Even in the Pandemic, Consumers Are Pursuing Alternative Dairy Beverages From a Leading-Edge Brand.

The COVID-19 pandemic has not slowed consumer demand for plant-based products. As more consumers than ever question the health, ethical, and environmental implications of animal products, innovative plant-based meat and dairy alternatives are taking the packaged food world by storm. To better understand what’s driving disruption in this space, we had the good fortune to interview Greg Steltenpohl, the co-founder and chief executive officer of Califia Farms, one of the fastest-growing plant-based beverage companies in the world.

[The Hartman Group] Califia has been at the forefront of building the market for next-generation plant-based products, notably in dairy alternatives. With competition heating up in both plant-based and premium beverages from both large, established CPG brands and also in private label products, how do you think Califia can continue to differentiate itself in an increasingly competitive market segment?

[Greg S.] We’re very proud to be one of the dairy disrupters! As the competitive landscape heats up, several factors work in our favor. First, we are and will continue to be an independent company, focused on transforming the food system into one that’s inclusive, equitable, and sustainable. While most of our competitors are owned by larger companies with divergent interests, including increasing dairy consumption, our independence and our sole commitment to true plant-based change set us apart.

Another key strength that comes from our independence is our ability to remain nimble and innovate on an accelerated time frame. Our product development process always begins with the same question: can we offer something different, something better? Our goal is to provide options with greater nutritional content and unique taste profiles.

Finally, we have a cleaner, shorter label than most plant-based foods. We use minimally processed, whole-food ingredients and have lower-sugar content across our portfolio than nearly all our competitors. We’ll continue to operate with a quality-obsessed mindset, which will in turn allow us to remain on the cutting edge.

One interesting aspect of Califia has been its focus on plant-based creamers and products for the craft and premium coffee segment. Why did you choose to focus specifically on coffee? So many alternative creamers fall short when it comes to consistency and flavor. Your products seem to reflect the love of coffee in our culture. Do you have an in with the barista community on what makes a great creamer?

We have a very close relationship with the coffee community, specifically specialty coffee shops. The entire coffee ecosystem is a wealth of exploration, and that’s where many beverage, and even some culinary, trends take off.

Early on, we established close ties with the barista community, which helped us win with the broader consumer market. Baristas have helped drive brand awareness and explode adoption of products like our Oat Barista Blend, which we launched in 2019. Oat Barista is popular with third-wave coffee shops because of its superior taste and product performance; it can be paired with coffee or consumed on its own. It also steams beautifully and creates gorgeous latte art. It’s a hit with consumers and is the top-selling oat milk on Amazon.

We chose to focus on coffee because the coffee consumer base is younger, and the segment is growing. It’s that young consumer who is actually driving these trend usages and new flavor profiles. The coffee community is also highly discerning. So again, we knew that if we could win with them, we would stand a good chance of delighting the average consumer.

Do you think consumers connect Califia's marketing efforts that plants can build a better tomorrow with their own lives ... or do you think it’s more about trying high-quality alternatives to conventional dairy products?

Today’s consumer approaches the category with a much higher awareness of the importance of better plant proteins. As we take cues from our core customers, we’re pivoting our supply chains to more ingredients like yellow pea, oat, and tiger nut that offer greater possibilities for regenerative agriculture. These leading consumers are now carefully considering the interrelated effects of their daily choices on the planet, animals, and their own health.

So, yes, we believe our plant-based messaging resonates with people because it's a natural extension of a conversation they’re already having. We also know that most people are not ready to adopt a 100% plant-based diet. We’re here to support folks along their plant-based journey, wherever they may be.

Related to the previous question, what role do you think transparency (about sourcing, production, ingredients used) plays these days in terms of communicating with mainstream consumers about something like plant-based products?

It’s incredibly important. Consumers are demanding transparency, and they care deeply about where their food comes from. They also care about food quality and farmer livelihoods, particularly if they’re paying a premium. These issues concern us, too, which is why we use only the safest, most effective whole-food ingredients and purchase our coffees via Direct Trade partnerships throughout Africa and Central America – partnerships that pay premiums to farmers.

Similarly, Califia has been at the forefront of eliminating carrageenan as a thickener, an ingredient avoided by Core wellness consumers. While this means your products might come at a higher price point, it appears you are appealing to a more mainstream consumer as well. What do you attribute this to?

We appeal to a wider audience because today’s consumer understands that premium prices like ours typically mean higher quality and a commitment to clean, wholesome, nutritious ingredients that might be more labor-intensive or require expensive certifications. They aren’t willing to compromise on quality when it’s something they put into their own body or feed their family.

Particularly in the age of COVID-19, when heart disease and diabetes are higher-risk factors than ever, more and more people are looking to transition toward a healthier diet. In fact, 51% of the population have purchased a plant-based food and beverage alternative in the past three months. That tells us plant-based is becoming mainstream and is no longer a niche category.

Are there other market segments for plant-based products that you find compelling and of interest? With almond milk coming under fire as a less sustainable ingredient due to its water requirements, are there other nuts/seeds that might be on the horizon for the alternative milk category?

We’re always testing or experimenting on the edges with various plant proteins and nutritious micronutrients that have the potential to produce new, exciting taste profiles. Our goal is to offer a variety of different plant-based, nutrient-dense products to match the diversity of consumer taste preferences in North America and abroad. Last year we launched our 48-ounce Oatmilk and Oat Barista Blend, which have since become big sales drivers for us. And in January we debuted Oatmilk Creamers, which have completely surpassed our sales forecasts and excited our retail partners.

We’re excited about a culinary launch slated for later this month that includes the addition of cashews and tiger nuts for whole-food, plant-based goodness with full-on flavor. We also have other product launches in the pipeline that will bring more unique ingredient and flavor combinations to the fore.

With regard to almonds, while it’s true that other plant proteins, like oats, normally require less water to grow, plant milks in any form are much better for the environment than traditional dairy. Our recent Life Cycle Assessment found that a glass of Califia Unsweetened Almondmilk requires over 40% less water and has about 60-80% less global warming impact than U.S.-produced dairy milk.

What might be some barriers going forward that you think Califia and other plant-based producers face?

Again, in the mid- and post-COVID-19 world, there are and will be many unforeseen challenges faced by the food supply chain. That said, our products are more popular than ever, and the alternative global dairy market is projected to reach $25.12 billion by the end of 2026. Thus, we need to ensure that we have the infrastructure to meet increasing demand.

Innovation is another key focus area as we aim to deliver on our “something different, something better” promise. We believe our recent capital raise ($225 million) will allow us to meet these challenges while investing further in production capacity, substantial R&D, continued global expansion while building a deeper community with our growing consumer base.