A New Type of Disruption: Make Way for Plant-Based Milks
In a world where we are accustomed to seeing technology disrupt various industries, plant-based milks are bringing a new type of disruption in an area where most people didn’t see it coming: the dairy industry.
Every now and then, I try to assess both my dietary and spending habits, since the two go hand-in-hand for me. When added up, my recent oat milk kick has probably cost me more than I’d be willing to admit; an extra $0.50 for the matcha lattés I have every morning, $3 for a tiny cup of oat-based yogurt as my afternoon snack, and just yesterday, I bought a $10 pint of Oatly ice cream without thinking twice (and I can tell this is not going to be just a one-time purchase). I’m not vegan and I don’t have a dairy allergy or lactose intolerance, yet I’ve unintentionally cut down on my cow milk intake as other plant-based milks have become more mainstream.
The global dairy alternatives industry in 2019 is estimated to be worth approximately $16 billion, with research pointing towards a steady rate of growth through 2025, at the very least. Just five years ago, the industry was worth only a mere $2 billion. In addition to the growth of the market, plant-based milks have shown 6% better returns in comparison to traditional dairy products. For people who wouldn’t or couldn’t drink cow milk in the past, the only readily available alternative was soy milk. Now, cafés and grocery stores are stocked with many different options including almond, cashew, macadamia, coconut, rice, and oat.
While dairy alternatives are great for people with allergies (and coffee shop aficionados), non-dairy products can’t seem to co-exist in harmony with cow milk. Just this month, Dean Foods, America’s largest milk producer, announced that it was filing for bankruptcy after nearly a century of business. Simply put, Americans are drinking less cow milk, and Dean Foods has unfortunately been on the painful receiving end of the effects. According to CNN, the company’s sales went down 7% in the first half of 2019, profit decreased by 14%, and their stock lost 80% of its value. Dean Foods also recently announced that they are now in discussions with the Dairy Farmers of America cooperative to work out a deal where the cooperative would buy a majority of the company. This is just one of the many harrowing signs for the dairy industry as a whole.
Cow milk has been a household staple in the modern world for as long as anyone can remember, so what exactly is causing this massive shift towards plant-based milks?
The changing dietary habits of consumers are certainly a big factor. The Economist’s World in 2019 article on veganism points out that for the past 50 years, veganism had been “a minority within a minority.” Now, a quarter of Americans age 25 to 34 identify as either vegan or vegetarian. While the meat industry is not seeing the same type of disruption that dairy is facing, Beyond Meat is certainly on the rise as one of the fastest growing food companies in the US and has seen its revenue increase by more than five times in the last two years. Things just aren’t the way they used to be when it comes to dietary preferences.
Dairy allergies and lactose intolerance have also become more prevalent in recent years. For impacted consumers, the shift towards plant-based milks is not just a dietary preference, but a necessity. The US National Library of Medicine has found that approximately 65% of the global population has some level of lactose intolerance. In the US, it’s most common among Asian Americans and African Americans. It’s also common for people to develop a lactose intolerance later in life, absent of any previous symptoms growing up. Dairy allergies, which are more extreme than lactose intolerance, are also on the rise. While widely published studies on the increase of dairy-specific allergies are still a bit sparse, research shows that food allergies in general have become more rampant in recent decades. In 2019, approximately 32 million people in the US are estimated to have food allergies. That’s ten-times the prevalence reported 35 years ago.
Concern for the environment is also a big factor. ESG-conscious investing and consumer spending have become more of a priority, and the shift towards plant-based milks are just one of the many steps that supposedly lead to a more sustainable future. More and more, people are trying to align their spending with their values.
In addition to concerns raised over animal cruelty, cow milk is found to have a more severe environmental impact in comparison to non-dairy alternatives, particularly when it comes to greenhouse gas emissions, land use, and water use. According to an Oxford University study, producing one glass of cow milk results in nearly three times the amount of greenhouse gas emissions of any alternative — a staggering statistic when you think about climate change. However, it’s important to note that not all plant-based milks are environmentally friendly or neutral. Almond milk has gotten some criticism for the amount of water necessary to produce one glass. To put it into perspective, it requires about 47 liters, which is more than a typical shower. When it comes to choosing which milk is best for the environment, sometimes it’s a matter of choosing the lesser of two (or many) evils.
Like most new trends, there are both skeptics and true believers. While dairy alternatives are trying to replace something it claims humans don’t need (see Oatly’s controversial tagline: “It’s like milk, but made for humans”), dairy supporters argue that milk is the foundation of a healthy diet (remember those iconic “Got Milk?” advertisements?) Earlier this year, the Food and Drug Administration debated whether or not dairy alternatives could be officially labeled as “milk” after FDA Commissioner Scott Gottlieb made a public comment saying, “an almond doesn’t lactate.” The argument was that calling dairy alternatives “milk” is misleading to consumers, but this ended up being rejected in federal court. Who would have thought that milk would be such a controversial topic?
I first tried oat milk simply because I was curious, and somehow I ended up forming a habit without any strong reasoning. I have no food allergies, and despite being Asian American, I can handle all the yogurt and ice cream my heart desires without any issues. A Comax Flavors survey from 2017 found that consumers choose dairy alternatives for several subjective reasons: the taste, perceived health benefits, source of ingredients, and being all-natural. Not all preferences need to be backed by a passionate deposition. It’s normal for consumers to like whatever it is they like — no further explanation required.
And I am one of those people. While traditional dairy products are still present in my diet, I will continue to buy plant-based dairy alternatives as well. I’m sure there are a lot of consumers exactly like me who are helping drive the disruption of the dairy industry one purchase at a time.
What initially seemed like just a fad is now making a lasting impact, so moo-ve over cow milk — it looks like dairy alternatives are here to stay.
Disclaimer: This is an opinion piece and the information in this article should not be taken as professional investment advice. Any conclusions or explanations above do not reflect the market views or industry views of my employer. If you’re interested in learning more about this topic, I highly suggest reading this comprehensive article.
