Cafe Owners Face Challenges With Dairy Alternatives – CoffeeTalk

As alternative milks become more popular, cafe owners are facing challenges in absorbing the costs of these products. Professor Nitika Garg, a consumer behavior researcher at UNSW Sydney’s School of Marketing, says that extra charges for alternative milks are often a source of frustration for cafe customers. The rise in popularity of alternative milks has led to coffee shops charging customers an extra 50 cents for oat, soy or lactose-free milk and $1 for almond, which costs “significantly more.”

Some cafes don’t charge extra for alternative milks, but instead choose to absorb the costs or raise prices. Starbucks announced in October that it would stop charging extra for non-dairy milk, and some customers could see price reductions of more than 10%. However, most consumers who consume alternate dairy beverages do so from a preference or dietary requirement and are aware of the additional cost that puts on the business.

The rising cost of coffee is another factor that makes it harder for cafes to absorb extra costs, including from alternative milks. As of last week, coffee prices were at record highs again, and from a coffee roasting perspective, the cost of goods for green coffee sourcing is going up a minimum of 20% for the next 12 months.

Increased competition has meant there are much better alternative milk products on the market than there were previously. From a consumer perspective, people form their allegiances [to different brands] fairly militantly. As competition has grown, there’s a lot more parity in the brands.

Michael Perich, the chief executive of Noumi, which sells plant-based and other alternative milks under the Milklab and Australia’s Own brands, says that barista alternative milks are designed to produce better froth and foam and prevent drinks from splitting or curdling. He says that there’s investment there … on their side, which does come at a cost. It’s important that they continue to develop [products] to ensure they perform well, and that’s where different price points come into it.”

Competition could bring prices down — but it might not be reflected at cafes. Modern barista alternative milks do tend to be better for coffee, and he uses them at home. Professor Garg, the marketing expert, says continued competition could bring prices of alternative milks down over time.

However, cafes may not see a commensurate drop in cafe prices. “Buying coffee at a cafe is not something we need to do, it’s something we want to do — and cafes are capitalising on that. It’s not just a demand and supply issue here,” she says.

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