The alternative protein market has rocketed over the past five years as investors pour billions into finding sustainable alternatives to meat and consumers switch to animal-friendly diets. The market for alternative meat, eggs, dairy, and seafood products is set to reach $290 billion by 2035, according to Boston Consulting Group.
But this year, the market has experienced turbulence as a number of the leading players have suffered revenue declines and share price dips. California-based vegan meat alternative Beyond Meat, which listed on the United States stock exchange in 2019, has seen its share price drop by 80 per cent from a high of $234 and a $14 billion valuation as fierce market competition and consumer reticence have stoked investor concerns. Market jitters prompted observers to ask if alternative protein is a bubble waiting to burst.
Didier Chanove (left) and Chris Coggin. Images: LinkedIn
Joining the Eco-Business Podcast to explore the sustainability of the alternative protein market are Didier Chanove, alternative proteins business director for Asia, Middle East and Africa for nutrition and taste firm Kerry and Chris Coggin, investor outreach analyst for the FAIRR Initiative, an investor network that assesses the environment, social and governance (ESG) risk of intensive animal protein production.
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We saw US$5 billion growth in 2021 alone – we’re not seeing a slow-down at all, despite the geopolitical and market turmoil.
Chris Coggin, outreach analyst, FAIRR Initiative
Tune in as we discuss:
- What does the fall in share price of big alternative protein brands tell us about the state of the market?
- The ESG risk for alternative protein
- What is driving alternative protein market growth?
- Vegan, vegetarian, flexitarian or meat-eater?
- Where will plant-based fit in the future of diets?
The script in full:
The plant-based foods sector is booming as investors pumped billions into alternative protein firms and conscientious consumers swap meat for meatless meals.
But lately the market has wobbled, prompting some to ask is plant-based a fad or the future.
This is the Eco Business Podcast. I’m Robin Hicks.
In the first of a series of podcasts on the future of protein and association with nutrition [and taste] company Kerry, we’re going to look under the hood of a market that has been growing by double digits over the past five years, despite the distractions of a pandemic in a global food crisis.
The demand for alternatives to meat, eggs, dairy and seafood is by some estimates projected to be a $290 billion market by 2035.
Plant-based foods will account for a big chunk of that demand, along with cell-based and fermented products, as consumers opt for healthier, more ethically-produced meat alternatives.
But over the past year, a number of the big alternative protein companies have taken a hit to their profits and seen their share prices nosedive.
Analysts have signaled a correction in a market that is still in its infancy while some observers have wailed that the plant-based bubble has burst.
So what has happened?
Joining the Eco-Business podcast to tackle this question, are Didier Chanove, alternative proteins business director for Asia, Middle East and Africa for nutrition [and taste] company Kerry, and Chris Coggin, investor outreach analyst for the FAIRR initiative, an investor network that assesses the ESG risk of intensive animal protein production.
First question for you, Didier.
Is plant-based meat and alternative protein, a fad or the future?
The reason I asked this is because there have been some “corrections” in the market. We’ve seen the share prices of some pretty major companies slump recently, and questions have been raised over the long term future of the market.
Didier Chanove [2.28]
From my company’s perspective, this is not a fad, this is a growing category.
We do see, as you mentioned, “corrections” in the market. But we are basically hearing this from one or two companies globally. But the reality is that we are living in the post-Covid era. In 2019, we saw big booms in brands’ growth globally in all of the categories, then Covid arrived in 2020. There was a strong shift in consumption. The food service industry was heavily affected with [sales] declines in the food service industry and hotels.
But since things have opened up again from the second half of 2021, the food service market is growing again. From our perspective, we see this category growing and see more demand across the markets. And we think this will be a very strong lasting trend.
Robin Hicks [4.42]
Chris, what’s your take on the market?
Chris Coggin [4.47]
When looking at the alternative protein market more broadly – which includes fermented products and cultivated protein as well – we’re really seeing a lot of growth in investment.
