Plant-Based Dairy: Strong Growth, but Mainstream Potential Remains Untapped
Strong growth signals a market in transition
The plant-based dairy market is experiencing remarkable growth as consumers become increasingly health-conscious and environmentally aware. In 2023, the retail market size for plant-based dairy in Western Europe and North America reached EUR 10.7 billion, a significant leap from EUR 6.8 billion in 2019, reflecting a compound annual growth rate (CAGR) of 12%. This growth is primarily driven by plant-based beverages, which constitute approximately 60% of the total market, followed by yogurt and cheese.
Plant-based dairy still a mere fraction of the overall dairy market
Despite this impressive growth trajectory, the plant-based dairy market still occupies a mere fraction of the traditional dairy market, valued at EUR 33.6 billion in 2023. While milk (beverage) substitutes have achieved a 12% penetration of the total milk market, other categories like yogurt, butter, spreads, and ice cream remain underrepresented, occupying 4% or less. The disparity in market maturity across Western European countries presents a substantial opportunity for growth, as indicated by per capita spending variations - Finland spends EUR 34.20 per person per year on plant-based dairy, while France spends only EUR 5.90.
Consumer preferences drive the shift towards plant-based options
The rise of plant-based dairy is largely fueled by shifting consumer preferences centered around health, sustainability, and ethics. Regional tastes and the appeal of premium products also contribute significantly. The retail and horeca sectors are increasingly embracing dairy alternatives, driven by substantial innovation in taste, texture, and nutritional value. These trends provide plant-based dairy products with a solid foundation for continued growth.
Barriers remain for wider adoption of plant-based dairy
A recent global online survey conducted by Roland Berger revealed that while many individuals are already using plant-based dairy products, a significant 58% are open to making the switch. However, barriers such as taste and texture, limited availability, high prices, and perceptions of over-processing remain challenges to wider acceptance. Addressing these barriers is crucial for unlocking the full potential of the plant-based dairy market.
Leading brands strategize for market penetration
Leading brands like Alpro, Oatly and Magnum are already strategically positioned to capitalize on this growth. These companies have focused on innovation, expanding their portfolios, and investing behind their brands to enhance market presence. The Roland Berger survey indicates high brand awareness for Alpro and Oatly, recognized by 83% and 82% of respondents, respectively. “To significantly penetrate the dairy market, brands must adopt targeted strategies, including optimizing protein crops & extraction processes, innovating recipes for improved taste, enhancing brand strength, expanding distribution, and driving product innovation to increase consumer delight”, explains Alexander Belderok.
