Beyond Milk #1: The World VS Japan

Are we going nuts over milk?

Hello, Market Shakers!

Welcome to Market Shake’s second cycle, dedicated to all the dairy alt lovers out there!

Like with the plant-based meat category, a lot has been happening in the dairy alternative industry. Around the world, health concerns, primarily lactose-related issues, and beliefs about animal welfare and sustainability are convincing more consumers to go dairy-free, partially or entirely. It’s an unstoppable wave that sweeps through store aisles, bringing new tastier and healthier products to consumers’ shopping carts. 

The range of products is quite extensive, with milk at the top, yogurt, and cheese coming next, so we chose to kick off the dairy category with milk.

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Summary of this edition

  • A new chapter in humanity’s food saga

  • Is 2020 the year the industry cracks the mass market? 

  • More variety, innovation, and flavors than ever before

  • In Japan, the market is still small, but it’s catching up fast.

  • Industry news

A new chapter in humanity’s food saga

The plant-based milk category is the largest and the most developed one among all the plant-based alternatives coming to the market. No surprise when you know that humanity has been drinking plant-based milk as conventional beverages for centuries! 

Take soy milk, a traditional Chinese drink referred to in the literature as early as the 13th century. It reached North America and Europe at the end of the 19th century, with the first factory founded in 1910 in Paris. Almond milk, native to the Middle East, is a key ingredient in the Middle Age’s cuisine and Christian culture. Coconut milk is millennial in India and has been around the block in South Asia, the Caribbean, and South America. While dairy producers would disagree, the definition of the word milk itself encompasses “the white juice of certain plants.” 

The super-powerful dairy industry casts a shadow on the wide variety of plant-based alternatives starting in the early 20th century. Cow milk becomes a staple food in industrialized countries and is no longer children’s morning drink. But plant-based milk stuck around. Today, their success is just a new chapter in humanity’s food saga, but it’s easier to win consumers’ over when the groundwork is there and the switch feels natural.

As plant-based milk comes back to the front scene, they gain a new aura. On top of being a traditional beverage, they’re labeled as substitutes for people who can’t or won’t consume dairy products. They’re good for us and good for the planet. 

Is 2020 the year the industry cracks the mass market? 

Soy, almond, and newer varieties such as oat and nuts, rose from niche in the early 2010s to an unstoppable wave by 2015. Industry experts projected then that the category could seriously capture mainstream consumers in the coming years. The momentum built up, and in 2020 the industry witnessed a fantastic bump in plant-based milk sales. The global market jumped from 19.2 billion dollars in 2019 to 22.6 in 2020 (+17.7% annual growth!), aided by a rise in product launches. Global Market Insights now forecasts an 11% annual market growth between 2020 and 2026.

In 2021, plant-based milk alternatives are no longer a niche catering to vegans and vegetarians and are entirely on mainstream consumers’ radar. Dairy milk is still primarily the king when it comes to number, but plant-based alts are coming for its crown. 

Will the future be dairy-free? Robbie Lockie, the founder of the World Plant Milk Day, is convinced. Several factors that are, in a way, all connected boosted the switch from dairy to plant-based alternatives. 

Environmental and ethical factors

Consumers are growing more aware of the environmental and ethical impacts of the food and beverage industry. It’s hard to ignore livestock’s relationship with greenhouse gas emissions and climate change. On top of that, the dairy industry has been publicly strongly criticized for its cruelty to animals. The media coverage of these issues made its way to a large public. 

Awareness of veganism is rising too, and even if not all the population embraces a definitive change of diet, they tend to shift toward more responsible consumption choices. Consumers are learning that replacing dairy with plant-based alternatives is very easy. And healthier. 

Health consciousness heightened by the pandemic.

Besides sustainability and animal welfare, health and wellness are driving the demand for plant-based milk alternatives. Consumers are more aware of lactose intolerance and allergies, and these health issues are becoming more prevalent. The dairy industry has built itself as the foundation for a healthy diet, but consumers are no longer convinced and seek health benefits in plant-based substitutes. With obesity and hypercholesterolemia on the rise, cholesterol-free plant-based products come in as perfect substitutes. 

