic grass-fed milk, you have to keep those milks [separate] from the farm all the way to the store shelves. You end up with a much bigger number of products and a much smaller volume of each of those products. That becomes more expensive for the companies to deal with,”​ Laine said.

Brands also struggle to secure shelf space among so many options at the grocery store, leading grocers to charge higher slotting fees. And it may be this way for a while.

“As long as consumers are willing to pay these higher prices and there’s still a demand, which there seems to be, I think there’s room for that to continue,” ​Laine said.

Related topics Ingredients Dairy drinks

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