After a spike in growth of 4% in 2020, due to the shift to cooking and eating at home during the COVID-19 crisis, retail sales of dairy products and alternatives registered more modest growth of 2% in 2021. Euromonitor International identifies the following five key factors shaping the dairy products and alternatives industry: 1) Dairy alternatives continue to rise in popularity; 2) Spotlight on immunity and gut health; 3) Back-to-local dairy surges; 4) Allergy-friendly is a key focus area in baby food; and 5) E-commerce maintains momentum.
Dairy alternatives continue to rise in popularity
Growth in dairy alternatives is set to accelerate, thanks to a growing number of consumers trying to follow a plant-based diet and limit their intake of dairy products. Soy drinks has lost ground due to the poor perception of this ingredient, in favour of other milk alternatives (non-soy plant-based milks), with the latter seeing 16% growth in retail sales in 2021, making it the most dynamic category across the whole dairy products and alternatives space. Milks made of oats, with strong health and sustainability credentials, and blends of plant-based ingredients, which can offer a better nutritional profile, continue to gain ground.
Source: Euromonitor International’s Passport Dairy Products and Alternatives, 2022 edition
Spotlight on immunity and gut health
“Food as medicine” has benefited globally from consumers looking at preventative health amidst the COVID-19 pandemic. Globally, yoghurt and sour milk products, which have intrinsic probiotic content, take the lead in the prime positioning of immune support, and maintained growth in 2021. Milk with immune support claims remains a niche, although it was the fastest growing category in 2021.
Aside from immunity, products geared towards gut health, in connection with the gut-brain axis, and targeted at improving mental and emotional wellbeing, will also continue gaining traction. Product innovation has been active in this space, with product launches such as cheese snack Babybel Plus+ with probiotics, and desserts from Thai brand Dutchie Plus+ with added probiotics, claiming to support mental wellbeing, the nervous system and brain health, and improve the immune system.
Back-to-local dairy surges
Food localism has come to the fore, in connection with supply chain disruptions and consumers looking for fresher, high-quality dairy products. Having local claims within dairy products and alternatives presents an opportunity to target a more premium positioning and support local farms and the local community. Locally sourced product labels were considered as trustworthy by almost 60% of global respondents in Euromonitor International’s Voice of the Consumer: Lifestyles survey.
Allergy-friendly is a key focus area in baby food
Allergic reactions to milk affect a significant number of consumers. A2 milk, which contains no A1 beta-casein protein and targets lactose-intolerant adults, has become a rapidly growing niche in milk formula in Australia and China, with products aimed at babies who have difficulty in digesting milk. A2 milk formula in Australia experienced a more positive performance in 2021 following a notable drop in value share the previous year on account of a loss of daigou (cross-border) trade from China, as a result of the pandemic.
Besides A2 milk, other offerings that target parents of babies allergic to dairy, such as goat milk, sheep milk and plant-based alternatives, which highlight an “allergy-friendly” profile, containing ingredients such as gluten-free oats, peas or rice, are set to be further boosted due to their positioning as easier to digest.
E-commerce maintains momentum after a spike in 2020
E-commerce was already seeing healthy growth pre-COVID-19, but the pandemic accelerated its growth globally in 2020, with its share of sales of dairy products and alternatives reaching 5% of the total retail space, as brands increased their digital presence to generate sales. After record 46% growth in 2020, e-commerce maintained strong growth of 10% in 2021, despite many consumption occasions moving from retail back to foodservice. The habit of buying online continued in 2021, and was supported by more companies either strengthening their online presence or entering new markets.
Developments in digital technology give rise not only to e-commerce as a distribution channel, but also to food traceability and sourcing. Manufacturers will have more accountability in food safety and efficient delivery.
Source: Euromonitor International’s Passport Dairy Products and Alternatives, 2022 edition
Further insights on these trends are included in our briefing World Market for Dairy Products and Alternatives.