Then came the 2020 pandemic and its long-lasting ripple effects on the food and beverage industry. Consumer health consciousness experienced substantial growth, with physical health and immunity concerns driving consumers to review how they eat and drink. The worries over getting sick push them toward choices that they perceive healthier. Stay-at-home orders also compelled consumers to change their lifestyles to maintain their waistline.

In a remarkable circle effect, the stronger focus on their well-being leads consumers to care more about the planet. Sustainability took the stage, with people concerned about climate change and how their choices affect the environment. People with no particular dietary restrictions are consuming more plant-based products more often. “Plant-based” equates “healthy” and “good for the planet” in their mind, whether that’s true or not. 

‘It’s like milk, but made for humans’ 

A fourth factor plays a role in the plant-based milk market’s explosive growth, and that’s the products themselves. Sniffing the increasing demand for dairy substitutes, manufacturers dusted off the classic—soy, almond, coconut, rice, and came up with new products—oat, hazelnut, macadamia, hemp, pistachio.

To expand this new industry from the ground up fast, manufacturers are playing smart. They launched disruptive brands carried by clever messaging and transparent communication on consumers’ expectations. Oatly’s marketing campaign “It’s like milk, but made for humans”, first released in Sweden in 2014, then in 2018 in the United Kingdom, is a perfect example of this new, conscious food industry. California-based company Ripple Foods makes non-dairy milk, “as it should be'' and bet on the truth: the positive impact consumers make by choosing Ripple products over… Dairy products. As for US nut milk maker Milkadamia, their website jokingly claims that ‘Moo is moot.’

These newcomers hit on the dairy industry’s weak spot and rattled milk producers. In Europe and the United States, the war on labeling rages on. In 2017, European Union ruled that the word ‘milk’ could only be used for animal liquids. It is not a problem for Rebel Kitchen, its brand Mylk, and for the M*lkman and its “M*lk to get you off” provocative slogan. The rise of plant-based milk is going full steam, and nothing stands in the way.

More variety, innovation, and flavors than ever before

The global market has long been dominated by soy milk, closely followed by almond milk and rice. But in the last three years, other varieties have captured consumers’ attention, starting with oat, which experienced a meteoric rise. 

“Clearly, plant-based is a lasting trend that is gaining power over time. We see a steady rise in plant-based products year over year across regions, which indicates that this is not a bubble or a fad, but a real change in consumer behavior. This is a tipping point, with so much product innovation yet to hit the market.”

Caroline Bushnell, Associate Director of Corporate Engagement at The Good Food Institute (GFI) Plant-Based Foods Now a $5B Market

North America

In 2018, the Plant-Based Food Association estimated that non-dairy milk represented 15% of the total milk market, after a steady 61% sales growth rate over the past five years. That same year, almond milk outranked soy in sales. Oat milk, barely known a few years back, muscled its way in, and new types—pecan, quinoa, flax, are catching consumers’ attention. The region counts numerous leading companies and start-ups, opening the category to more variety. 

Nut-milk maker Califia Farms, founded in 2010, has been a leader in the plant-based beverage category and aims to rule the market, no less. In January 2020, they announced having raised $225 Million in funding. 

In 2019, TerViva, the world's first F&B firm to develop food products from the Pongamia tree, raised $20 million in funding to help bring new plant-based foods derived from the seeds of the Pongamia tree. This California startup believes Pongamia milk is an ideal replacement for soy milk—bringing similar nutritional benefits with a better mouthfeel. 

In 2020, Blue Diamond’s iconic Almond Breeze hit a record high of $554 million in sales. But oat milk is more than ready to snatch almond milk’s first place, while soy is losing some ground to tastier nutty milk. 

