Destroying the dairy alternative tax?

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In the United States, alternative milk charges are rapidly being dropped at café chains across the country. What’s causing the movement and is it overdue?

Peet’s Coffee CEO Eric Lauterbach probably didn’t have receiving a letter from The Beatles icon Sir Paul McCartney on his March 2025 bingo card. Teaming up with animal rights organisation PETA, the musician called on Lauterbach to remove alternative milk charges from the menu of the roaster’s 200 coffee bars across the United States (US).

In the letter, McCartney said: “I must say this [vegan milk upcharge] surprised me as I understand that your company is committed to reducing methane emissions and water waste, yet cow’s milk significantly contributes to them. I would like to politely request that you consider dropping the upcharge on plant milks, just as Starbucks and Dunkin’ have recently done.”

This pressure on Peet’s is the latest in a chain of events that has seen many of the US’ biggest coffee chains drop additional charges for dairy alternatives. Since the late 2010s when soy, oat, almond, and other milk substitutes increasingly became commonplace on coffee menus, most cafés have charged extra for their use, with many stating this was due to plant-based milks being more expensive than dairy.

And the data suggests this is the case. Retail statistics from 2022 revealed that on average plant-based milk cost US$7.87 per gallon while cow’s milk was $4.21 per gallon. Despite dairy milk production being much more resource-intensive than the alternative milk industry, milk alternatives are thought to be more expensive for a number of reasons, including the financial support the dairy industry receives from the US Federal Government.

Despite the price difference, there’s a growing movement in the country looking to end alternative milk charges, with some suggesting the additional cost is discriminatory. As such, in November 2024 the No Milk Tax campaign was launched by The Center for Responsible Food Business.

“Non-dairy surcharges are discriminatory because they unfairly penalise those who cannot digest dairy, including the majority of people of colour,” says Taylor Warren, President of The Centre for Responsible Food Business.

“As much as 75 per cent of the global population is lactose intolerant. About 50 million Americans are lactose intolerant, including 80 per cent of Black Americans, 90 per cent of Asian Americans, and 50 per cent of Latino Americans. This population is forced to choose between paying up to $1.50 more for non-dairy drinks or risking nausea, diarrhoea, bloating, gas, and abdominal pain.”

Warren believes the surcharges also disproportionately disadvantage consumers who choose not to consume dairy products due to health, sustainability, or ethical concerns, incentivising customers to avoid an option that he says is better for their own wellbeing, the environment, and animal welfare.

The No Milk Tax campaign was launched in response to Starbucks’ announcement on 30 October 2024 that it would be removing alternative charges from its US stores. Warren says he saw Starbucks’ decision as an opportunity to accelerate change.

“No Milk Tax aims to capitalise on that momentum to ensure fair pricing for non-dairy milks becomes standard practice in the coffee industry as rapidly as possible,” he says.

“Consumers are increasingly aware of dairy’s environmental impact and health concerns, and we support efforts that make sustainable, non-dairy options more accessible. We also believe this change benefits companies. For them, dropping the ‘milk tax’ is not just about customer demand: it’s about staying relevant.”

Despite other large café chains dropping the charge before Starbucks – most notably Panera Bread in 2020, which is thought to be the first major brand to make the move – the US’ biggest coffee chain started a ripple effect in the industry. Removing the charge in the US and Canada was one of the first major moves by incoming CEO Brian Niccol, who pledged to get Starbucks back on track.

“Core to the Starbucks experience is the ability to customise 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,” said Niccol at the time of the announcement.

The company says that since the charges were removed on 7 November, its customers in the US and Canada have been taking advantage of the change. In its first quarter 2025 results, Starbucks reported its non-dairy customisations had grown year-over-year.

“As we shared last quarter, we’ve seen strong increases in customer interactions with our brand and non-dairy customisations grew mid-single digits year-over-year off a double-digit decline in the prior year. Additionally, price parity for non-dairy milk customisations brought back lapsed Starbucks Rewards members,” says a Starbucks representative.

“We are also supporting growth in dairy-free alternatives around the world by introducing no extra charge for non-dairy substitutes in more than 25 markets globally. As with everything on our menu, we continuously evaluate our plant-based menu items and their pricing on a product-by-product and market-by-market basis.”

Following Starbucks’ announcement, in March 2025 the country’s second largest chain, Dunkin’, followed suit and removed the charge from its 9775 venues across the country. Dutch Bros, Tim Hortons, and Scooter’s Coffee also all removed their charges in early 2025.

“By our tally, more than 325 coffee chains have ditched this outdated fee. This incredible momentum in the coffee industry would not have happened had consumers not made their voices heard. More than 1600 people have signed our petition, sending up to 15 emails each to different coffee company executives,” says Warren.

Yet, the team at the No Milk Tax Campaign don’t believe their job is done and dusted. Warren says many smaller and mid-size chains are falling behind by maintaining the pricing models.

“We have engaged with many of these companies directly, and we have been particularly dismayed to see chains with strong social responsibility and sustainability claims refusing to live by their own values,” he says.

Whether pressured by Sir McCartney’s letter or its competitors making the change, Peet’s Coffee announced the removal of its alternative milk charges just days after PETA launched the campaign against it. In a statement, the company outlined that the new prices would commence on 4 June 2025 and that Peetnik Rewards members would have early access via its app starting from 1 April.

As one of the world’s most influential coffee markets, the US’ move away from alternative milk charges is expected to be adopted around the world. As the plant-based milk sector is still in its infancy, some economists suggest the price of these products may fall over the next few years as it matures and more competitors enter the market.

“Reducing reliance on dairy milk is one of the most effective ways for coffee chains – and all food service businesses – to shrink their environmental footprint,” says Warren.

“Compared to oat or soy milk, dairy production emits about three times more greenhouse gases, uses 10 times more land, and consumes 20 times more water.” 

The post Destroying the dairy alternative tax? appeared first on Global Coffee Report.

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