Keeping an eye on the alternative products in any sector is critical. A recent conference in London entitled, “Dairy Free: Drivers for International Growth”, provided insight into what’s happening in the alternative dairy sector.

As reported in the conference, high milk prices have created optimism amongst the suppliers of alternative products. A lot of work is going on to create alternative powders and protein isolates to act as substitutes for dairy, particularly for bakery purposes. But the relative price differences between dairy and non-dairy ingredients suggest that the ingredients are not entirely substitutable yet.

The alternative dairy sector itself is, of course, not totally immune from price increases itself. Although prices have remained fairly constant to date, many experts expect the rapid rise in land use to produce bio-fuels to create increases in input costs and force price jumps soon.

It also is important to note the small penetration that dairy alternatives have in consumer markets. In the United Kingdom, for example, the market represents 2.7 percent of the total dairy market. But, on paper at least, the sector would appear to be booming with many multinational food companies showing an interest in the sector. Worldwide, nearly 1,600 products were launched last year alone. However, closer examination of these launch figures shows that the biggest portion of these products were in fact launched in China, where the Chinese have been drinking soya drinks for 400 years. So some of these products are not necessarily being introduced as dairy alternatives.

Competition for Shelf Space

This is one reason why in some markets the use of dairy terms is not seen as necessary for the market to be successful. It also is important to note the powerful effect that retailers have with the success of products launched with “lack of fixture space” being a major restriction in innovation for many producers. Competition for the available space is a reason why lactose-free alone is now not sufficient for a milk alternative to be listed, creating the need for such terms as organic, calcium-enriched and cholesterol-lowering, all of which have become norms.

It is interesting to note that German retailers’ treatment of alternative dairy as commodity rather than niche products has failed, and sales have fallen there, although previously sales had been rapidly increasing in percentage terms. In markets in the U.K. and the United States, sales of soya beverages have also slowed, perhaps due to some negative health stories and the perception that growth is tied to rice and oat products. With the importance of the environment on the rise, soya processors have been keen to overcome negative perceptions resulting from the removal of rain forests. These concerns are being addressed with a new roundtable with representatives from many multinationals who have gained interest in the sector.

Undoubtedly, the biggest question is, can these products succeed in moving from a niche “lactose intolerant”, “health food” market to the mainstream? A full report on the conference can be found in the members-only section of the Global Dairy Platform website.