Extract A: Changes in the retail prices of fresh dairy milk and oat milk in the UK, 2018–2024

Extract B: The plant-based transition alters the drink market

In 2024, the prices of fresh dairy milk and dairy alternatives reached historic highs. The rising price of dairy stems partly from rising costs of animal feed, fertilizers, and energy on farms. But why should plant-based milk prices also continue to rise? Under normal market conditions, manufacturers should be able to meet increased demand for oat and almond milk simply by increasing production runs. However, while production capacity has grown, market demand has grown even faster.

Oat milk is widely used as a close substitute for dairy milk. In many high-income economies, health and environmental concerns have driven consumers to switch their purchasing habits. As dairy prices rise, many shoppers migrate to plant-based aisles. It is worth noting here that the cross elasticity of demand between dairy milk and oat milk is positive.

Another driving factor in the rising retail price of oat milk is the elevated cost of processing. Since 2021, key packaging raw materials, such as carton paper and plastics, have risen in cost by over 40 per cent across Europe. At the same time, governments in several nations are subsidising plant-based farming initiatives to support sustainability goals.