NETHERLANDS – Rabobank, a global leader in food and agriculture financing bank, has reported that dairy markets should learn new alternatives to dairy products as consumers are increasingly going dairy-free, particularly when it comes to fluid ‘milk’ used on things like cereal or in coffees.

According to the company, its latest Raboresearch dairy report ‘Dare Not to Dairy — What the Rise of Dairy-Free Means for Dairy… and How the Industry Can Respond’, has indicated that the time is right for the dairy sector to reflect on the success of alternative dairy products and to consider applying those lessons to dairy.

The dairy industry, according to Dairy Reporter, has risen at a rate of 8% annually over the last 10 years, to which dairy-free ‘milk’ represented 12% of total fluid milk and alternatives globally in 2017, with retail sales valued at US$15.6 billion.

More recently though, biotechnology has entered the arena, brewing milk proteins through biofermentation, the Rabobank report said.

Dairy alternatives have competed in the dairy space for decades, but competition has intensified as dairy alternatives broaden in types, styles, and categories of product.

Nutrition, price, and flavour tend to favour dairy, but changing consumer perceptions around health, lifestyle choices, curiosity, and perceived sustainability are increasingly drawing more people to select ‘dairy-free’ products.

“Global demand for dairy is expected to grow by 2.5% for years to come, with demand for non-fluid categories offsetting weak fluid milk sales,” says Tom Bailey, RaboResearch Senior Analyst – Dairy.

“While it’s not essential to diversify into dairy alternatives, it would be wise for the dairy industry to at least learn one thing from the success of dairy alternatives, which may be putting the consumer first and trading in the old grass-to-glass model for glass-to-grass.”

The challenge for dairy lies mostly in fluid milk, where retail sales in Western Europe (US$18.6bn) and the US (US$12.5bn) declined at an annual rate of 5% and 3%, respectively, in the five years to 2017, according to Euromonitor.

The results over the last five years have favoured dairy players who have invested in milk alternatives across the supply chain – from planting almond trees to buying brands.

The investments in dairy alternatives have shown returns above standalone dairy.

The plant-based dairy alternatives market is expected to come to represent 40% of the combined total of dairy and dairy alternative beverages by 2021 – up from 25% in 2016, according to Plant-Based News.

According to a new report by market research firm Packaged Facts in the fourth edition of Dairy and Dairy Alternative Beverage Trends in the U.S., the non-dairy industry is predicted to be worth US$28 billion in the next two years – a staggering growth from only US$6 billion in 2016.

Packaged Facts research director David Sprinkle explained that flexitarians are responsible for the shift toward vegan milk.

“Vegetarians and vegans together account for less than 15% of all consumers, and their numbers do not grow very rapidly,” he said.

“But a growing number of consumers identify themselves as flexitarian or lessitarian, meaning that they’ve cut back on their consumption of animal-based foods and beverages.

It is this group that is most responsible for the significant and on-going shift from dairy milk to plant-based milk.”