Why Does Oat Milk Cost More Than Dairy?

January 12, 2026 •

4 min read

According to a 2023 analysis by The Guardian, the retail price of oat milk was approximately six cents per ounce, while cow's milk was only two cents. Understanding why does oat milk cost more involves examining the entire supply chain, from the farm to the supermarket shelf. Several complex factors contribute to the higher price of this popular dairy alternative.

Quick Summary

Oat milk's higher cost is driven by specialized processing, greater marketing expenses, and lack of government subsidies common in the dairy industry. Production scale also plays a significant role, as plant-based milks operate at smaller volumes than established dairy networks, resulting in higher unit costs. Demand, transportation, and R&D also impact the final price.

Key Points

Complex Processing: Unlike dairy milk, oat milk production requires specialized, multi-stage processing including enzymatic hydrolysis, adding to manufacturing costs.
No Government Subsidies: The dairy industry receives significant government subsidies that keep prices low, a benefit not extended to the plant-based milk market.
Lower Economies of Scale: As a smaller, growing market, oat milk producers cannot achieve the same cost efficiencies as the vast, established dairy industry.
Higher R&D and Marketing: Plant-based brands invest heavily in research and development to improve their products and in marketing to compete for market share.
Added Ingredients: Commercial oat milk includes costly, food-grade additives such as oils and vitamins for flavor, texture, and nutritional fortification.
Market Demand and Perception: Consumer demand for trendy plant-based products allows companies to maintain a premium price, as many customers are willing to pay more.

The Core Difference: Production and Processing

At a fundamental level, the manufacturing process for oat milk is more involved than for dairy milk. While cow's milk is a product that can be pasteurized and bottled directly, oat milk requires several more complex steps. The journey from whole oats to a smooth, creamy beverage necessitates a multi-stage process that adds to the overall production cost.

Specialized Manufacturing

The process for making oat milk involves more specialized and energy-intensive machinery than dairy production. The raw oats must be milled, mixed with water, and then undergo enzymatic hydrolysis to break down the starches into smaller molecules. This extra step is crucial for achieving the sweet, smooth texture consumers expect. The resulting liquid must then be filtered and homogenized to prevent separation. Dairy production, by contrast, has a well-established and highly efficient infrastructure built over decades, making its processing far cheaper.

Added Ingredients and Quality Control

While homemade oat milk might contain only oats and water, commercial versions include a variety of added ingredients to improve flavor, texture, and shelf-life. These can include oils (like sunflower or canola) for creaminess, fortified vitamins and minerals (such as B12 and calcium), and stabilizers. These high-quality, food-grade additives add to the raw material costs. Furthermore, meeting stringent quality standards and regulatory requirements for a processed food product requires additional investments in testing and quality assurance.

The Power of Scale and Market Dynamics

The massive scale of the conventional dairy industry allows it to achieve economies of scale that plant-based alternatives simply cannot match yet. This affects everything from purchasing raw materials to distribution.

Economies of Scale

The dairy industry benefits from decades of large-scale, optimized production and a vast, established distribution network. This allows dairy producers to purchase feed and supplies in huge quantities at a lower per-unit price. Oat milk, as a newer and smaller market, has not reached this level of production scale. Smaller production runs mean higher costs per unit for ingredients, packaging, and factory operation. As the plant-based market continues to grow, these economies of scale will improve, but it will take time to catch up to dairy.

Government Subsidies

One of the most significant reasons for the price disparity is the stark difference in government support. The dairy industry in many countries, including the U.S., has been heavily subsidized for decades. These government programs help keep the price of cow's milk artificially low for consumers by guaranteeing payouts to farmers and managing supply. Plant-based milk producers do not receive similar subsidies, which means the full cost of production is passed directly to the consumer.

Marketing and R&D Investment

As a growing and competitive market, plant-based milk brands must invest heavily in marketing to build brand awareness and educate consumers. This is in contrast to the dairy industry, which has relied on decades-old, established networks and generic advertising campaigns like "Got Milk?" The innovation within the plant-based sector also requires ongoing research and development to create new flavors, improve existing recipes, and perfect texture. These costs are reflected in the final retail price.

Supply Chain and Consumer Behavior

Global events and consumer trends also play a role in oat milk pricing.

Supply Chain Sensitivity

The cost of oats and other ingredients, like oils and stabilizers, is subject to volatility in the global commodity markets. Events such as poor harvests or geopolitical conflicts can drive up the price of raw materials. The war in Ukraine, for example, has been cited as a factor that increased grain and energy prices, impacting the cost of oat milk production. This sensitivity to supply chain disruptions makes oat milk pricing less stable than dairy.

Consumer Demand and Brand Perception

As a trendy and sought-after product, oat milk commands a higher price because consumers are willing to pay for it. This is particularly true in coffee shops, where the up-charge for alternative milks has become standard. This perception of oat milk as a premium product allows manufacturers to maintain higher profit margins than the more commoditized dairy industry.

Conclusion

In summary, the higher price of oat milk is a result of several intertwined factors, from more complex and expensive production processes to the lack of government subsidies that benefit the dairy industry. While oat milk's increasing popularity and scaling production may lead to future price reductions, the current market dynamics, including marketing investment and higher unit costs, keep it a premium-priced product compared to its dairy counterpart. The decision to pay more for oat milk is a choice many consumers make based on dietary needs, ethical considerations, and evolving taste preferences.


Factor	Oat Milk	Dairy Milk
Production Process	Complex: Milling, enzymatic hydrolysis, homogenization, and fortification.	Simpler: Pasteurization and bottling.
Economies of Scale	Lower scale, resulting in higher per-unit costs for production and distribution.	Massive scale, leading to significant cost efficiencies.
Government Subsidies	None in most major markets; full cost is passed to consumer.	Heavily subsidized for decades, which suppresses retail prices.
Raw Materials	Oats and additives like oils and vitamins, subject to commodity market fluctuations.	Primarily cow's milk, benefiting from long-established, stable supply chains.
Marketing Costs	Higher investment needed for brand building and consumer education in a competitive market.	Lower, as the market is mature and established.
R&D Expenses	Significant investment in product innovation and quality improvement.	Minimal investment required for an established product.

For more information on the economics of plant-based products, see the article from Sentient Media explaining why alternative milks are more expensive than dairy.

Frequently Asked Questions

Generally, yes. Most retail analyses show that oat milk and other plant-based alternatives cost more per liter or gallon than conventional dairy milk. However, specific pricing can vary by brand, store, and region.

Coffee shops charge extra for oat milk because their wholesale cost is significantly higher than that of dairy milk. This up-charge covers the increased expense, helping them maintain their profit margins, though larger chains may sometimes absorb these costs.

No, the U.S. government does not subsidize oat milk production. The lack of government support for plant-based alternatives, in contrast to decades of subsidies for dairy, is a major reason for the price difference.

Yes, making oat milk at home is significantly cheaper than buying commercial versions. The ingredients are simple and inexpensive, though the homemade product will lack the stabilizers, fortifications, and consistent texture of a store-bought brand.

Prices could potentially decrease as the plant-based milk industry scales up and achieves greater economies of scale. However, factors like demand, commodity prices, and lack of subsidies may prevent it from ever becoming as cheap as subsidized dairy milk.

Yes, they do. New and competitive plant-based brands spend more on marketing and branding to gain market share and build consumer awareness, which is a cost reflected in the final retail price.

The multi-step processing of oat milk, which includes milling, enzymatic hydrolysis, and homogenization, requires specialized equipment and energy that contribute to higher production expenses compared to the relatively simpler process for dairy milk.