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First came almond milk, then oat milk. Now entrepreneurs are betting that the next big thing in dairy alternatives can be found in pistachios and potatoes.
A three-year-old US company called Táche and Dug Drinks of Sweden are among those vying to replace the milk in your cereal bowls with nut and vegetable-based substitutes.
Milk alternatives may be great for consumers wanting choice, whether it is for health or sustainability reasons. But past experience shows they have not always delivered the same benefit for investors.
On the face of it, the launch of pistachio and potato milks looks well-timed. Dairy substitutes have exploded in popularity over the past decade. In the US, the market for plant-based dairy grew by 15 per cent from 2019 to 2020, by 6 per cent from 2020 to 2021, and by 11 per cent from 2021 to 2022, according to Euromonitor.
By contrast, Americans’ consumption of cow’s milk has been in steady decline since the 1970s. The pace accelerated in the 2010s. In 2019, Americans drank an average of around half a cup of milk a day, according to the United States Department of Agriculture. That is 50 per cent lower than in 1970.
More recent data shows the decline has continued. Milk sales fell 1.4 per cent in the first nine months of 2023, compared with the same period a year earlier. Milk producers and processor Dean Foods and Borden Dairy Company both filed for bankruptcy in 2020.
French food group Danone, owner of the Alpro and Silk brands, is among those betting on the future of milk substitutes. In January it sold its US organic dairy business, including the flagship Horizon Organic brand, to a private equity group. It intends to focus on plant-based food and drinks instead.
The performance of companies that specialise in milk and meat alternatives should act as something of an appetite suppressant, however. Having gone public at $17 a share in 2021, oat milk maker Oatly trades at around just $1.12. Shares in Beyond Meat have also suffered a similar collapse in value.
Milk alternatives are often touted as more sustainable yet they have their own issues. Almonds tie with pistachios for fourth place in the ranking of California’s most water-intensive crops. They require on average four acre-feet of water per acre.
Talk of peak plant milk is unlikely to prevent new products coming to the market, however. Expect the continued decline in milk demand to drive ever more elaborate alternatives.
