Alt-Milk’s Consumer Cohort

You don’t need a farmer to tell you the milk market ain’t what it used to be.

As traditional dairy milk has experienced a decades-long decline, sales of plant-based alternatives such as almond- and coconut-milks have in recent years skyrocketed. Consumers are dropping not just less-flavorful soy milks, but dairy milk as well, in favor of nut-based brands. According to SPINS, nut-milks alone nearly crossed the billion dollar mark in annual sales as of September 2017, bringing in more than $999 million. And now other innovative “alt-dairy” beverages are staking their share of the market – coconut, pea, flax, and hemp milk alternatives collectively jumped by 22.8 percent in sales since last year to more than $99 million in sales.

So who’s drinking this stuff? If you ask brands and analysts, it’s not just the vegans and the lactose intolerant who are supporting the category. Although those shoppers still make up their fair share of the market, changing diets – part of the trend adoption culture spurred by the internet – are inviting in large swaths of millennial shoppers to the once niche category.

For imported Swedish oat milk brand Oatly, the net has been cast wide. The company, said U.S. General Manager Mike Messersmith, looks across the board, from older consumers in their 50’s and 60’s to teenagers seeking plant-based options, positioning the drink as a “post-milk” lifestyle brand that satisfies consumers’ newfound ken for nutritionally meaningful, environmentally friendly products.

Many brands credit plant-based beverages perception as being “healthier” than dairy milks as part of the change – although many in the dairy industry would challenge that notion. But the aura is there, and many brands are now finding ways to try to deliver on the promise. Ripple Foods, which produces a carefully designed pea milk that among other qualifications boasts 50 percent more calcium than dairy milk, has made being nutritionally superior a hallmark of the brand. And their key customers take note.

According to Ripple co-founder Neil Renninger, the brand aims for the “young millennial family” with a higher household income.

“Today only 14 percent of alternative dairy drinkers are lactose intolerant,” Renninger said, citing a statistic from Mintel. “The rest of the folks are coming primarily for nutrition.”

To build around the family market, Ripple has added a children’s line. Since it is pea-based, the brand also gets around a growing body of restrictions in schools that ban nut milks due to allergy concerns.

According to the company’s own data, 40 percent of its consumers had previously purchased organic milk, which Renninger said demonstrates the consumer’s search for better nutrition.

DEVELOPING A STRATEGY

Fitness seekers have long turned to dairy-derived whey protein for their workout regimens; as times change, that customer, too, is now looking for animal-free protein sources. In the fitness realm, several companies have launched plant-based protein beverages. Muscle Milk maker CytoSport launched this past winter Evolve, a plant-based protein shake. At Natural Products Expo East 2017, startup OWYN likewise premiered a plant-based protein beverage targeted at people with active lifestyles. The twist for OWYN, however, comes in subverting the traditional “masculine” elements of older protein drinks.

“Fitness has evolved,” said OWYN co-founder Jeff Mroz. “In the 90s it was about the World’s Strongest Man competition, so the brands were rooted in this ‘bulking up,’ masculine space. But fitness has evolved into an everyday run on the treadmill, Crossfit mindset. Now you’re in this space where we’re seeing cycling and yoga becoming popular among males and females.”

Urban females going to yoga class, he said, most likely don’t want to be seen walking around with a Muscle Milk package any more than they want branding evocative of a nutritional supplement. But wellness plays into it as much as look, which is why Mroz said he believes plant-based protein options have an opportunity in the market. Athletes, particularly active millennials, are seeking out plant products.

Califia Farms has opted to strike hard and strike deep with a multi-channel strategy that includes a diverse product line of almond milk beverages. They range from grab-and-go to multi-serve packs and barista blends designed to serve as many usage occasions as possible.

“Wherever people work, shop, play, learn – I like to say however, whenever, wherever,” said founder and CEO Greg Steltenpohl.

Following a group study of 10,000 consumers, Steltenpohl said Califia Farms was able to break up its shoppers into several key segmentations. In addition to discovering an unexpectedly large portion of male buyers, there were many with dietary restrictions looking for “technical solutions.”

“They’re careful label readers for a technical reason and they shop off of that,” Steltenpohl said. “Usually, they remain brand loyal once they’ve found their solution.”

Another segment, he added, is “enthusiasts” – people who get excited for the brand either for fitness, flavor, or as “plant-based explorers.”

DAIRY COMES BACK

As significant is the growth of the alt-milk business has been, don’t write off dairy just yet.

By one reading, much of the dairy alternative category’s apparent growth has actually been an internal shift from one alt-milk to the next. According to John Crawford, vice president of client insights for dairy at market research firm IRI, the nut-milk category is actually slowing, having only grown in the mid-single digits this past year, and what initially drove much of the growth was an exodus away from soy milk.

Dairy sales, however, have been on the decline over the past three decades, and to stop the slide, in the past year the dairy industry has to lobbied Congress, leading to the introduction of the “Dairy Pride Act.” If passed, it would tighten enforcement of regulations specifically defining terms such as “milk,” “cheese,” and “yogurt” as being animal products, thereby shutting down the brands appropriating the words for plant-based products.

Defending the terminology remains important for the dairy industry, but it may not need the legislation to restore lost sales – according to Crawford, the pendulum is beginning to swing in their favor already.

“[Dairy] milk growth is actually starting to come back and whole milk has been a bright spot for dairy,” Crawford said. “We did a study last year called ‘Fat is Back.’ And what you’re finding throughout all of dairy is that whole fat dairy has been growing across the board…. I think consumers have been shifting their mindset to wanting nutrient rich calories and calories that are going to fill them up.”

Efforts from the dairy industry to connect with consumers may be sinking in. Crawford noted that the larger alt-dairy brands frequently put out products without clean ingredient lists, something that has turned off some shoppers. The lack of protein and actual nut content – such as many almondmilks being sourced from as few as four almonds – are likewise returning many consumers to dairy products that feature simpler ingredient lists.

But, as dairy fights for consumer hearts and minds, some alt-dairy brands are fighting back. Earlier this year, Ripple launched an online marketing campaign challenging these notions. Dubbed “Not Milk?” the company took the dairy industry to task for its claims, positioning itself as the healthier option by underlining its nutritional benefits.

And to the benefit of both categories, some consumers are also double dippers, Crawford said. About 39.2 percent of shoppers purchase both dairy and dairy alternative products. Crawford also noted plant-based beverages index toward consumers with higher incomes, although volume sales across all wealth brackets have been on the rise.

WHERE DO WE GO FROM HERE?

As the demographics fluctuate, some plant-based dairy producers are looking at new ways to grow the category by reaching previously untapped bases. At Califia Farms, Steltenpohl sees potential to break through to consumers who have long avoided dairy alternatives due to negative preconceptions. Many older shoppers, particularly baby boomers, have long associated nut- and soy milks with either the hippie culture of their youth or the poor taste of older product types.

For some brands, innovative packaging has been a solution. Brands like Oatly feature decorative packaging with poppy text, while others, such as Malk Organics, boast bold, modern, and minimalist labeling. Califia has become known for their unique big-bellied bottles, which couple with strong and clear labelling to jump out on the shelf.

“They [older shoppers] haven’t allowed themselves to just try something,” Steltenpohl said. “That’s where our exposure in mainstream supermarkets, with a disruptive package, hopefully gets their attention and gets them to convert more than a Silk – which has been around in that package with that look for 20 years.”