This article originally appeared on Natural Products INSIDER.
The large and complex U.S. dairy market faces several forces that are influencing future growth and challenging the status quo. One trend impacting the industry across cheese, milk and yogurt, among other categories, is the competition from plant-based alternatives. Once a nascent, niche trend driven by a narrow subset of consumers, plant-based formulations are now surging in popularity with more products entering the mainstream market. Growing concerns about the environment, animal welfare and health are attracting several consumers to plant-based products, poaching sales from traditional dairy sectors in the process.
The rise and disruption of plant-based dairy alternatives have been steadily building for many years. Most notable is the category’s recent evolution, from a rapidly growing upstart sector to one with widespread availability and mainstream appeal. In a way, this signals the onset of the second generation of plant-based alternatives, beyond merely acquainting Americans with the idea of consuming plant-based products and focused on expanding the sector to new frontiers and diversifying its offerings.
In the minds of many, dairy alternatives remain associated with traditional cow’s milk. For generations, cow’s milk has been as much of a staple commodity for U.S. consumers as any food item can be. Understandably, soy-based milk alternatives were the face of this sector for many years. More recently, the vast majority of sector expansion has been a result of developing other popular milk alternatives from ingredients like almonds and cashews.
Competition has increased significantly as more players enter the fray, and, much like other fast-growing industries, concerns have grown over the potential of an impending stagnation as a ceiling is approached. In light of these concerns, manufacturers of dairy alternatives have sought new growth frontiers, a pursuit that has influenced the evolution of new formats that are quickly gaining popularity. Free-from-dairy ice cream and yogurt products, in particular, have rapidly proliferated. Though much smaller sales, free-from-dairy cheese products and even coffee creamers have also seen promising recent developments, demonstrating the potential for plant-based products to thrive well beyond serving as a contrast to milks and instead functioning as a class of viable alternatives to dairy more broadly.
In addition to pursuing new alternative dairy formats, manufacturers are also rethinking the specific ingredients used in these products. For quite some time, a few key plant-based sources, such as almonds, coconuts and cashews, have been the primary ingredients, especially in milk alternatives, but also within burgeoning areas like ice cream and yogurt alternatives. These well-known and familiar nut sources have saturated the alternatives market, providing an opportunity for manufacturers to explore less common, and often much more eye-catching, ingredients. This has inspired a growing chorus of companies to produce alternatives from peas, rice, hemp and peanuts, to name a few. Perhaps the most noteworthy ingredient is oats, exemplified by the 2016 U.S. debut of Swedish brand Oatly. The brand has since proliferated across thousands of grocery stores and coffee shops, often struggling to keep up with demand behind uniquely attractive taste and thick texture bona fides. While the diverse array of plant-based sources steadily spreads, oats offer a bright spot for growth in the coming years.
Among the pursuits of new plant-based sources and formats, manufacturers have stayed committed to competing with traditional dairy products in the strongest way possible by mimicking dairy attributes. This goal has primarily focused on replicating taste and texture, and it continues to be a dominant focus as steady technological advancements lead to impressive achievements in this regard. Beyond just taste and texture, this new generation of dairy alternatives has produced even more creative solutions to offer products replete with attributes associated with traditional dairy. This has notably included growing attempts at marrying plant-based lifestyles with the demand for probiotic components viewed to be beneficial for gut health. A familiar ingredient in many dairy-based yogurts, probiotics have increasingly materialized as an addition to plant-based varieties, offering consumers interested in both qualities to avoid choosing between the two.
The exact extent to which specific innovations like plant-based coffee creamers, oat milk or probiotic alternatives truly become mainstream fixtures of this industry is far from clear. Yet, strong demand for dairy alternatives continues to display resilience and consistent growth, regardless of its specific dynamics. As the sector continues to mature behind this growth, this next generation of dairy alternatives will likely look distinct from the first, fueling fresh pursuits of innovation and offering significantly more options to consumers.