Founded in 2014, California-based Ripple Foods entered the market in 2015 with non-dairy products made from pea protein and, as of 2021, is now a key player. According to vice president of marketing Scott Lee, “interest in the category [has grown] over the past six years, with category growth up more than 20 percent year over year in 2020.” (Demand for Alternative Dairy Is Here to Stay, as Consumers Seek Balance Between Sustainability, Health and Taste). 

Milkadamia, founded in 2015 by Jim Richards, an Australian nut farmer, became one of the most successful dairy alternative brands in the US in about four years and has today a growing reach in global markets. Milkadamia launched its product series in London at the end of 2019, with plans to expand nationwide in 2020. The company is also planning to expand in Asia, where premium products are appealing to consumers. 

In Canada, Earth’s Own is a pioneering food and beverage company with an extensive portfolio of plant-based milk products made from soy, oat, almond, and cashew.

Europe

In Europe, home for Oatly and Alpro, two of the biggest oat milk brands globally, non-dairy milks are increasingly finding their place in people’s pantries. 

Oatly, currently sold in 25 countries, has seen a 212% growth in sales in 2020. The company pursues an aggressive expansion plan, carried by its commitment to sustainability and celebrities’ support (Oprah Winfrey, Natalie Portman, Jay-Z). In 2021, the oat milk specialist targets a 10 billion dollars IPO. 

Under the umbrella of Danone and sold worldwide, Alpro is also doing well and producing a wide range of products made from soy, almonds, cashew, hazelnuts, oats, and coconuts. The brand focuses more on health-related benefits for the consumers.

Oatly and Alpro are far from being alone in the European market. The United Kingdom has its fair share of dairy-free start-ups like Minor Figures (founded in 2014), which announced its first expansion to the US market earlier this month. The London-based coffee and milk alternative company already sell to 25 countries with their Oat M*lk cartons as best-selling products. 

Founded in 2018, German-based VlyFoods believes they’re on a mission to “reinvent milk.” Early 2020, they launched a 100% vegetable and nutritious milk they think will satisfy health-conscious consumers' needs. By December, they had sold their millionth liter. 

Experiencing an impressive rise since its start in spring 2020, DRYK is a Danish startup producing low-sugar oat, pea, and hemp milk. From day one, they eyed the Asian market, and in February 2021, they won a contract to supply drinks to several cafe chains in China. While their products are not available for retail, consumers can sign-up for a subscription scheme from their website, and the model is doing well in Denmark.

Liquats Vegetal, founded in 1991, is the first company in Spain dedicated to producing and distributing 100% plant-based drinks from soy, oat, almond, and rice. Their sales increased by 20% in 2020. In 2021, they announced teaming up with start-up Ypsicon to develop a new generation of high added value plant-based drinks.

Australia, New Zealand

In this part of the world too, the market is growing. Soy and almond products have the most significant market share, followed by rice, coconut, hemp, and oat milk. Among the leading brands, Australian-based Nutty Bruce operates in Australia, New Zealand, and the United Kingdom. Like Oatly, they’ve adopted a marketing strategy hitting hard on the dairy industry, focusing on animal cruelty and plant-based milk's health benefits.

New Zealand also counts Little Island Creamery (founded in 2010) produces coconut milk and ice cream, and yogurt. In 2016, they announced their global expansion, starting with Australia and the US. Early 2020, they raised NZ $2 million to fund its expansion after merging with a smaller yogurt company and are eyeing the Asian market. With a retail launch in 2020, Otis Oat M!lk is New Zealand’s first homegrown oat milk, though farmers have to send their oats abroad for processing. Earlier this year, they announced the construction of the first kiwi oat milk factory. 

Asia 

Soy milk brands primarily dominate the market in Asia, but some newcomers are making noise and expanding. That’s the case with the innovative start-up Sesamilk, a family-owned business that holds 80% of the sesame market in Thailand, launched in 2019. They’re applying an aggressive export strategy (30% of sales) and are already present in Macau, Hong Kong, and Vietnam. They’re planning to launch in China and Taiwan next, promoting their products to people with lactose intolerance, soy, or nut allergies. Thailand is also home to the brand 137 Degree, manufactured by Simple Foods. The company sells a large variety of nut milk products, including almond, walnut, and pistachio. 

