The future of dairy alternatives

For Irish dairy farmers, consumer demand isn’t always on the radar. Instead, they focus on creating the best possible primary product through animal care, growing great grass and striving to improve each year for increased sustainability.

Consumers also consider welfare and the environmental impact of dairy when they shop. This is according to the latest research from global market intelligence and research agency, Mintel.

While consumers will not be giving up on dairy any time soon, this research shows they are increasingly interested in ‘flexitarian’ options which take their concerns into account.

However, (especially considering the recent cost-of-living crisis), the affordability of traditional dairy offers a competitive advantage over plant-based alternatives. Dairy also sees opportunity in the nutrition and health space across multiple age groups.

Speaking with Irish Country Living, Mintel consultant analyst Caroline Roux says dairy still has a critical role to play in delivering affordable nutrition during “inflationary times.”

“Dairy brands must keep innovating to stay relevant to meet consumers’ changing tastes,” she states. “To fit into their health and wellness agenda, dairy brands can address the health issues related to ageing and bring convenience to younger, time-pressed consumers.”

Caroline says those aged 45-60 (Generation X) are particularly loyal to dairy. “In Ireland, 92% of Generation X drink animal milk,” she says. “This generation of consumers is debunking ‘old’ age-related stigmas, and is seeking tailored solutions to support them during the menopause, for example. Women trust dairy to support them during this time, be it to improve digestion, slow down bone loss and improve their sleep quality.”

Meanwhile, for younger consumers known as Generation Z (aged 12-27), convenience is key. “[These consumers] are looking for unconventional snack meals with minimal effort,” she says. “It is not unusual for them to put together a collection of ‘snacky’ foods that replaces a traditional meal. These consumers need products that offer elevated convenience, affordability, smaller pack sizes and fun.”

While dairy is here to stay, concerns around something called ‘dairy avoidance’ still needs to be addressed. Dairy avoidance describes the cohort of consumers who don’t consume dairy due to environmental or ethical reasons.

“Dairy avoidance remains a major challenge for the industry, and one that is not fading,” Caroline says. “Yet loyalty towards dairy is strong, suggesting a flexitarian future. Mintel research shows that over eight in 10 Europeans are unwilling to give up dairy entirely.”

When considering dairy avoidance, a key piece of advice is for farmers to share their stories; to be more transparent and open about farming practises.

“For consumers [who] worry about the environmental impact of dairy production, they would like to hear about regenerative farming that can help position dairy as part of the solution to global warming,” Caroline says.

“When it comes to understanding environmental issues, consumers trust farmers [more than food brands or companies]. Therefore, dairy brands should let trusted advisors, like farmers, share details on their expertise related to animal grazing and soil health.”

With this flexitarian future in mind, Kerry Dairy Consumer Goods recently launched a hybrid-dairy product line called SMUG Dairy. At present, the brand (which combines dairy and oat drink to make butter, spreadable butter, cheese and milk) is only available in the United Kingdom.

According to the SMUG Dairy website (smugdairy.com), the butter is comprised of 65% dairy and 12% oat drink; the block cheese is 42% cheddar and 17% oat drink and the milk is 74% dairy milk and 26% oat drink. All products boast lower saturated fat than traditional dairy with fibre, vitamins and minerals.

Victoria Southern is strategy, marketing and innovation director at Kerry Dairy Consumer Foods. She tells Irish Country Living that SMUG Dairy was launched to “disrupt the dairy aisle.”

“Consumer research found that one in four people would like to reduce the amount of dairy in their diet due to health, environmental and ethical concerns. In fact, 42% of consumers currently are actively reducing their dairy intake,” she says.

“It was from this insight that SMUG Dairy was born. We tried a multitude of different plant and dairy combinations, but oats bring a natural creamy taste and texture and are a perfect fit when paired with our dairy counterparts.”

Currently, the SMUG Dairy butter and cheese is being made at the Kerry site in Ireland while the spreadable butter is being made at their site in the UK. The SMUG Dairy milk is being made by a third party, also in the UK. Irish Country Living asks: could these products provide opportunities for Irish tillage farmers down the line?

“We’re very supportive of Irish agriculture, both dairy and tillage, and are open to all sourcing,” she says. “We source our milk from local farms close to our production plants. Currently the oats for SMUG Dairy milk are from the UK, and the oats for cheese and butter are sourced from EU countries, but as we continue to innovate we’ll be assessing our sourcing plans to ensure our ingredients are always of the best possible quality.”

A few months have now passed since SMUG Dairy’s official launch and Victoria says, while it is still “early days”, the consumer response has been positive.

“Consumers have responded with curiosity and have loved the creamy taste [of the products],” she says. “We’re excited about the future growth of the category, which will have a positive impact on the environment and people’s health, and we are proud to be at the forefront of dairy innovation.”

Irish oat drink production

There are a few Irish producers making a plant-based alternative to milk, particularly at an artisanal level, but Flahavan’s started producing 100% Irish oat drink in 2020 and has seen positive growth since.

Sales director, James Flahavan, says their main competitors are non-Irish brands with little connection to the primary producer.

“Our product has a significant USP [unique selling point] compared to other similar products,” he explains. “By using Irish oats we offer transparency which other brands don’t generally have.”

James says Flahavan’s oat drink sales have been strong and they are happy with its trajectory. Their Irish-grown ethos reflects Mintel research, which shows the traceability and sustainability of plant-based alternatives is increasingly important to consumers.

The main drivers of oat drink sales are climate, lifestyle and dietary necessity. Larger global brands offer less transparency than Irish brands and, obviously, do not benefit Irish farmers in any way. Consumer avoidance of so-called ‘ultra-processed’ foods is also starting to put some plant-based alternatives under the spotlight. Their ingredients are more complex than dairy milk; usually requiring added vegetable oils and enzymes to create a shelf-stable and flavourful product.

James says, while they need to consider the cost-of-living crisis, there is projected growth for Irish-made milk alternatives.”We’re anticipating significant growth in the category driven by younger users who have a higher dispensation to trying dairy alternatives. Data from Statista shows they’re anticipating the alternative milk market to grow by 14% [this is all types of plant-based alternatives; not just oat drink].”

• Global dairy trends show an increased interest in “flexitarian” dairy options, including hybrid dairy products made with plant-based ingredients.

• Both dairy and plant-based alternatives need to deal with consumer concerns around transparency and sustainability.

• Consumers are becoming increasingly concerned around ultra-processed foods, and many plant-based alternatives potentially fall under this category.

• There are opportunities in dairy around health, nutrition, convenience and indulgence.

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