In late 2023, extreme weather events and severe droughts in California—the source of over 80% of global almond supplies—significantly impacted the market for almond-based products. A series of late-spring frosts destroyed blossoms, while regional water restrictions raised production costs for almond orchards.
As a result of these supply contractions, the retail market share of almond milk in UK supermarkets fell from 42% to 35% over the course of the year. In response, the average price of a litre of almond milk rose by 12%.
Concurrently, consumer demand for alternative plant-based milks, particularly oat milk, has been rising due to lower environmental footprints (such as lower water usage per litre). Many domestic oat milk manufacturers are expanding production, aiming to capture the market share lost by almond milk. However, some supermarkets are bypassing national wholesalers to secure direct contracts with local arable farmers to guarantee oat supplies.
Assess the likely impact of a 12% increase in the price of almond milk on the market for oat milk.
