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The next generation of disruption in dairy alternatives

The large, complex U.S. dairy market faces several forces that are influencing growth and challenging the status quo. One trend impacting the industry across cheese, milk and yogurt, among other categories, is the competition from plant-based alternatives.

Once a nascent, niche trend driven by a narrow subset of consumers, plant-based formulations are now surging in popularity with more products entering the mainstream market. Growing concerns about the environment, animal welfare and personal health are attracting consumers to plant-based products, poaching sales from traditional dairy sectors in the process.

The rise and disruption of plant-based dairy alternatives has been steadily building for many years. Most notable is the category’s recent evolution from a rapidly growing upstart sector to one with widespread availability and mainstream appeal. In a way, this signals the onset of a second generation of plant-based alternatives, beyond merely acquainting Americans with the idea of consuming plant-based products and focused on expanding the sector to new frontiers and diversifying its offerings.

In the minds of many, dairy alternatives remain associated with traditional cow’s milk. For generations, cow’s milk has been as much of a staple commodity for U.S. consumers as any food item can be. Understandably, soy-based milk alternatives were the face of this sector for many years. More recently, the most sector expansion has been a result of developing other popular milk alternatives from ingredients such as almonds and cashews. In fact, sales of milk alternatives other than soy-based varieties skyrocketed in the U.S. from less than US$100 million in 2008 to just under US$2 billion in 2018, according to Euromonitor International.

Competition has increased significantly as more players enter the market, and, much like other fast-growing industries, concerns have grown over the potential of an impending stagnation as a ceiling is approached. Considering these concerns, manufacturers of dairy alternatives have sought new growth frontiers, a pursuit that has influenced the evolution of new formats that are quickly gaining popularity. Free-from-dairy ice cream and yogurt products have rapidly proliferated. According to Euromonitor International, both categories achieved double-digit retail sales growth in each of the last five years behind strong consumer enthusiasm for products, surpassing taste expectations and carving out notable portions of the market as a result. Though much smaller sales, free-from-dairy cheese products and even coffee creamers have also seen promising recent developments, demonstrating the potential for plant-based products to thrive well beyond serving as a contrast to milks and instead functioning as a class of viable alternatives to dairy more broadly.

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