The plant-based dairy alternatives market is hitting a speed bump.

Following years of growth, demand for alternatives to traditional dairy selections is declining because of factors such as higher product prices and lengthy ingredient statements, analysts say.

While total dairy dollar and unit sales were up 4.9% and 2.3%, respectively, for the 52 weeks ending Aug. 23,
plant-based dollar and unit sales declined 2.5% and 2.8%, reports NielsenIQ, a Chicago-based consumer intelligence firm.

The price of alternative milk, the most active plant-based category, is about 11% greater than dairy milk, and unit sales declined 5.4% for the 52 weeks ending Aug. 10, reports Circana, a Chicago-based market research firm. In addition, alternative yogurt unit sales fell 1%, while dairy yogurt volume was up 6.9% despite a higher price point.

Plant-based milk accounts for about 13% of milk category dollars, Circana states. Plant-based alternatives with lower shares include creamers (8.8%), yogurt (2.4%) and spreads (1.2%).

In addition, 48.3% of households purchased plant-based dairy alternatives, down 1.1 points from the year-earlier period, Circana reports. Also decreasing was the amount of plant-based dairy alternative triers (0.1%), repeat purchasers (1%) and buyers (1.7%).

Declining demand for plant-based dairy alternatives is likely to result in fewer products on store shelves, particularly because the growing popularity of value-added dairy, which could result in the merchandising of more organic, lactose-free, high-protein and low-sugar selections, said John Crawford, Circana senior vice president, client insights.

“Consumers do not view plant-based dairy alternatives as being as healthy as they did previously,” he said. “Retailers will get behind products that are growing, so there will be more emphasis on value-added.” 

Because of a shortage of temperature-controlled shelf space, “It is difficult to encroach on the dairy-based part of the aisle given what a trip driver some dairy-based segments are,” said Chris Costagli, vice president, thought leadership, and food and non-alcoholic beverage insights lead for NielsenIQ.

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Operators should reconsider the need to offer many varieties of a specific plant-based item from assorted brands, such as almond milk, when evaluating selections, he said. “Does a retailer really need six-plus SKUs of the same alternative or would shoppers be more interested if faced with two to three SKUs plus two to three different
value-added options?” Costagli said.

The greater consumer interest in purchasing familiar products with less processing also is contributing to waning alternative sales, he said. “Shoppers are paying close attention to ingredients,” Costagli said, adding that dairy milk typically has three or four ingredients with which most consumers are familiar, while plant-based milk will have 10 or 11 ingredients with little familiarity.

Performance differences are souring consumers on plant-based alternatives as well, he said. “Anyone who has tried making a latte or cappuccino with plant-based milk knows it doesn’t froth the same way as dairy-based milk, and in hot beverages, plant-based milk can separate and curdle.”

A focus on lower pricing and strong promotions will be the most effective way for retailers to generate greater plant-based dairy alternatives activity, Costagli said. “Affordability is critical to getting plant-based into the basket,” he said, noting that NielsenIQ research found that 50% of shoppers are looking for promotions and deals, and 44% are prioritizing essential products and foregoing nonessentials to scale back spending.

“Pricing is a big challenge because more than 50% of consumers are extremely concerned about food price inflation, and that is causing them to change how they shop, where they shop and what lands in the cart,” Costagli said. 

He said consumer pullback at the shelf often results from shoppers having less money for groceries because of higher costs for health care, rent, transportation and other day-to-day expenses. “Plant-based unit prices are higher in every category except butter,” he said.

Some shoppers still embrace plant-based dairy alternatives because of sustainability and animal cruelty concerns, flexitarianism and veganism, with higher-income customers the most active purchasers, said Russell Zwanka, associate professor of food marketing and director of the food marketing program at Western Michigan University in Kalamazoo. 

“As with any specialty diet, there tends to be a price premium for plant-based dairy alternatives,”
he said. “Those on the lower end of the income scale often stay more mainstream in their food choices, and vice versa.” 

Key customer segments also include consumers who are using GLP-1 medications and looking for higher-protein alternative milks; shoppers with allergies and digestive needs; and those seeking foods that are lighter in fat, said Missy Davis-Hood, category manager, frozen/refrigerated, for Natural Grocers, a Lakewood, Colo.-based operator of about 169 stores in 21 states that focus on natural and organic.

She said the chain is moving away from offering plant-based dairy alternatives with unnecessary emulsifiers, oils and stabilizers, while providing selections with additional protein to boost nutrition. “Shoppers want options that not only taste good but also bring real benefits to the table, and that’s where this category is heading,” she said. “It is about having choices that fit different lifestyles and health goals.”