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FAIRR: Food companies have a long way to go to meet alt-protein demand

July 24, 2019

Investor network FAIRR released its latest report this week analyzing how 25 major food companies are responding to what it views as an increase in consumer demand for plant-based protein.

The companies making the most progressive steps to increase alternative protein offerings include Unilever, Tesco, Nestle, M&S, and Conagra, according to its findings, while Amazon (via Whole Foods) and Costco appear to be among the least proactive. 

Across the 25 companies scrutinized in the study, more than 87% of retailers have ramped up their own-brand plant-based products, while 64% of companies have added words like plant-based or vegan to their annual reporting or quarterly earnings calls.

When it comes to measuring environmental impact, four companies – Marks & Spencer, Conagra Brands, General Mills, and Groupe Casino – have undertaken some type of risk assessment specifically on their protein supply chains, including climate risks. 

“For too long big food has been playing catch up to consumers and start-ups on alternative proteins, when they should be leading this transformation. This report shows that some food multinationals are seizing the moment by setting clear strategic goals to increase their alternative protein exposure, supported by relevant metrics that are tracked and reported,” Jeremy Coller, founder of FAIRR and chief investment officer at Coller Capital, wrote in the statement announcing the report. 

“That’s a good start, but as alternative proteins go mainstream, investors want more food retailers and manufacturers to capitalize on the opportunity including improving branding, merchandising and tracking of alternative protein products to expand their appeal across a broad swathe of consumers.”

Alternative proteins could account for 10% of the meat market within 15 years, according to the report, entitled Appetite for Disruption, and may already be worth $19.5 billion. Nestle has quantified the category as likely reaching $1 billion in 10 years. 

Established by the Jeremy Coller Foundation, FAIRR originated from a three-year shareholder agreement aimed at increasing awareness about the material environmental, societal, and governance (ESG) risks associated with intensive animal production.

In 2016, 36 investors managing $1.25 trillion of assets signed on to the initiative. Now, it has attracted 74 investors with combined assets of $5.3 trillion including Schroders, (UK) NN Investment Partners (NL) and Boston Common Asset Management (US).

But just today, plant-based poultry startup founder Christie Lagally wrote for AFN that the plant-based meat revolution is not inevitable.

“Today, plant-based meat still costs two-to-five times as much as its animal counterparts and can be difficult to find outside of foodie meccas. While sales of plant-based meat increased 23% from 2018, the actual volume of plant-based meat on the market still makes up a minuscule one-fifth of one percent of the entire meat industry,” Lagally points out.

This could explain why some companies are being less than bullish about increasing their plant-based offerings.

There’s also the question of whether the segment will be able to expand beyond ground beef replacements to other proteins like chicken or even muscle cuts of beef. Impossible Foods ran into a supply shortage that left many of its distributors having to turn consumers away, raising questions about whether plant-based protein alternatives are achievable at scale, especially in light of the staggering number of pounds that the average US consumer eats each year – 222.2 pounds.

But the money pouring into alternative proteins still suggests that a substantial portion of the future will be plant-based.

“You will have to have been living under a rock not to have seen Beyond Meat’s blockbuster IPO and stock market listing last week that’s pushed the company’s valuation beyond $3 billion. Impossible Foods will no doubt follow suit soon,” AgFunder co-founder Rob Leclerc wrote recently. “To say the industry is having a moment is an understatement.”

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