Thursday, February 15, 2018

Why Plant-Based Products Make Sense in your Dairy Foods Portfolio: A Lesson Learned from an Independent Grocer

Before farmer and cooperative readers send me disheartening notes, please hear me out on today’s topic of why it makes good business sense for dairy processors to offer dairy alternatives. And please remember, I’m a dairy-loving lady, so much so that I volunteer at the Farm-in-the-Zoo in Chicago’s Lincoln Park Zoo in order that I may educate visitors during the cow feeding and milking programs.

The fact is, dairy alternatives are a growing business. They may still be a small part of the big picture, especially in cheese, where, let’s be honest, nothing compares to real cheese. But on the beverage side, business is booming. Many of you were grumbling about it at Dairy Forum. Instead of complaining, act on it. By the end of this blog, I think you will be convinced that it is time to include plant-based products in your dairy foods portfolio.

In beverage, the numbers tell the story. The market for dairy and dairy alternative beverages will reach a projected $28 billion by 2021, according to market research firm Packaged Facts’ report, Dairy and Dairy Alternative Beverage Trends in the U.S., 4th edition. Spurring the segment’s growth will be plant-based dairy alternatives, which are expected to represent 40% of the combined total of dairy and dairy alternative beverages, up from 25% in 2016 when dairy alternative beverages alone accounted for barely $6 billion in retail sales. (Personally I think this projection is inflated, but regardless, it cannot be ignored.)

The shift away from traditional dairy products, namely cows milk products, towards plant-based alternatives revolves around health concerns, with a growing number of consumers believing that plant-based foods are healthier than animal-based foods. Further, there is a growing consumer base that is motivated by animal welfare concerns, leading them to choose plant-based beverages, as well as other plant-based foods over animal-based products. (Again, real or perceived, these beliefs cannot be ignored.)

The key is they are doing this, sometimes, not necessarily always. It may be every other shopping trip. Or they may keep both dairy and dairy alternative options on hand, and enjoy both depending on daypart and usage occasion.

“Vegetarians and vegans together account for less than 15% of all consumers and their numbers do not grow very rapidly, but a growing number of consumers identify themselves as flexitarian or lessitarian, meaning that they’ve cut back on their consumption of animal-based foods and beverages,” says David Sprinkle, research director for Packaged Facts. “It is this group that is most responsible for the significant and ongoing shift from dairy milk to plant-based milk.

“The point of non-dairy is to be non-dairy,” says Sprinkle. “Our research shows that among non-dairy milk alternative buyers in the U.S., only 5% are watching their diet for lactose intolerance, and only 11% are vegetarian/vegetarian leaning. In contrast, 82% of these non-dairy milk buyers also buy dairy milk or half-and-half.”

Please take note of that important figure: 82% of non-dairy milk buyers also buy dairy milk or half-and-half.

The truth is, marketers of plant-based beverages and other dairy alternatives are hardly concealing the nature of their products. The whole point is that they are offering dairy alternatives.

“With their non-dairy identity a given, they are signaling to consumers the dairy products they aim to compete with,” says Sprinkle. “It’s true, non-dairy products compete brazenly against dairy products, but that’s how the marketplace works. And it’s true that these products generally are substitutes for and imitations of dairy products, but that does not necessarily mean they are inferior. When they obviously are inferior, on the terms that matter to individual shoppers, consumers will purchase them once at most, which indeed is the fate of a disproportionate number of dairy alternative products. When dairy alternatives are inferior but less obviously so, the dairy industry can make its case directly to consumers through marketing.”

That brings me to National Grocers Association (NGA) annual meeting earlier this week in Las Vegas. It’s an educational expo for me, as I gain insights on retailing from the independent grocers who attend the event and the suppliers who serve them.

Fresh and in-store foodservice were hot topics of discussion, as was snacking and how to best accommodate the growing array of snack foods. I was talking with a number of retailers about their dairy departments, mostly refrigerated but frozen, too. The consensus was that many of their shoppers purchase both dairy and dairy alternative products because of household members’ preferences or dietary needs. What surprised me was the next revelation, and this was made specific to Ben & Jerry's, Organic Valley and Stonyfield. These retailers told me that shoppers who purchase dairy and dairy alternatives tend to stay within the same brand whenever possible. One retailer specifically said he wished more dairies would offer nondairy under the same family brand.

I pressed one retailer on this and he gave me an explanation I could not wait to share with all of you. “My shoppers trust dairy brands and they want to support local farmers. They just want options, and for many, that includes non-dairy products.”

To learn more about this opportunity, I encourage you to register for a webinar on this topic that will be held on Wednesday, Feb. 28, 2018. The speakers will explore the trends that are reshaping the dairy market and provide fresh insights on how you can set your products apart. You will gain insight to consumer perceptions of alternative dairy products currently in the market, which will help you develop the next generation of dairy alternatives. Dairy alternatives from dairies. Register HERE.

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