Why Are Alternative Milks More Expensive Than Dairy?

Want your milk to be dairy-free? Well, you’ll probably have to pay extra for that. With a few rare exceptions, non-dairy replacements like oat milk, soy milk and almond milk cost significantly more than cow’s milk. But why? Does non-dairy milk cost more than dairy milk to produce? Or are there other factors at play?

The Plant-Based Milk Premium

Whether you’re at a cafe, a restaurant or the grocery store, you’ll probably have to plunk down extra money for non-dairy milk. In supermarkets, the average plant-based milk costs $7.27 per gallon, compared with $4.21 per gallon for cow’s milk. Although a handful of upscale coffee shops have recently stopped up-charging for non-dairy milk, most major chains and mom-and-pop cafes charge customers extra for plant-based milks in their drinks.

The exact amount of this upcharge varies depending on the chain, the location and the drink in question, but in general, substituting dairy-free milk for traditional milk at a coffee shop will add somewhere between 50 cents and $1.50 to your order. Alternatively, some places have hybrid models; for instance, Starbucks allows customers to add dairy-free milk to basic orders like plain coffee and tea for free, but adds a surcharge for specialty drinks, like cappuccinos.

If you drink plant-based milk on the regular, none of this is news to you. But what’s the reason for this additional cost, and what are the barriers to making the more sustainable plant-based milks cheaper?

Why Does It Matter That Plant-Based Milks Are More Expensive?

The elevated price point of plant-based milks is a problem for a number of reasons. For one, the majority of people are lactose intolerant, and lactose intolerance is especially common among people of color, so expanding access to non-dairy milks is, in part, a matter of racial justice.

“A lot of customers have no choice,” Laura Lee Cascada, Senior Director of Campaigns at the Better Food Foundation, tells Sentient. “They can’t drink dairy. It’s a justice issue to make dairy-free foods more accessible, and to not upcharge them.”

In addition, farming dairy milk is much more resource-intensive than plant-based alternatives. This is true across the board; producing dairy milk requires more land, more water, emits more greenhouse gasses and causes more eutrophication than any of the plant-based alternatives. In some instances, the difference is quite significant: it takes around 22 times as much water to produce a liter of dairy milk as a liter of soy milk, for instance.

“Even plant-based milks made with water-intensive crops, like almonds and rice, still use [roughly] half the water used for cow’s milk, and also retain greenhouse gas and land use advantages,” Daniell Gernter, business analyst at the Good Food Institute, tells Sentient.

Lastly, the dairy industry is brutal on the cows themselves. In order to produce a steady stream of milk, dairy cows are forced to be pregnant for as much of their lives as possible, and the artificial insemination process itself — specifically, the process of extracting semen from male cows — is far more painful and invasive than many people realize.

Plant-based milks circumvent all of these problems. Moreover, some of the ingredients used to make plant-based milks, specifically oat and soy, are already in abundant supply, so it’s not a matter of scarcity making them more expensive. And yet despite this, plant-based milks still cost more.

Why Is Plant-Based Milk More Expensive Than Dairy?

As is often the case with questions like this, the answer is complicated. Some of the factors that contribute to plant-based milk’s higher price tag are relatively intuitive and straightforward, while others require a bit more explanation.

Reason #1: Plant-Based Milk Is a Young Industry

As it currently stands, plant-based milk is more expensive to produce than traditional milk. This is largely because plant-based milk is a much younger industry than dairy milk.

From the very first bottled milk deliveries in the 1700s to the countless brands of dairy milk now available in grocery stores, cow’s milk has been a commercial staple for hundreds of years. This means that the industry has had several centuries to explore and experiment with different cost-saving measures. It’s had over 300 years to build out its infrastructure and forge relationships with other industries that it does business with. As a result of all this, the dairy milk industry has developed an extraordinarily efficient supply chain.

But although non-dairy milk has existed in some form for quite some time, the industrialization of plant-based milk is a much more recent phenomenon, and has only really exploded in the last few decades. It wasn’t until the mid-20th century that plant-based milk products started getting a foothold in Western commercial spaces, and while they’ve steadily grown in popularity since then, that rate of growth has been slow.

Furthermore, while almond and soy milk have been in existence for hundreds of years, many other varieties are much more recent. Oat milk was only invented in 1994, for instance. Other types of alternative milks, such as pea milk, were introduced to consumers less than 10 years ago.

So, while the dairy industry has had more than enough time to iron out its kinks and become as efficient of an industry as possible, plant-based milk is still playing catch-up.

