Are oats the new almonds in plant-based beverages?

Oats have emerged as a major new player in the plant-based dairy alternatives market, with growth outstripping almond and soy in 2018, according to Nielsen data.

The global dairy alternative beverage market has skyrocketed over the past decade, doubling in value since 2010 to reach $16.3 billion in 2018, according to Innova Market Insights. The number of new dairy alternative product launches rose 20% each year from 2012 to 2016, and the sector has expanded beyond fluid milk substitutes alone, with plenty of innovation in dairy-free yoghurt, ice cream and cheese and frozen desserts.

Nielsen's latest data found plant-based blends represented the fastest growing category with 45.4% growth last year, followed by oat milk with 32.5%, almond milk at 11.5% and coconut milk at just 1%. Meanwhile, soy milk, once the mainstay of dairy alternatives, saw sales drop 8% in the year to August 25, 2018.

Oat milk sales have grown so quickly – particularly in the UK and the US – that major Swedish oat milk firm Oatly reportedly had to delay production of new lines to meet demand in existing markets. As the market has increased, other companies are starting to muscle in on the space, including big names like Danone, which is set to launch an oat-based beverage under its Silk brand in the US in 2019, and PepsiCo’s Quaker brand has said it intends to enter the oat-based beverage market with its own range this year. In Finland and Sweden, the Finnish dairy cooperative Valio has also released a range of oat-based products under its Oddlygood brand.

According to Rabobank, a major reason for the success of oat-based products is that they have a texture and flavour that work well in coffee. Oatly, for example, produces a ‘barista version’ of its beverage that froths like cow’s milk and, after being established on the European market for 25 years, the brand crossed the Atlantic into the US market in 2017.

Apart from its taste and functionality, oats could also have an edge on other dairy alternatives when it comes to sustainability. Globally, soy-based products account for the biggest share of the market, at 64% followed by almond and coconut, which together account for about 25%. However, some consumers are concerned about water use associated with almond cultivation, and soy has been plagued by associations with GMOs and deforestation. Oats, on the other hand, have no such connotations and require about six times less water than almonds to grow.

Meanwhile, Rabobank says fluid cow’s milk sales have fallen 3.5% in the five years to 2017 – providing added impetus for dairy companies to invest in alternatives. It recommends that dairy companies should look at product differentiation as a major strategy rather than cost leadership, which suggests that further innovation in oat-based dairy alternatives looks likely in the months and years ahead.