Free-from 2021: Oatly heralds birth of ‘post-milk’ shopper

Free-from is entering a new phase in its evolution. Since 2014, when the category first featured in Top Products, it has gone from being defined primarily by what it does not contain (gluten, grains, lactose) to a trendy lifestyle choice – and now to products that can help reduce the toll our species takes on the planet. 

In that time, sales have exploded. In 2014, the market was valued at £517.6m and the bestsellers list was dominated by products marketed at people following specific diets. Today, it’s worth more than £3.5bn after seven consecutive years of growth – and the biggest brands are using more universal selling points to lure shoppers.

That appeal shows no sign of slowing. This year, sales surged by £212.9m – the category’s second greatest gain after the £358.3m spike reported in 2020.

Amid all this growth, one brand stands head and shoulders above the rest. Oatly has added £31.8m, with unit sales rocketing by 37.8%. The past year has seen the brand put its 2020 funding round  – which attracted investment from the likes of Jay-Z and Oprah Winfrey – to good use, forking out on expansions into categories such as ice cream, cheese and yoghurt alternatives, new production facilities and campaigns aimed at encouraging shoppers to ditch dairy. 

According to Oatly UK general manager Ishen Paran, shopper motivations for buying the brand now go far beyond mere dietary considerations. “We have developed a brand that goes beyond an oat-based drink and connects people with our sustainability mission,” he says.

“Consumers are looking for brands that do more than sell products. We’ve created a global community, ‘the post-milk generation’, who don’t just buy our oat drink but want to talk to us on social media, hang out with us and even wear our merch.”

 

With the global shipping crisis, driver shortages and ongoing impact of the pandemic exposing supply chain weaknesses – as well as growing consumer concern over the distance food travels from farm to plate – Oatly unveiled plans in March to open a factory capable of producing 300 million litres of oat milk a year in Peterborough.

“Being able to source oats from the UK means we can set up better traceability back to farm and work with farmers and suppliers to implement practices that restore carbon and boost biodiversity,” says Paran.

It’s not alone in investing in UK production. In November, market leader Alpro announced a £41m investment plan to increase production capacity at its Kettering facility, while Rude Health has started using British oats for its drink and moved production to the UK, instead of making it in Italy from crops grown in Northern Europe. 

Rude Health’s performance – value has fallen 5.3% on volumes up 2.4% – makes clear the decision to bring production closer to home wasn’t made purely on environmental grounds. Supply chain disruptions have taken a toll on sales, but brand director Camilla Barnard insists the move has helped.

“The team has been working valiantly to try and ensure we always have our foods and drinks on shelf despite all the supply chain challenges,” she says.

She adds that the brand’s accreditation as a B Corp was in recognition of its “commitment to sourcing ingredients where they grow best, like oats from rain-rich Britain and almonds from sun-soaked Sicily.”

Taste & health

Like Rude Health, Alpro is certified as a B Corp. But that doesn’t make it immune to allegations of greenwashing. In October, the ASA banned the brand from using ads that claimed its products, including its almond milks, were “good for the planet”. Alpro stood by the ads, which had appeared on buses in 2020 –  insisting plant-based “had a lower environmental impact than alternative dairy-based products”. 

Either way, the ASA decision doesn’t seem to have hurt sales. The brand is up £5.3m, having expanded its range in July with the launch of two Greek-style yoghurt alternatives – one oat-based, the other coconut-based. “Taste and health are key factors in driving shoppers into the category and these latest additions certainly tick those boxes,” said marketing director David Jiscoot at the time.

These factors are becoming increasingly important as manufacturers as try to widen their appeal beyond consumers with medical needs. Warburtons’ growing Gluten Free range, which was bolstered with the April launch of Super Soft Sliced Square and Brioche Rolls, is a case in point. The baker said at the time that it was “expanding and improving our gluten-free offering” with products that deliver on taste.

It seems to be working. Warburtons Gluten Free has achieved the second greatest gain of the year after Oatly, with growth of £6.3m on volumes up 33.8%, buoyed partly by a social media campaign using influencers to support the launch of the new rolls. 

But even the buoyant free-from category hasn’t been immune to the multple challenges of the past year. While Oatly and Warburtons are on the rise, NielsenIQ’s bestsellers list paints a mixed picture for snack brands. “Trek has had a very strong year (up £2.7m), perhaps benefiting from continued working from home, increased outdoor activity and the return to school and packed lunches,” says NielsenIQ retailer team leader Lisa Rees. “By contrast, Nakd has contracted.”

Indeed, Nakd has suffered the greatest loss of the year with sales falling £3.1m on volumes down 7.1%, driven chiefly by the collapse of the impulse sales during lockdown.  “As the restrictions have eased, however, the importance of healthier products to consumers steadily increased” leading to a “return to growth year on year”, says a spokeswoman.

Likewise, gluten-free cakes brand Mrs Crimble’s has lost £1.1m amid the dearth of impulse sales. Sales have been recovering since March, though, says owner Ecotone UK. The brand’s attempts to appeal to the gut health-conscious during Coeliac Awareness Week with a digital campaign also led to a positive sales uplift,  Ecotone claims. 

Now free-from brands face a new challenge: the looming restrictions on HFSS foods and drinks. But for some, it could actually present an opportunity. “With the HFSS restrictions coming into place in 2022, Nakd is in a strong place,” says the spokeswoman, thanks to a “core fruit & nut bar range with 100% natural ingredients, no added sugar and non-HFSS”.

So, the next phase of the category’s evolution could well favour healthy products, as well as those that deliver on taste.