With the increasing shift in consumer preference, the global dairy alternatives market is expected to chalk out remunerative growth trend through a diverse range of verticals.
Consumers are increasingly conforming to vegan and flexitarian diets, seeking dairy alternatives, as interest in health, sustainability, environmental protection and ethics continue to bulge across the World.
With the increasing shift in consumer preference, the global diary alternatives market is expected to chalk out remunerative growth trend through a diverse range of verticals. According to a research by the world’s leading food processing and packaging solutions company Tetra Pak and Lund University, demand for dairy alternatives could increase by 25% to 65% by 2030. During the forecasted period, the dairy alternative segment has a potential of occupying up to 50% of the dairy market, with the demand for animal-based dairy foreseen to reduce by between 35-75%.
“The food & beverage sector will undergo an enormous transformation over the next decade, with the dairy industry feeling this most acutely. The key to success in the new landscape will be in embracing flexibility and proactively responding to the wave of disruptive changes,” Frederik Wellendorph, Vice President Business Unit Liquid Food, Tetra Pak said.
Market research firm, Research and Markets concurs with this finding, highlighting that the once niche dairy alternative market estimated at US$22.6 billion in 2020, is projected to reach US$40.6 billion by 2026, recording a CAGR of 10.3 % in terms of value.
Asia Pacific region accounts for the largest market share in the segment owing to the increasing consumer inclination towards vegan food, ascribing to religion, culture or altruism, and increase in reported cases of milk allergies and lactose intolerance. North America has also accounted for a considerable share in the global plant-based milk market.
However, Europe is projected to be the fastest-growing market of the segment, driven by rising health awareness among consumers, especially the millennial who focus on the nutrition factor, along with environmental concerns and sustainability issues.
In the Middle East and Africa, the market is projected to grow at a CAGR of 6.76% during the forecast period (2020-2025), according to Mordor Intelligence, as majority of the population in the region are lactose intolerant thus turning towards dairy alternatives so as to maintain the required nutritional level in the body. South Africa is the largest market in the region.
In the long run, the outbreak of COVID-19 is expected to trigger market growth, as it has increased awareness about the various health benefits of plant-based dairy products. In addition, initiatives taken by governments and other organizations to promote the consumption of alternative protein products have also contributed significantly to market growth.
For instance, the government of Canada has launched the Protein Industries Canada (PIC) super-cluster, in order to grow the plant-based food & beverage business in the country. Under this project, the Canadian government invests in various plant-based businesses.
Apart from this, global animal rights organizations such as People for the Ethical Treatment of Animals (PETA), promote the consumption of plant-based food & beverages by conducting various awareness events and campaigns.
Wide breadth of offering coupled with readily available raw materials
With the dairy alternatives category presenting itself as a key battlefront contender in the consumer-driven revolt, manufacturers have resorted to formulate products with a broad range of positioning.
Non-dairy options cover a gamut of products to include milk, ice cream, frozen desserts, yogurt, cheese, drinks, creamer, butter and dressing, among many others. In place of animal sourced dairy, the segment has expanded far beyond the traditional soy milk to incorporate different plant sourced bases – almond, cashew, coconut, rice, oat and even hemp, flax, quinoa etc.
These are the ingredients of choice as they are low on fats, cholesterol and have zero concentration on lactose. Most importantly, advances in formulation of products that meet the ideal taste, stability, nutrition and mouth feel, has made consumer to excitingly explore the new offerings. Seeming like a bingo moment is the fact that they are readily available raw materials.
For instance, global soy production has increased to around 361 million metric tons in 2018 from 320 million metric tons in 2014, according to SOPA reports. USDA reports that the global almond production has also grown to 1.480 million metric tons in 2019/2020, from the nearly 1.069 million metric tons in 2014, while the global oat production in 2013 was 20.73 million metric tons, growing to 22.8 million metric tons in 2019/2020.
Joseph Poore, a researcher at the University of Oxford, published a study looking at the impact of soy, oat, rice, and almond milk on the environment. In terms of carbon emissions, almond, oat, soy, and rice milk are all responsible for around a third or less of the emissions dairy milk puts out, with almonds the lowest of the bunch at 0.7 kg per litre, followed by oat (0.9 kg), soy (1 kg), then rice (1.2 kg). Dairy milk is responsible for 3.2 kg of emissions per litre of milk and the farming alone contributes 4% to the total emissions of greenhouse gases from human activity – that is about two billion tonnes of CO2 equivalent every year.
