Plant-based dairy alternative sales grow during COVID-19 pandemic

July 22, 2020

At last week’s Institute of Food Technologists SHIFT20 virtual event, Cargill discussed the projected performance of milk and milk alternatives in 2020.

Plant-based dairy-alternative sales continue to grow—and so far even the COVID-19 pandemic can’t stop their rise. During last week’s Institute of Food Technologists SHIFT20 virtual event, ingredient supplier Cargill (Minneapolis) hosted a webcast providing a look at how plant-based milks are expected to perform compared to dairy milks in 2020.

Many dairy-alternative categories should continue seeing strong growth in 2020 as they have in recent years. The same is not true for dairy. Looking at Euromonitor data from May 2020 on the milk alternatives market, webcast speaker Mark Fahlin, business development, Cargill, said that while dairy milk’s market size is forecasted to decline 5.3% overall in 2020, milk alternatives’ market size is expected to grow 9.2% in 2020. This has been a long-term trend—declining dairy-milk sales alongside increasing milk-alternative sales—over the past decade and more. Fahlin, again reporting Euromonitor data from May, said that on a 15-year long-term CAGR basis during 2005-2020, dairy milk’s market size declined 1.5%, while milk alternatives’ grew 6.7%.

Many food categories have seen volatile sales shifts due to the COVID-19 pandemic. Consumers' shopping behaviors changed drastically especially during the beginning months of the pandemic as nationwide lockdowns ensued. Fewer consumers now dine out, while shoppers significantly increased their volume of grocery store purchases for at-home consumption. For dairy milk, this spells trouble since at least 30% of dairy milk’s market in 2019 came from the foodservice market while 70% comes from retail channels such as grocery stores, Fahlin explained citing Euromonitor data from May. By contrast, milk alternatives “have less exposure to the foodservice channel compared to milk,” with only 15% of its market coming from foodservice in 2019, he said. Dairy milk has much more to lose if consumers aren’t eating out.

That’s not to say that dairy milk sales haven’t grown in the retail channel. Like many food and drink items during the pandemic, dairy milk sales stemming from grocery store and other retail channels are expected to rise in 2020, to the estimated tune of a 6.3% gain in retail volume in 2020 over 2019, which is pretty healthy retail growth. However, because the dairy milk market is still being dragged down by the large 33.7% foodservice market decline expected in 2020 over 2019, when you combine foodservice and retail performance, dairy milk is still expected to decline 5.3% overall in 2020 compared to 2019.

The 2020 picture is much rosier for milk alternatives. Milk-alternative retail sales are projected to grow a significant 16% in 2020 over 2019 (above and beyond the average 6.7% CAGR the category has seen in the past 15 years). This healthy retail growth softens the 28.8% decline that milk alternatives are expected to see from the foodservice channel in 2020. Overall, subtracting foodservice losses from retail gains, the milk alternatives market is set to see a net gain in 2020 of approximately 9%.

Beyond 2020, it’s difficult to solidly predict how sales will change for either category. “Of course, so much can change which is why we’re not forecasting out beyond 2020,” Fahlin said.

Dairy Product Types

Fahlin also took a look at how various products in the dairy category (conventional and plant-based) performed during the first months of the pandemic based on Nielsen retail sales data spanning February 22, 2020, to May 23, 2020. Many product types (again, conventional and plant-based combined) saw growth outperform the general retail average of 7.6% over that time frame.

Cheese sales grew 16.4% during the time period, outperforming the general retail average of 7.6%. (Comparatively, although Nielsen data show dairy-milk sales growing 2.7% during the time period, that growth was still lower than the 7.6% retail average.) Ice cream sales grew 14.1% during the time period. But the highest growth during the time period was for butter, which saw 51.7% growth likely due to an increase in home baking. Milk-alternative growth during that time frame was impressive, too, at 22.4%.

One product that saw a decline during the time period was yogurt. Yogurt sales fell 6.5%, possibly due to the fact that consumers often eat yogurt on the go; if consumers are staying home, they might be opting for other breakfast and snack items.

Regarding milk alternatives, Fahlin said, “One thing to take into account is that prior to COVID, plant-based milks were growing on a volume basis at about 8% over the previous year, which is already pretty healthy, but you’re still seeing about a 14 percentage point lift over the baseline period as things net out. So,it really seems like the adoption rate has even increased during this COVID period.”

Plant-Based Market

Within the dairy alternatives market alone, different product types are faring better than others. Looking at the market share of different plant-based product types, plant-based milks are by far the largest category in dairy alternatives, growing at 9.6% in the 52 weeks ending April 18, 2020, per Nielsen data. This is followed, in order, by plant-based creamers (which grew 32% during the time period), plant-based ice cream (which actually declined 1.8%), plant-based yogurt (which grew 30.8%), and plant-based cheese (which grew 19.2%). Regarding plant-based cheese, Fahlin said: “Plant-based cheese is really the nascent category that we’ve been doing a lot of work in. We expect this will grow very quickly.”

In terms of plant-based products' penetration of the overall, conventional market, plant milks have made the greatest inroads in the conventional milk market, accounting for 9% of overall milk sales in the 52 weeks ending April 18, 2020, per Nielsen. Next highest is plant-based creamers (with 3.3% product category penetration), plant-based yogurt (with 1.9% category penetration), plant-based ice cream (with 1.4% category penetration), and plant-based cheese (with 0.4% category penetration).

Fahlin also provided an updated look at the market share of various plant-based ingredient sources for plant-based milks. Citing Nielsen data, Fahlin said that in 2019, almond milk accounted for 76% market share of plant-based milks, with soy next largest at 10%. Third largest is oat milk with 4% market share.

Some notable shifts Fahlin pointed out is that back in 2014, soy accounted for 25% of the plant-milk market, but now soy is seeing an 11% CAGR decline in the category with a lot of usage shifting to almond. Coconut milk used to be the third most popular plant source but in 2019 moved down to fourth place behind oat milk and saw a 7% CAGR decline in 2019.