Post-Dairy Era: The Unstoppable Rise of Plant-based Alternatives

March 2020

Shelves have been inundated with an ever-expanding array of plant-based dairy products. This is a response to the increase in flexitarian diets and the consumer perception of free from dairy as healthier and good for digestion. This report analyses factors driving adoption, key hotspots that manufacturers should be exploring for future investments, developments on the ingredients front and key recommendations to remain relevant moving forward.

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Key Findings

Rise of flexitarians, health reasons and digestion: key drivers of dairy-free diets

Dairy is under siege in key markets, most significantly in Western countries. This is due to a wide range of reasons, including health, concerning indigestion and allergies/intolerances, and changes in consumer beliefs around sustainability and animal welfare. On the other hand, plant-based dairy continues to surge in popularity. The rise of flexitarian diets is the driving force, and the key motivators of dairy-free diets include health reasons and good digestion.

Western Europe and the US are key hotspots, while APAC relies heavily on tradition

Despite the hype for plant-based foods, the penetration of dairy-free alternatives remains low in milk, yoghurt and ice cream globally. In the West, the US dominates and leads innovation, but fast growth is also expected in Western European markets such as the UK and France. On the other hand, APAC draws a different dynamic. It is the region with largest sales coming from traditional soy milk and popular nut-based drinks. Western manufacturers are looking to enter the region through the foodservice channel and e-commerce.

Upcoming plant-based ingredients accelerate innovation in the dairy-free space

In recent years, shelves have been inundated with an ever-expanding array of plant-based dairy products. While soy milk has struggled due to bad press around sourcing from GMO crops, other non-soy milk alternatives have skyrocketed. Pea is one of the newest ingredients entering the category, benefiting from its high protein content and its sustainability credentials. Other more exotic ingredients, such as pistachios and pili nuts, have also arrived on the scene.

Dairy companies are entering the dairy-free category to revitalise struggling brands or to diversify their thriving brands

Dairy manufacturers are following several approaches to benefit from the plant-based movement. On the one hand, some players are leveraging the trend as a means of revamping their struggling dairy brands. This is the case of Danone’s launch of plant-based Activia and Chobani’s entry in plant-based yoghurt in 2019 to reverse declining sales. On the other hand, there are also players focusing on extending their fastest-growing brands into the plant-based space. This is exactly what General Mills and Lactalis pursued with their successful brands Oui and Siggi’s.

Introduction

Scope
Key findings

Factors Driving Adoption

Dairy’s reputation is under threat
The boom of plant-based alternatives comes from Western markets
Rise of flexitarianism drives growth of plant-based foods
Ethical reasons close on the heels of health for vegan diets
Health and digestion: Crucial drivers behind dairy-free diets

Analysing Key Hotspots

Penetration of dairy-free remains low globally
The US dominates, but Russia is set to lead growth
France, the UK and Germany are key hotspots in milk alternatives
Milk alternatives become price-competitive in the US
Lifestyle trends and product variety are key growth drivers
Milk alternatives play a different role in China
Opportunities through foodservice heat up in China
The US is the bright star in free from dairy yoghurt
France and Italy: Key hotspots for dairy-free yoghurt beyond the US
Dairy-free yoghurt set to be the next plant-based craze in China
The US ahead of the curve for dairy-free ice cream
Italy and Sweden: Crucial markets in free from dairy ice cream
Cheese alternatives still targeted to vegans and dairy-free consumers
Dairy-free cheese still far from being clean label
Nuts used to make plant-based cheese more natural

Focus on Ingredients

Soy drinks plummets in the US
In pursuit of a more diversified plant-based milk experience
Plant-based milks not nutritionally competitive with cow’s milk
Sustainability credentials in question for nut-based milk
Pea protein brings an added-value dairy-free offering
Pea spurs innovation as a base ingredient, or as fortification
Pili nuts and pistachios arrive on the scene
Differentiation by building brand identity

How Companies are Reacting

Danone wins in Western countries
Danone leverages learned expertise in plant-based in its own portfolio
M&A and venture capital become key routes to tap into plant-based
Plant-based expansion to revamp dairy portfolios
Plant-based diversification by leveraging flourishing dairy brands

Recommendations

What is next in the plant-based dairy aisle?
In pursuit of a more natural plant-based offering
Plant-based innovation starting to align with clean label trend
Innovation to come from more sustainable and nutritious offerings
Is quinoa the next oat milk?
Functionality to bring added-value propositions to the table
Exploring opportunities beyond Western markets
Local plant-based ingredients to close the price gap with dairy
Bringing learnings from Asia to the West
50:50 blends of dairy milk/dairy-free milk: An untapped opportunity
Tech-driven innovation to pose challenges to traditional routes
Key takeaways

Appendix

About Via Pricing from Euromonitor International
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