Plant Milks, Oat Milk Included, Have Become a New Consumer Choice — By Picking a Fight With Cow's Milk

Chinese consumers know so-called plant milk inside out. So why does it still feel new to them?

"Hmm... it doesn't seem to have that gamey smell milk has." That was a customer at Barista Specialty, a café in Beijing's Sanlitun, after trying the oat milk latte the staff had recommended.

After the flat white, the piccolo latte and the "dirty" coffee, the oat latte is the new thing to push. On café menus across Beijing and Shanghai you may spot "oat milk +5 yuan" or "New: oat latte." But the force behind it isn't the cafés. It is Oatly, a Swedish company that sells oat milk.

Six months after formally entering the Chinese market, Oatly is already in more than 1,300 cafés. Many of them — Seesaw and Barista Specialty among them — don't even offer soy milk, yet they have taken up Oatly.

"It's because the product is good, and it goes well with coffee." That is what CEO Toni Petersson told QDaily when asked how Oatly got into so many cafés so quickly — of course he would say that. Toni once ran a café himself. He brought baristas into Oatly's product development, which is how the gray-packaged Barista Edition oat drink came about.

The bigger reason, though, is word of mouth inside the barista community. "A lot of our staff come out of the barista world. Our people know baristas, personally, and they respect them. No other company has that kind of close relationship with baristas," he said, noting that nearly everyone on Oatly's Hong Kong team has a coffee background.

Working through the community makes it easy for Oatly to strike deals and get onto café counters. Lu Jianxia, who owns Manner Café, told QDaily that a friend in coffee circles recommended Oatly to her; Liu Yeyan, who owns Barista Specialty in Beijing, said he and the person handling Oatly's business development "have known each other all along."

In the United States it took Oatly just a year and a half to reach 2,500 cafés, mostly small third-wave chains or independent shops like Intelligentsia. In 2017, Oatly's sales were 640 million Swedish kronor (about 500 million yuan); with its expansion in China and the US, 2018 sales are expected to reach 1 billion kronor (about 770 million yuan).

"This — expanding through cafés — is the global strategy. We do the same thing everywhere," Petersson said.

Oatly seems to have arrived at the right place at the right time. Coffee is one of the hottest drinks in China's first- and second-tier cities. According to a survey by Meituan and the coffee trade magazine Kamen (《咖门》), the country had more than 100,000 cafés by the end of 2016, and the market is still growing at 16%. Mass-market coffee sellers have shown no sign yet of reaching for oat milk, but there is no harm in building the mood first — you never know when Starbucks and McDonald's will follow the specialty cafés and put oat milk on the menu as "the right choice."

"The right choice"

Oats are a traditional food in the Nordic countries. In the 1990s a lab at Lund University in Sweden found an enzyme that turns oats into oat milk. Until Oatly was repositioned in 2014, it was an unremarkable drink aimed at people with weak digestion or lactose intolerance.

Petersson and Oatly's creative director, John Schoolcraft, remade it into something edgier, a drink with a challenger's posture, squaring off against milk. "Like milk, but made for humans." "Post milk generation." That was their copy. In the interview, Petersson, selling his own product, also offered the view that milk is for calves, not for people.

After the rebrand and the shift toward cafés, Oatly took off first in Sweden, where it holds more than 40% of the plant milk market, with the rest of the Nordics and Europe close behind. By the time it entered the US in 2016 it was already Europe's second-largest "alternative milk" brand. Because the plant-based diet movement was already popular there, it quickly found a place. Besides independent cafés, Oatly got into upmarket supermarkets such as Whole Foods and Target.

Mintel puts plant milk's popularity down to its "functional benefits" and "distinctive taste and texture". A survey of 1,000 people by the food-industry publication Food Navigator found that taste matters most to American buyers, followed by price, health benefits, where the ingredients come from and whether the product is natural.

Wherever it turns up, oat milk — plant milk generally — comes down in the end to people wanting a new flavor. But in Europe and America, where food has entered its post-industrial age, "lower fat" and "more fiber" make plant milk look like the more correct choice. It has been loaded with social meaning too: good for the environment, fewer carbon emissions, more ethical if you think about animal welfare.

Food Navigator found that millennials and the younger Gen Z care more than earlier generations about whether plant milk is healthy and environmentally sustainable. A Nielsen survey found the same thing.