Land use shows an even more dramatic split, with nine square metres of land needed to produce just a litre of dairy milk, compared with less than a one square metre for plant-based milks, ranging from 0.3 square metres for rice milk to 0.8 square metres for oat milk. Further to that, oats are regarded as a valuable part of crop rotation systems, thus not contributors to deforestation and excessive utilization of water. Even almond milk, a notorious water-hogger, takes less water to produce than dairy – needing on average 371 litres of water per litre of milk produced, compared to dairy milk’s 628 litres. Rice milk follows shortly behind, needing 270 litres of water per litre of milk. Soy and oat, on the other hand, need just 28 and 48 respectively.
“In fact, for some plant milks, the environmental impact of the crop itself is almost negligible in comparison to dairy cows,” says Poore.
To further ensure accountability in the industry, players like Alpro, a Danone subsidiary say they only buy soy directly from farmers so they can trace their origin, and that most of the beans that goes into their milk comes from France, a region revered for its sustainable farming operations.
Milk from the lab
Science has also taken stage in the evolution of the dairy industry, with Singapore based biotech company Turtle Tree Labs, making milk from cells without stepping foot on a farm by using giant bioreactors.
“We have already seen other companies do something very similar with meat. And consumers are increasingly pushing for cruelty-free products, they are more conscious of reducing their greenhouse gas emissions. By extracting milk from cells in our lab, we can get real milk without having to harm the planet and harm the animals, so this is the future,” said Max Rye, chief strategist at TurtleTree Labs in an interview with BBC.
The pioneer of cell-based milk solution, recently raised US$6.2 million in an oversubscribed Pre-A funding round, to accelerate research and production of bioactive compounds found in human milk, which will be applied to both infant and senior nutrition.
Innovations drive the segment
Danone, Nestle, Kroger, Chobani, Oatly, Eden Foods, Alpro, Harmless Harvest, Alden’s Organic, Hain Celestial Group and Sunopta, are some of the key manufacturers in the industry.
The players are extensively focusing on product innovations and new product launches in a bid to capture greater market share and secure it. Some of the notable launches include Danone’s plant-based So Delicious Dairy Free brand expanding its offerings to include shredded and sliced cheeses, as well as creamy spreads. This was followed with Barry Callebaut launching a 100 percent dairy-free milk chocolate coined “M_lk Chocolate” as part of its new “Plant Craft Indulgence” range. Nestle has also unveiled plant-based creamers under its Natural Bliss brand.
Innovations have also graced the market in the previous years with Del Monte Foods introducing a new line of non-dairy parfaits dubbed Fruit Crunch Parfaits, made with coconut cream. Alcohol beverage maker Diageo changed the game with the launch of 13% ABV dairy-free version of its Baileys liqueur in the UK, which is made from almond milk in 2018. Unilever’s Ben & Jerry’s has over the years introduced new flavours of its dairy-free ice-cream range.
In Africa, Chi Limited of Nigeria introduced Soya Milk under its Hollandia brand, which it later expanded with a 100ml convenient pack in 2018, to make the product more affordable and accessible. Further in East Africa, Jetlak Foods an established food and beverage manufacturing company based in Kenya recently launched its Nuziwa plant-based nutritional drink range, made from soya coming in original, unsweetened, chocolate, strawberry, caramel and banana flavours.
In South Africa, products brought into the country by the local importer and distributor such as Infinite Foods, Vfoods and Health Connection Whole Foods, compete for the market share alongside products by local players such as Good Hope International Beverages, Clovers, Blue Diamond Almonds and private label brands by retailers such as Pick n Pay, Checkers, Woolworths and Spar.
Investments and buy-outs increase
The plant-based dairy arena is also characterised with mergers, acquisitions and huge denominations of investments, which is seemingly threatening the traditional dairy industry.
French multinational dairy company, Danone has invested €12 million in a new plant-based production line at its Parets del Vallès factory, near Barcelona, Spain, which will produce coconut and oat-based yogurts. “Answering the new food trends, such as flexitarianism, brings us closer every day to our ambition to offer a healthy, sustainable and inclusive food choices,” said Paolo Tafuri, CEO of Danone Spain.
Food giant, Nestlé SA has inaugurated a new research and development (R&D) accelerator in Konolfingen, Switzerland, to drive innovation and speed-to-market of sustainable dairy and plant-based dairy alternatives that will serve start-ups, students and scientists and help bring products from ideation to commercialization.
