Why Smart Coffee Chains Are Eliminating Non-Dairy Milk Surcharges
The movement to eliminate non-dairy milk surcharges is gaining momentum across the coffee industry. Following Starbucks’ recent announcement to drop these charges across U.S. and Canadian stores, Gregorys Coffee has just made the same commitment, joining forward-thinking chains like Stumptown, Blue Bottle, Philz, Pret A Manger, Panera, and Intelligentsia. This shift represents more than just a pricing change; it’s a strategy all coffee retailers should consider as they respond to evolving consumer preferences and strive to meet their climate goals.
The Writing's on the Wall: Future-Proof Your Business
The decline in dairy milk consumption has been dramatic and accelerating. U.S. per capita milk consumption has plummeted from 45 gallons in 1945 to just 16 gallons in 2021, with the steepest drops occurring in recent years. The 2010s saw the fastest decline in seven decades, and younger consumers are leading this shift. Generation Z already purchases 20 percent less dairy milk than the national average.
As Stumptown Coffee's Vice President of Direct to Consumer Jon Perry told Perfect Daily Grind, "To continue to default to cow's milk felt antiquated." Before making their switch, dairy had become just 30 percent of Stumptown's orders.
The Numbers Don't Lie: Market Growth and Consumer Demand
The non-dairy milk market has become a major force in beverage retail. These alternatives now represent 15 percent of all U.S. retail milk dollar sales, with nearly half of U.S. households purchasing non-dairy milk options. The global market, valued at $19.42 billion in 2023, is projected to grow at 7.6 percent annually through 2030.
This growth is supported by increasing awareness of plant-based milk's nutritional benefits. Leading brands like Oatly offer products that are rich in calcium, vitamin D, vitamin B12 and fiber while being lower in saturated fats. These alternatives provide essential nutrients while being free from dairy proteins and lactose.
The market significance of this shift is clear. Starbucks highlighted their decision with a full-page advertisement in the Sunday New York Times, generating substantial positive press coverage. As consumer advocacy groups prepare targeted advertising campaigns about non-dairy pricing, coffee chains that maintain surcharges risk losing customers to more accommodating competitors.
Stumptown’s Perry puts it plainly: "The plant milk surcharge always felt unnecessary and an abnormal business practice. It makes sense to charge a premium for syrup or an extra shot, but the type of milk is an essential part of an espresso-based drink."
Operational Benefits Support the Switch
Beyond market demand, eliminating surcharges — and even transitioning to non-dairy defaults — can streamline operations. As Arkansas-based chain Onyx Coffee Lab discovered, shelf-stable non-dairy options reduce refrigeration needs and simplify inventory management. Oatly’s shelf-stable products, for example, last about a year from the production date, whether stored in the fridge or at room temperature. Dropping surcharges can reduce waste from spoilage, simplify training, and reduce service friction by eliminating complicated pricing modifications.
Addressing an Important Equity Issue
The traditional dairy surcharge model disproportionately impacts certain communities. Approximately 68 percent of the global population has lactose intolerance, with rates reaching 80 percent among African Americans and Native Americans and over 90 percent among Asian Americans. This issue particularly affects women's health, as lactose intolerance may increase women's risk for serious health conditions like osteoporosis. Eliminating dairy surcharges is about equity, reducing unnecessary barriers for lactose-intolerant customers while enhancing corporate social responsibility.
Enhanced Customer Experience Drives Brand Value
The change creates opportunities for positive brand positioning and enhanced customer loyalty. Nearly 95 percent of consumers are trying to live more sustainably, according to a Nielsen report, and 76 percent emphasize the importance of transparent product information from brands. By eliminating surcharges, coffee shops can align themselves with these values while improving the customer experience.
As Starbucks CEO Brian Nicchols put it: “Core to the Starbucks Experience is the ability to customize your beverage to make it yours. By removing the extra charge for non-dairy milks we’re embracing all the ways our customers enjoy their Starbucks.”
Environmental Leadership Strengthens Your Brand
The environmental benefits of reducing dairy dependence are substantial. When Blue Bottle Coffee conducted a life cycle assessment of their café operations, they identified dairy as a leading source of greenhouse gas emissions. This tracks with broader research on the environmental impact of dairy milk: Dairy production emits about three times more greenhouse gas emissions and requires approximately ten times more land and up to 20 times more water than plant-based milks; it takes about 144 gallons of water to produce just one gallon of milk.
Leading non-dairy producers are demonstrating commitment to sustainability throughout their supply chains. Oatly, one of the most popular barista-focused brands, reports their Barista Edition has 44 to 80 percent lower climate impact than dairy milk across key markets. The company has achieved 100 percent renewable electricity in all factories and repurposes all production byproducts. In many cases, switching to plant-based options supports sustainability goals beyond just reducing greenhouse gas emissions.
For companies looking to demonstrate environmental leadership, this change offers a tangible way to reduce their climate impact while meeting growing consumer demand for more sustainable options.
The Time to Act Is Now
With Starbucks' and Gregorys' recent announcements, consumers will increasingly question surcharges at other chains. The question isn't whether to eliminate non-dairy surcharges, but when. Forward-thinking coffee chains are already moving beyond this to make dairy-free options their default, recognizing both the business opportunity and broader benefits of this approach. Meanwhile, others are falling behind:
Biggby Coffee
In July, a woman with lactose intolerance sued Biggby Coffee, arguing that its surcharge for non-dairy alternatives is excessive and violates the Americans with Disabilities Act. Though Biggby previously offered coconut and soy milk at no additional charge, the coffee chain quietly eliminated those options from its menu and now charges a hefty premium for its remaining non-dairy substitutes.
Caribou Coffee
Caribou Coffee claims to take sustainability seriously, but the chain’s actions may tell another story. Despite targeting net-zero emissions and identifying dairy as one of its greatest sources of greenhouse gas emissions, the company still charges sustainability-concerned customers an extra dollar to avoid dairy.
Peet’s
Peet’s recognizes the outsized negative impacts of dairy on emissions and the environment. In 2023, the company dropped its non-dairy upcharge for the month of April in recognition of Earth Month. The company also claims that “Every month is Earth month.” However, it continues to charge eco-conscious customers more for the choice that aligns with their values.
The Human Bean
The Human Bean believes “there is more to business than profits” and counts among its top priorities making all guests feel welcome. But for the 50 million Americans who are lactose intolerant, paying an additional $1.45 for non-dairy milk must feel most unwelcome.
The evidence is clear: eliminating non-dairy surcharges isn't just about keeping up with competitors — it's about positioning your business for future success in a rapidly evolving market. Companies that act now have the opportunity to lead rather than follow, building customer loyalty while creating more efficient, fair, and sustainable operations.
Visit www.NoMilkTax.com to learn more about this issue and sign a petition asking coffee chains to drop the surcharge.