Plant-based drinks are becoming increasingly popular

When it comes to plant-based products, Canadians have never had more choice, and nowhere is that choice more evident than in the dairy section.

To meet growing demand, companies are investing in new products and technologies to adapt to consumer tastes and differentiate themselves from all the other players on the shelves.

“The product line has expanded so quickly,” said Liza Amlani, co-founder of Retail Strategy Group.

She explained that younger generations in particular are driving the growth of the plant-based market, as they consume less dairy and meat.

Commercial sales of cow’s milk have been declining for years, according to research firm Mintel, likely in part because of the rise of plant-based alternatives, even though many Canadians still drink dairy products.

The main reason people are switching to plant-based drinks is that they see them as healthier than dairy, explained Joël Grégoire, associate director of food and drink at Mintel.

“Plant milk, the one thing about it is it’s not new,” Gregoire said. “It’s been around for a while. It’s well established.”

According to him, for this reason it serves as an “entry point” for many consumers interested in plant-based alternatives to animal products.

More options available than ever before

Plant-based beverage consumption is expected to continue to grow in the coming years, according to research from Mintel, with more options available than ever and more consumers opting for a diet that includes both dairy and non-dairy milk.

A 2023 report from Ernst & Young for Protein Industries Canada predicted that the plant-based dairy market would reach US$51.3 billion by 2035, at a compound annual growth rate of 9.5%.

Due to this opportune growth circumstance, even well-established dairy or plant-based companies are stepping up their efforts.

It’s been more than three decades since Natura, based in Saint-Hyacinthe, Que., first launched a line of soy beverages. Over the years, the company has rolled out new products to meet growing demand, and earlier this year launched a line of oat beverages that it says are the only ones to receive Celiac Canada’s seal of approval.

Competition is tough, said owner and founder Nick Feldman, especially from big American brands that have the means to ensure their products reach shelves across the country.

Natura has nevertheless continued to grow, with an emphasis on the use of organic ingredients and local production from raw materials.

“We may not appeal to the mass market, but we appeal to the natural consumer, the organic consumer,” Feldman said.

Amlani said brands are increasingly promoting the simplicity of their ingredient lists. She also notes that more companies are offering different types of products, such as coffee creamers.

Companies are also looking to stand out through eye-catching packaging and marketing, Mr.^me Amlani, and competing on price.

Oat drinks top the list

Aside from all the companies vying for shelf space, consumers can choose from many types of plant-based beverages, including almond, soy, oat, rice, hazelnut, macadamia, pea, coconut and hemp.

However, one product in particular has recently seen a rapid rise in popularity.

“I would say oats are the big growth product,” Feldman said.

Mintel’s report found that the share of Canadians who say they purchase oat beverages quadrupled between 2019 and 2023 (although almond is still the most popular).

“There seems to be a really good marriage between coffee and oat milk,” Feldman explained. “The flavor combination is excellent and better than any other non-dairy option.”

The drink’s rise in popularity in coffee shops is a big part of the reason it’s rising so quickly, Gregoire explained — its texture and ability to froth make it a good alternative to lattes and cappuccinos.

He says it’s also a good example of companies presenting a strong “use case” for another new entrant in a competitive market.

Among long-standing brands and new entrants, there is another – perhaps unexpected – group of players that is increasingly investing in plant-based beverage avenues: dairy companies.

For example, Danone has owned the Silk and So Delicious brands since a 2014 acquisition, and long-standing U.S. dairy company HP Hood LLC launched Planet Oat in 2018.

Lactalis Canada also recently converted its Sudbury, Ontario, plant to manufacture its new plant-based brand Enjoy!, with beverages made from oats, almonds and hazelnuts.

“As an organization, we obviously follow consumer trends and have seen interest in plant-based products, particularly liquid beverages,” said Mark Taylor, president and CEO of Lactalis Canada, whose parent company Lactalis is the largest dairy company in the world.

The plant was a milk processing facility for six decades until Lactalis Canada began renovating it in 2022. It now manufactures not only the new brand, but also the company’s existing Sensational Soy brand, and is the company’s first dedicated plant-based facility.

“We are primarily a dairy company, and we always will be, but we see these products as complementary,” Taylor said.

It makes sense that big dairy companies would want to get into plant-based beverages, Gregoire added. The dairy sector is big — a “cash cow,” if you will — but it’s not really growing, while plant-based products are enjoying success.

“If I’m looking for growth opportunities, I don’t want to be left behind,” he said.

Joel Gregoire said there is a risk that consumers will be confused by so many options, which is why it is so important for brands to find a way to differentiate themselves, whether it is through taste, health or the quality of the foam of the drink for a latte.

Competing in a more crowded market is tough, but Taylor believes it means better products can be offered to consumers.

“It keeps you on your toes and forces you to be really good at what you do. It drives innovation,” he said.