While this is bad news in the short-term for enjoyers of non-dairy milk, it is, at least in theory, only a temporary problem; the longer plant-based companies are around, the more time they’ll have to make their own production processes as cheap and efficient as possible.

Reason #2: Plant-Based Milk Is a Smaller Market

While the market for plant-based milk is growing, it’s still just a fraction of the dairy milk industry. This also keeps dairy milk prices low, because when an industry is making a large amount of a product, it can take advantage of economies of scale to bring down its overall manufacturing costs. That’s exactly what the dairy industry does — but plant-based milks, still being a relatively small market, don’t yet have this luxury.

Like the supply chain issue, this will most likely only be a temporary obstacle for plant-based milks.

“As the production of plant-based milk scales, we expect economies of scale to help lower the costs of plant-based milk,” Gertner tells Sentient. “We can already see this in the plant-based milk category itself, where more established products like almond and soy milk are typically priced below nascent segments like oat, cashew and hemp milk.”

Reason #3: Dairy Is Aided by the Federal Government

One of the biggest reasons dairy milk is so cheap has nothing to do with production, supply or demand, and everything to do with government interference in the dairy market.

The U.S. government gives significant financial support to the agriculture sector. This support takes many different forms, including direct payments, direct purchases, discounted crop insurance, price controls and more.

Dairy is no exception to this. The USDA’s website lists no fewer than 10 different federal programs aimed at assisting the dairy industry, such as Federal Milk Marketing Orders, the Dairy Forward Pricing Program, the Dairy Margin Coverage program, the Dairy Revenue Protection program and more. While the nature of these programs varies, they all have the same goal: to support the dairy sector and ensure that market fluctuations don’t significantly hurt dairy farmers’ bottom lines. The exact amount of this assistance can vary significantly from year to year, as it’s based in part on market prices for various commodities related to dairy farming.

As a consequence of these subsidies, the dairy industry is largely insulated from market trends and economic factors that might otherwise hurt its sales and profits. More to the point, these subsidies allow dairy companies to charge significantly less for milk than they’d otherwise have to if they were subject to the normal market forces that other industries — such as the plant-based milk industry — are beholden to.

Reason #5: Dairy Milk Has Generic Brands

Lastly, there are countless generic, store-brand versions of dairy milk on the shelves, which isn’t often the case for plant-based milks. This also contributes to the lower price of dairy milk.

“The plant-based milk category is comprised largely of branded products, which tend to be more expensive than store-brand items and come with their own set of marketing and brand-building expenses,” Gertner says. “Some retailers may be incentivized to keep plant-based milk prices elevated to maintain a higher profit per unit if enough consumers are willing to pay those higher prices.”

Will Plant-Based Milks Ever Fall in Price?

It’s too soon to say whether plant-based milks will ever reach parity with dairy milk. People For The Ethical Treatment of Animals has been lobbying Starbucks to eliminate its non-dairy upcharge for all drinks since 2019; the organization hasn’t been successful so far, but did express optimism in September that the company’s new CEO, Brian Niccol, might be more amenable to doing so.

In the meantime, some coffee shops have found creative solutions to evening out the prices. 

One is what’s called flat pricing. This is when a coffee shop or restaurant charges the same amount for dairy milk as it does for plant-based milks by reducing the price of the oat milk and increasing the price of the dairy milk, thus making up for the difference. For instance, rather than charging $4.00 for a regular latte and $5.00 for an oat milk latte, a cafe might instead price both of them at $4.50.

Another potential solution for coffee shops is to not include lids or straws for drinks with plant-based milks, or alternatively, to require customers to bring their own cups if they want to avoid the upcharge for dairy-free milks. It might sound insignificant, but anything that will shave a few cents off the cost of serving plant-based milks can help offset the difference.

The Bottom Line

Some of the factors that make plant-based milks more expensive will likely fade; they’ll almost certainly become cheaper to produce over time, for instance, as alternative milk companies perfect their supply chains and find effective cost-cutting measures.

Other causes for the disparity, such as the federal government’s subsidization of the dairy industry, may continue to be factors for the foreseeable future.

But Gertner is hopeful that over time, this and other factors keeping plant-based milk pricier than dairy milk will eventually subside.

“We hope that as the market develops and additional public and private funding is provided, plant-based milk will continue to close the price gap to cow’s milk,” says Gertner. “In the meantime, companies will continue to improve these products on the metrics of taste and functionality to make them even more attractive to consumers.”