Putting growth in dairy alternatives into perspective

Friday, 5 May 2017

Innovation has been important to the dairy category in recent years and there has been a wealth of new product development. There has also been continued growth in the number of products that market themselves as alternatives to dairy, as well as in the volume that is sold. Is this rapid growth likely to continue and what impact could it have on the global dairy market?

Consumers have seen a wealth of new product development over the past few years, particularly in the area of alternative dairy products. These include soya, coconut and almond-based products. 

Over the past five years alternatives to dairy (including soya) have seen 59% growth in volume sold in Great Britain, according to Kantar Worldpanel data. Mintel report 18% of adults purchased dairy substitute products in the six month period to September 2016, this is higher than both lactose-free dairy products (15%) and dairy-free products (eg dairy-free biscuits, 14%) in the same period.

Reasons for reducing consumption

According to Mintel, half of Brits avoid or have a household member who avoids one or more type of food and one in five of these say the reason is due to an intolerance or allergy. One reason given for avoiding dairy is because of a perceived dietary requirement such as an allergy or intolerance, but it is important to remember that this is not the only reason. The decision can also be a lifestyle choice which may be influenced by a wide range of factors, such as media coverage of celebrity exclusion diets, or choosing to follow a vegan diet.

New product development in the dairy industry 

Part of the reason behind dairy alternatives achieving rapid growth is effective marketing and extensive new product development. Despite the high level of growth, it is important to acknowledge that its contribution to the total GB dairy market remains small at just 3.7% of the total milk category by volume and 7.4% by spend for the 52 w/e 29 Jan 17 (Kantar Worldpanel).

Chart showing 80% of GB dairy spend is pasteurised milk

Innovation has not been restricted to dairy alternatives, with a wide range of filtered and vitamin enhanced cow milk products now available. This shows that the dairy industry has begun to target some of the health concerns of consumers, these added value products aim to emphasise the nutritional value of milk. 

Introductions of products with low/no lactose grew from 7% of all NPD in dairy in 2011, to 11% in 2016, according to Mintel data. Lactose-free products are produced using cows’ milk, so this could be considered a product area where traditional dairy products can be adapted to meet the needs of consumers who have restricted their consumption due to dietary requirement.

Will there be similar growth in the global market?

GlobalData’s research suggests the popularity of alternatives to dairy is likely to continue to grow at a global scale; the graph below shows alternative milk products are predicted to continue to see growth over the next five years compared to white milk.  In North America and West Europe, it is predicted that white milk might see its market begin to shrink. The only exception to this is the Middle East and North Africa (MENA) region, where growth of white milk is expected to be higher. In a post-Brexit world, regions outside Europe may offer new opportunities for the dairy industry to target.

Chart showing dairy alternatives are in volume growth globally, while white milk volumes are declining in North America and West Europe

GlobalData has found on average, 23% of people in the UK limit or avoid intake of dairy, five percentage points higher than the Europe average. This is not the highest in Europe, however, as both Sweden and Italy were found to have a higher average proportion of people limiting their dairy consumption.

Image showing 29% of people limit dairy intake in China, compared to only 18% in Europe

What does this all mean?

It appears likely that there will continue to be volume growth in alternatives to dairy over the next few years, but it should be noted that white milk is also expected to see volume growth in many areas of the world. Although it is always difficult to predict how a market will perform, this suggests that the entire dairy category will continue to grow. This can perhaps be considered a reflection of the growing demand for a western style of diet by people across the world.

The future of dairy alternatives will partly depend upon food trends. Despite the rapid growth of dairy alternatives, it is important to remember that they currently only account for a very small proportion of the overall milk market in Great Britain. There may be opportunities for the dairy industry to understand the reasons for this growth and apply this knowledge to adapt cows’ milk products and market them more effectively.