Dairy alternative products are not new in the market anymore. As consumer behavior changes and product offerings rapidly diversify, the dairy-free ecosystem has become more dynamic. As part of the vegan trend, the consumption of dairy alternatives is significantly gaining market share, which is currently 3% of the dairy category sales.
For instance, from 2012 to 2016, the sales of milk alternatives experienced a CAGR of over 10%, while conventional milk sales declined at an annual rate of 3%, showing a deep change in consumer behavior.
Both large and small players in dairy are taking action to leverage the opportunities presented in this high-growth, high-margin market. In 2016, Danone acquired WhiteWave Foods for $12.5 billion. The acquisition of the plant-based food and beverage company was part of Danone’s strategy to add new organic and plant-based products to their portfolio.
An even more extreme example is Elmhurst, a traditional dairy company from New York. At the end of 2016, Elmhurst decided to step out of the dairy industry and convert itself into Elmhurst Milked to launch its new line of plant-based milks.
Dairy free is about health
Even though veganism is a major trend driving dairy alternatives growth, brands in the space have steered away from being an ideological dietary choice. Instead, they are positioning themselves to become a health-based choice.
As the search for healthier diets continues, people are increasingly introducing plant-based meals to their diets. Dairy alternatives seem to be filling this need, as health claims dominate consumer discussion around the benefits of dairy alternatives. Consumers frequently use hashtags such as #healthy or #healthyfood in social media posts related to vegan. Product reviews also show this clear connection with health.
As the number of calories is usually lower in dairy alternatives, weight management shows up as the number one benefit mentioned by non-dairy consumers. Weight concern helps to explain why almond milk had 64% of milk alternatives sales in 2017, as it is option with the least amount of calories.
High interest around Obesity and Weight Management spotlights an opportunity for companies to advertise their products around this major consumer need. But, the current overall product offerings seem to lack weight loss and low-calorie claims.
Avoiding perceived “bad” nutrients comes first when consumers talk about the nutritional value of dairy alternatives. Escaping from gluten, sugar and fat play a more important role than consuming more protein, vitamin, fiber and calcium. What may be surprising is the fact that avoiding lactose is only the fifth most popular consumer discussion around nutrition.
Milk alternative ingredients: Oat and pea are gaining traction while soy fades
Soy milk was the first non-dairy ingredient to become popular on the U.S. market. This was largely accomplished by claiming that soy protein prevented heart disease. However, raising concerns around GMO and the launch of several nut-based milks put soy as the worst ranked in consumer sentiment for milk substitute main ingredients.
As consumer interest in soy slowly fades away, oat and pea milk are gaining share in consumer discussion, although these alternatives are adopting different strategies. Pea milk was introduced to the market as one of the best alternatives regarding nutritional value. Most of the buzz was around the brand Ripple (Google Ventures invested in them in 2016). Pea milk is being praised for having the highest protein content among milk alternatives - a notable advantage as consumer awareness around protein increases.
Oat milk on the other hand, may not have the best nutritional facts compared to other plant-based milks, but consumer discussion around it soared in relation to other popular alternative milk ingredients. The increase in its popularity can be partially credited to the brand Oatly, that found its way into coffee shops by creating a barista edition oat milk. It has been exalted for its better taste and texture when used to prepare coffee drinks.
As the dairy alternatives market continues to grow, led by a combination of several dietary trends, it also becomes more mature and complex. Initially driven by a general health perception around non-dairy, consumers are now gaining deeper knowledge around these products and their nutritional properties. Consumers are increasingly adopting them as part of functional diets. This shift forces brands to stop relying on emotional and general claims only, and focus more on fact-based messaging to keep ahead of competition.
Additionally, new ingredients such as oat and pea are gaining in popularity and should make companies rethink their product offering. In order to succeed, tracking market changes is essential for companies to determine whether their product portfolios and messaging are still aligned with consumer needs.
Written by Pedro Gorski
CPG/F&B Business Analyst at Signals Analytics. Pedro has worked on a variety of projects for food & beverage companies in the US, European and LATAM markets. He is also currently studying Civil Engineering at Universidade Federal do Rio Grande do Sul.
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