Petersson firms up your impression of the product this way: "Making oat milk produces 80% less carbon than making milk." That is plainly one of the selling points. He says the Swedish factory will cut its emissions another 25% by 2020. Rod Coligado, who owns Butler, a café in Williamsburg, told The New Yorker: "It's environmentally sustainable, it takes less water, and there's no added sugar in the product."

From all this you can more or less sketch the oat milk drinker. In the brand's telling, these are people who demand something of themselves, of the environment and of the way they live. Real life is looser than that. Environmentalists, vegans and the lactose intolerant may well buy oat milk — but so, quite possibly, do people who just want to try what's new.

Plant milk is becoming a trend

According to Mintel, US sales of plant milk — plant-protein drinks, if you prefer — reached US$2.11 billion in 2017. Between 2012 and 2016 the category's compound annual growth rate hit 20%. The market is open and the varieties keep multiplying: beyond the mainstream almond, soy and coconut, there are now quinoa protein drinks, pecan protein drinks, rice milk, hazelnut milk, flax milk. Starbucks in the US already offers a wide choice of bases — cow's milk, soy, coconut and almond.

You could see the rise of plant milk as part of the plant-based movement, which, as the name says, urges people to eat more plants and fewer animal products.

Plant milk was first aimed at the lactose intolerant, sold as a substitute for cow's milk. The health pitch soon widened.

Some consumers have absorbed the message that plant milk is healthier than milk. Mintel found that one in five Americans is cutting back on milk for health reasons. But according to US Department of Agriculture surveys, plant milk buyers have not given up animal milk: 90% still drink it, just less of it.

Megan Hambleton, a beverage analyst at Mintel, put it this way: "Milk actually contains the things plant milk consumers are looking for — minerals, vitamins and protein — but consumers don't know that."

Bonnie Wertheim of The New York Times argues that Oatly's lack of dairy, nuts, soy and GMOs, plus its relatively high soluble fiber (as the brand claims), are all decent selling points. But Oatly carries roughly twice the carbohydrate calories of an equal amount of almond milk.

Set original Oatly against Meiji Chunyi whole milk and a 100 ml serving has a third of the protein — and half the fat. On calcium, the two are about even.

As with any research on food or nutrition, whether about milk or plant milk, you can always hear both sides. Marion Nestle, professor of nutrition at New York University, says: "Nutritionally, plant milks have their value, but as with most processed foods, you're always better off eating the ingredient closer to its original state — almonds, oats." (Soy may be the exception: turned into tofu or soy milk, soybeans become easier to digest and absorb.) According to a comparison by researchers at McGill University, almond, coconut and rice milk all have less protein than cow's milk; only soy comes close.

The plant milk camp's reply is that people don't need that much protein. "Our diets — Western diets especially — have too much protein and too little fiber," Petersson told QDaily. There is some theory behind this. Walter Willett and David Ludwig, two American nutrition researchers, both at Harvard, wrote in JAMA Pediatrics that for healthy adults already eating enough vegetables, nuts and protein, drinking milk brings no extra benefit.

Whether plant milk or cow's milk is healthier looks unsettleable. But plant milk has become a rising consumer trend all the same. Corporate money makes the so-called trend look like a real thing. People take to a finished consumer product and a good sales pitch far more readily than to a research finding.

Oatly's Chinese shareholder is China Resources. In 2016 it took an investment of undisclosed size from China Resources Verlinvest Health Investment, a joint venture between China Resources and the Belgian equity fund Verlinvest. China Resources promptly put Oatly into its upmarket supermarket chain Ole', and into more than 600 Pacific Coffee shops in mainland China and Hong Kong.

The other big companies moved earlier. General Mills has invested twice in the almond-milk brand Kite Hill; Coca-Cola bought Zhonglv Culiangwang in China and invested in AdeS, the top-selling soy milk in Latin America; Danone paid US$12.5 billion for WhiteWave in 2017, whose most valuable brands — Silk (sold in China as Zhipu Mofang) and So Delicious — are both plant-protein drinks.

PepsiCo has spotted oat milk too: Quaker, its oat brand, will launch an oat drink in the US next year. Vita Coco, the plant-based movement's star company, which made its name in coconut water, has added a coconut milk. And there are small, fast-growing brands like Oatly itself: Califia Farms, a plant-based drinks company built on almond milk, raised US$50 million in a round led by the investment bank Ambrosia Investments, and has had the highest compound annual growth of any plant milk brand since 2014. Good Karma Foods, which makes milk and yogurt from flaxseed, is growing sales 50% this year.

Plant milk in China

That is how it works: plant milk builds its case on a rereading of the nutrition science of animal milk.

