The cost-of-living crisis has forced more price-conscious purchasing decisions among consumers in the UK. Value-orientated retail channels such as discounters have recorded significant gains, accompanied by growth of private label products. In contrast, retailers operating in the higher price tier have experienced a slowdown in sales, and brands have struggled to stand out in the intensified value-driven competition.
Plant-based dairy products, including plant-based milk, yoghurt and cheese, are setting a remarkable example in current market dynamics. While discounters continue to rise, the category is increasingly reliant on e-commerce, which commands 16% of its value sales in 2024. The category’s online penetration has thus surpassed that of conventional dairy products, which see 11% of their sales channelled via e-commerce.
As the offline channel remains significantly challenged by the expansion of discounters, this article explores the learnings from the online success of plant-based dairy products in the UK, to offer retailers a lens to find opportunities for related and other FMCG categories in the growing e-commerce channel.
Value repeat customers
Across retailers in the UK, most online sales of plant-based dairy products come from repeat customers. Data from Euromonitor International’s E-Commerce system illustrate the role repeat customers play in online sales at major grocery retailers. Tesco achieves nearly 95% of its online sales of the category through repeat customers. This group also makes up 78% of the retailer’s customers for plant-based dairy products. Loyal shoppers not only provide a steady revenue stream, but they also tend to spend more than one-time shoppers.
Repeat customers spend 26% more than one-time shoppers per order, which highlights the importance of customer retention in driving business success in this category
Source: Euromonitor International
Brands and retailers, thus, must build long-term relationships through personalised experiences and loyalty rewards in a competitive environment to achieve sustainable growth.
Target the wider consumer segment
Over the past decade (2014-2024), dairy milk consumption in the UK has dropped by a staggering 12% per capita, while plant-based milk per capita consumption has quadrupled. Although just 8.5% of the population is vegan and vegetarian in the country, 24% of consumers are actively reducing intake of meat or animal products when they want to improve eating habits, according to Euromonitor International’s Voice of the Consumer: Health and Nutrition Survey, fielded January to February 2024. As a result, consumers motivated by health benefits, sustainability, and animal welfare are fuelling the shift towards plant-based diets.
98% of shoppers buying plant-based dairy products also purchase conventional dairy products, including milk, cheese, and yoghurt
Source: Euromonitor International Passport: E-commerce, June 2023 to May 2024
Thus, as plant-based products are not confined to niche diets, the category holds strong prospects to become mainstream given wide-reaching appeal. Retailers and brands must harness this potential to drive category growth by adapting digital marketing to meet the diverse needs of today’s shoppers.
Assess product portfolio between brand and private label
While private label products make inroads in the category, retailers need to uncover what drives their audience’s loyalty to the category—are they captivated by innovative new products, consistency in price and quality, or do they prioritise value-driven offerings? Understanding this balance is key to aligning strategies with customer preferences and staying ahead in the competitive landscape.
Plant-based milk, which accounts for 64% of plant-based dairy in the UK, heavily features branded products which dominate more than 80% of the category’s online sales. At Ocado, private label barely makes a dent, representing less than 1% of the category sales. Waitrose holds a similar portfolio.
On the other hand, Asda and Morrisons heavily focus on private label. Examining shopper behaviour around private label on these platforms shows that these products have a slightly higher share among repeat purchasers compared to one-time shoppers, indicating that while consumers generally prefer brands, they tend to switch to private label over time.
As private label gains traction, retailers such as Ocado and Waitrose take a different approach. Both retailers foster a less price-sensitive consumer segment and welcome new market entrants. This not only makes them a strategic gateway for smaller brands aiming to break into the market but offers their customers new products at convenient price points with brand name and quality.
Thus, while Ocado maintains a brand-driven portfolio, it still manages to lead the category online.
For more insights on how e-commerce is evolving in a value-driven market dynamic, read our article, Black Friday: An Enduring Shopping Phenomenon in a Discount Driven Era.