What’s next for dairy alternatives?

While much of the recent hype around vegan foods has been for meat alternative brands such as Impossible Foods and Beyond Meat, substitute dairy food and beverage products have also been greatly increased in popularity. Plant-based foods that are marketed to take the place of animal-based dairy and meat products reached $7 billion in retail sales last year, according to a study by research firm SPINS commissioned by the Plant Based Foods Association and the Good Food Institute. A Packaged Facts report estimates that the plant-based dairy and egg alternative segment will grow at an annual rate of 6% to reach $5.4 billion by 2024.

As dairy alternatives continue to flourish and remain in demand from consumers, food and beverage businesses across the industry continue to expand and innovate within the category.

Milk

Well-known retail soy and almond milk brand Silk was established in 1977 — then known as Whitewave Foods — and quickly became a category leader in the plant-based food sector. Following its acquisition by legacy food company Danone in 2016, the brand has only become more relevant with the spike in demand for plant-based products. Now in 2021, Danone North America is continuing to invest in its plant-based dairy efforts as the category’s sales grew 17% last year, according to CEO Shane Grant.

Plant-based milks comprise the largest segment of the animal products replacement market, according to the SPINS data, and several retail and foodservice brands are teaming up to bring more nondairy beverage options to customers.

Starbucks recently launched a nondairy drink featuring Oatly’s flagship oat milk product, and last summer, Dunkin’ added oat milk beverages to its menu via a partnership with milk alternative brand Plant Oat.

“Providing choice is a key element of menu innovation at Dunkin’, and we are committed to expanding our menu with options that meet our guests’ dietary needs and lifestyle preferences,” said Anh-Dao Kefor, director of brand marketing at Dunkin’.

She added that the coffee and doughnut chain selected Planet Oat to work with because of the brand’s creamy texture, which is said to be comparable to traditional milk, and the oat milk options have performed even better than the company expected as well as attracted significant interest from younger consumers.

“Adding non-dairy and vegan-friendly options to our menu has represented a significant step in our efforts to distinguish Dunkin’ by offering innovative and exciting choices that meet the ever-evolving needs and demands of today’s on-the-go consumers,” added Kefor.

Ice Cream

Dairy-free ice cream substitutes grew 20.4% in 2020, according to SPINS’ data analysis, and new product launches in the space have continued into 2021. Frozen dessert producer Chloe’s recently added three new flavors to its oat milk pops collection and plant-based creamery Forager Project has introduced its own selection of nondairy ice creams.

While some people consume plant-based dairy foods and beverages for health reasons such as allergies or lactose intolerance, many consumers have adopted a vegan diet to address environmental and animal treatment concerns. With the help of modern food production technologies, this means that vegan diets do not only include plant-based foods. Proteins grown in labs have created a new offshoot of the dairy alternatives category: animal-free dairy products.

Startup Perfect Day has developed a technique to manufacture milk proteins that are identical to those found in cow’s milk via fermentation. Because the product isn’t made by animals, the dairy is classified as vegan and lactose-free but still has “the same creamy, melty, silky taste and texture of conventional dairy that plant-based alternatives just can’t match,” said Ravi Jhala, the global head of commercial at Perfect Day. He added that the company prioritizes labeling in order for consumers to be fully informed on its definition of animal-free dairy proteins and is planning further educational materials with expertise from allergy scientists and groups for consumers.

Through partnerships with three ice cream companies — Brave Robot, Graeter’s, and N!ck’s — Perfect Day’s milk proteins were featured in its first product launches in 2020.

“We started with ice cream because we felt it was the most delicious product our food team had created to date, and allowed us to get us into market in the shortest time frame,” said Jhala.

He added that these ice cream brands were ideal for releasing products during the coronavirus pandemic because all three have online ordering features so that the products could be delivered to customers as safely as possible even during lockdown orders.

Cheese

While substitutes to traditional milk and ice cream products have successfully entered the mainstream, most brands have encountered hurdles to creating plant-based and vegan cheeses. The plant-based cheese category has enormous potential for growth and development, and the Packaged Facts’ study predicted that plant-based cheese will emerge as the No. 2 segment of plant-based dairy products because of recent developments in food production technology.

In addition to expanding its existing plant-based brand portfolio, Danone has purchased a new plant-based dairy brand this year: Earth Island’s Follow Your Heart set of dairy-free cheeses, mayonnaise, sour cream and more.

“Plant-based cheese is an area we feel particularly bullish about, as cheese is a $20 billion market in retail alone and plant-based currently accounts for less than 1% of that, so there’s huge runway ahead,” Grant told Foodnavigator.

Danone entered the market via its So Delicious brand, and Grant said the Follow Your Heart acquisition will continue to help the company establish a strong presence in the nondairy cheese category.

Perfect Day’s unique vegan manufacturing process means the brand wouldn’t face the usual challenges — such as replicating taste and texture — of plant-based cheese products. Jhala shared that the brand is prioritizing scaling its business in 2021, and a major feature of that growth includes entering the cheese market.

“The functional versatility of Perfect Day proteins means the opportunity is massive for what we can do,” he said.

As many consumers have become more health- and environment-conscious in recent years, the substitutes for animal-based products have come to the forefront of the food and beverage industry. Dairy alternatives are a simple, effective way for consumers to create these desired diet and lifestyle changes.

“People want products that are kinder to animals and to their own bodies, created sustainability with less impact on our planet,” said Jhala.