Coffee chains are doing away with oat milk surcharges at the exact wrong time

Frothy options.
Frothy options.
Image: REUTERS/Marcos Brindicci
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Oat milk latte lovers, rejoice: Paying extra for your milk substitute may soon be a thing of the past.

This week, Starbucks said it will not charge extra for any of the five dairy alternatives—oat, soy, almond, coconut, and a Starbucks-branded nut blend—in any of its 1,020 stores in the UK. In the US, though, requesting plant-based milk will still cost an extra 70 cents and it may stay that way for while as the price of oats soars.

Starbucks is not the first coffee chain to do away with the milk surcharge. Since 2019, Pret A Manger, a sandwich and coffee shop, has offered plant-based milk at no additional cost in locations internationally. Last year, Blue Bottle, an Oakland-based speciality coffee roaster, started offering oat milk as the default milk option in coffee in some locations in California.

Oat milk has become a hot commodity

The demand for oat and other plant-based milks has soared in recent years, driven in part by the perception it’s good for the environment and the products becoming more abundant. Foods and beverages claiming to be “free from dairy” on their packaging are up 27.5% versus two years ago, according to Nielsen data.

🎧 For more intel on plant-based milks, listen to the Quartz Obsession podcast episode on oat milk. Or subscribe via: Apple Podcasts | Spotify | Google | Stitcher.

Similar to other plant-based milks, oat milk is made by blending together the grain with water, before the liquid is filtered out. But, unlike traditional dairy products or almond milk, oat milk uses a lot less water.

Helping speed the adoption is oat milk’s similarity to traditional cow’s milk, such as in its ability to replicate froth, says Sherry Frey, a wellness analyst at Nielsen. From 2016 to 2021, global sales for milk alternatives grew 23% from $14.4 billion to $17.7 billion, according to data from Euromonitor, a London-based market research firm.

Though alternative milk represents only 15% of total US milk sales, it is further ahead than other plant-based categories like artificial meat or cheese, according to Frey.

Rising oat prices in the background

But as oat milk becomes more accessible, the grain is also getting more expensive.

In 2021, oat prices reached an all-time high. As of Thursday, Jan. 6, oat futures prices hit $6.85, nearly double what it was this time last year, driven by extended droughts.

While most of the global oat crop goes to feed livestock, the higher prices are showing up in oat milk products as well. Oatly, the world’s largest oat milk company, said in a November call with analysts it will raise the prices of its products to help offset commodity prices. Similarly, Starbucks said commodity prices are expected to have an impact on its business this year. That may damper the growing movement to giving more milk variety to your coffee.