Milk alternatives - separating fact from froth
We explore some of the claims being made about milk alternatives and how those claims relate to the competitiveness of New Zealand's dairy sector.
There has been plenty of interest in recent years regarding milk alternatives, questions about their sustainability and suggestions that they will disrupt the traditional dairy sector.
What do we mean by milk alternatives? In the context of this article, they are any product consumers consider to be substitutes for the traditional (mammalian) dairy category. Broadly, these milk alternatives can be divided into two groups: those originating from plants, such as soy, oat, almond and rice; and those produced using precision fermentation which uses genetically modified microbes to produce specific proteins.
Precision fermentation products are not currently available to New Zealand consumers, and neither group of alternatives currently have compositions that replace all of the components found in milk and dairy products.
Nutrition
The Riddet Institute (a National Centre of Research Excellence in Food Science, located at Massey University) and Fonterra recently assessed the nutritional value of plant-based beverages and bovine milks1. Their study identified a wide-range variation in nutrient content between plant-based milk products and between products within the same plant category (e.g., soy, oat).
Calcium-fortified soy was the only product approaching a similar protein composition to bovine milk, including comparable amino acid content bioavailability, and cost (Figure 1). The implication is that, with the exception of soy products, a lot more product must be consumed (and paid for) to achieve a similar nutritional value as traditional dairy products.
There is no comparable study for precision-fermented milks but, in theory, it is possible to match the nutritional profile of milk proteins and some of the other components with this method. However, this is complex and, therefore, costly.
For many market segments, nutritional properties are unlikely to be the sole driver of individual consumer purchasing decisions2. For example, consumers seeking a milk-like liquid for their coffee or breakfast cereal could be more focused on cost, taste, or sustainability and ethics of the production systems. Manufacturers of highly processed foods could also select ingredients that replace milk powder for similar reasons.
Sustainability
Sustainability is an increasingly important attribute, so how do we compare on this front? There are two aspects where animal production systems come under scrutiny.
The first consideration is the type of feed offered to the animals. If an animal eats 1kg of feed, it will produce less than 1kg of product for human consumption. This leads to the conclusion that animal production systems reduce global food production, when animals are offered feed that could be directly consumed by humans3.
From this perspective, New Zealand pasture-based dairy systems are at an advantage relative to dairy systems based on harvested crops. That’s because our systems mostly utilise human-inedible grass, of which most grass is grown on land where arable or horticultural production is either not feasible or not profitable4.
The second consideration is greenhouse gas (GHG) footprint. In an analysis of products produced in Italy, researchers reported milk had roughly twice the footprint of soy beverages, though noted a 13% increase in consumption would be required for an equivalent protein intake, which would cost the consumer 66% more money compared with milk5. It’s important to note that the footprint of NZ milk is 43% lower than that of Italy, meaning there’s potentially a comparable footprint6 between soy beverages and NZ milk.
Manufacturers of fermented milk alternatives have made bold claims. Perfect Day, for example, says its whey protein has 91-97% lower GHG emissions, 29-60% lower energy demand, and 96-99% lower surface and groundwater consumption compared to bovine milks7.
However, Perfect Day allocated only 22 % of that footprint to the whey protein; the remainder was allocated to the byproduct, based on the weight ratio of protein and by-product. Typically, GHG footprint is allocated to each co-product by economic value, which would have allocated a much higher proportion to the whey protein. Perfect Day argued for footprint allocation by mass because the by-product’s economic value was unknown. Using typical allocation methods, if the byproduct had no economic value, the footprint of their product would be almost five times higher. Ironically, one way of generating value from the by-product could be as a feed for animals.
Another study, by the Technical Research Centre of Finland, Fonterra and AgResearch collaborators, likely provides a more balanced view8. Researchers compared the carbon footprint of beta-lactoglobulin (a common milk protein) produced by New Zealand dairy systems with precision fermentation. The study determined that precision fermentation’s carbon footprint could be comparable but was highly dependent on the energy source for processing, and the carbon source (i.e., sugar) for the microbes. Precision fermentation could have a low footprint when produced with mostly renewable energy, as in New Zealand, and if a lower footprint carbon source (other than sugar) could be found. However, precision fermentation results mostly in long-lived GHGs, relative to shorter-lived GHGs (methane) produced in dairy systems. This has implications for long-term warming. The technology is relatively immature, so improvements are likely, which should provide a strong incentive for the dairy sector to continue striving to reduce its footprint.
