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Innovation promise in 'maturing' plant-based dairy alternatives market

Plant-based dairy is a maturing market that still faces significant hurdles around taste, functionality, nutrition, and price, but industry is innovating fast, according to experts speaking at Fi Europe.

In 2023, the retail market size of plant-based dairy in Western Europe and North America hit €10.7 billion – up from €6.8 billion in 2019, reflecting a CAGR of 12%, according to global consultancy firm Roland Berger. But as this market grows and matures, what are the biggest challenges facing the category? And where are the innovation opportunities to propel continued growth?

Crop research and smart processing

Dr Sirli Rosenvald, food technologies research director at food-biotech R&D firm TFTAK, said there is a lot of work being done exploring new crops, ingredient blends, processes and technologies.

“I'm very, very happy to see, right now, a lot of innovation looking into different crop varieties,” Rosenvald said. “It makes sense to start from the beginning. The sooner you start from the [beginning of the] value chain, the easier it is to mitigate some of the challenges.”

And the key challenges facing the plant-based dairy category remain taste, fucntionality, nutritional value and cost, she said. Many consumers expect plant-based dairy products to imitate the taste and mouthfeel of regular dairy products, she explained, and expectations are high around matching the nutritional value of dairy products.

But new areas are bringing forward possibilities for formulators and developers in the space, Rosenvald said, such as precision fermentation, bioprocessing, and enzyme technologies. Harnessing the potential of different microorgranisms, for example, can help improve flavour profiles as well as functional and nutritional aspects of a final formulation, she explained. And precision fermentation enabled the development of hybrid formulations and highly functional components for future innovative products.

Precision fermentation future?

Precision fermentation – a production process that relies on genetic engineering of a microorganism to produce a target molecule chemically identical to its naturally occurring counterpart – is starting to gain ground in dairy alternatives.

Nathalie Rolland, co-founder and CEO of French precision fermentation startup Nutropy, said that whilst end products haven't widely hit shelves in Europe yet, interest and intention is building.

“Both France and Europe support the development of these technologies and new products,” Rolland said. Horizon Europe, for example – the seven-year European Union research initiative focused on developing a sustainable and liveable society in Europe – has supported the upscale of precision fermentation to deliver benefits across agriculture, food and feed, she said.

Continued financial public support will be critical to building out this category which is largely made up of startups and research institutions, she said. Looking further ahead, Rolland said consumer education on the processes behind these products will also be key, to provide good levels of insight to consumers in an understandable and engaging way.

“In general, using terms like 'fermented' can be something that could help with consumer adoption because it already sounds familiar.”

Consumer scrutiny and expectations

consumers are certainly looking more closely at ingredient lists and product messaging in the plant-based dairy alternative space, according to Fabien Sauleman, vice president of sales and commercial director at French vegan cheese brand Jay & Joy.

“At the moment, we very much see interest in the naturalness and the nutrition [of these products] from the customer and the shortlist of ingredients is becoming more and more important. People don't want some ultra-processed vegan cheese anymore,” Sauleman said.

But whilst ingredient lists and nutrition remain broadly important across Europe, consumer expectations in plant-based dairy vary from country to country, he said. In France and Southern Europe, for example, taste and indulgence come first; in the UK quality is a priority; and in Germany cost comes first.

Pricing, though, is becoming an increasingly global focus for the plant-based dairy alternative category, Sauleman said.

“There is always this idea of price parity withn dairy products that we have to reach, but we are still not there.” And this isn't just because of the composition of plant-based products, it's also a point of scale and size, he explained–particularly when working alongside long-established global dairy giants.

Scaling the cost challenge

Rosenvald said pricing is a “multi-faceted” issue for the plant-based dairy alternative category but one that can be addressed with smart innovation and, eventually, time.

If industry can find new crops where the protein content is already higher, for example, processes can become more efficient. Similarly, if new ingredients are integrated in smaller concentrations with higher functionality, costs can be reduced. “Eventually, if we manage to use all those new ingredients and find consumer acceptance, then we can scale up. Some of the price issues will be solved when we just go to that larger scale.”

Sauleman said plant-based dairy alternatives is clearly a “maturing category” and market consolidation via acquisitions and new product launches from major dairy brands along with rising interest from food service will only continue to drive the category further forward.