Identifying opportunities for dairy and dairy alternatives

While demand for dairy alternatives continues to grow in Europe, brands are still trying to work out how to fully capitalise on this trend. What should manufacturers be thinking about, to ensure that their dairy and dairy alternative products remain relevant to European consumers?

Dairy remains a consumer staple, with strong health and nutritional credentials, especially among parents. According to Mintel, some 81% of German consumers who buy dairy say they would never completely give up on dairy products, while 70% of parents in France would be concerned that their child would miss out on important nutrients if dairy was cut out completely.

Consumer data from January 2022 reveals that over a third of consumers have consumed both dairy and dairy alternatives. And almost all consumers buy dairy products, despite all the buzz around plant-based. In other words, the dominant consumer trend at the moment appears to be about adding dairy alternatives to shopping lists, rather than cutting out the dairy category completely.

“Consumers are questioning dairy as a healthy staple,” notes Caroline Roux, Consultant Analyst at Mintel. “Yet as a healthy and nutritious affordable food, dairy still has a critical role to play in consumers’ lives.”

This helps to explain why supermarket shelves are full of dairy alternative products that look like dairy and mimic dairy’s nutritional benefits; this is what consumers expect. Mintel data, shared at Dairy and Dairy Alternatives Deep Dive Day, part of Food Ingredients Webinar Series, found that 68% of Spanish consumers think that alternatives should offer the same nutritional benefits as dairy.

Identifying areas of innovation

This is borne out by the data on recent product innovations. According to Mintel, 29% of plant-based spoonable yoghurt launches in 2020 and 2021 were fortified with calcium. “In the US, Danone has launched a plant-based product called Silk Nextmilk, targeted at dairy consumers who have not yet tried alternatives,” says Roux. “The product is designed to look, taste and perform like dairy, and is made from a blend of plant-based ingredients – coconut oil and cream, oats soy, chicory root and gums.”

Indeed, most innovation in the dairy and dairy alternative sector has been in liquid format, with a third of all innovations in the sector consisting of plant-based drinks. In fact, innovation in plant-based drinks has increased by 10% over last three years. Drinking yoghurt makes up 30% of all launches of liquid dairy and dairy alternative products.

“Why is innovation that brilliant in the liquid category?” asks Roux. “The reason is that major dairy companies have realised the potential offered by consumer demand here for dairy alternatives. Many companies are selling dairy alternative products under their dairy brands.”

By contrast, innovation in the spoonable dairy and dairy alternative sector has been much more stable, increasing by only 1% over the last three years, according to Mintel. There has also been far less innovation in product segments such as plant-based or vegan cheese. Nonetheless, the arrival of several major manufacturers to this segment is likely to encourage more innovation and drive market penetration.

Smart nutrition opportunities

So how is the sector likely to evolve? Mintel notes that there is a degree of polarisation when it comes to European consumer opinion about protein sources. Some believe that plant-based is healthier, while others disagree. It is notable that some dairy alternative products on the market are targeted specifically at consumers looking to shift from animal-based ingredients to plant-based. In the same way, some dairy products are consciously highlighting their strong health and nutritional credentials. “Brands of dairy alternatives are still working out their positioning,” says Roux. “Should they mimic dairy’s nutrition, or differentiate with other health benefits?”

Product differentiation isn’t the only way to go however – blending the benefits dairy and dairy alternatives could be an interesting option. This strategy has the benefit of meeting the needs of flexitarian consumers, who want to increase their consumption of plant-based ingredients, while decreasing their consumption of animal-based. At the same time, the nutritional and cost benefits of milk can be factored in.

“Yoghurt is well placed to go a step further and explore what we call smart nutrition opportunities, to launch one-stop products that offer a balance of nutrients, including those naturally found in milk,” says Roux.

Indeed, some 42% of French consumers expressed an interest in such a blended option. In addition, Mintel notes that some 72% of UK yoghurt consumers would be interested to see spoonable products with added vitamin and minerals. The dairy and dairy alternatives sector is therefore well placed to capitalise on consumer demand for smart nutrition solutions.