"We're going after milk drinkers first. We won't aim straight at soy milk drinkers," Petersson told QDaily. "Soy milk is part of Chinese tradition — why would we try to change that? But drinking cow's milk isn't a Chinese tradition. It was learned from the West."

The messaging is still being worked out, but Oatly plans to position itself as "the new milk" and tell stories about being a good company and making the world a better place: a carbon-neutral Swedish factory, an open and trustworthy operation, less carbon than milk. Petersson admits there is no direct evidence that Chinese consumers weigh any of this when they buy. He adds: "The absolute number of vegetarians in China isn't large, but it's growing very fast."

As Oatly's slogan "Wow, No Cow" says, this is a plan to strike back at milk.

Counting from 1988, when the Dietary Guidelines for Chinese Residents first urged people to drink milk, it took more than 20 years for milk to become an everyday Chinese drink. The Dairy Association of China puts per-capita dairy consumption at the equivalent of just 36.3 kilograms of raw milk a year, under 100 grams a day, which is taken to mean there is still room to grow.

Figures Euromonitor International provided to QDaily put China's packaged milk market — chilled and UHT together — at more than 122.2 billion yuan, ten times the packaged soy milk market. Worth noting, though: freshly made soy milk reaches more restaurant counters than milk does, from KFC and McDonald's to Yonghe King and even sit-down restaurants. Chinese households also make their own. Soy milk machines sold so well at one point that they carried companies like Joyoung to a listing. None of that shows up in the numbers.

Packaged soy milk will grow faster from here. Euromonitor puts its compound annual growth in China from 2014 to 2018 at 9.3% by volume and 12% by value, against 1.1% and 4.6% for milk. Over the next five years soy drinks should keep growing more than twice as fast as milk. Not because of the plant-based movement, and not entirely because so many Chinese are lactose intolerant, but because eating soy is a Chinese habit — and because the 2008 melamine scandal handed soy milk and everything around it, soy milk machines included, an opening.

China has no real concept of plant milk yet, though people have been drinking plant-protein beverages for a long time. Lulu almond drink, Weiwei soy milk, Yinlu peanut milk, Coconut Palm coconut juice — all were nationally known plant-protein brands by the 1990s or earlier.

Aging products and their own management problems have kept these companies quiet in recent years.

Chengde Lulu's revenue started falling in 2015, then dropped 6.85% and 16% in 2016 and 2017. Weiwei Co. has spent years trying to build side businesses in dairy and baijiu while its core business barely moved for more than a decade; it is still circling soy milk powder with a "cheerful and carefree" slogan. Nestlé's takeover of Yinlu was followed by years of weak results; Yinlu did grow both revenue and profit in 2017, but on coffee and eight-treasure porridge, not peanut milk. Coconut Palm's output was worth 4.021 billion yuan in 2016, down 430 million yuan from 2014.

Vitasoy is one of the companies riding the shift well, pushing north from its home ground in Guangdong, Hong Kong and Macau. As its distribution widened, its results improved sharply. It is not only in shops: Vitasoy shows up in restaurants too, and it teamed up with Manner Café on a soy milk latte.

Vitasoy International's mainland revenue grew more than 25% in each of three straight fiscal years, from FY13/14 to FY15/16; growth eased to 17% in FY16/17, then jumped 39% in FY17/18. This May it launched a premium line, Health Plus, said to use micron grinding — one version with extra calcium, one with extra fiber. Compared with regular Vitasoy, in short, it is more "healthy," and about 3 yuan dearer.

China's plant-protein market still has few young brands that fit the move upmarket. Walk up to the chiller in a Lawson or FamilyMart in Shanghai and yogurt and milk take three to five shelves. Plant drinks can't fill one. Some companies have seen the gap. Dali Foods launched Doubendou in 2017 and in under two years took 4.8% of the packaged ready-to-drink soy milk market, second only to Vitasoy.

Oatly has now opened up a new line of thinking for plant milk: turn cafés into your promotion channel. In some shops Oatly even sits on the register. It may work better than selling cartons directly. Like a soy-based latte, it mixes in novelty without feeling as industrial as something off a shelf.

Without coffee, Oatly tastes faintly of grain and nuts, like the aftertaste in your mouth after a bowl of oatmeal.

Then again, set aside the labels — plant-based movement, vegan, low carbon — and what it offers an ordinary person is roughly this: "Hmm... it doesn't seem to have that gamey smell milk has."

Cover image, except where noted: Luke Porter on Unsplash, Gordon Plant on Unsplash