Forget plant-based milks, lactose free tops supermarket sales

Plant-based milks – or “alternatives” as they are called in Europe – were meant to spark a revolution, but in the dairy fridges of Australian supermarkets, shoppers are voting with their wallets.

Sales of fresh plant-based milks – including soy, nut, oat, rice and coconut – have slumped as much as 36.2 per cent, according to the latest grocery scan data, vindicating A2 Milk’s “dairy is good strategy”.

While the broader dairy industry has attracted criticism about livestock greenhouse gas emissions, A2 Milk has doubled-down on its dairy offering, launching a lactose-free product in the middle of last year.

It has since gained more than a 14 per cent share of the lactose-free segment, becoming the best-selling new fresh milk launch in the past year, according to IRI data.

A2 Milk – which has a market value of $5bn – now plans to increase the entire category’s sales by more than 40 per cent within two years as it capitalises on a consumer shift to less processed foods.

Kevin Bush, who heads A2 Milk’s Australia and New Zealand operations, believes it is a winning strategy.

He picks up a carton of oat milk and turns it around to show the ingredients – water, vegetable oil, salt, antioxidants and gluten.

“These additives are what holds it together,” Mr Bush says. “If you didn’t have them, you’d just get this little white lump at the bottom with all this water.”

He then turns around a label of A2 Milk Lactose Free of which there are two: cow’s milk and the enzyme to remove the lactose.

“It’s a natural whole food. It hasn’t got all these additives in it. As an industry, we’re saying that dairy really is a perfect food and it’s fantastically natural,” Mr Bush says.

But many people have trouble digesting milk, finding they feel bloated and having stomach upsets. Meanwhile, lactose-free has been considered more of an additional product, with the entire segment worth about $140m, despite being available for years.

To this end, A2 Milk is hoping to make lactose-free milk sexy, believing there is still a significant untapped market.

Currently, Zymil – owned by French dairy titan Lactalis – has the lion’s share of lactose-free sales, generating $100m a year.

“With Zymil, we’re going to take it to $200m between us,” Mr Bush says. “So, that’s going to be 10 per cent of the (entire milk) category. We’re already under way and we’re chasing it.”

Lactose-free milk supermarket sales soared 12 per cent last year – the highest growth in the fresh milk segment. This compared with regular full-cream milk and reduced-fat milk, rising 9.1 and 5.1 per cent respectively.

Meanwhile, fresh soy milk slumped 5.2 per cent and nut, oat and coconut milk dived 6.1 per cent, 25.8 per cent and 36.2 per cent respectively.

In the long-life segment, oat milk still performed well, gaining 48.5 per cent, while lactose-free recorded 7.6 per cent growth.

A2 Milk is yet to release a UHT lactose-free product, while its fresh lactose-free varieties are only available in 1000 stores in NSW, Victoria and Queensland.

Mr Bush also believes that A2 Milk can hold off new entrants to the market, saying sourcing the proprietary enzyme – which it buys from Europe – is complex, with lengthy shipping.

That hasn’t stopped the supermarkets offering private label lactose-free products for years, but he argues A2 Milk has a point of difference when it comes to digestive problems.

“Often, we’ve said it’s not always the lactose that upsets people, it can be the protein,” he says.

Cows milk contains two beta-casein proteins: A1 and A2, with A1 the result of genetic mutation from selective breeding and believed to be the cause of digestive issues.

“So, we’ve got the best of both worlds,” Mr Bush says.

And the supermarket chains know it, having approached A2 Milk to produce a private label product under contract. Mr Bush has politely declined.


Extracted from The Australian

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