A few years ago, oat milk took the specialty coffee industry by storm, and it still remains the most popular non-dairy option in many markets for its neutral taste and creamy texture.

Whether it’s for reasons related to lactose intolerance, lifestyle choice, or simply a dietary preference, many people are willing to pay more for oat milk. But the question still remains whether plant milk surcharges are fair.

For business owners, the argument is that higher retail prices for oat milk mean customers have to pay extra to spread the costs. On the other end of the spectrum, some consumers feel that surcharges are unreasonable – especially if they’re unable to drink cow’s milk.

As the debate continues, key players in the industry have seemingly sided with customers. By March 2023, Starbucks had dropped its plant milk surcharge at all of its UK, German, and French stores. However, for smaller independent coffee shops, is it realistic for them to follow suit?

David Schneiderman, co-founder of Two Bears, and Bryan Serwatka, Coffee Community Manager at Minor Figures, have their say in today’s article.

You may also like our article on whether defaulting to oat milk paid off for coffee shops.

Oat milk’s cult following: Why people are willing to pay more

In a market once dominated by soy, almond, and coconut products, oat milk has truly come out on top. According to data from World Coffee Portal, over 28% of customers at UK branded coffee shops ordered oat milk – which makes it the most popular plant milk in the country.

The situation is similar in many other countries, with some major players in the US specialty coffee market – such as Stumptown, Blue Bottle, and Onyx Coffee Lab – even defaulting to oat milk in recent years.

Oat’s ascension to specialty coffee’s favourite plant milk can be traced back to 2017, when cult brand Oatly ran highly effective marketing campaigns in the US and UK. Sales representatives handed out free samples of the company’s barista edition oat milk to cafés, and many were impressed with its neutral flavour, creamy texture, and ability to create high-quality microfoam.

In the ensuing months, more and more coffee shops began to stock Oatly – leading to supply shortages following sharp rises in demand, which heightened interest even more. 

A plant milk like no other

Oat milk’s remarkable similarities to dairy helped drive its popularity in specialty coffee shops – replicating the creamy mouthfeel and flavour of cow’s milk better than any other plant milk before it.

David Schneiderman is the co-founder of Two Bears, a Canadian roaster that also manufactures ready-to-drink coffee products and oat milk. 

“For baristas and consumers, there’s nothing more important than taste,” he says. “There are many reasons why people drink dairy alternatives, but many of them don’t complement the flavours in coffee.”

Bryan Serwatka is the Coffee Community Manager at Minor Figures – another cult oat milk brand. He agrees, saying that many consumers prefer dairy alternatives for their taste, but oat remains a firm favourite.

“Demand in cafés rises massively year on year, but we’re also seeing the same level of growth in grocery stores, while sales of other dairy alternatives are in decline,” he tells me. “Dairy is no longer accepted as the default, nor should it be.”

The debate about oat milk surcharges continues

It’s not uncommon for coffee shops to charge extra for oat milk, which has caused a fair amount of controversy over the past couple of years. As the number of people who follow a vegan lifestyle has increased around the world, coffee consumers have become more vocal about their dissatisfaction with plant milk surcharges.

The most notable example is Starbucks. Even though the chain dropped its additional fees for oat, soy, almond, and coconut milk in some countries, US stores still charge customers up to 80 cents for dairy alternatives.

As part of a marketing campaign, anti-dairy advocacy group Switch4Good criticised the decision in a fake press release, which suggested that Starbucks would instead implement a dairy surcharge to “eradicate dietary racism”. This statement may appear unusual at first, but given that lactose intolerance is more likely to affect people of colour, it’s understandable why plant milk surcharges are considered unfair. Research has found that between 90% and 100% of East Asian people have issues consuming lactose, so dairy alternatives are naturally a more viable option. But should that mean they have to pay more for them in coffee shops?

The answer is a little more complicated than we might expect. According to data from Mintec, the retail price of plant milk is roughly twice the amount for dairy for a number of reasons. The costs of research and development, production, transportation, packaging, and marketing are all higher for plant milks compared to dairy. Moreover, the price of oats reached an all-time high in 2023 – albeit still lower than cow’s milk.

Coffee shop owners have a decision to make

For most café operators, stocking oat milk is a necessity, but it also means higher costs for their business. This begs the question: do coffee shops need to charge more for oat milk?

According to a recent Perfect Daily Grind poll, 53% of respondents said plant milk surcharges were fair, while only 29% stated that coffee shops shouldn’t charge customers extra.

“We know it costs more to buy oat vs dairy, so we would never judge a café for doing what it needs to make ends meet,” Bryan says. “However, we work with many coffee shops that serve oat as their default option and find ways to make the margins work for them.”

At the same time, however, food and energy costs have never been higher for store operators, so some may have no other choice but to implement surcharges to maintain increasingly tight margins.

Is there a “fair” price for oat milk?

The decision to charge customers extra for oat milk is heavily dependent on individual business needs. There is, however, no market regulation on surcharges, so prices can vary across different coffee shops. 

This undoubtedly influences consumer behaviour. Research from McKinsey shows that price increases have a greater impact on sales of plant milks than dairy products, so customers may decide to visit another coffee shop if they deem surcharges to be too high.

In line with this, it’s important to ask whether cafés across the board should implement a set price for upselling plant milk.

David, however, says it’s impossible to know just how much consumers are willing to pay for oat milk.

“Some people will never spend over US $3 for a coffee, while others are happy to pay US $6 or more,” he tells me. “We used to sell RTD flash-brewed Gesha for US $100 which sold out quickly. You need to set the right price in the right location at the right time.”

Specialty coffee is marketed as “superior”, so most customers anticipate paying a higher price, as Bryan explains.

“Cafés are experiential places, and this extends to the milk they use,” he says. “Some have even started to serve freeze-distilled milk to pair with competition coffees. These are premium products, and coffee shops can communicate the value of these experiences to their customers.”

Oat milk is reinventing itself

Whether we can refer to oat milk as a “premium product” that warrants a surcharge is up for debate. But David emphasises that customers are usually willing to pay extra for products marketed as healthy or functional.

“Quality matters more than ever. People will pay extra for products that meet their standards,” he says. “We make our barista oat milk with organic, gluten-free oats, so our customers appreciate the value of the product because they can taste the difference. Price is relative to perceived value.”

In the wake of recent controversies about the sugar content and nutritional value of oat milk, the market has started to diversify. Oatly notably launched its Barista Organic Oat Drink in early 2024, which contains fewer ingredients than the original Barista Edition milk to target more health-conscious consumers.

So does this mean people will be willing to pay more for organic or simple-ingredient oat milk? The answer is still unclear.

“We believe oat milk is the best pairing for coffee, as well as the planet and the consumer,” Bryan says. “Defaulting to oat is the direction coffee shops should go in, which would eliminate the discrepancies in surcharges. We know that not everyone is aligned on this vision, but it’s what we hope for.”

David, meanwhile, highlights how communication will play a huge role in consumer behaviour.

“Coffee businesses are experiencing a tough time with rising inflation and costs,” he says. “On the other hand, consumers will essentially let coffee shops know how they feel about surcharges through their purchasing behaviour. Owners need to ask consumers for their feedback so they can make the right decisions.”

With its cult following, many people will always be willing to pay more for oat milk. But, at the same time, the question of whether they should have to will also linger.

There’s no straightforward answer, and both coffee shop owners and consumers are sure to disagree. Ultimately, it’s about balancing business costs with customer expectations – which isn’t always as simple as it may seem.

Enjoyed this? Then read our article on what roasters need to know about roasting for oat milk vs dairy.

Photo credits: Tim Craig

Perfect Daily Grind

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