Another sustainability consideration is the fundamental difference that dairy production systems require animals. Animal welfare standards must keep pace with new evidence-based knowledge and the expectations of consumers.
New Zealand pasture-based systems are, potentially, able to align more closely with biodiversity criteria than the monoculture carbon sources for milk alternatives. Also, our systems could be more desirable to some consumers because of their naturalness, compared to highly processed products.
Economics
Price is often the strongest driver for individual consumers and purchasers of dairy ingredients. If compared at a dollar per nutritional level (as in Figure 1), soy beverages are the only comparable product to bovine milk.
Understanding the economics of precision fermentation is more challenging due to the industry’s immature state. Its competitiveness will likely improve with cost reductions from improved processes and achieving scale. Commercial-scale plants are likely to be expensive, and this will make their total cost of production per unit of protein higher than dairy products9. Only a handful of start-ups have raised the large amounts of capital required (USD $200M+), and the timeline to commercial production at large scale is still years away.
The target market of the final product is also key to competitiveness. Each precision fermentation process produces a single protein. So, to produce the six major proteins in bovine milk, six different fermentation lines would be required, without considering the other proteins, lactose and lipids. This would likely cost four times as much to produce than fresh dairy milk10. On the other hand, there are only two key proteins in ice cream, simplifying the process and likely cost.
Another example is a ‘simple’ but high-value product like lactoferrin, which could possibly be produced at a competitive price using precision fermentation. Improvements to precision fermentation processes are likely to reduce costs; however, there may be limits to simplifying production because facilities may need be at pharmaceutical-grade standard, compared to food-grade standard, to avoid contamination10. The implication is that traditional mammalian-derived dairy may compete in some product categories but not others.
It is not yet clear if any of these products could, in future, be disruptive to New Zealand dairy on the world market. This could be explored by determining the approximate volume of each product that can be produced from a kilo of milksolids under a range of market scenarios, and the subsequent value of each product. Examples of this are represented in Figure 2, where the largest end product (whole milk powder), also has the highest gross value of production, but is very difficult for alternatives to replicate. Alternatively, the highest-value product (lactoferrin) could potentially be replicated, though even if alternatives displaced dairy-sourced lactoferrin, the effect on New Zealand’s gross value of production would be limited (due to its gross value). This type of analysis could identify the potential impact to milk price, should the value of any of these products be affected by alternatives.
Consumer trends
A final piece to the puzzle is trends in consumer preferences. A recent New Zealand survey found consumers perceived cows’ milk to be better nutritional value, better value for money and better for the NZ economy, but that plant-based alternatives were better for the environment11.
Global sales of milk alternatives have seen greater than 10% annual growth from 2017 to 2021 and reached USD$25 billion in 202112. However, by value, the alternatives market is still relatively small — the dairy products category is about 20 times larger. So, while the traditional dairy products have grown at only 1% over recent years, that 1% growth represents twice as much in sales value compared to milk alternatives.
There are signs of stagnation in the growth of alternative proteins, in particular, meat. In one study of 100 plant-based meat brands in Europe, the US, Canada, Australia and New Zealand, not one brand was making a profit, even after five years in business13. This was because products were not delivering the taste and texture desired by consumers and, consequently, were not converting trials into repeat purchases. The authors commented that the size of the potential market had been overstated and that plant-based advocates had not been able to accelerate the number of consumers converting to meat alternatives. To be successful, milk alternatives will need to taste good and this may require novel products, rather than attempting to mimic traditional dairy.
A final point is that milk alternatives are highly processed. With consumer trends appearing to favour natural products, this may limit their appeal, at least in some market segments14.
