Covid-19 may have added significant uncertainty to the macroeconomic outlook but investments should still be made to lean into consumer trends proving robust – and Upfield Group’s spending on plant-based dairy R&D is one such move that looks sound, writes GlobalData.
Upfield Group, the Netherlands-based supplier of plant-based alternatives to dairy products, is stepping up its investment in research and development – and, despite the macroeconomic uncertainty wrought by Covid-19, it is the right time to spend.
The company, home to brands including I Can’t Believe It’s Not Butter dairy-free spreads and Violife plant-based cheese, is investing EUR50m (US$56.1m) into a new R&D centre in the Dutch town Wageningen.
The move emphasises the growth and attractiveness of the dairy-alternatives market – and it also underlines how competitive the category is becoming.
Upfield wants to use the facility to develop and launch more plant-based food products along with sustainable packaging solutions.
Amid the Covid-19 pandemic, it may seem a difficult time to invest but the sustained recent growth of the dairy-alternatives market should give businesses like Upfield confidence – as should the dynamics driving demand in recent weeks and the prospects for the category moving forward.
Consumer demand for dairy-free products has been steadily rising year-on-year to form a large and well-developed consumer cohort. Demand is largely driven by the perceived healthiness of plant-based diets. Whilst the vegan population worldwide is, in actual fact, rather small, more and more people are adopting low-meat or flexitarian diets. Whether due to health or dietary needs, or just personal choice, consumers who have switched to dairy-alternatives have largely maintained their buying habits.
Moreover, since the outbreak of Covid-19, there appears to have been an uptick in demand in certain markets.
According to GlobalData’s week 10 Covid-19 tracker consumer survey, published on 3 June, consumers in four major European markets (Sweden, Italy, the UK and Germany), when asked how their shopping behaviour has changed since the outbreak of Covid-19, 49% of consumers said they have been buying the same or more, plant-based dairy alternative products. This compared to 19% who stopped buying or are buying fewer dairy-alternative products.
This is why Upfield’s investment looks like a good idea. Demand for dairy-alternative products is only on the rise. Not only that, as consumer demand is relatively well developed, the near future will likely see demand go beyond a core product and more interest given to innovative new products within the space.
However, competition in the dairy-free sector is on the rise, with big names in dairy entering the category through M&A and innovation and venture-capital funds also placing bets on the category.
Furthermore, our research shows that, while Covid-19 is, for obvious reasons, front-and-centre in consumers’ minds, a range of factors continue to drive purchasing behaviour – and environmental concerns are holding their importance. Upfield’s investment in R&D around sustainable packaging also looks a good bet.