Plant-based meat and dairy to become €7.5 billion market in Europe by 2025

European retail sales of meat and dairy alternatives have grown by almost 10% per year between 2010 and 2020.

Much of this achievement can be attributed to the introduction of new products, like plant-based burgers, drinks and ice cream, and the underlying trend among consumers to consider health, animal welfare and sustainability in their decision making. But the rise of plant-based sales is coming from a small base and alternatives represent only 0.7% of the market for meat and 2.5% of the dairy market.

There are regional differences across Europe when it comes to the use of plant-based alternatives, particularly in terms of product range and pricing. The UK is the most-developed market, with retail sales of nearly €1 billion, and is followed by France and Germany. Consumption per capita is highest in the Nordics and the Benelux.

At the moment plant-based alternatives have three important weak spots compared to meat and dairy.

They’re relatively expensive, their taste, texture and composition (‘user experience’) are not yet on par and availability is limited. The challenge for producers of plant-based products is to bring down the price gap with animal-based products, improve the user experience and increase availability.

The UK is leading the way with lower prices because the plant-based market is more mature, and the retail environment is highly competitive. This is notable compared to markets such as Italy, where plant-based alternatives are still mainly targeted at consumers who are willing to pay a premium for these products.

The current level of investment and innovation in the food industry and the supply chain indicate that all three barriers will be lowered substantially over the next five years. As a result we expect the market for meat and dairy alternatives to be able to maintain an annual growth rate of around 10% towards 2025. This means retail sales of meat alternatives could increase to 2.5 billion EUR and retail sales of dairy alternatives to 5 billion EUR in 2025.

According to our calculations, the market share for meat alternatives is set to increase to 1.3% and for dairy alternatives to 4.1%.

The continued growth of plant-based alternatives has consequences across the food value chain, with the need for change bigger in some parts than in others. While start-ups like Beyond Meat and Oatly and FMCGs like Danone, Nestlé and Unilever were building the plant-based category and starting to enter the meat and dairy market most traditional meat and dairy companies followed a wait-and-see approach. This is currently shifting and many meat and dairy companies are trialling plant-based alternatives in addition to their current product range.

Ongoing investments in technology and ingredients are leading to more sophisticated products and companies with a subpar product will have a hard time staying on the shelves. For the suppliers of the food industry, the plant-based trend can be both an opportunity and a threat. Many suppliers of ingredients and machinery are able to serve animal and plant-based producers while farmers are more dependent on either the animal or plant-based value chain.

Plant-based alternatives draw a lot of attention, but the hard numbers show that the dominant role of meat and dairy in European diets is far from over, despite the momentum behind various plant-based market leaders.

Some characteristics of meat and dairy products are very hard to mimic and the sheer size of the meat and dairy market, compared to that for plant-based alternatives, mean that it’s not self-evident that alternatives will eventually surpass retail sales of meat and dairy products.

Even if you assume plant-based can keep growing at the current rate, it would take until the mid-2050s before alternatives can catch up with meat and dairy in terms of sales.