The Impact of Milk Alternatives Goes Beyond Demand
For several years the demand for conventional milk has been declining while milk alternatives made from almonds, soy, oats and peas have been gaining popularity. The impact of these milk alternatives goes far beyond a decrease in demand.
According to Benjamin Laine, senior dairy economist with CoBank, milk alternatives are “forcing a change in the way traditional milk companies do business.”
He says some companies are investing in plant-based alternatives and others are adding differentiated product lines like organic, grass fed or ultra-filtered milk.
“These premium milk products—which more directly compete with some of the plant-based alternatives—are growing in popularity and helping to slow the decline in milk sales to some degree, but they are also challenging traditional dairy supply chains which now need to manage a much larger number of smaller volume product lines,” Laine explains. “The introduction of all of these premium milks and plant-based alternatives is making the dairy case much more crowded, driving up retailer fees and marketing costs that are needed to keep the consumers attention.”
In addition, the extra marketing costs necessary to compete with these products are pressuring margins across the fluid milk space, he says.
“Ultimately, the beverage space as a whole is becoming more complex and competitive,” Laine says. “And, the heightened competition between and within dairy milk and plant-based alternatives is a reminder that there is a need for continued innovation and differentiation to compete and survive in a rapidly evolving beverage market.”