Plant-based products are emerging as a strong growth opportunity for the dairy sector. A new study from Roland Berger shows how the plant-based dairy market in Western Europe and North America has grown at an annual growth rate of around 12% over the past six years.
There has been significant development in the plant-based dairy sector in recent years driven by the growing appeal of these products. Many consumers turn to dairy-free products for reasons related to health, sustainability, and ethical considerations.
The size of the plant-based dairy market reached €10.7 billion in 2023, up from €6.8 billion in 2019. Much of that growth has been driven by plant-based beverages – like soy, almond, and oat milk – which make up 60% of the total market.
Plant-based products are especially popular in Western Europe among the younger demographic, with Germany currently the largest market for these products. As demand increases for these milk alternatives, cafes and restaurants are also increasingly embracing them.
Source: Roland berger
A Roland Berger survey of consumers reveals that 62% already consume plant-based dairy products. “The plant-based dairy segment is a high-growth market,” said Alexander Belderok, a senior partner at Roland Berger in Amsterdam. “The main driver has been plant-based beverages, which account for approximately 60% of the total market, followed by yogurt and cheese.”
Meanwhile, there remains a massive growth opportunity for the segment. Despite its impressive growth, the plant-based dairy market is a mere fraction of the traditional dairy market. 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.
Roland Berger’s survey found that of the consumers that currently don’t consume plant-based dairy products, 58% were open to making the switch, with one in five being highly convertible.
Barriers to growth
Despite the healthy growth in the market, there are also some significant barriers. For example, one of the main factors turning off consumers, cited by more than half of respondents, has to do with taste and texture.
Source: Roland Berger
Another barrier is price, which 37% of consumers believed to be higher than traditional dairy. Some others also pointed to limited availability in stores and a perception that the products are overly processed.
The brands making a splash in this market are working on innovation and expanding their product ranges. Some, like Swedish oat milk producer Oatly, have focused on high-impact marketing, while others, like Flora Food Group, look to come out on top in subcategories, in this case, plant-based cheese.
“The rise of plant-based dairy reflects a profound shift in consumer preferences towards sustainability and health, which paves the way for innovation and growth in the market,” said Belderok.
“To significantly penetrate the dairy market, brands must adopt targeted strategies, including optimizing protein crops and extraction processes, innovating recipes for improved taste, enhancing brand strength, expanding distribution, and driving product innovation to increase consumer delight.”