We saw US$5 billion in investment in 2021 alone – that’s a 60 per cent rise year on year. So we’re not seeing a slowdown at all.
Even in the first quarter of 2022, we saw alternative protein companies raising US$991 million of which US$475 million was plant-based companies. This is only moderately below the Q1 2021 figure.
So despite the significant geopolitical and market turmoil, we’re continuing to see strength in the investment flows going into the market.
Just to support this point, we’ve seen leading consultancy firms, including AT Kearney and BCG, forecasting that the alternative protein market will represent anywhere between 17 and 60 per cent in 2040, with AT Kearney predicting around a 30 per cent overall market share by 2030.
So I support Didier’s point, we think there has been a temporary blip in the market, and the future is driving towards alternative proteins.
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We need to rebalance the way we use resources, in a way that is healthier for people and planet. I don’t see any risk in that.
Didier Chanove
Didier Chanove [6.10]
We are now living in the world where there is constantly more pressure on land, more pressure on the climate and more education about how we can improve our health. There is a need for the food industry to transform, and that’s why we feel there is a long lasting trend in the market.
Robin Hicks [6.46]
Pushing back a bit – what about the environmental and social risks of alternative proteins that could affect the market, such as the health risk of eating highly-processed protein and the deforesation risk associated with soy products?
Chris Coggin [7.27]
From an investment risk perspective, plant-based products are more established in the market. Cultivated protein is considered a high-risk endeavor at the moment, because it is relatively unproven.
On the nutrition side of things, I can’t really comment. But I’ve heard the same argument around the highly processed nature [of some alternative protein brands].
But this is a very new industry. Scientists and dieticians are continuously improving the nutritional profile of these products.
There is exciting innovation in substituting saturated fats for unsaturated fats and reducing the salt content and sugar [of alternative protein products].
Investors now want to see improvements in how ingredients are sourced and the packaging, particularly in the reduction of plastics and the ability to recycle packaging.
Didier Chanove [9.06]
Personally, I don’t see the risk. The risk is bigger in not doing anything [to reduce meat consumption].
Secondly, we are already producing a lot of grain to feed animals. Then we use animals to feed ourselves. By reducing the quantity of animals we consume, we can continue to grow the production of grain. So whether it’s plant-based, fermented products or cell-based, we are more able to meet future protein needs.
We need to rebalance the way we use resources, in a way that is healthier for people and better for the planet. I don’t see any risk in that.
Chris Coggin [10.11]
We are currently running the Sustainable Proteins Engagement [a global investor engagement focused on encouraging global food companies to transition product portfolios to facilitate healthier, more sustainable diets] and Kerry Group is one of those companies.
We’re really seeing large consumer-facing brands such as Nestle and Unilever really understand the materiality of the issue of using a single source of protein – animal-based protein. We’re really seeing the industry de-risk itself. We’re seeing huge improvements from an investment-risk perspective.
Robin Hicks [10.55]
What are the factors that have been driving growth of alternative protein to date?
Didier Chanove [9.06]
Over the past few years, the main driver of growth [in alternative protein] has been flexitarianism – people who do not eat meat every day. They are either driven by health reasons and also sustainability.
We recently did a lifecycle assessment analysis, which clearly showed that using plant is much more sustainable than rearing animals, particularly chicken and beef.
People are also driven by animal welfare concerns.
Robin Hicks [12.47]
Chris, what do you see as the drivers of alternative protein consumption? In Asia, although there seems to have been a rise in plant-based meat consumption, but it is predicted that consumption of meat and seafood is increasing in this region…
Chris Coggin [13.21]
There are huge crises at hand with the climate and biodiversity. If we want to achieve the Paris Agreement, emissions from the food system alone will make it impossible to limit warming to 1.5 degrees Celsius and difficult to achieve the 2 degree target [with the intensification of animal protein systems]. Consumers are really waking to the sustainability angle of diet and of course the nutrition angle of things. It’s not so much a question of if this is going to happen but when [they will transition to alternative protein].
