With the sale of plant-based proteins increasing by 46 per cent in FY20, the economic opportunities of the plant-based market remain largely untapped, the latest report from alternative protein think tank Food Frontier says.
Food Frontier commissioned Deloitte Access Economics for its 2020 State of the Industry report, which found a doubling of manufacturing revenue (up from $35 million to $70 million), workforce, and number of products on retail shelves (to more than 200). Of those products, 42 per cent were from Australian companies.
This was confirmed in the keynote address by Woolworths Group chair Gordon Cairns at the Food Agility Summit on 15 March. Cairns said the Group saw a 60 per cent increase in plant-based protein sales in 2020, as more people put greater emphasis on their health and wellbeing.
The drivers
One third of Australians are limiting their meat consumption, Deloitte said.
The 2019 EAT-Lancet Commission research, in which 37 scientists spent three years analysing the best available data to form a global ‘planetary health’ diet, taking into consideration environmental sustainability, human health and food security.
The findings recommended a 50 percent global reduction in meat by 2050 and more than doubling of protein consumption from pulses and grains.
Food Frontier said that growing awareness about the economic and societal benefits of alternative protein sources as well as their role in feeding the future has seen record investment in plant-based meats – the category of alternative proteins that promises the greatest immediate potential and commercial opportunity.
Plant-based meats are forecast to account for 10 per cent of the $1.4 trillion global meat market by 2029 – up from one per cent in 2019.
Awareness of these foods’ benefits among meat-reducing consumers – and their appeal as convenient alternatives in familiar formats – is driving increased sales, and in turn fuelling further investment and industry expansion, it said.
Food Frontier CEO Thomas King said, “Australia can build a multi-billion-dollar plant-based meat industry, enabling our food businesses and farmers to capitalise on fast-growing global demand for alternative proteins.
“Australia has the agricultural capacity, commercial appetite and research know-how to become an international leader in new protein industries including plant-based meat. To not make the early investments necessary to leverage these unique strengths would be a missed opportunity.”
Investment
At December 2020, 22 companies made up Australia’s plant-based meat industry, up from 11 in FY19.
In 2020, there was $1.54 billion invested in plant-based meat ventures globally from both private and government sources.
The poster children came out of the US market with Beyond Meat and Impossible Foods. From its public offering in May 2019 to February 2020, Beyond Meat’s stock price more than doubled. Impossible Foods raised since its public offering in May 2019
The Canadian government invested $103 million into Merit Functional Foods to establish a canola and pea protein extraction facility, which will be the first in the world to produce food-grade canola protein safe for human consumption.
And closer to home, the New Zealand Ministry of Business, Innovation and Employment, together with the Agency for Science, Technology and Research announced the launch of the New Zealand-Singapore Bilateral Research Programme on Future Foods, an investment of $10.2 million (NZ$11.8 million) over three years.
One of the initial projects, led by the University of Auckland, is investigating the interactions between plant proteins (including soy, bean and pea) and cell-cultivated livestock cells with consideration to their application in ‘hybrid’ products – foods that are a combination of both plant-based protein and cell cultivated proteins.
In November 2020, Unilever announced its Future Foods initiative. At its centre was a €1 billion ($1.63 billion) sales target for plant-based meat and dairy alternatives within the next five to seven years. The growth will be driven by increasing vegan alternatives from brands including Magnum, Streets, Continental, and Hellmann’s, the company said.
Unilever Foods & Refreshment Division president Hanneke Faber said: “As one of the world’s largest food companies, we have a critical role to play in helping to transform the global food system.
“It’s not up to us to decide for people what they want to eat, but it is up to us to make healthier and plant-based options accessible to all. These are bold, stretching targets which demonstrate our commitment to be a force for good.
In September last year, UK retailer Tesco outlined its sales target for plant-based alternatives, saying it would boost sales by 300 per cent by 2025.
While in May, Nestlé invested more than $155 million on its operations in China, developing a new production facility for plant-based products. And in August launched its first plant-based alternative to tuna, Vuna, under its Gourmet Garden brand.
A 2019 Forum of the Future report reviewed 132 of the world’s largest companies in the broader protein market. It found 34 per cent of conventional meat and dairy companies, and 79 percent of food and ingredients manufacturers were advancing plant proteins through acquisitions, investments or new product launches.
