Dairy Alternatives Market

At a 10.1% CAGR, the global dairy alternatives market size is projected to reach US$ 43.6 billion by 2028 from a projected US$ 27.0 billion in 2023. The global market size was valued at US$ 24.6 billion in 2022.

In recent years, the global food industry has witnessed a significant shift in consumer preferences, with a growing demand for dairy alternatives. This trend reflects changing consumer attitudes toward health, sustainability, and ethical considerations. As more people seek to reduce or eliminate dairy products from their diets, the market for dairy alternatives has experienced exponential growth. One of the primary drivers behind the surge in demand for dairy alternatives is the increasing focus on health and wellness. Many consumers are becoming more health-conscious and are looking for options that align with their dietary preferences and restrictions. Dairy alternatives, such as almond milk, soy milk, and oat milk, are often perceived as healthier choices due to their lower saturated fat content and absence of cholesterol. Additionally, some dairy-free options are fortified with vitamins and minerals, making them attractive alternatives for those seeking to maintain a balanced diet. Lactose intolerance is another factor contributing to the popularity of dairy alternatives. A significant portion of the global population is lactose intolerant, meaning they have difficulty digesting lactose, the sugar found in dairy products. For these individuals, dairy alternatives provide a solution, allowing them to enjoy milk-like products without discomfort or digestive issues. Moreover, dairy allergies are becoming more prevalent, further driving the demand for plant-based milk and dairy substitutes.

The rising demand for dairy alternatives is a multifaceted phenomenon driven by health-consciousness, environmental concerns, ethical considerations, and accessibility to a variety of innovative products. As this trend continues to gain momentum, the dairy alternatives market is likely to evolve even further, with increased investment in research and development, more plant-based product offerings, and a broader consumer base. Whether for health, ethical, or environmental reasons, dairy alternatives are transforming the way we think about and consume dairy products, reflecting a dynamic shift in the global food industry.

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Drivers:  Consumers are increasingly showing a preference for vegan food options

The growth of the dairy alternatives market is primarily driven by the global shift towards vegetarian and flexitarian diets. These dietary preferences have gained significant popularity, influenced by various factors such as concerns about animal welfare, environmental issues, and personal health. Veganism has emerged as a lifestyle choice that abstains from consuming animal-derived products, including dairy. The increasing worldwide condemnation of animal cruelty has further boosted the demand for dairy substitutes. Many consumers view a vegan diet as a healthy choice and opt for dairy alternatives like soy milk, almond milk, rice milk, and other plant-based options instead of traditional dairy milk.

Significant growth in the vegan population has been observed in major economies like the United States and the United Kingdom. Consumers in developed nations embrace plant-based milk as it offers energy, health benefits, aids in weight management, and enhances the taste of food. According to The Vegan Society, avoiding meat and dairy consumption plays a crucial role in reducing the environmental impact, particularly concerning carbon emissions. Currently, the livestock industry contributes an estimated 18% to total greenhouse gas emissions across the five major sectors for greenhouse gas reporting. Within the agricultural sector, farmed animals are responsible for nearly 80% of all emissions. This environmental concern has prompted environmentally conscious consumers to shift towards dairy alternatives.

In 2021, The Vegan Society recorded 16,439 products bearing The Vegan Trademark, with over 82% of these registrations occurring in the past five years. The Vegan Trademark is now recognized in 87 countries globally, and more than half of the registered products come from companies located outside the UK. Given the rapid growth of the vegan population, numerous dairy manufacturers are transitioning towards producing plant-based milk products, which is expected to have a positive impact on the plant-based beverages market.

Restraints: The issue of allergies among soy food consumers

In the realm of dietary choices, where people often make decisions based on health considerations and ethical values, the issue of allergen cross-contamination has emerged as a significant challenge within the dairy alternatives market. As more consumers opt for plant-based milk substitutes due to health, environmental, or lifestyle reasons, addressing the prevalence of food allergens and sensitivities has become crucial. Allergen cross-contamination, especially involving common allergens like nuts or soy, presents substantial risks for individuals with allergies or sensitivities. This situation calls for increased awareness and proactive measures throughout the industry.

Food allergies are immune responses triggered by specific proteins in food, affecting a substantial portion of the population. Nuts and soy are among the most prevalent allergens, capable of causing severe reactions in susceptible individuals, ranging from mild hives to life-threatening anaphylaxis. Many dairy substitutes, including soy milk, soy-based cheese, and soy-based yogurt, contain soy proteins that can induce allergic reactions. While soybean oil and soy lecithin were initially considered safe for those with soy allergies, it's now recognized that these products may still contain trace amounts of soy protein, potentially leading to allergic responses. Given that numerous dairy alternatives are manufactured in facilities that also handle allergens like nuts or soy, the risk of cross-contamination exists at various stages of production, including sourcing, processing, and packaging.

