Where Consumers Shop for Dairy Products and Alternatives

June 2022

Store-based retailing, fueled by the global growth of modern retail, is the key engine driving sales volume in dairy products and alternatives. On the other hand, e-commerce sales are expanding due to younger generations' increased acceptance of the practice and the growth of digitally-driven business models such as subscription services. This study evaluates the performance of different distribution channels in the sale of dairy products and alternatives and focuses on the actions of retailers.

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Key Findings

Channel shifts enhance category performance

COVID-19 has reshuffled consumers’ preference to shopping for dairy and alternative products across retail channels, while e-commerce was enjoying healthy momentum prior to the pandemic, with the onset it emerged as a favoured channel as it delivered on consumers’ key concerns. This variation in dynamics has forced changes to trickle through all retail channels.

Innovation creates new level of traction

Grocery retailers are investing heavily in partnerships that enhance in-store footfall, while non-store retailers are exploring business models that sustain continuous purchase such as subscription models. Dairy farms are exploring removing the middlemen across the value chain and accessing consumers directly through their owns apps or partnership with platforms having robust delivery network.

Enhanced offerings maintain momentum across modern grocery

Modern grocery retailers dominate the industry sales for dairy and alternative products, with supermarkets taking the lead in absolute growth over 2016-2021 and posting a CAGR of 3.4%.

E-commerce emerged as a vital component of the purchase cycle

Even with consumers regaining free access to brick-and-mortar stores, the convenience provided through e-commerce guaranteed an upward trajectory. E-commerce dominates non-store based dairy and alternative retailing. E-commerce reached a 5% value share of total category distribution in 2021, up from just 2% in 2016.

Economic challenges guarantee consistent consumption for private label brands

The value for money attribute has gradually elevated in importance for many consumers as they started to manoeuvre the economic challenges laid upon them by the impact of the pandemic followed by soaring inflation. Modern retailers have capitalised on their knowledge of synergies across the dairy products value chain to launch offerings at a competitive prices.

Scope
Key findings
Dairy products return to moderate growth rates in 2021
Habit persistence expected to shape category growth rates in the near future
Evolving retail landscape paves ground for growth
Convenience elevates the growth rates for non-store retailing
Non-store retailing gain grounds across all regions
E-commerce platform penetration across grocery retailers boosts growth
Supermarkets maintains leadership while other formats compete to maintain shares
Convenience precedes value as consumers choose their preferred channel for dairy purchases
Consumers’ mobility in 2020 and beyond dictated growth rates across convenience stores
Strong presence in offline and online channels creates recipe for success
Innovation and unique partnerships enhance growth for modern retailers
Strategic planning and agile solutions maintain global ranking
Economic challenges guarantee consistent consumption for private label brands
Private label growth remains higher in 2021 vs 2019 signalling increased adoption
E-commerce emerged as a vital component of the purchase cycle
E-commerce’s current growth rate signals a robust future
Dairy products and alternatives secure increasing sales through e-commerce
Innovation within delivery solutions ensures upward trajectory
While Asia Pacific leads in value terms, MEA and LATAM witness great potential
Amazon regains the lead after fierce competition in 2020 from Alibaba
UK holds the highest unmet potential in e-commerce
Plant based and functionality pave the road for growth over the forecast period
Although growth rates are lower than in 2020, e-commerce maintains healthy growth rates
Key takeaways
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