Dairy & dairy alternatives in Europe 2021

Dairy and dairy alternatives in Europe 2021

Regions in the Spotlight 12-23 April 2021

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Contents Dairy alternatives in Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Almond-based alternatives leading the way . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Market size: dairy and alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Dairy sector invests in alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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European dairy trades . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consumption habits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Added value dairy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 EU dairy recovering from COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Key takeaways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

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Dairy alternatives in Europe The European Union is among the world’s largest producers and consumers of dairy products,1 but one of the biggest stories in the dairy sector over the past few years has not been about dairy at all.

Dairy alternatives have boomed, starting with milk alternatives, but now encompassing other foods, as a growing number of companies has introduced ranges of dairy-free yoghurts, butters, cheeses, frozen desserts and ice cream. According to Innova Market Insights, sales of dairy alternative drinks are up 60% and spoonable non-dairy yoghurt sales have doubled between 2015 and 2019.2

Almond-based alternatives leading the way In Europe, soy dominated the milk alternatives market until 2015, when almond-based products began to outsell soy for the first time.3 It is a growing and dynamic market. The global retail sales value of non-soy milk alternatives reached USD10.6 billion in 2019, according to Euromonitor International, as consumers increasingly look beyond soy for newer plant alternatives that are allergen-free, non-GMO, environmentally friendly, and good-tasting.4 In Europe, almond milk leads the way, and the UK’s Vegan Society expects almond-based products to dwarf all other plant milks by 2025, with a CAGR of 16.7% over the next five years.5

Europe dairy alternatives market estimates and forecast by product, 2014 - 2025 (USD Million)

Source: The Vegan Society6

Meanwhile, oat-based products are also growing strongly, and a recent report from Allied Market Research estimates a CAGR for oat milk of 13.4% from 2021 to 2027, to reach a global retail value of nearly USD1 billion.7

Dairy and dairy alternatives in Europe 2021 | 3

Market size: dairy and alternatives Dairy alternatives may be big news, but their share of the market remains tiny in comparison to conventional dairy, at about 2.5% of the European market, according to analysis from ING8 – although it expects this to increase to 4.1% by 2025. To put that in context, even if plant-based alternatives were to maintain current growth, sales would not surpass dairy until beyond 2050.9 The good news for dairy is that even as sales of dairy alternatives have grown in Europe, many traditional dairy segments have continued to grow, too, including sales of yoghurt and cheese. On the other hand, demand for liquid milk has been falling for several years, and the European Commission expects this trend to continue.10

Dairy sector invests in alternatives Despite the dairy sector’s dominance, major players in the industry take the rise of plant-based alternatives seriously. So seriously that some dairy executives have rethought their product portfolios, and several are investing in plant alternative brands of their own. French dairy giant Danone acquired dairy alternatives specialist WhiteWave Foods in 2017,11 for example, while Finnish dairy firm Valio launched its oat-based Oddlygood range in 2018, which includes alternatives to both milk and spoonable yoghurt. 12 At the same time, specialist dairy ingredients companies including Chr. Hansen13 DuPont Nutrition & Health14 and Butter Buds Food Ingredients15 have added lines of ingredients for plant-based dairy alternatives, such as probiotic cultures and flavour and texture improvers.

Valio Oddlygood™ non-dairy product range made from Finnish oats

Source: Valio.com16

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European dairy trades The European Union is one of the world’s biggest dairy exporters17 – alongside the United States and New Zealand – and produced about 158 million tonnes of raw milk in 2019.18 The main producers are Germany, France, Poland, the Netherlands, Italy and Spain, which together account for about 70% of EU milk production.19 China is the biggest importer of European dairy.20 On the other side of the equation, the EU buys more cheese and butter from the UK than any other country, followed by Switzerland and New Zealand respectively.21

Consumption habits Across Europe, consumption habits vary when it comes to dairy and alternatives. Germany has recently replaced the UK as the top consumer of dairy alternatives in the region.22 Some countries consume more traditional cheese (Germany, France, the Netherlands, Italy and Austria are among those that eat the most, at 21-27 kilograms per capita each year23), while others consume more fermented milk products like yoghurt.

Regional specialities are now widely available across Europe, from Finnish skyr – a dense, low-fat product made from skim milk acid curds – to thick Greek yoghurt, which generally has a high protein content and creamy mouthfeel.24

Added value dairy The dairy industry also has taken note of the key drivers behind the rise of plant-based alternatives.

According to Euromonitor International, many people choose non-dairy options for animal welfare and environmental reasons,25 and some dairy companies have started specifically to highlight their sustainability credentials, including Globemilk in the Netherlands26 and Valio in Finland.27 Organic claims also have been steadily rising, according to Mintel figures, and the number of dairy launches carrying an organic claim increased by about 25% from 2015 to 2019.28 Cow’s milk already has an enviable nutritional profile, containing a wide range of vitamins and minerals that are not naturally present in plant alternatives. But dairy companies are looking beyond direct comparisons with plants and are finding additional ways to boost nutritional value. Ultra-filtered milk is one example. With a protein content about 50% higher than regular milk, the intention is to tap into general consumer interest in protein.29

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fairlife® ultra-filtered milk fairlife® Whole Ultra-Filtered Milk is said to be deliciously creamy and full flavoured whilst offering consumers 50% more protein and 50% less sugar when compared to regular milk.30 Source: Fairlife 30

Some consumers turn to plant alternatives for a lactose-free option, leading some dairy companies to expand their lactose-free offerings. European dairy launches carrying a lactose-free claim have tripled since 2011, according to Mintel.31 ‘Easy to digest’ has been a key positioning for such products, to broaden its appeal beyond those consumers who are lactose intolerant.32

EU dairy recovering from COVID-19 The dairy sector was hard-hit by COVID-19, with the closure of foodservice and restaurants. However, EU figures show that retail sales and exports have since made up for earlier losses, and dairy prices remained stable during 2020 overall, despite an initial drop due to the outbreak.33 Considering its importance as an importer of EU dairy products, China’s success in controlling the spread of the virus was instrumental for European recovery as the country reopened.

