31 Mar Dairy Farmers of America report 8% decrease in net sales for 2018 while plant based sales surge 17%
During the Annual Meeting on March 20th, Dairy Farmers of America (DFA) officials reported an 8% decrease in net sales (or $1.1 billion) in 2018 vs. 2017.
Although DFA officials do not quote the growth of plant-based dairy alternatives as a primary reason for the decline, a review of recent plant-based market trends makes it difficult to argue otherwise.
Recently commissioned data from leading market research firm, Nielsen (1), shows U.S. retail sales of plant-based foods have grown 17% in the past year to over $3.7 billion (see full breakdown by plant-based alternative category in Figure 1 below).
In contrast, the total US dairy industry market value is estimated to be worth $57 billion dollars in 2017 and has been experiencing weak growth since 2013 with a compound annual growth rate (CAGR) of 0.7% between 2013 and 2017. This weak growth was primarily attributed to declining fertility rates, reduced milk prices and increased domestic milk production (vs. exports). (2)
Plant-based milk alone accounts for almost half of the total plant-based food market ($1.8 billion) with 37% of all U.S. households purchasing plant-based milk (over 45 million households).
Not surprisingly, sales of plant-based milk far exceed that of other plant-based products as shown in Figure 1; attributed to a well-established distribution channel (plant-based milk is sold in 89% of retail food stores and 100% of grocery stores) and competitive prices (vs. dairy milk). In addition, growth in the plant-based milk industry appears to be strong, in 2018 the market grew 9% vs. 2017.
As impressive as the plant-based milk results were in 2018, the growth experienced in other plant-based dairy categories far exceeded that of the plant-based milk market. For instance, the plant-based cheese market grew by 41% vs. 2017, now worth $133 million (see full breakdown of the “other plant-based dairy” categories in Figure 2 below).
In contrast, cheese sales accounted for the highest value in the US dairy market in 2017, with total sales of $22 billion, equivalent to 38.0% of the market’s overall value; sales of milk reached a value of $17 billion, equating to 28.9% of the total market value. (2)
The plant-based dairy market is growing, there is no question about that, but there are key areas that need to be improved before they are able to begin taking away market share from juggernauts like Kraft Heinz and Dean Foods, which, as of 2017, owned 12.4% and 6% of the dairy market respectively. (2)
These key areas of opportunity are:
Improve distribution channels (i.e. plant-based cheese is sold in only 61% of retail food stores)
Build efficiencies in their supply chain to achieve economies of scales in order to reduce consumer prices and compete with their dairy counterparts. The dairy industry is highly competitive, even minor fluctuations in price can have a significant impact on sales.
Of course, an increase in the American vegan population will have the biggest impact on moving the needle in the plant-based dairy market. Nielsen found in 2017 that only 3% of the population called themselves vegans, a number that appears to have remained more or less stable since 2012 (3).
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The custom data summarized here represent retail sales of plant-based foods that directly replace animal products as defined by GFI, including meat, seafood, eggs, and dairy, as well as meals that contain direct animal ingredient replacements.
This data was obtained over the 52-week period ending August 11, 2018 from Nielsen’s Expanded All Outlets Combined (xAOC) channel – which includes grocery stores, drug stores, mass merchandisers, club stores, dollar stores, and military stores – plus Whole Foods Market.
Measured by %ACV
1.Good Food Institute: Plant-Based Market Overview.
2.MarketLine Advantage. United States – Dairy. Industry Profile published by MarketLine on 27 June 2018.
3.The Economist. World industry: The retreat from meat. October 13th 2018