Conclusions
By evaluating information in the public domain, New Zealand dairy appears well placed to compete with milk alternatives in the near- to medium-term. However, several questions remain for the long-term outlook. How much can precision fermentation costs be reduced? What is the value of the milk products most at risk of substitution? What will drive consumer demand for milk alternatives, and how large will the market be? DairyNZ’s Frontier Farms project (see right) is investigating these questions and assessing the attributes our farm systems need to deliver in the future, to remain competitive.
Frontier Farms project
DairyNZ has recently launched an exciting project called Frontier Farms, which aims to design profitable and sustainable farm systems that are ahead of where the frontier of international competition will be in 2030. We forecast the attributes farm systems will need to deliver and started with an assessment of US ‘mega’ dairies. We are now investigating milk alternatives, as discussed in this article. Based on these assessments, we will co-design potential farm systems with farmers and test the most promising ones at a commercial scale to meet this frontier.
References
1. Smith, N. W., A. C. Dave, J. P. Hill, and W. C. McNabb. 2022. Nutritional assessment of plant-based beverages in comparison to bovine milk. Frontiers in Nutrition 9.
2. Adamczyk, D., D. Jaworska, D. Affeltowicz, and D. Maison. 2022. Plant-based dairy alternatives: consumers’ perceptions, motivations, and barriers – results from a qualitative study in Poland, Germany, and France. Nutrients 14: 2171.
3. Mottet, A., C. de Haan, A. Falcucci, G. Tempio, C. Opio, and P. Gerber. 2017. Livestock: On our plates or eating at our table? A new analysis of the feed/food debate. Global Food Security 14: 1-8.
4. Harris, S., R. W. McDowell, L. Lilburne, S. Laurenson, L. Dowling, J. Guo, P. Pletnyakov, M. Beare, and D. Palmer. 2021. Developing an indicator of productive potential to assess land use suitability in New Zealand. Environmental and Sustainability Indicators 11: 100128.
5. Coluccia, B., G. P. Agnusdei, F. De Leo, Y. Vecchio, C. M. La Fata, and P. P. Miglietta. 2022. Assessing the carbon footprint across the supply chain: Cow milk vs soy drink. Science of The Total Environment 806: 151200.
6. Mazzetto, A. M., S. Falconer, and S. Ledgard. 2022. Mapping the carbon footprint of milk production from cattle: A systematic review. Journal of Dairy Science 105: 9713-9725.
7. Perfect Day. 2021. Life cycle assessment of Perfect Day protein. [Accessed November 4, 2022]; available from: https://perfectday. com/blog/life-cycle-assessment-of-perfect-day-protein
8. Behm, K., M. Nappa, N. Aro, A. Welman, S. Ledgard, M. Suomalainen, and J. Hill. 2022. Comparison of carbon footprint and water scarcity footprint of milk protein produced by cellular agriculture and the dairy industry. The International Journal of Life Cycle Assessment 27: 1017- 1034.
9. Poinski, M. 2022. From science to CPG: How money makes the food tech startup world go round. [Accessed December 3, 2022]; available from: https://www.fooddive.com/news/food-tech-investment-moneystartup-scale-up/635941
10. Wood, P., and M. Tavan. 2021. The changing face of protein production. New Zealand Science Review 77: 59-61.
11. Research First. 2022. How do plant-based alternatives stack up against milk in consumer perceptions? [Accessed November 4, 2022].
12. Fortune Business Insights. 2022. Dairy Alternatives Market Size, Share and COVID-19 Impact Analysis. [Accessed November 9, 2022].
13. Askew, K. 2022. Plant-based brands accused of creating ‘a category failure, maybe one of the biggest in food industry history’. [Accessed November 4, 2022]; available from: https://www.foodnavigator.com/ Article/2022/09/08/plant-based-brands-accused-of-creating-acategory-failure-maybe-one-of-the-biggest-in-food-industry-history
14. Morrison, O. 2022. Unilever hopes to launch ‘cow-free’ ice cream but asks: ‘how do we position it to mainstream consumers’? [Accessed December 3, 2022]; available from: https://www.foodnavigator.com/ Article/2022/11/23/unilever-hopes-to-launch-cow-free-ice-creambut-asks-how-do-we-position-it-to-mainstream-consumers