Mooving Consumers: Plant-Based and Dairy Milks Shift Strategies Towards Health

What seems healthier for a growing body than a tall glass of milk? Both plant-based and dairy milk companies are leaning into the health benefits of milk’s age-old claim of being the best daily source of protein, calcium and vitamin D. Alternative milk brands are trying to broaden their consumer appeal with kid-friendly formats and fortified product lines, while traditional dairy companies are pushing healthier, premium varieties of cow’s milk.

Demand has shifted over the years towards plant milk’s environmental sustainability claims but as inflation puts pressure on milk-buyers’ wallets, both conventional and plant-based dairy brands are looking for new ways to bring in new customers.

According to data from market research group SPINS, the price gap continues to narrow between dairy milk and plant-based alternatives. Dairy still has an edge with the average retail price (ARP) of $3.64, increasing 6% in the last 52-week period. Plant-based milk’s ARP is $4.34, increasing only 4% in the same period.

From a strict cost-to-consumer perspective, dairy milk, often sold in larger, 1 gallon quantities whereas plant-based is more often found in a 64 oz. size, continues to be the better deal, with dollar sales increasing 10% for dairy while plant-based increased 7% from a year ago.

As with other categories, premium dairy is growing: milks labeled animal-welfare (+18%) and grass fed (+9%) outpace conventional brands not labeled by either term, which only grew 3%.

Oat milk continues to be the fastest growing non-dairy alternative, with dollar sales up 41.6% in the latest 52-week period, according to IRI data. By comparison, almond milk only grew 0.6% and soy was down -0.7%.

Dairy alternative producer SunOpta’s third quarter earnings reported 19.9% revenue growth in its plant-based segment and a 68% increase in oat milk revenues compared to the same quarter of 2021, showing the grain’s continued dominance in vegan milks.

Opportunity In Children

Plant-based brands see the sustained consumer adoption of dairy alternatives as an opportunity to move to a younger age cohort.

Berkeley-based dairy-free brand Ripple has been playing in the alternative milk space for some time; among its offerings is a kid-positioned product, Ripple Kids. A new 48 oz. bottle boasts 50mg of DHA Omega-3 fatty acids and 8g protein from peas that is fortified with prebiotic fiber and choline to promote healthy brain health. The brand saw a 33% sales growth in the 52-weeks ending October 3.

Plant milk maker Good Karma, based in Boulder, Colorado, also offers lunchbox-sized, 6.75 oz. cartons of its oat, flax and pea-based milks in Vanilla and Chocolate flavors. The kid-friendly decorated labels have 4g of plant protein and 700mg of Omega-3s per serving.

One brand seeing early success with its kid-positioned plant-based milk is Kauai-based PlantBaby. For now, the company’s first brand, Kiki Milk is only available online through its website, Amazon, and Thrive Market, but it has garnered enough interest to close a $4 million seed round this past summer. Initially conceived to help feed their young son who has a dairy and soy insensitivity, founders Alex and Lauren Abelin found a void in the plant milk category for clean-label, allergen-free dairy alternatives specifically targeting young children.

“When you are designing a product for kids, you can’t really do it the same way you would do for adults,” Alex Abelin said. “Their gut lining is evolving. Their immune system is coming online. You have to be more sensitive and careful when you make products for children.”

The brand’s first two products were 8 oz. cartons available original and chocolate flavors. In September, the company released a 32 oz. format to broaden the brand’s positioning in the shelf-stable dairy aisle and “widen the narrative of usage for adults to use in coffee, protein smoothies or as a baking substitute,” Abelin told BevNET.

“A lot of adult products aren’t really good for kids but adults can enjoy kid products because they’re super safe and nutrient dense.”

The brand’s tagline “Made by kids, enjoyed by all” affirms its plans to grow beyond the kids drink aisle. Kiki Milk is banking on its all-organic recipe blend of oats, hemp seeds, sprouted pumpkin seeds, coconut, seaweed, and bananas will continue to resonate with consumers looking for a plant milk with no soy, gluten or nuts that is safe to feed kids or adults.

Originally, the Abelins intended to make the first U.S.-based, vegan infant formula but found the arduous process of navigating FDA regulation to be too much for the company’s first product entrance. The couple still plans to launch an infant formula, calling it their “North Star product” but expects to release a toddler milk first.

Kate Farms is another plant-based brand that has leaned heavily into formulas. The brand has focused on bringing USDA Organic, vegan medical formulas to the healthcare industry for tube and oral feeding of children and adults.

