The rise of the plant based milk (PBM) industry in Europe and the US, in concurrence with the steep decline in fluid milk consumption, is causing havoc in the dairy industry. Danone acquired PBM leader WhiteWave to create DanoneWave; and Dean Foods recently invested in the emerging competitor Good Karma, to diversify from dairy into plant-based. Dairy associations are resorting to fighting the use of the word “milk”, as if it matters.
Virtually every report we read on the subject, states that this is a result of the rise in vegans and lactose-intolerant consumers. If that’s indeed the case, then dairy companies are right to be afraid. But is this really the case?
Take the United States, where PBM penetration was 55% of households in 2015: according to USDA data, fluid milk’s decline between 2005 to 2015 is consistent with the decline between 1985 to 1995, or 1995 to 2005. In other words, the “free from” or much-hyped vegan trend is not the main cause. The fact the yogurt, butter and cheese continue to grow, indicates that the 1% vegan population still does not affect the industry as much as some companies think, but it might indicate that digestion is one of the causes – as milk contains more lactose, and is considered by many consumers as a cause for gastric inconvenience (indeed, gut health is one of the most important wellness factors today, according to Schieber Research). Apart from the small vegan population, a rather large population seeks to diverse its food and beverage consumption into plant-based food – “flexitarians”. They may still consume dairy and animal based products, but are looking for a diverse nutrition.
When we analyzed the marketing strategy, and subsequent growth, of leading brands, we discovered an interesting story. Once the vegan or lactose-free claims moved to the back, and taste/ multiple varients became the prevalent claim, brands experienced growth, causing retailers to adopt the category, driving further growth. This means that the main reason for milk’s decline, and for PBM growth, is that milk is not considered to be a sacrifice: plant based is considered as healthier, lower in calories and sugar, and offers a huge variety of flavors and ingredients, including extra protein and calcium, while milk (aside from the flavored variety – which is growing in per-capita consumption) – is… boring. And indeed, among omnivores who consume PBM, “healthier than milk” is the number one reason for consumption – while for the general population, taste is the number 1 factor.
What this means:
(a) PBM rise doesn’t necessarily indicate that other dairy categories are at risk; however they do indicate that consumers want to consume more plant-based products, and if given a proper variety and ease of shopping, the plant-based swap is likely to succeed.
(b) Dairy is not the only industry that needs to take a closer look at PBM. A lifestyle drink, this segment can influence sales of better-for-you beverages, including juice, iced coffee and even bottled water.
To learn more about this market, visit the Plant-Based Milk Report Page.