In recent years, the prevalence of food allergies has risen, becoming a significant concern for both consumers and food manufacturers. According to the Food Allergy Research & Education Organization in the United States, soy ranks among the top eight major food allergens responsible for most serious food allergy reactions in the country. Soybeans are packed with essential nutrients such as vitamins, minerals, isoflavones, and proteins. However, soy also contains anti-nutritional components that can lead to health problems, including soy allergies that manifest as itching and hives. Additional symptoms include gas, bloating, and damage to the intestinal tissue. These factors are anticipated to pose challenges to the dairy alternatives market in the foreseeable future, as soy protein serves as a primary source for producing dairy alternatives.

Opportunities: Changes in lifestyles of consumers

With the global population on the rise, placing additional strain on already limited resources. Escalating energy prices and increasing raw material expenses have a direct impact on food prices, which in turn affects individuals with lower incomes. This stress on the food supply is further compounded by a scarcity of water, particularly prevalent in regions such as Africa and Northern Asia. Additionally, the Asia Pacific region offers cost advantages in terms of production and processing. The combination of high demand and cost-effective production is a significant advantage for dairy alternative suppliers and manufacturers as they target this market.

In response to rapidly evolving lifestyles, people are increasingly gravitating towards nutritious and healthier food options. The distinction between fast food and unhealthy junk food is expected to become more pronounced as consumers actively seek convenient yet health-conscious choices. Identifying naturally high-nutritional-value products represents a significant opportunity for suppliers and manufacturers in this evolving landscape. The factors fueling the demand for dairy alternatives in these economies are as follows:

• Rapid urbanization
• Rise in disposable income

Food & beverage manufacturers have shifted their focus toward these markets due to the following reasons:

• Growth in demand for vegan food products
• Changes in lifestyles of consumers, preferring convenience foods
• Abundance of raw materials
• Availability of cheap labor
• Low tariff duty.

Challenges: Limited availability of raw materials

The increasing rates of deforestation in developing nations have led to a shortage of essential raw materials for dairy alternatives like soy, almond, and rice. Additionally, the extremely cold climatic conditions experienced in countries such as the UK, France, and Spain pose challenges to the cultivation of agricultural crops. Soy milk is derived from whole soybeans or full-fat soy flour, almond milk is created from ground almonds and is devoid of lactose and cholesterol, and oat milk, a lactose-free alternative, is naturally derived from oats, grains, and beans. The scarcity of these agricultural raw materials imposes constraints on European manufacturers, limiting their ability to produce alternative dairy beverages.

The setting up of many industries in developing countries such as China and Australia have diminished the availability of agricultural land. This creates a scarcity of raw materials and prevents the production of dairy alternative products.

Market Ecosystem

Based on the source, the soy sub-segment is estimated to account for the largest market share of the dairy alternatives market.

Soy-based dairy alternatives are considered efficient substitutes for dairy products and occupy a significant share of the dairy alternatives market. The widespread popularity and increasing consumption of soy-based products can be attributed to their exceptional nutritional value. These products serve as abundant sources of proteins and calcium, making them highly regarded as excellent dairy substitutes, especially for those who are lactose intolerant. Furthermore, soy-based products do not contain casein, a common allergen found in many dairy items.

Soy milk, which is available in a variety of flavors and types, offers consumers a wide range of options to choose from. It is typically derived from soybeans or soy protein isolate, with thickeners and vegetable oils often added to enhance taste and consistency. Soy milk finds its best application in savory dishes, coffee, and cereal, where it serves as a suitable replacement for cow's milk.

For reference, a one-cup (240 ml) serving of unsweetened soy milk contains approximately 80-90 calories, 4-4.5 grams of fat, 7-9 grams of protein, and 4 grams of carbohydrates. In terms of nutrients, soy milk closely mirrors cow's milk with a similar protein content but only half the calories, fats, and carbohydrates.

However, it's worth noting that soy milk derived from soybeans is not recommended for individuals with FODMAP intolerance or those in the elimination phase of the low-FODMAP diet. FODMAPs are short-chain carbohydrates naturally present in some foods that can lead to digestive discomfort such as gas and bloating.

Soy milk also boasts isoflavones, natural antioxidants that set it apart from other milk alternatives. Isoflavones have been associated with a reduced risk of heart disease, and studies suggest that consuming at least 10 milligrams of isoflavones per day can lead to a 25% reduction in breast cancer recurrence. A typical serving of soy milk contains roughly 25 milligrams of isoflavones, with genistein being the most abundant and biologically active isoflavone found in soybeans. Additionally, soy proteins offer protective and therapeutic benefits against various diseases. Soy-based foods are also rich sources of phytochemicals like phytosterols, recognized for their cholesterol-lowering properties. Dry soybeans contain about 40% protein, 20% oil, 35% carbohydrate, and 5% ash.

In addition to lactose and cholesterol-free properties, soymilk is also a good source of essential amino acids and high-quality protein, potassium, and vitamin B, which are required for the growth of consumers. Lactose-free, cholesterol-free, high nutritious content, high digestibility, and low cost are reported or claimed benefits of soy milk. Owing to these health benefits, soy milk has been used as a functional ingredient in preparing processed foods. Soy-based cheese and frozen desserts are also much in demand. Soy-based products are also rich in fiber, which helps deal with gastrointestinal problems.