In September, the company closed a $75 million Series C funding round.

“Historically, people have had little choice when needing alternative or supplemental nutrition. When formula makes up a large part, or in some cases, all of your daily calories, what you consume matters that much more,” said Coefficient Capital managing partner Franklin Isacson, who joined Kate Farms’ board as an observer in November after Coefficient invested in the company. “Kate Farms gives children and adults an organic and plant-based alternative that is clinically proven to be just as nutritious but without the allergens and artificial ingredients of conventional products.”

Parents of young children and consumers who rely on formula as a main source of nutrition were frantic earlier this year when an Abbott Nutrition production facility recall exacerbated an already short supply of formula in the U.S.

New Zealand-based a2 Milk Company announced earlier this month that it was FDA-approved to bring its easier-to-digest Platinum Premium infant milk formula to the U.S. The milk maker expects to sell up to 1 million cans through June 2023 and is also banking on its Stage 3 toddler product to further its reach within the U.S. among health-conscious milk drinkers.

Within the country, a2 claims distribution in more than 27,000 stores and, according to IRI data, has increased dollar sales by 25.5% and unit sales up 18.4% year-over-year.

Dairy Companies Tout Cow Milk’s Health Benefits

Milk drinkers are not abandoning conventional dairy altogether, food and ingredient maker Cargill reported in a 18-month research survey. In fact, the number of consumers actively avoiding animal-based dairy products dipped from four in 10 survey respondents in 2021 to less than three in 10 in July 2022.

“Clearly, there’s a growing swath of plant-based dairy consumers who are open to both categories. Look in their refrigerator, and they may have conventional milk and a plant-based alternative sitting side-by-side,” Cargill business development manager Mark Fahlin explained in a press release discussing the survey.

Cargill’s research pointed to consumers perceiving animal-based dairy as a better source of protein, calcium and vitamin D while preferring the texture of conventional milk to plant-based options.

This aligns with Mintel’s 2022 Dairy Report, which found that “nearly eight in 10 milk buyers agree they want to improve their diet over the coming year, and 72% of total milk purchasers agree they generally view dairy as having a positive impact on health.” Additionally, inflation might be playing a role in bolstering dairy from its steady decline in recent years due to its slightly lower price point compared to plant milks.

Some animal-milk brands see that opportunity by leaning into low-sugar options that can also be consumed by people with lactose sensitivities.

Initially launched in 2012, ultra-filtered brand fairlife was fully acquired by early investor Coca-Cola in 2020; as of February it had been built into a $1 billion brand. Banking on the success of fairlife, organic dairy companies Horizon and Organic Valley followed suit in 2019 and got into the ultra-filtered milk category with their own products.

According to IRI data covering the 52-week period ending October 2, Horizon dollar sales are down -2.9% in the refrigerated white milk category year-over-year while Organic Valley and Fairlife are up 12.8% and 24% respectively. The total refrigerated white milk category is up 9.1% year-over-year with total unit sales slumping -2.7%.

Other dairy companies have not found the same consumer success in ultra-filtered varieties, but they’ve tried different approaches.

Maple Hill Creamery launched a sugar-free, ultra-filtered line in 2021 to complement its portfolio of 100% grass fed dairy products. The Whole and Reduced Fat varieties were launched on the claim of being the first zero-sugar milks without sweeteners or additives in the country, but were discontinued in July due to a “lack of consumer demand,” according to a company representative.

Similarly, Greek yogurt maker Chobani initially announced its own foray into the refrigerated milk category with a February release of its own four SKUs of ultra-filtered milks along with two SKUs of Half & Half. Yet, the company pulled the line of lactose-free milks only three months later, citing inflationary pressures weighing heavily on the company’s copacker.

Dairy is still struggling to compete in consumer buying trends and plant milks are not the main driver of the reduction in milk sales.

“U.S. per capita fluid milk consumption has been trending downward for more than 70 years and fell at a faster rate during the 2010s than in each of the previous six decades,” the USDA’s Economic Research Service reported in a June blog post.

Americans are just drinking less milk with the average person drinking 0.49 cups per day in 2019, down from 0.69 in 2000, according to the USDA.

To gain back consumer demand for milk-drinking, the USDA said that both plant-based and dairy companies will need to “to gauge and anticipate the mix of attributes most appealing to consumers” be it allergen- and sugar-free varieties or focused messaging describing the health benefits of drinking a protein- and vitamin-rich beverage.