According to research by Rabobank, European dairy sales were “sluggish” in 2023, with many Western European companies seeing weaker-than-expected sales. Forecasts for 2024 are similarly weak. Companies in regions such as Australia, Brazil, and China also saw decreased demand last year.
Rabobank predominantly blames high food price inflation and slowing economic activity for the decline, but acknowledges that changing consumer purchases also play a role in some regions. One of these changes could be a shift towards plant-based alternatives.
Plant-based on the rise
Figures published last year revealed that European plant-based milk sales had risen by 49% in the space of two years, with Germany having the highest turnover and market potential. In Switzerland, sales of milk alternatives increased by almost 80% between 2017 and 2021, leading the dairy industry to regard the products as a threat.
While sales of some plant-based foods have been struggling due to challenging economic conditions, dairy alternatives continue to see growth and account for the largest share of the plant-based market. The market for plant-based cheese is particularly strong, with a 15.1% CAGR predicted over the next decade.
A report published by GFI Europe last year found that plant-based cheese sales saw double-digit growth from 2020 to 2022. It also found a 20% increase in unit sales for milk alternatives, and a 9% decrease for conventional milk.
Furthermore, plant-based milk had an 11% market share of the total milk category and was less badly affected by inflation than conventional milk, with prices rising by just 1% compared to 17% for dairy. Other dairy alternatives such as plant-based yogurt, spreads, and ice cream also saw significant growth.
Tax challenges
In some European countries, (and potentially not entirely unrelated to the above), there are challenges for milk alternatives in the form of higher taxes. Some plant milks in Belgium are taxed at a rate of 22 cents for sweetened drinks and 17 cents for unsweetened, while many brands in the Netherlands have just seen a tax increase from 8.83 to 26.13 cents per litre. In Austria, taxes on plant-based milk are double those for dairy; despite this, sales increased by 21% between 2020 and 2022, and every tenth milk carton sold at supermarket chain BILLA is now plant-based. The retailer is among those calling for taxes to be reduced, which would likely boost sales even further.
“Giving plant-based and animal milk the same tax treatment would not only provide a financial incentive for our customers, but also give them a real choice based on their individual tastes,” said Verena Wiederkehr, BILLA Head of Plant-Based Business Development. “Especially in times of inflation, it is important to relieve the financial burden on our customers, as has already been the case in various European countries such as France, the Netherlands, and Finland, which have enshrined VAT equality in law.”
