Various kinds of bean-based dairy beverages are on display at an expo in Shanghai. [Photo by LYU LIANG/FOR CHINA DAILY]

Milk made of plant-or vegetable-based sources is growing in popularity as a health food and has spawned a niche market whose sales have seen significant growth this year, industry insiders said.

Health-minded Chinese consumers who are also keen to buy products whose sourcing and manufacturing processes do not ravage the environment favor beverages made of such milk, experts said.

Plant-based milk is a term for plant-based protein beverages like soybean milk, almond syrup, walnut dew and oat milk. It contains less fat, no lactose or cholesterol. Hence, lactose-intolerant people, those allergic to dairy or formula milk, people on a diet, and some consumers with a heightened sense of animal protection tend to prefer plant-based milk.

On Alibaba Group's e-commerce platform Tmall Global, the compound annual growth rate of vegetable-based protein beverages ranked first among all beverages in the January-November period this year. The niche market scale is expected to surge 800 percent year-on-year in 2020, said a report released by Tmall in July.

Offline, plant-based milk sales at convenience store chain Bianlifeng saw a year-on-year increase of 10 to 30 percent this year at different locations, Yu Shaohui, a purchasing manager of Bianlifeng, told China Central Television in November.

Against the backdrop of the COVID-19 pandemic and increasing health awareness, Chinese consumers showed a growing preference for healthy beverages whose labels have phrases like "sugar-free" and "plant-based", said Jason Yu, general manager of Kantar Worldpanel China, a market research firm.

Cecilia Zhao, 25, a marketing worker in Beijing, said she consumes plant-based milk almost every day when studying in the United Kingdom. Among her favorites are milk varieties made of rice, soybean and cashew nut. She said they taste refreshingly different, are more diverse, though a bit more expensive.

"Conventional milk gives me pimples and does not go well with some ingredients in the drugs I'm taking. That's why I chose plant-based milk as a replacement, although normal milk is cheaper and has more nutritional elements," she said.

Yu said the niche market for plant-based protein beverages is set to boom as major dairy giants, overseas brands and emerging labels are investing in the sector. "Consumers of plant-based milk in China are a broad category, but emerging brands mainly target the urban young middle-income group, who value a healthier lifestyle and cultivate good tastes."

Oatly, a Swedish firm specializing in plant-based oat milk, entered the Chinese market in 2018. The company said it mainly targets consumers who have interest in fitness, support environmental protection, and pursue fashion and health.

Its oat milk products are available in over 10,000 cafes on the Chinese mainland, and at boutique supermarkets and on e-commerce platforms. It said both online and offline sales performed well this year, with its sales on Taobao surging a staggering 2,305 percent during the January-April period.

"China has a tradition of drinking plant-based milk in the form of soybean milk. Chinese consumers are also open to new things. We think now is the period of high growth for plant-based milk," Oatly said in a written statement to China Daily.

"The compensatory consumption during the post-COVID-19 era, increasing health awareness and consumption upgrade are also driving the plant-based food and beverage market in China," it said.

Chinese dairy producer Yili announced it upgraded its soybean milk brand into plant-based milk in December 2019. Its plant-based milk sales surged 500 percent year-on-year during this year's Nov 11 online shopping festival, it said.

Vitasoy, a Hong Kong-based beverage company, launched five new products in September, including one containing almonds and macadamia nuts, as part of its effort to explore high-end plant-based milk market.

Starbucks announced it has added plant-based food and beverages, including oat milk coffee, to its menu in Asia in September. Other global brands such as Coca-Cola, Unilever, Danone, Nestle and Arla Foods also expanded into the sector.

Chinese oat milk startup Oakidoki received funding of 10 million yuan ($1.53 million) from Vision Plus Capital in September. News portal Jiemian reported Wang Xin, founder of Oakidoki, as saying monthly sales tripled three months after the firm began retail sales in July on Taobao, Tmall and at high-end supermarket Hema Fresh. Its 2021 revenue is expected to surpass 100 million yuan.

Euromonitor International, a market research firm, said compound annual growth rate of plant-based protein beverage in the Chinese market is expected to reach 2.7 percent from 2019 to 2024.

Kathy Jiang, chief researcher of consumer industry at global consultancy Roland Berger, said brands tend to combine function with dairy products and upgrade old products with new concepts, resulting in higher prices and higher profit.

She also said the plant-based milk market is still at an exploration stage in China compared with mature markets in some Western countries. She suggested companies should study Chinese consumers' catering culture, accord taste top priority and emphasize innovation in consuming scenarios.