Founded in 2017, Indian-based Goodmylk is one of the leading brands offering plant-based products in India. They launched nuts and oat milk. Early 2020, they raised $400000 in funding to help the company expand distribution.

Now let’s take a closer look at what’s boiling up in Japan. Is the Japanese market getting nutty too? 

In Japan, the market is still small, but it’s catching up fast.

The plant-based milk market is still relatively niche (9% of the dairy market) but is steadily growing since 2019, surfing on health and wellness trends. In 2020, there was an acceleration, with foodservice such as Dean and Deluca and Starbucks offering oat milk on a trial basis.

But the market has been an immature one, centered on soy for many years. Leading manufacturers—Kikkoman (50% of market share) and Marusan (20%), largely occupy space shelves with unflavored and flavored products.

Kikkoman made its specialty to release new flavors every year to capture consumer’s attention. Flavors range from the classic matcha, coffee, and chocolate to bold choices, such as pudding, mint chocolate, and cheesecake. 

Marusan bets on soy-based recipes and marketing on social media. In 2020, when the Japanese government issued stay-at-home orders, they promoted “at home cafe” on Instagram and Tiktok. 

The “almond effect.”

The increasing consumption of soy milk in Japan (6.8% per year on average) was beneficial for other varieties. Since 2013, the almond milk market sees double-digit growth in sales. 

In 2019, overall almond milk sales rose by 24%, with a 30% increase in volume. While it’s still a relatively minor segment, almond milk visibly made its way to the soy-dominated shelves and is nicknamed the “third milk” after cow and soy milk. 

The Ezaki Glico group, which owns 90% of the market share, talked of an “almond effect.” An effect that matches with the increase in bulk sales, especially for one-liter packs and sugar-free options sales. The group noted a 14% increase in supermarket sales for their Almond Kouka between 2017 and 2018. 

This segment is particularly appealing to women for health and beauty benefits. Glico started to develop a series of flavored almond milk, and their “three nuts” type, made of almond, walnut, and hazelnut, is one of the most performing products today. 

It’s a nuts story. 

Soy and almond milk are not the only options on the market. Believing there’s space for more variety, Kikkoman launched macadamia milk in 2020. They had released a macadamia flavored soy milk in 2019, and the success with their consumers prompted them to try ‘real’ macadamia milk. 

Both the original and sugar-free versions are widely available in Japan. Rice, sesame, barley, and other nutty milk are also available, but market share competition is very intense. Japanese company Busco Foods launched two sesame milk in April 2020, with the slogan “the third wave of plant-based milk, after soy and almond.”

“But the competition was too intense,” explained sales representative Yuji Takama. “Sesame was not successful on the retail market and couldn’t make its way between soy, almond, and newer products.” The company isn’t giving up on its sesame milk but instead shifted toward the B2B route. 

The oat milk race is on.

Oat milk freshly arrived in Japan in 2018, with imported brands Provamel, EcoMil, and The Bridge, with limited availability and sold at international supermarkets. Oat milk really took a front seat when Danone Japan released Alpro in April 2020, first in Tokyo’s metropolitan area, then nationwide in October.

This entry didn’t go unnoticed. Swedish brand Oatly is now planning its entry for 2021. Local player Marusan, a soy and almond milk manufacturer, launched Japan’s first locally produced oat milk in March 2021. The Japanese company expects this segment to grow and outpace almond milk in the coming years. 

Another player entered the market this year, OATme, a locally manufactured foreign brand developed by the German company Dolher in partnership with market entry specialist First Step Japan. OATme aims to hit the stores within the year.

That’s all, folks!

Stay tuned for our next issue on Japanese consumers and their perception of plant-based protein as an alternative to animal products. 

Industry news