“In 2021, adjustments of some distribution channels (e.g. e-commerce, takeaways) are expected to support the recovery of dairy consumption,” predicts a recent report from the European Commission, DG Agriculture and Rural Development.34

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Key takeaways • Skyrocketing sales of plant-based products now go beyond milks, to yoghurts, butter, cheeses, ice cream and frozen desserts • Almond-based products lead in Europe, followed by soy, but others are growing rapidly • Dairy alternatives still account for just 2.5% of the conventional European dairy market • Dairy yoghurt and cheese are still growing segments in Europe, although liquid milk consumption is falling • Dairy companies and dairy ingredient specialists increasingly are diversifying into plant alternatives • The dairy industry is taking note of key drivers for consumption of plant alternatives, such as nutrition, animal welfare and sustainability • Added value dairy products are on the rise, including those with digestive and protein claims • As a whole, the European dairy industry has largely recovered from COVID-related losses

The information provided here was compiled with due care and up to date to the best of our knowledge on publication.

Sources http://www.fao.org/3/ca8861en/Dairy.pdf https://www.innovamarketinsights.com/plant-based-spotlighton-dairy-alternatives/ 3 https://www.vegansociety.com/news/market-insights/dairyalternative-market/european-plant-milk-market 4 https://blog.euromonitor.com/the-unstoppable-rise-of-plantbased-alternatives/ 5 https://www.vegansociety.com/news/market-insights/dairyalternative-market/european-plant-milk-market 6 https://www.vegansociety.com/news/market-insights/dairyalternative-market/european-plant-milk-market 7 https://www.alliedmarketresearch.com/oat-milk-marketA07149 8 https://think.ing.com/reports/growth-of-meat-and-dairy-alternatives-is-stirring-up-the-european-food-industry 9 https://think.ing.com/uploads/reports/ING_report_-_Growth_ of_meat_and_dairy_alternatives_is_stirring_up_the_European_ food_industry.pdf 10 EC (2020), Short-term outlook for EU agricultural markets in 2020. European Commission, DG Agriculture and Rural Development, Brussels [https://ec.europa.eu/info/sites/info/files/ food-farming-fisheries/farming/documents/short-term-outlookautumn-2020_en.pdf] 11 https://www.danone.com/content/dam/danone-corp/ danone-com/investors/en-investor-conferences/2016/danoneto-acquire-whitewave/Presentation_Danone_WhiteWave.pdf 12 https://www.valio.com/news/valio-introduces-valio-oddlygood-non-dairy-product-range-made-from-finnish-oats/ 13 https://www.chr-hansen.com/en/food-cultures-and-enzymes/ fermented-plant-bases 14 https://www.dupontnutritionandbiosciences.com/productrange/cultures-for-plant-based-food.html 15 https://www.bbuds.com/food-ingredients/products/nondairy-specialty-products/non-dairy-dairy-flavors 16 https://www.valio.com/news/valio-introduces-valio-oddlygood-non-dairy-product-range-made-from-finnish-oats/ 17 http://www.fao.org/3/ca8861en/Dairy.pdf 1 2

https://ec.europa.eu/eurostat/statistics-explained/index.php/ Milk_and_milk_product_statistics 19 https://ec.europa.eu/info/food-farming-fisheries/animals-andanimal-products/animal-products/milk-and-dairy-products_en 20 https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/milk-trade-main-competitors_en.pdf 21 EC (2020), Short-term outlook for EU agricultural markets in 2020. European Commission, DG Agriculture and Rural Development, Brussels [https://ec.europa.eu/info/sites/info/files/ food-farming-fisheries/farming/documents/short-term-outlookautumn-2020_en.pdf] 22 https://www.marketdataforecast.com/market-reports/europe-dairy-alternatives-market 23 https://www.worldatlas.com/articles/countries-who-consumethe-most-cheese.html 24 https://www.yogurtinnutrition.com/fermented-milks-take-alook-back-in-2019/ 25 https://blog.euromonitor.com/the-next-disruptors-in-dairyalternatives/ 26 https://globemilk.com/about-us/ 27 https://www.valio.com/sustainability/animal-welfare/ 28 Mintel, Global New Products Database 29 https://extension.sdstate.edu/what-ultra-filtered-milk-product 30 https://fairlife.com/ultra-filtered-milk/whole-milk/ 31 Mintel, Global New Products Database 32 Mintel, Global New Products Database 33 EC (2020), Short-term outlook for EU agricultural markets in 2020. European Commission, DG Agriculture and Rural Development, Brussels [https://ec.europa.eu/info/sites/info/files/ food-farming-fisheries/farming/documents/short-term-outlookautumn-2020_en.pdf] 34 EC (2020), Short-term outlook for EU agricultural markets in 2020. European Commission, DG Agriculture and Rural Development, Brussels [https://ec.europa.eu/info/sites/info/files/ food-farming-fisheries/farming/documents/short-term-outlookautumn-2020_en.pdf] 18

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