Articles
22 October 2020

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

The growth of meat and dairy alternatives is stirring up the food industry, as an increasing number of meat and dairy companies enter the plant-based market to cater to shifting consumer demand. At ING, our latest Report finds that the plant-based alternatives market in the EU and the UK will be worth €7.5 billion by 2025, compared to €4.4 billion in 2019

Despite high growth, plant-based alternatives are still a small category

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.

Plant-based particularly popular in Northwestern Europe

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.

Three barriers determine future growth

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.

Soya drink prices are a bit above and oat drink prices are still far above regular milk

Retail price of 1 litre of milk and plant-based drinks in a selection of countries

Source: Company websites: Ah.nl, Carrefour.fr, Carrefour.it, Tesco.com
Company websites: Ah.nl, Carrefour.fr, Carrefour.it, Tesco.com

Alternatives market set to grow to EUR 7.5 billion in 2025

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%.

Source: Euromonitor, forecast ING Research; *Excluding margarine which accounts for 4.5 to 5 billion in retail sales
Euromonitor, forecast ING Research; *Excluding margarine which accounts for 4.5 to 5 billion in retail sales

Consequences across the value chain

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.

Still a long way to go to surpass sales of meat and dairy

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.

Starting from a small base means it would take decades before alternatives could surpass meat and dairy

Depiction of the long term development of market share in a high growth scenario*

Source: *based on the assumption that sales of meat and dairy alternatives would maintain an annual growth rate of 10% and growth would be a the expense of regular meat and dairy
*based on the assumption that sales of meat and dairy alternatives would maintain an annual growth rate of 10% and growth would be a the expense of regular meat and dairy
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