Based on applications, the milk sub segment of the dairy alternatives market is anticipated to dominate the market.

Factors supporting the popularity of dairy-free milk are health concerns related to lactose intolerance and the hectic lifestyles of the working middle-class population, which encourage them to use convenience products for on-the-go consumption to save time. Since health and convenience are prioritized by consumers while making a beverage choice, companies have diversified their beverage offerings with products containing almond milk, coconut milk, and soymilk, along with other non-dairy ingredients and alternatives derived from hemp, oats, or flax.

Plant-based milk has become increasingly popular with consumers because it is perceived as a healthier substitute for traditional cow's milk. Many people are opting for plant-based milk due to health considerations, particularly if they have lactose intolerance or dairy allergies. Plant-based milk options are often viewed as a better choice for health-conscious individuals because they typically contain lower levels of saturated fats and may be enriched with essential vitamins and minerals.

Plant milk offers a diverse range of flavors and varieties, catering to different consumer preferences. Almond milk, soy milk, oat milk, and coconut milk each have their unique taste profiles and textures. This variety appeals to consumers seeking novel flavors and textures in their dairy alternatives, enhancing the overall culinary experience.

The Asia Pacific market is projected to dominate the dairy alternatives market.

The Asia-Pacific region is witnessing an increasing demand for fortified nutritional food and beverage products due to busy lifestyles and rising disposable incomes. Within this trend, the adoption of dairy alternatives is expected to grow at a faster rate due to consumer preferences. The region's higher economic power is likely to boost the consumption of affordable and abundant soymilk. Food manufacturers are introducing various forms of soymilk to cater to the growing consumer interest in healthy beverages and pasteurized soymilk as dairy substitutes, offering unique flavour options.

This focuses on the study of major countries in the region, including Japan, Australia, China, and India. Key market players in this area include Sanitarium Health & Wellbeing Company, Freedom Foods Group Ltd., Vitasoy International Holdings Limited, and Purebates. The dairy alternatives industry in the Asia-Pacific region is expanding, driven by changing consumer lifestyles. The dairy alternatives market in this region is currently undergoing significant changes due to urbanization, dietary diversification, and increased foreign direct investment in the food sector. Additionally, higher income levels, the rapid growth of the middle-class population, heightened consumer awareness of health and fitness, and the demand for nutritional and health-conscious products present promising growth opportunities in the region's food sector.

Key Market Players

Danone North America Public Benefit Corporation (US), The Hain Celestial Group, Inc. (US), Blue Diamond Growers (US), SunOpta (Canada), Sanitarium (New Zealand) are among the key players in the global dairy alternatives market. Companies are adopting various strategies to boost their revenues and market presence. These strategies include the introduction of new services, forging partnerships, and expanding their laboratory facilities. In the dairy alternatives market, companies are employing key tactics such as: geographical expansion: expanding into emerging economies to capitalize on their growth potential, strategic Acquisitions: acquiring companies strategically along the supply chain to establish a stronger market position, new service launches: introducing new services, driven by extensive research and development (R&D) efforts. These initiatives are geared towards enhancing company performance and market influence.

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Scope of the Report

Dairy Alternatives Market:

By Source

• Soy
• Almond
• Coconut
• Rice
• Oats
• Hemp
• Other Sources

By Formulation

• Flavored
• Plain

By Application

• Milk
• Ice Cream
• Yogurt
• Cheese
• Creamers
• Butter
• Other Applications

By Distribution Channel

• Retail
  • Supermarkets/Hypermarkets
  • Health Food Stores
  • Pharmacies
  • Convenience Stores
  • Other Retail Channels
• Foodservice
• Online Stores

By Nutrient ( Qualitative)

• Protein
• Starch
• Vitamins
• Other Nutrients

By Region

• North America
• Europe
• Asia Pacific
• South America
• Rest of the World (RoW)

• Other sources include cashews and hazelnuts.
• Other retail channels include direct sales by manufacturers, gourmet stores, bakeries, warehouse clubs, and mass merchandisers.
• Other applications include sauces, dressings, tofu, and smoothies.
• Other nutrients include fats, fibers, and minerals
• RoW includes the Middle East & Africa.

Recent Developments

• In June 2023, Oatly Group AB (Sweden) launches introduced a vegan cream cheese that is now available nationwide in the US. This oat-based cream cheese innovation comes in two flavors: Plain and Chive & Onion.
• In April 2021, SunOpta announced the acquisition of the Dream and WestSoy plant-based beverage brands from The Hain Celestial Group, Inc. The acquired brands helped the company expand its product portfolio, further accelerating growth in this business.
• In November 2021, Blue Diamond introduced Almond Breeze Extra Creamy Almond milk. This product was made from almond oil made from quality California- grown Blue Diamond almonds to give the product an extra creamy texture. This launch I would help the company to attract more customers.

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