As I’m sure you are aware, plant-based foods have experienced profound growth in the marketplace. According to the Plant Based Foods Association, with data commissioned from Nielsen, the plant-based food category is valued at $3.1 billion across all channels, an 8.1% growth from the previous year (1). This growth was particularly prominent among plant-based dairy alternatives (excluding milks, but including plant-based cheeses, yogurts, and ice creams), with 20% growth, topping $700 million in sales over the past year. Plant-based milks alone grew 3.1% in the last year while during this same period, sale of cow’s milk dropped 5%. Across all types of milk, plant-based milk accounted for 9.3% of sales. For their part, plant-based “meat” accounted for 2.1% of sales in refrigerated and frozen meat products sold at retail.

Changing AttitudesThe growth in sales certainly reflects a real change in attitudes toward the plant-based category. Another survey conducted by Nielsen shows that in North America, most consumers are actively incorporating more plant-based foods into their lives (39% of Americans and 43% of Canadians) (2). It is notable as well that vegetarians in North America only account for 6% of the population and vegans account for 2.5% of the population, meaning that plant-based products attract a large cross-section of consumers.

Proprietary market research from manufacturers in the plant-based milk space validate this. “Four out of five of our consumers consume dairy products as well,” says April Siler, senior VP of marketing for Califia Farms, based in Los Angeles, CA.

David Lee, CEO of Field Roast based in Seattle, WA, echoes this as well. “More people are becoming vegan and vegetarian although I think that the larger segment of our audience and our customer base are people that are flexitarians,” he says.

This is important because ultimately, animal-based and plant-based are all competing for many of the same customers. As retailers, you’ve likely witnessed how these significant shifts in sales and attitude physically changed the makeup of your perishable aisles, particularly the dairy aisle, but are you effectively merchandising plant-based and animal-based to reflect these changes, and how are brands competing for space in your stores?

Dairy Holding Down the FortTraditional dairy is still the foundation of the dairy aisle, despite the growing number of plant-based milk SKUs crowding them out in the natural space. “‘New’ item submissions are definitely tilted to plant based,” says R. Scott Owen, senior grocery merchandiser, PCC Community Markets, based in Seattle, WA. “Plant-based yogurt, for example, is up 35% but off a small base while cow’s milk is up 8% but off a huge base. Dairy ‘cow’ sales are about 7x plant based.”

Still, one cannot ignore the challenge dairy is facing. “There is a real turf war,” says Daniel Lohman, CPSA, an organic and CPG industry strategic advisor based in Littleton, CO. “I talk a lot about how organic is what’s driving traffic in stores, market basket sales, well, plant-based does the same thing, even more.”

Hans Eisenbeis, director of media relations for Organic Valley Coop, based in Lacrosse, WI, understands this as well. “The big picture is we know that plant-based is on the rise, we know that we’ve got some big market players coming into the dairy aisle and competing in a big way,” he explains. “From our point of view, it’s our job to continue to educate consumers about the benefits of livestock dairy, and the benefits of full fat, cow’s milk and the products that come from full fat cow’s milk like butter and whole milk and your cheeses. Nutritionally speaking, the benefits of dairy over plant-based, are a fuller spectrum of amino acids and proteins that you have to work a bit harder to get in the plant-based world.”

The nutritional value of milk is an important point for dairy companies to reinforce, especially considering that plant-based milks are challenging this narrative. That is not the only thing plant-based food challenges the dairy industry on, namely environmental sustainability and animal welfare. “[Animal farming] is the ethical blight of our time,” says Hill. “The other element of that is that there is an environmental impact, so it all aggregates into one kind of symphony of purpose.”

While the idea that livestock agriculture is damaging to the environment and cruel to the animals is popular among vegetarian and vegan customers and more people are dipping their toes into the vegan pool, as the data above shows, most people are still buying and consuming dairy products. That does not mean people are ignoring those ideas or rejecting them outright, however. In fact, it may be the reason a person decides to cut down on dairy and meat products, incorporating more plant-based alternatives. Over time, this may lead to a permanent transition.

What dairy companies like Organic Valley want is for people to understand the difference between conventional and organic farming practices. These differences can be significant enough to ease the conscience of most consumers feeling ambivalent about consuming dairy and meat. Beginning with health factors, organic livestock must be fed 100% certified organic feed and managed without antibiotics and added growth hormones (3). Their welfare is also part of the equation for organic certification. “Organic ruminant livestock — such as cattle, sheep, and goats — must have free access to certified organic pasture for the entire grazing season,” writes the U.S. Department of Agriculture (USDA). “This period is specific to the farm’s geographic climate, but must be at least 120 days.”

