Dairy feeling the pinch as plant-based sales top $5bn

As governments move to help dairy famers in the UK and US, could the coronavirus outbreak be another defining moment for the plant-based food industry?

Within dairy the rapid spread of Covid-19 is now causing supply chain issues that are difficult to circumnavigate. Foodservice closures and a drop in demand have brought about a surplus and that has led to farmers in the UK and US dumping thousands of litres of milk owing to a lack of alternative markets. 

As suppliers began to lower prices paid to dairy farmers many were left facing financial ruin without urgent government intervention. In the US the Coronavirus Aid, Relief and Economic Security (CARES) Act was quickly ushered in to help provide support. Now, the UK government has moved to temporarily relax elements of competition law to enable further collaboration between dairy farmers and producers. It is hoped this new legislation will help prevent surplus milk from the 40m litres produced daily going to waste.

Dairy UK and AHDB to identify opportunities

Working together, Dairy UK and the Agriculture and Horticulture Development Board (AHDB) will help to identify spare processing capacity, stimulate demand and ascertain how production can be temporarily reduced for the UK’s largest farming sector.

Figures show that milk represented over 16% of total agricultural output back in 2018, with approximately 50% of dairy output being fresh milk – thereby accounting for a significant amount of UK processing capacity.

The task now will be to identify opportunities for processing milk into storable products such as butter, cheese and skimmed milk powder.

Sales explosion for plant-based options?

But while it’s been a difficult few weeks for dairy and coronavirus supply chain problems hit the meat industry too, could this be another big moment for plant-based options that have enjoyed a boom over the past year?

Various reports suggest a sales explosion. THIS, a London-based plant-based meat company, reports a doubling in supermarket revenues from February to March, adding to its impressive 35% month-on-month growth figures. Since launching in June last year, the firm has sold over 3m portions of its products. So, is this part of a wider developing trend?

Retail sales eclipse $5bn

According to figures from the Plant Based Foods Association and the Good Food Institute, US retail sales of plant-based foods grew by more than 11% last year, eclipsing $5bn. Almost fives times faster than total US retail food sales during the same period. Add in US retail dollar sales of plant-based foods of nearly 30% over the past two years in comparison to just 4% for total retail food dollar sales and the numbers begin to suggest so.

During the past year, sales of plant-based milk have also grown by over 5% to reach $2bn, with this accounting for 40% of the total market share as almond continues to lead the field. This means that in the US plant-based milk now makes up 14% of the entire milk category, as demand for dairy alternative creamer and yoghurt both grew by more than 90% to $287m and $283m respectively.

As the pandemic escalated consumers sent US retail sales of fresh plant-based meats up by 279% in the week ending March 14th, according to figures released by Neilsen. Of particular interest was a 476% spike in Oat milk sales that week in comparison to sales during the same period last year. 

Consumers swayed by shelf life

This has led to some speculation that in the present climate consumers are being attracted by the longer shelf life offered by such products that have been stockpiled in certain quarters. However, other factors will play out in the longer term. 

Consider price point. If we are to truly rely on plant-based protein, it needs to be produced at a cost and in quantities that can rival industries such as poultry. Seattle-based Rebellyous has just raised more than $6m in Series A funding as it attempts to refine technology to make its products more affordable for consumers at scale. 

China to restructure its food system?

But will consumers be more inclined to make more plant-based purchases as they consider the stability of their food supply chains and the potential role of animal agriculture when it comes to disease? Perhaps. The coronavirus outbreak has certainly made people consider this more carefully and leaves those within government with much to evaluate.There is also some indication that China has recognised this too and may look at restructuring its food system to replace smaller producers with large-sale farming post-coronavirus, according to the South China Morning Post

Of course, China has been here before. The coronavirus epidemic follows recent outbreaks of Avian Flu and African Swine Fever (ASF) – the latter having decimated the country’s hog herd and pork supply chain throughout 2019. Recovering from ASF alone was always going to take time, so Covid-19 brings new added pressures as China continues to work through this.

So, could this be a decisive moment in the acceptance of plant-based proteins? While we’ve witnessed new pressures on the more traditional supply chains of meat and dairy, plant-based options aren’t without issues of their own. The appetite for investment is certainly there alongside a growing consumer interest of exploring new health options, but for consumers to switch en masse the price will also have to be right.