Food Frontier said growth in China and Thailand is predicted to grow by 200 per cent by 2025.
Ingredient Processing
There is significant demand for Australian grown plant protein ingredients and processing. From FY19 to FY20, the volume of plant-based meat manufactured in Australia increased 70 per cent, with leading companies indicating their desire to use more Australian ingredients in their products.
Again, Woolworths Group chair Gordon Cairns at the Food Agility Summit said its research found 74 per cent of consumers said Australian made was important in their purchasing decision making.
Food Frontier said the value to the Australian farming sector of value-adding crops like pulses and legumes as ingredients for products like plant-based meat – instead of farmers selling their produce into volatile commodity markets – is becoming more widely recognised. However, significant investment in local plant protein processing infrastructure is required to cater to this demand.
It said the EAT Group’s investment in establishing a protein fractionation facility in Victoria in 2020 brought new, yet limited capacity to Australia.
“There remains significant scope for greater investment in fractionation infrastructure considering the plant-based meat industry, as per Deloitte’s moderate growth scenario, is projected to produce 169,000 tonnes of end product by 2030.
The demand for plant protein ingredients is expanding into different market segments as well, with demand for baked goods, snacks and sports nutrition products also growing. This demonstrates significant need for local plant protein processing, Food Frontier said.
Food Frontier said that at least one state government is actively scoping the need for further investments in such processing facilities to generate jobs and support Australian agriculture, while more private businesses are also exploring the opportunity, signalling key developments ahead in 2021 and beyond.
A 2018 Nielsen study found Australia’s are some of the most price-sensitive grocery shoppers in the world, and at the moment, plant-based meat products are around 49 per cent more expensive than conventional meat.
Most plant-based meat products command a price premium relative to their conventional meat equivalents, between 16 to 77 per cent more on a dollar-per-kilogram basis. Australian plant-based meat products tend to be lower-priced than their imported counterparts – around $3.50 less per kilogram. Food Frontier says this is an encouraging sign that the increase in availability of locally made products is helping reduce average price points across the category.
It also explains why catering to the rising demand for protein from a growing and increasingly affluent global population – who are receptive to the premium, safe nature of ‘Brand Australia’ goods – is key to the business strategies of many new Australian plant-based product manufacturers.
Food Frontier said increased exports will be key towards the sector achieving economies of scale, with the growth in production volume driving down unit product manufacturing costs.
Another concern at the moment is that the 32 per cent increase in consumer expenditure across grocery and foodservice sectors does not tally with the more than doubling of products available in the marketplace.
The report said that notwithstanding COVID-19 impacts, the disparity suggests that in retail, too high a proportion of plant-based meats are not being purchased by consumers before their use-by dates and therefore are going to waste.
While the strategy to stock plant-based meats in the chilled case alongside conventional meat has been successful in spurring greater experimentation and trial, the shorter shelf-life limitations have to be taken into consideration.
Freezer aisle products have the advantage of less in-store waste, but their positioning is less likely to motivate customer trial, while also contending with perceptions that frozen offerings are less fresh than chilled.
Category planning and forecasting that take into account market maturity will be critical to avoiding in-store waste as well as market growth and achievable sales targets, Food Frontier said.
The economic and job contributions of Australian plant-based meat businesses in FY20 are reflective of an industry in an early growth phase. Its rapidly increasing capacity and rising consumer demand are trends mirrored globally.
This growth is reflected in the Australian sector’s manufacturing revenue, which nearly doubled from $35.2 million in FY19 to $69.9 million in FY20.
Employment increased 106 per cent in the same timeframe, from 265 to 547 people. That s made up of 246 direct full-time equivalent (FTE) roles (up 137 percent) and 301 additional indirect FTEs, an increase of 87 percent, which relates to the sector’s purchase of up-stream inputs.
Average wages in the sector fell from $94,000 to $73,000, reflecting the employment of more production workers as output increases.
Food Frontier CEO Thomas King said governments need to support investment in R&D and infrastructure for the industry, as well as evidence-based regulation to ensure an even playing field for all players in this burgeoning market.
Full report is here.