Shade, clean bedding, shelter, clean drinking water, space for exercise and direct sunlight are also requirements for raising livestock organically. Environmental sustainability comes into play as well. “Organic farmers and ranchers use practices that minimize impacts to the off-farm environment,” writes USDA. “They implement plans to avoid manure runoff, instead using manure as fertilizer or composting it to conserve nutrients.“

Other than organic, there is also the claim of “grass-fed,” for which Organic Valley sells several SKUs. These also boast higher nutritional value, quality of life for the animal and lower environmental impact. “Notwithstanding consumers’ interest in plant-based, grass-fed milk is the ultimate ‘plant-based’ in the sense that you have an animal entirely on forage, hay and grass, the way we all kind of imagine cows want to be and need to be and moving away from green rations,” says Eisenbeis. “It’s important for consumers to understand the huge benefits that come out of that kind of a dairy product but we need to ensure that and build consumer trust in that kind of claim.”

The frustration for organic dairy producers is the use of unverified claims. “This is part of our frustration with label fatigue and all these animal welfare claims that are kicking around in the marketplace,” says Eisenbeis. “We’re ultimately worried that they confuse consumers.” Doubling down on organic status and grass-fed claims is a way to maintain consumer trust and therefore a consistent customer. Similar with plant-based consumers, organic shoppers are often values-based. “From a consumer perspective there’s always going to be the price premium because organic is going to cost more and it’s going to cost more for a lot of good reasons,” says Eisenbeis. “We’re finding people care more and more about these bigger issues than just the price tag on the carton.”

Other dairy companies are getting more creative and scientific in the effort to be competitive. A2 Milk is the most recent innovation in the dairy segment that threatens to encroach on the clientele of plant-based milks. Its major selling point is that it’s easier to digest for those who have troubles after drinking or eating dairy. It’s not a lactose-free option, but simply made with cows that do not produce a specific A1 protein known to cause digestive discomfort. Instead, they utilize only cows that have an A2 protein.

“As many as 25% of the U.S. population claim to have lactose intolerance when some of them may be suffering from a sensitivity to the A1 beta-casein protein, which is found in conventional cow’s milk,” explains Blake Waltrip, CEO of the a2 Milk Company. “a2 Milk selects cows that naturally produce only the A2 protein, giving some of those with dairy sensitivities the opportunity to enjoy real dairy milk again.”

To be clear, a2 Milk still has the same lactose level of regular milk and is not suitable for those clinically diagnosed with lactose intolerance. Instead, it targets consumers who have moved away from milk simply because it didn’t make them feel well and therefore transitioned to plant-based. Someone in that population is bound to miss the taste of dairy milk and give a2 Milk a try. The company, like Organic Valley, also emphasizes the nutritious superiority of dairy milk. “a2 Milk contains about 6 times the natural levels of calcium as soy milk, approximately 8 times the natural protein levels of almond milk and 6 times the potassium levels of most rice milks,” says Waltrip. “Because of this, many alternative milks are then fortified with additional vitamins and minerals like calcium and protein along with added sugar, gums and stabilizers.”

The thing is, every company is going to claim superiority over another and as a natural product retailer, if you put a product on the shelf, it’s because you know it is quality. So, what does all this rhetoric mean for you? Well, it gives you some perspective as to how to sell these products. If you find that dairy is really dropping in sales, this is something you want to improve. So, perhaps it will help to emphasize what organic means for dairy, as well as the benefits of grass-fed with shelf talkers, for example. When it comes to a2 Milk, you are presented with a unique opportunity. It’s a new innovative product, first of all, but it also attracts a specific consumer. That consumer may welcome the opportunity to drink milk again without discomfort, but having been a plant-based milk consumer will also maintain a presence there as well.

Plant-based = OpportunityThe difficult thing for retailers in the turf war between animal-based and plant-based is having the shelf space. Natural product retailers in particular are feeling this. “We definitely see the natural channel leading the way in merchandising dairy free plant milks and also dedicating the largest amount of space on a percentage of total space to plant milks,” says Siler. “What we’re seeing in the mass market and conventional retail is that the plant milk space is growing, but it’s still smaller on a percentage basis but also we’re seeing the organic and specialty milk space growing, so it’s really the kind of mass marketed dairy milk brands that are shrinking.”

The fact that natural product retailers are dedicating more shelf space to plant-based is confirmed by Dean Nelson, owner of Dean’s Natural Food Market, based in New Jersey. “We’ve seen a dramatic change in the diversity of the product mix in the dairy case and there’s so much diversity in non-dairy products, the fact that we have one plant-based milk brand outselling organic milk by 4 to 1, says a lot about what the consumer is looking for in a store like ours,” says Dean. “We carry three different milks but we probably carry five, six different almond milks alone.”

