The Case for Change
Many hot drink retailers still charge up to 50p extra per drink for plant milk. Why does this matter? Well, as we explain below there are benefits for consumers, retailers and the planet by removing them. Some of these points are directed toward chains - we know how hard it can be for independents.
Whether you are reading this as a consumer, a chain or an independent, we want to show you why it's in your interest to see an end to extra charges. Be it to reduce your individual carbon footprint, gain market share from a growing customer segment or stand out in a saturated market, we outline our case to you here.
Dairy production is on the rise...
Based on current projections, agriculture will account for 52% of global greenhouse gases (GHG) by 2050, with 70% coming from meat and dairy production. Moreover, dairy production must be reduced by 50% by 2050 to avoid irreparable climate change and to keep the Paris Agreement on track .
A 2018 study on global attitudes to climate change showed that 66% of UK residents (68% globally) believe climate change to be a major threat to their way of life and are looking to align with brands which recognise this . Brands which are genuine in their purpose here will yield higher loyalty, consistency and relevance to their customer base over time .
Despite these facts, UK milk production has grown by 6.6% (CAGR) over the past decade. A thoughtful but structured reduction is required. Furthermore, we ask government to consider a restructure of current policy, encouraging dairy farmers (who account for 16.3% of UK agriculture ) to consider other forms of harvest, and the introduction of incentives for consumers of plant milk.
We have no Planet B. We must loosen the grip on this industrial animal production line or risk losing the world as we know it.
Source: DEFRA, 2020
The above, taken from a 2018 study by Oxford University  demonstrates the impact of a choice to favour dairy alternatives over dairy (based on a serving of 200ml). Drinking just one glass of dairy milk daily for a year requires the equivalent of 585 miles of driving emissions, 703 showers and 7,000 sq ft of land, more than 10x required for the same amount of oat milk . Whilst Almond and Rice milk requires some significant water, it is worth noting that they continue to out-perform dairy in all categories.
The dairy free market is growing 4x faster than dairy production...
Between 2016-2020, UK sales of dairy free products rose by 26% each year (CAGR) . Furthermore, the number of Britons using plant milks rose to 23% in the three months to February 2019 . 16-24 year olds accounted for 33% of this change. The number of UK Vegans is also on the rise, reaching 600,000 in 2019 from 150,000 in 2014 . Crucially, the plant-based milk market is forecast to more than double by 2025 .
A new, more socially-conscious generation is emerging, keen to 'do their bit' and looking to transact with retailers who think the same way. As current children enter the market as young adults, they too will adopt this perspective. The tide has turned in plant milk's favour.
Source: Kantar Sales Data, 2021
For coffee shops, this rapid growth shows no sign of slowing, with 77% of the UK population yet to make the switch. By removing extra charges, coffee shops can appeal to this purpose-driven demographic, take the market share of existing plant milk users and increase sales as more and more consumers either transition to or enter the market. The later you remove charges, the more likely you are to lose market share and loyalty to your competitors.
This trend will be accelerated by the endorsement of countless celebrities and successful athletes who have successfully adopted a plant-based diet whilst maintaining performance. From Venus Williams to Lewis Hamilton, elite athletes are turning to a vegan diet for a number of reasons, whether that be for their health and/or to protect the planet .
Plant-based milks offer a wealth of benefits including:
Rich in vitamins and minerals;
Most are low in fat;
They do not contain cholesterol;
They have a healthy combination of mono- and polyunsaturated fats;
Perfect for those who are lactose intolerant; between one and two in every 10 people in the UK suffer lactose intolerance .
Check out the table below for a nutritional comparison of different milk types (for a regular-sized glass; 250ml). Choosing plant milk can be a great option if you are looking to reduce your calorie, cholesterol, fat or sugar intake.
Extra charges are not proportional to cost...
Charges and profit are often significantly above real cost. Furthermore, when you pay for plant milk, the current structure means you are subsidising the production of dairy milk. The global industry standard is to wrap the cost of dairy milk into the retail price of hot drinks. Consider that the cost of an Americano is the same whether it is black or white. There is however, often an extra charge for plant milks but the cost of the dairy milk has not been removed. We ask industry to recognise this fact but more importantly recognise that removing charges can actually improve bottom-line profit (click here to see the potential upside for businesses).
Few UK chains have abolished extra charges for dairy alternatives. The UK has the highest number of branded coffee shops in Europe which means if we are truly to improve health and sustainability whilst removing charges, we need the major chains to see our perspective.
To illustrate why charges are disproportionate, we have included an example to show financials behind 1L of plant milk. For the individual, assume you are charged 40p for plant milk in an Americano - we are showing that 29p of the 40p (or 72%) is above and beyond the cost of the plant milk and taken as profit. We think this is excessive. Read below to see why this profit is likely higher than our conservative example.
Profit per 40p
To understand this further, we need to understand how the revenue and profit per litre of plant milk is calculated. We call this 'Milkonomics! We know there are a lot of figures - head to our Instagram to see more visuals, or contact us to discuss them further.
Assumptions: Hot drink retail price = average high street values; Plant milk charge = charge levied per drink - 40p is an average; Plant milk cost = retail (Tesco) price of Oatly Barista 1L; Milk per drink = estimated using Barista knowledge; Wastage = estimated using Barista knowledge; Total drinks made = 1000ml/[milk per drink]; Revenue = 40p*[Total Drinks made]; Profit = [Revenue]-[Plant milk cost (per 1L)]
There are some further considerations worth an explanation:
The example above assumes plant milk is bought at retail price from the high-street. In some cases we know this is true but in many (especially large chains) this is highly unlikely as they are able to bulk-buy dairy alternatives for significantly less than retail price. Therefore, the real profit is potentially much higher.
The cost (and profit margin) of both the coffee AND dairy milk is included in the coffee's original retail price. The majority of additional overheads are included in this price also. Therefore, consumers are being charged twice (once for dairy, once for the alternative).
To cover the cost of plant milk for Americanos, just 11p extra per drink is required. Whilst the margin for a Latte or Flat White is lower, this can be offset by bulk buying and the sale of more profitable drinks such as Americanos.
10% wastage is assumed per 1L - we are being overly cautious here. Coffee shops often keep unused dairy milk to re-use for ricotta/dairy products to sell. We ask them to do the same with plant milk and reduce this waste.
Some large retailers have recently invested in manufacturing their own plant milk (Oat, Almond and Coconut). This should significantly reduce their plant milk costs and so we ask them to consider the reduction or negation of charges as a result.
Considering this information and true to our mission, we ask consumers to share this information and coffee shops/chains to review their current charges. We welcome any discussion with any retailer, to better understand your challenges, following our purpose and ultimate aim to see the end to extra charges for plant milk.
There's no point stating the issues if you don't propose solutions. Find out more here.