Robin Hicks [14.17]
I switched to vegetarianism a few years ago, because I’m an animal lover. What are your dietary preferences and why?
Didier Chanove [14.47]
I’m flexitarian. I like meat. But over the last three years, I’ve really reduced my [meat] intake. And I continue to do so. Why? Because I’ve been working in alternative proteins industry for a couple of years already, and I see that there is more access to good products on the market. I wouldn’t be surprised in a couple of months or years, if I decided to be vegetarian or vegan.
Robin Hicks [15.37]
Chris, I gather you’re vegan. Do you mind sharing your decision to shift to that preference?
Chris Coggin [16.00]
My decision was primarily based on animal welfare and environmental reasons. The more I researched, I found other benefits such as health. I want to be part of that driving force pushing these alternative protein products into the market and driving change.
I believe that we don’t need animals to satisfy our taste or the mouthfeel of these products. It’s becoming easier to become vegan. I live in the UK, which is a great market to live in if you are vegan. There are lots of alternative protein products on every supermarket shelf.
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We’re seeing large consumer-facing brands understand the materiality of using animal-based protein. We’re seeing the industry de-risk itself.
Chris Coggin
Didier Chanove [17.00]
I have wonderful children. I’m thinking not only about me and my health, but the kind of world I will leave them in the future. I don’t want to be selfish. I want to make sure that I can do my part to let my kids grow in a better world.
Robin Hicks [17.34]
What is the consumer profile of people who eat plant-based products? Let’s face it, a lot of plant-based products on the market are more expensive than meat products. So what does that say about their consumer profile? Isn’t plant-based food a luxury for the middle classes and the well off?
Didier Chanove [18.16]
I work across Asia-Pacific, Middle East and Africa, and I can tell you that the demand [for plant-based food] is increasing everywhere. And there is more product innovation bringing new products into the market.
Asia is the market where taste is so important. Culturally, the type of food we have access to in Asia is fabulous. Plant-based products are available across different socio-economical groups. For instance, [plant-based] products are available in fast food and are doing very well across different markets, for example Burger King in the Philippines has more products in their range.
I would say [plant-based] food is for everybody. The more the category is growing, the more everyone will have a access to it.
Robin Hicks [19.59]
Chris, what sort of innovation in plant-based food are we likely to see as the market develops?
Chris Coggin [20.15]
Different technologies enable plant-based protein to be produced in different ways.
There are methods to make the mouthfeel of plant-based protein more like meat, for instance.
In cultivated meat – that is, growing animal cells outside of the animal’s body – will be a huge source of growth in the market going forward.
We’re also seeing hybrid products being produced – which are a mix between cultivated and fermented products. Cultivated meat is expensive, which is why we’re going to see more blended products [to bring down the cost]. This will give consumers more choice.
Robin Hicks [21.32]
I do wonder, though, if products are blended that could lead to issues around standards and labelling – it could be a can of worms. So, what do you think the diets of the future will look like, and how will plant-based fit into that diet?
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I’m flexitarian. I like meat. But over the last three years, I’ve been reducing my [meat] intake.
Didier Chanove
Didier Chanove [21.59]
The food industry is going through a major transformation. The future is bright in that we are stepping up the technologies and capabilities to create better products, not only for people but for the planet. We will see plant-based options in different categories, from snacks to dairy, and as Chris mentioned, we will start to see a combination of different products as the market matures.
Chris Coggin [23.38]
From the investment perspective, we’re going to continue to see innovation into plant-based, fermented and cultivated products, but also the packaging of these products.
We’re going to see more regulatory clarity around alternative protein products, particularly in cultivated meat.
And I think consumer awareness is going to drive the change.
So there’ll be a more balanced protein portfolio in the market. Instead of one or two options, as we do today, we’re going to have four or five on the supermarket shelf.
I agree that the future is bright, but there’s some level of urgency in driving sustainable outcomes globally. Consumers are pushing for it, and businesses and regulators need to come on board and make sure that they are adapting to the climate and biodiversity challenges we’re facing.