Indeed, the diversity in plant-based is huge. Califia Farms, for example, currently carries 90 SKUs, selling both in retail and online, with not only plant-based milks, but also cold brew coffees and a range of juices. This makes them not only a formidable plant-based milk company, but a formidable beverage company in general. So how do you make the best use of your shelf space considering the wealth of options and disparity between categories? “Retailers need to not worry about whether by definition this is a pure milk product vs. a non-milk and focus on how the consumers shop the category,” says Lohman. “I was in a store last night, my local mainstream that I think is very progressive, and they’ve got a section of all the dairy creamers and the milks, then they’ve got the non-dairy alternatives in another cooler door far away from their counterparts.”

This isn’t the way people shop, says Lohman. This is also demonstrated by the earlier statistics. Most people don’t shop exclusively milk or exclusively plant-based, so separating them makes the shopping experience more frustrating for the customer. Retailers need to accommodate what is called the need state. “Say you have a cold, your need state is to get a cold remedy,” says Lohman. “Now, if I put facial tissues on one end of the store, medicine on the other and vaporizers in the middle, I make it really hard for you to shop. However, conversely if I put all of those products in the same department or sections next to each other, then you’re going to perceive my store as being shopper friendly.”

Translated into the dairy set, this means milk next to plant-based milks, creamers next to plant-based creamers, yogurt next to plant-based yogurt and so on. Cross-merchandising the categories makes sense because it’s the way people shop. Customers will buy milk and almond milk together because they utilize them for different things — one for cereal and the other for smoothies perhaps.

Natural product retailers appear to understand this. “Our products are all merchandised together,” says Nelson. “[If you segregate] you’re making the customer work and the object is not to make the customer work, the object is to just have similar products in one set so that they can see the diversity of product selection.”

It’s not unusual for natural product retailers to have a better grasp of trends. This is because you understand your customers and listen to their feedback. “I think that in the conventional supermarket, there’s a habitual perspective to a shopping experience,” Nelson explains. “But when they come in here, I think they’re coming in with an open-mindedness and a curiosity to try new things so I think that drives an alternative purchase to what they’re used to and we also get to cater to specific needs of customers.”

Not only that, it’s smart business, margin-wise. “We have to be so competitive on dairy, but we don’t have to with plant-based milks, we don’t have to be as margin conscious,” he says. “So it’s in our best interest to sell those products because the margin opportunities are much greater in non-dairy products than they are in dairy products.”

Jay Jacobowitz, owner of Retail Insights, based in Brattleboro, VT, and a WholeFoods columnist, suggests an even better way to maximize sales of plant-based. “If you take space limitations out of the equations, control for that, I’d double merchandise, do a vegan/vegetarian set of two feet, three feet but then also, on the top sellers, select a few SKUs that are maybe the highest velocity options and merchandise them adjacent to the analog they are imitating,” he explains.

Because a variety of plant-based milk products come in aseptic shelf-stable packaging, this presents an opportunity to showcase the product on the dry shelf alongside other vegan/vegetarian items as well as in the refrigerator next to their dairy counterparts. This ensures that vegan/vegetarian consumers have a convenient place to find their plant-based milk and those that eat/drink dairy also have a convenient place to grab their favorite plant-based beverage as well.

Meat AlternativesPlant-based meat substitutes have not experienced the same level of innovation and surge in the marketplace as dairy alternatives but the category is growing and gaining momentum. However, this category poses a different issue than the dairy alternatives because cross merchandising raw meat and meat alternatives doesn’t work (ie. beef patties next to veggie burgers, because to vegans, it’s gross). In fact, Nelson has a completely separate section for his plant-based meats because he finds the number and diversity of the products warrant its own dedicated space.

“We’re working on really low margins on meat and we’re working on healthier margins on plant-based,” he explains. “There is also more promotional opportunities with plant-based meat alternatives and the other thing is that there is constantly new and innovative plant-based food products coming out while meat is meat.”

Although, as Lee mentioned earlier, “flexitarians” make up a majority of Field Roast’s consumers. So how does one reach a large cross-section of customers without grossing our the vegans and vegetarians?

“I started in this industry 20 years ago and my first idea was to market our roasts in the delis as sliceable roasts,” says Lee. “It wasn’t successful but I think that in the retail deli set that is where the opportunity lies and that is going to work fine. I think that what happened with the dairy set with milks will happen in the deli set eventually.”

So, the areas with the packaged cold cuts and hot dogs, can be a place where a meat alternative can thrive, getting into the hands of omnivores and not being repellent to those customers with strong convictions. In fact, this can be another space to double merchandise, with plant-based cheese slices. These would normally appear in the dairy set, but look perfectly at home with plant-based products in the deli set and reaching an even larger cross-section of consumers. WF

  1. "Plant Based Foods Sales Experience 8.1 Percent Growth Over Past Year,"
  2. "Plant-Based Proteins Are Gaining Dollar Share Among North Americans,"
  3. 'Organic Livestock Requirements,"
Published in WholeFoods Magazine November 2017