Courtesy of So Delicious Dairy Free

My first real business was driving an ice cream truck one summer when I was 17. Here in New England, we eat more ice cream than in any other region in the country, so it was a great job to get some business experience. 

But the world of ice cream has changed so much since my youth.  No more boxes of neapolitan or french vanilla flavors -- ice cream category growth has actually been driven by plant-based ice cream (aka “frozen desserts”) made with almond, coconut or soy milk, and even cashew milk. Increasingly, oat milk, well-known for its creamy mouthfeel, draws many liquid dairy-milk users. 

Plant-based ice cream is an emerging growth area, growing at the expense of dairy-based ice cream products. Plant-based or “dairy-free” ice cream hit over $450 million in 2018, and is expected to reach $1.2 billion by 2025. Paving the way for the growth of plant-based in the ice cream aisle is the liquid dairy category in grocery, with 16% of dollar sales now plant-based (2021) and a 3-yr CAGR of 20%.  

Growth in the plant-based category is driven partially by the healthy claims and sustainability promises which particularly appeal to Millennials, Gen Z, and, of course, vegans. However, the products are not always as healthy as one might think. They can include additional sugar which makes them less healthy, and their protein content can be significantly lower than that of traditional dairy-based ice creams.  Also, some products may contain big-six allergens other than dairy like nuts, coconut and soy.

Plant-based ice creams typically command a premium vs dairy-based offerings, with 1/3 of global consumers willing to pay more, especially younger cohorts.

Courtesy of Eclipse Foods

As with anything in the area of food, for plant-based ice cream, taste is king/queen and the only must-have of the three points on the classic food consumer triangle – taste, price and convenience. Notably, the new paradigm, driven by younger generations, means that the food need ‘triangle’ has become a ‘square', with the fourth consumer need – environmental sustainability – often ranking even higher than price.

As plant-based ice creams add amazing taste to their existing sustainability and health propositions,  one can see how the future looks bright. Cost efficiencies are emerging with brand and market segment growth, helping bring consumer pricing down to deliver that fourth part of the consumer food square, price.  This will expand the reach of plant-based ice creams among more price-sensitive consumers who share the same sustainability, health and taste demands.

Courtesy of Ben & Jerry's

For some, it may still be surprising that plant-based foods have now become so mainstream, unlike predecessors such as the tofu and tempeh plant-based categories of the past, which together represented a very small, but passionate, cohort.

Nowadays, “over 60% of households purchase plant-based foods for many different reasons.

These consumers may be motivated by health, sustainability, and/or animal welfare, or…they simply like plant-based dairy for the taste and the ability to add variety to their diets,” per the Plant Based Foods Association.

Most mass retailers are now offering plant-based ice creams, so all Americans have a plant-based option wherever they shop. This is in contrast to my youth when a separate trip to a natural foods store was required. 

For all dairy categories, the health benefits of dairy-free products represent a surprisingly large market need and opportunity. Consider that roughly one-third of Americans are lactose-intolerant; whereas in other parts of the globe, lactose intolerance is dominant. In East Asia, the lactose intolerant population is as high as 90%. The non-dairy ice cream category in these markets is already quite developed, providing a bounty of possible innovations for adoption by the US market.

Growth and innovation in plant-based ice cream is certainly impressive, but pundits sometimes overlook the fact that new and legacy (cow) milk-based ice cream players also continue to innovate, sometimes in revolutionary ways (often via startup companies). Halo Top was the darling of traditional milk-based ice creams, reaching the #1 spot in 2019 after only a couple of years in the market. 

Courtesy of Halo Top
When large companies innovate too incrementally (new products that are evolutionary, not revolutionary), there are great opportunities for upstart brands to enter the market, as in the case of Halo Top  ice cream. Halo Top offers great-tasting, affordably-priced ice cream with less fat.
Their marketing encourages consumers to eat a whole tub of ice cream without the guilt that comes with eating the equivalent amount of Häagen-Dazs  – 300 calories for a pint of Halo Top Vanilla Bean vs 1,000 calories for Häagen-Dazs!  
In 2017, Halo Top was the #1 brand, with sales of over $370MM.  In 2019, Halo Top was purchased by Wells, one of the major "Big Ice Cream” companies. By 2021, sales had dipped, though still over $200MM, under new ownership.  Further innovation will be required to upgrade the existing offering to hopefully stem the decline. 

“The decline for Halo Top in recent years is the result of robust competition as big brands, enamored with the upstart’s success, debuted their own offerings.” 

The strength of CPG companies lies in growing and innovating within branded products with an existing consumer base where brand awareness exists.  Think better marketing and promotion, innovation and product improvements, stronger retail relationships and know-how, competitive response and, of course, cost-controls that gin up the needed profit for these needed expenditures.  These are skills that are sometimes less developed in startups who are terrific with innovation and speed-to-market.  So, Halo Top’s acquisition by Wells would seem to be a perfect match for both to grow.

The Halo Top example has been repeated multiple times in plant-based dairy and ice cream categories. Companies, like Danone, acquire fast-growing innovative plant-based companies while still supporting milk as a primary part of their business. Companies need to evolve to meet demand, despite what their past business model looks like. Ben and Jerry’s Ice Cream parent Unilever plans a fivefold increase of vegan products by 2027 to $1.2 billion of its sales. Consumers' many emotional connections to ice cream brands can be particularly strong, given the associations with summertime and family togetherness and the mini-indulgences parents love to provide to their kids.

At Boston-based Compass Marketing here in the heart of high-ice-cream-consumption New England, we are ready to help your company and brand strengthen and grow your plant-based (or other!) business. Let's look at what's next, like plant-based hot fudge, waffle cones, and frozen dairy toppings lines!  We relish the opportunity to make these indulgent categories an everyday occurrence by looking at them with a health and wellness lens...much like Halo Top did a few years ago.

TAKEAWAYS

·       Plant-based ice cream is everywhere, with many companies competing for consumer attention.  But to survive in this growing competitive category, successful brands will need to connect to consumers emotionally by creating a benefit-based brand (not attribute-based).

·       Consumers are more concerned than ever before about sustainability and health. If they are choosing ‘plant-based’ they want it to be both good for them and for the earth.

·       Consumers expect brands to have plant-based lines AND are willing to pay more for these products. As plant-based becomes more wide spread, economies of scale will allow more economically priced options to appear...bringing in even more potential consumers.

Xander Shapiro

Xander is a seasoned General Manager and strategy leader with over 20 years experience driving profitable growth in both large CPGs and startups, including Del Monte and New Wave Foods. He focuses on businesses that deliver nutrition, health and wellness through fresh produce, plant-based foods, and botanical supplements.

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