05 Oct 2021

Oat Milk Rises to the Top

Contributor(s): Citi Global Insights
What’s behind the inexorable rise of oat milk? A new report by Citi’s global head of US Consumer Staples Research Wendy Nicholson, summarized here, dips into the dairy alternatives market.

Soy milk’s loss has been oat milk’s gain.

Within the alternative milk space, a shift has taken place in the past five years away from soy and other nuts toward oats. Oats are sustainable, low-input crops. They use few resources and have a positive impact on the soil in which they grow. And the milk they produce has a longer shelf life than dairy.

Oat milk manufacturers view their total addressable market (TAM) as the $600 billion global dairy and dairy alternatives market, just as alternative meat producers view their TAM as the $1.2 trillion meat industry. Today, dairy alternatives represent ~12% of total dairy category sales, and Euromonitor does not expect dairy alternatives to yield any share over the next five years. In fact, it forecasts a +6% CAGR for the dairy alternatives market from 2020 to 2025, as it benefits not only from population growth but also from the increasing popularity of dairy alternatives.


The Dairy Products & Alternatives Category Is ~$600 bn and Still Set to Grow +6% from 2020 to 2025


By region, alternative dairy is largest in Asia Pacific, where the majority of consumers are unable to process dairy.  However, alternative dairy is still big in markets such as North America and Western Europe, where it makes up ~9% and ~6% of total dairy category sales, respectively.


Alternative Dairy Is a Big Opportunity Outside of the United States

Source: Citi Research, Euromonitor forecasts


Dairy alternatives developed to fill a need: ~66% of adults are lactose intolerant (~80% in Asia Pacific), creating a built-in market for dairy alternative products. 

The dairy alternative category plays at the intersection of two strong secular trends:

Sustainability and Health: For the same reasons that we are seeing growth in the plant-based meat category, consumers are seeking plant-based dairy alternatives because they believe that these products will be better for their personal health and the health of the environment.

Connection with Specific Brand Values: Millennial and Gen Z consumers typically care much more than their parents about the values of the brands they support.  In fact, a Zeno study found that four out of six consumers are more likely to “purchase, protect, and champion purpose-driven brands.”

Oats are widely accessible to consumers, contain fewer allergens than other dairy alternatives (e.g., nut-based or soy-based milk), and boast a balanced nutritional profile.  In the last year, there has been a marked increase in the preference for oat milk, likely attributable to the increasing availability of oat milk in both independent coffee shops and large chains.

Oat Milk's Share of Dairy/Milk Alternatives Has Increased from 0% to ~16% Since 2017

Source: Citi Research, Nielsen

In the United States, the oat milk category has gained traction in recent years. Similarly, the number of total distribution points for oat milk brands has increased. 

The primary reason that consumers choose plant-based dairy is not usually the environment. Rather, consumers seem to be much more willing to switch products if they are able to see some nutritional benefit for themselves.  For the most part, one cup of oat milk has a similar nutritional profile to one cup of 2% milk.  However, one notable difference is protein content.  The average cup of oat milk has just ~2 grams of protein per serving, while 2% milk boasts ~8 grams of protein per serving.

For more information on this subject, please see the Wendy Nicholson's full research report, published on September 17, 2021, here: No Bones About It: Oats Are a Good Alternative to Cows. In addition, for a broader discussion of alternative proteins, please see the August 2021 Citi Global Insights report by Adam Spielman here.

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

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