Economic and Marketing Information
FOR INDIANA  FARMERS
Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana    
January 31, 1968
The Competitive Position of IMITATION MILK
number OF FLUID milk substitutes—generally called
imitation milk—are available to Indiana consumers. If
consumers accept these products as a substitute for natural milk, there will be important implications for the
Indiana milk producer as well as for Indiana agriculture
in general.
The purpose of this article is: (1) to describe the composition of imitation milk, (2) to produce information
on ingredient costs of imitation milk relative to natural
milk, (3) to discuss factors influencing consumer acceptance of imitation milk, and (4) to discuss some implications of imitation milk for Indiana agriculture.
Composition of Imitation Milk Products
Imitation milk products can be produced from a number
of ingredients. A basic characteristic of all imitation milk
is the existence oi vegetable fat in the milk. The vegetable
fat most commonly used in imitation milk is coconut oil.
There are, however, some blends of vegetable oil—including soybean oil—on the market which can be used in
imitation milk.
Aside from the common ingredient of vegetable fat,
three different imitation milk products can be denned according to the ingredients contained in the solids-not-fat
portion of the product. It is important to differentiate
among these products because their implications for dairy
and non-dairy agriculture are different.
No uniform terminology has yet been developed for the
three imitation milk products. As a result, they will simply
be referred to as Type I, II, and III.
Type I is simply a combination of skim milk, vegetable
oil, and some emulsifiers and stabilizers. The skim milk
used in the Type I may be either fresh skim milk or reconstituted non-fat dry milk. Some Type I might contain a
combination of vegetable oil and butterfat.
Type I can legally be marketed and is being distributed
by several milk processing firms in Indiana. Currently most
Type I is being distributed through supermarkets. The
Federal Filled Milk Act prohibits the interstate shipment of
filled milk. Type I falls within the definition of a filled
milk and therefore cannot be shipped across state lines.
As a result, all Type I milk distributed in Indiana must be
processed in Indiana.
Type II is generally made by combining water, vegetable
oil, sodium caseinate, corn syrup solids, emulsifiers, and
stabilizers. The distinguishing feature of Type II is the
use of sodium caseinate as the source of protein. Casein
is the protein component of milk. It is produced from nonfat dry milk by a manufacturing process that separates out
the protein portion of milk in the form of sodium caseinate.
Type II can also legally be marketed in Indiana. It is
expected that it will be produced and distributed in Indiana
Ronald D. Knutson,
Agricultural Economics
in the near future. Type II does not fall within the Federal Filled Milk Act definition of a filled milk. It can,
therefore, be shipped freely in interstate commerce.
Even though Type II contains sodium caseinate, an
Arizona lower court has ruled that this product is not a
milk product and therefore is not subject to the same sanitary and filled milk regulations as dairy products. However,
these imitation products must meet the sanitary standards
of other food products as established by the Federal Food
and Drug Commission. It should be realized that the
Arizona lower court decision is not final and is being appealed to a higher court.
Type III is an entirely vegetable product. Although Type
III is not yet on the market, it is anticipated that it will
contain essentially the same ingredients as Type II except
that the casein protein in Type II will be replaced by a
vegetable protein such as the protein in soybeans.
Considerable research is being done by leading manufactures of food and animal food products to develop a
vegetable protein which will produce an acceptable Type
III. Type III is not a dairy product, but it would be subject to the same sanitary regulations as other foods.
Ingredient Costs
One of the main factors influencing the competitive
position of natural milk relative to imitation milk is the
cost involved in producing the different products. The
cost involved in producing these products may be divided
into two groups—processing cost and ingredient cost.
Both Type I and Type II can be and are being produced
in fluid milk processing plants. Little extra equipment is
involved in processing the imitation products relative to
fluid milk products. However, in the beginning, imitation
product volume will likely be small and unit processing
costs will be expected to be somewhat higher than on more
conventional fluid milk items. Imitation milk also adds at
least one item to the processors product mix. This also
implies higher unit processing costs. The extent to which
these imitation milk processing costs are higher than
regular milk processing costs would be expected to vary
both from plant to plant and over time. It is, therefore,
difficult to provide specific information on the costs involved in processing imitation milk products.
There are important differences in the cost of the ingredients involved in making imitation and natural milk
products. For example, if milk used for bottling purposes
—Class I milk—costs the processor $6 per hundredweight,
the ingredient cost to the processor for one half-gallon of
3.5 per cent butterfat milk is 26.1 cents (Table 1). On
the other hand, the ingredients for a 3.5 per cent coconut
oil Type I which uses fresh skim milk bought at the Class I
skim price would cost the processor 19-2 cents per half