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HomeOpinionDairies are turning vegan, but that's not really cutting the carbon footprint...

Dairies are turning vegan, but that’s not really cutting the carbon footprint of your soy latte

All the growth in the dairy market these days has been in products other than milk, though the amount of milk being drawn from cows is still rising in the industry.

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How’s this for an instance of life imitating a hoax?

A spoof press release sent to journalists in February falsely stated that the U.K. unit of Danish dairy company Arla Foods amba was going to switch to producing only oat milk by 2030 to reduce its carbon emissions. No such plan was in the works — the release appears to have been sent out by an anonymous activist — but within days Canadian dairy giant Saputo Inc. said it would plan to acquire a plant-milk business, and a month later Arla announced its own oat-milk brand.

They’re not the only players getting in on the act. Sweden’s Oatly AB, whose investors include Oprah Winfrey, Jay-Z and Natalie Portman, is considering an initial public offering at a valuation of as much as $5 billion, people with knowledge of the matter told Ruth David, Kiel Porter and Vinicy Chan of Bloomberg News.

Danone SA spent $10 billion in 2017 buying plant-based WhiteWave Foods Co. and believes its U.S. vegan business could grow as large as its dairy yogurt unit within 10 years. Nestle SA last month announced plans to expand a range that already includes pea-based powdered milkshakes and vegan ice cream.

Part of this is simply chasing consumer demand. Most of the world’s adult population struggles to digest the lactose in milk. Even among the 29% or so (mostly of European descent) who can absorb it, self-diagnosed lactose intolerance appears to be on the rise. Seeking a source of tasty fats with a smaller carbon footprint than the cattle industry is a fresh justification for consumers to switch.

There’s a better reason for the dairy industry to chase the vegan market, though: dollars. Only about a quarter of the milk produced on farms ends up being sold as a liquid, with the vast majority turned into cheese, butter, infant formula, yogurt and the like.

Those manufactured goods are a far more profitable business for most dairy processors. Fresh liquid milk requires fiendishly complex supply chains capable of delivering consumers a highly perishable product in consistent quantities from living animals in every corner of the country or beyond, while managing the short- and medium-term fluctuations expected in any commodity. It’s no coincidence that the milk market in most nations is one of the most heavily regulated and government-supported industries around.


Also read: Nestle expands beyond vegan burgers, adds plant-based tuna alternative


 

Cheese, butter and other goods last longer, can easily be manufactured on demand from processed fats and powders, and can be heavily branded in ways that rarely work so well with plain milk. In that, non-milk dairy products have a lot in common with plant-based milks, which are similarly heavily processed and don’t pass their expiration date in a matter of days.

You can see the advantage by looking at returns on equity at Vitasoy International Holdings Ltd., a Hong Kong producer of soy milk. Among major dairy companies, only China’s Inner Mongolia Yili Industrial Group Co. manages a better performance.

The higher-margin nature of plant-based dairy is already showing up in shoppers’ purchasing behavior. While cow milk vastly exceeds the alternatives in terms of volumes, the contest is relatively tight in dollar terms. In China, plant milks have about a third of the combined market for milk and its alternatives, according to data from Euromonitor. While that share has actually been declining, in the U.S. the plant-based share is rising fast, to nearly 17% of the combined market by retail sales value.

For most of the dairy industry, there’d be a lot to like about a business that was even less focused on the stuff that comes in gallons, liters and pints.

Things have changed dramatically since the late 1990s, when dairy fats were so out of fashion that Anthony Bourdain could kick off a career as a bold teller of uncomfortable truths by saying that butter is, actually, good. All the growth in the dairy market these days is in things other than milk. Butter consumption in the U.S. rose 51% from 2000 to 2018; cheese was up 57% and yogurt posted a 138% increase, while whey and milk powder sales more than doubled. Only milk itself, and to a lesser extent ice cream and other frozen products, saw declines.

From that perspective, processors would be better off if the decline of milk-drinking accelerated and people switched to plant-based, factory-made alternatives. If that happened, they could divert more of the capital currently going into servicing milk’s byzantine, low-margin supply chain into developing more profitable branded goods. To be sure, the huge volumes in which milk is consumed probably help processors in their negotiations over shelf space and placement with retailers, but it’s not clear that’s enough to make up for the associated costs.

Farmers would probably be better off, too. While small businesses are always going to wind up being squeezed by the big processors and retailers, a more profitable dairy industry is probably one where they stand a better chance of making money for themselves.

So don’t be surprised to see milk producers increasingly going vegan-ish in the years ahead. Just don’t kid yourself that you’re cutting your own carbon footprint much by opting for an almond latte. While retail milk sales may be declining, the amount coming out of cows is still rising — and it’s the butter on your pancakes and the cheese in your omelette that’s driving it. – Bloomberg


Also read: Vegan, alcohol-free Christmas is replacing tradition this year


 

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1 COMMENT

  1. Vegans do not consume any dairy products at all; so your final paragraph is just flat out wrong, if of course aimed at full vegans.
    If aimed at non-vegans, which seems likely; even the highest protein plant source has LESS environmental impact than the lowest animal protein source. (according to IPCC Report & BBC food calculator via Oxford University study).
    Read that again.
    Many dairy farmers are switching flat out to plant farming and sending their cows off to live happy lives in sanctuaries – where they are thought of and looked after as beings, not property or milk machines. It would be wise if more dairy farmers stopped breeding these creatures in to existence, purely to create a financially unviable product for humans, who physiologically and nutritionally do not need to consume.

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