Despite the rapid rise of dairy alternatives, global sales of dairy products continue to grow, according to figures from the Food and Agriculture Organization. More than six billion people worldwide consume dairy and, according to a 2021 report by FMCG Gurus, around 44% of the global population regularly consumes dairy alternatives.
“A high proportion of consumers who say they turn to dairy alternatives also turn to real dairy products, saying they switch between different products based on the healthiness of the occasion,” said Mike Hughes, Head of Research and Insight at FMCG Gurus, during the Fi Europe 2021 hybrid event’s panel discussion, ‘The fragmentation of the plant-based protein market: How to target specific segments’.
Appealing to mainstream consumers
When asked their top reasons for eating and drinking dairy alternatives, consumer responses included that they were better for the environment (69%), they were healthier (67%), and they were more trustworthy (58%). However, even as the taste and texture of dairy alternatives have improved, there is still work to be done.
“The issue of sensory appeal is something that needs to be addressed when targeting everyday consumers,” said Hughes. “…Irrespective of concerns about health and sustainability, consumers will always prioritise me-centric need states such as sensory appeal when choosing products.”
The Covid effect
The Covid-19 pandemic also has contributed to increased consumption of traditional dairy, particularly butter and cheese, and in the past 12 months, the proportion of consumers globally who said they would struggle to give up dairy rose from 34% in 2019 to 40% in 2020.
“It needs to be remembered, in times of uncertainty, consumers are unwilling to compromise on products that offer moments of small indulgence,” Hughes said. “As such, it’s crucial that plant-based alternatives are seen to replicate the experience of eating and drinking animal produce.”
Jamie Rice, Director of Global Data and Insights at Food Trending, also underlined the influence of the pandemic on consumer food choices, noting increased consumption of plant-based foods among flexitarian consumers.
“What started as a niche for strict vegans or those with health concerns or lactose intolerance, it wasn’t long ago that these products were only available in health food shops,” he told attendees. “The dairy alternative market is now worth €8bn in Europe alone.”
Rice suggested these products, with their longer shelf life, were ideal for Covid times. Pre-pandemic, dairy alternatives were already growing rapidly, at a rate of 7.6% a year for yoghurt and cheese alternatives, 8.5% for milk alternatives, and 32.3% for ice cream alternatives, according to Food Trending figures.
“These are all incredibly impressive growth rates in the context of the food industry,” he said. “…However, these products have to be very, very good to ensure consumers come back again and again, especially for consumers who are used to the texture and mouthfeel of traditional dairy products.”
He said there had been a lot of new market entrants, but added that it was unlikely that they would all survive.
Consolidation on the horizon?
Meanwhile, dairy companies are adapting their product portfolios to meet increasing demand for plant-based products, too. Nestlé, Danone and Fonterra are among the big names that have diversified into dairy alternatives in the past few years, with everything from liquid milk alternatives to dairy-free coffee creamers.
At the moment, Danone dominates the dairy-free yoghurt market, but dairy-free cheese is still highly fragmented. Rice suggested there was still a lot of room for new products and new sales in the category over the next five years.
“As growth continues, expect to see the dairy-free category consolidate, with fewer players winning a greater share of the prize, a greater focus on technological innovation to replicate the unique characteristics of dairy, and more widespread availability as dairy-free becomes a natural choice for many and continues its move into the mainstream,” he said.
Focus on nutrition
The milk alternatives market already is well-established Europe and continues to grow, having reached a sales value of more than €3bn in 2020, said Rice. But nutrition claims are coming under scrutiny, particularly when compared with cow’s milk, which is naturally high in essential vitamins and minerals. Still, it is one of the fastest growing categories in the food and beverage industry.
“Oat has been very successful in replicating a traditional dairy mouthfeel, and it has positive health connotations with lowering cholesterol,” said Rice. “Recently activity has focused on pea, hemp and quinoa.”
Blending plant sources is another emerging trend. In the United States, Califia has launched a blended product with oat, sunflower seed and pea to match the protein value of dairy milk, while Andros is mixing plant sources like rice, coconut and oats with fruit for a twist on the traditional milkshake.