As investments in alternative dairy companies continue to skyrocket, tradition dairy segment clutches at straws, with firms such as Dean Foods, an American food and beverage company, announcing the shutdown of its major Illinois facility in 2018, with ‘decreased dairy consumption trends’ among the reasons given for the decision. Prior to the move, the company started diversifying its portfolio with acquisition of stake in plant-based brand Good Karma, which it later sold-back in 2020 after filing for bankruptcy.
The rapid uptake in alternative dairy products is keeping manufacturers on their toes as they strive to hack the right product formulations to deliver on the ideal taste, texture and nutrition composition in comparison to animal sourced dairy.
Despite the alternative dairy category edging out a substantial market share for itself, all is not rosy as questions have arisen as to whether plant-based dairy products should adopt the identity of their traditional counterparts.
In October 2020, the European Parliament voted to ban the use of dairy-related terms for all plant-based alternatives, which would prevent the use of dairy descriptors, such as ‘almond milk’ and ‘vegan cheese’, cream-imitation, as well as ‘yogurt-style’ for dairy-free products in Europe. The vote follows a 2017 ruling, which saw the European Court of Justice (ECJ) ban the use of dairy names such as ‘milk’, ‘butter’, ‘cheese’, and ‘yogurt’ for purely plant-based products – with the exception of coconut milk, peanut butter, almond milk and ice cream.
Unsurprisingly, the European Dairy Association (EDA) welcomed the move highlighting that it will help avoid consumer confusion, between products that are different in terms of origin, ingredient composition and nutritional value. The ruling is, however, a major blow to the plant-based dairy sector, with many players lamenting the outcome.
“We deeply regret the vote in favour of far-reaching and entirely unnecessary restrictions on the descriptions of plant-based dairy products,” said ProVeg vice president Jasmijn de Boo. Jasmijn further raised concerns that plant-based dairy businesses could now be ‘saddled with significant financial burdens’ and ‘practical challenges’ around renaming, rebranding, and remarketing their products. Dairy-free yogurt producer Alpro also added its voice to a coalition of nearly 100 plant-based proponents speaking out against the push. “These additional restrictions are neither necessary, nor proportionate. European Plant-Based Foods Association (ENSA) members have and will always make the plant-based nature of their products clear to consumers. Making it easy and understandable for consumers is all that should matter,” Sue Garfitt, CEO of Alpro said.
The fight has also been presented in the USA, with the Food and Drug Administration (FDA) in 2018 signalling plans to start enforcing a federal standard that defines “milk” as “the lacteal secretion, practically free from colostrum, obtained by the complete milking of one or more healthy cows.” Though non-dairy beverages are often substituted for cow’s milk, “they are not able to completely mimic the nutritional profile,” according to Vandana Sheth, a registered dietician and spokeswoman for the Academy of Nutrition and Dietetics.
According to a report by BBC, soy milk is the only one that really comes close in comparison to milk with protein levels of 3.4 g per 100ml versus 3.5 g per 100ml of cow’s milk, on average. However, rice milk, coconut milk and almond milk provide minimal amounts of protein, and they need to be fortified with vitamins such as calcium, D and B12, to be “dairy-like”. “To put it bluntly, milk sounds better than nut juice,” Galen said, acknowledging that it makes sense companies would rather identify their products with the former option.
In a bid to secure and protect the fast-growing sector, Danone, Hain Celestial and other plant-based food companies operating in Canada, formed the Plant-Based Foods of Canada (PBFA) lobbying organisation in 2018 to advance the interests of the plant-based foods sector in the country. “The time has come for the plant-based food industry to build upon its collective voice within Canada. In the next five to 10 years, we are going to see rapid growth in the interest and consumption of plant-based foods. It’s happening already. “As industry continues to move into the mainstream, it’s critical that it has a voice to accurately represent it and help shape the direction it takes for the benefit of all Canadians,” Beena Goldenberg, CEO of Hain Celestial Canada said.
PFBA’s agenda is to work with governments to raise awareness of the emerging issues shaping the sector, in order to foster the growth of the sector and encourage innovation, while providing Canadians with plant-based food choices which meet consumer expectations. Its core mission is to support the regulatory and market interests of plant food companies in Canada that make and market vegetarian products that are similar to traditional animal protein products.