Alternative meat: Global market overview

Alternative meat market report by Edison Group outlines the revenue growth of plant-based and cell-based products

Global meat market revenues are expected to almost double over the next 20 years, reaching $1.2 trillion by 2025; however, its growth looks set to be driven by the plant- and cell-based meat subsectors. “Plant-based products should dominate the meat alternatives space over the next five years, where innovation is creating a credible consumer proposition,” said Max Hayes, data analyst at Edison Group. Hayes co-authored the alternative meat market report ‘Meating demand – the lean, green money-making machine‘, a comprehensive report on the meat market. Below is an edited version of the report, including key takeaways.

Innovation is the major driver of growth in the alternative meat space – products can now mimic the sensory profile of conventional meat, where taste and texture offer a meat-like experience.

Longer-term growth projections vary greatly, with revenue estimates for the global market in 2030 ranging from $140 billion (Barclays) to $252 billon (Kearney).

It’s not surprising, therefore, to see that the number of companies entering the market is increasing, including several large multinationals that can support significant R&D investment.

In its report, Hayes notes the plant-based meat market is still in its infancy and faces several headwinds, including the threat of competition and regulatory scrutiny.

Innovation as a driver of growth

Plant-based diets are not a new concept nor are the links between animal protein consumption and its impact on the environment, animal welfare and human health. However, the popularity of plant-based foods has accelerated recently, with 29% sales growth for the US plant-based meat market between 2017 and 2019, outperforming the overall US retail food market growth of 4%, according to data from Good Food Institute.

Initiatives such as Veganuary and the emergence of flexitarianism have encouraged consumers to transition towards plant-based products. Here, pure-play Beyond Meat stands as one prime innovator in the plant-based meat industry.

Beyond Meat’s debut on the Nasdaq stock market in 2019 represented the first public investment opportunity in plant-based meat. With demand rising significantly over the last few years, many more companies are now entering the market.

Nestlé, Tyson and Tesco have all invested heavily in their own plant-based products and have leveraged their established market positions to compete with the likes of Beyond Meat.

Restaurants provide another route for investors, with examples including Burger King, which uses Beyond Meat in its plant-based range, or Greggs, which manufactures its own vegan range.

The consumer shift to animal-free protein is also seen on sports nutrition. For example, Science in Sport has a plant-based range of supplements, providing an alternative whey protein.

Healthy eating

Today, a plant-based diet is widely understood as a healthier diet versus one with a significant intake of animal meat, particularly red. Several studies indicate that life-threatening illnesses, such as cardiovascular and hypertension have been diminished through a decline in meat intake.

For example, in 2019, the Journal of the American Heart Association showed that in a study of more than 12,000 people those who ate mostly plant-based foods were 32% less likely to die from heart disease.

It also highlighted the potential for a plant-based diet to promote weight loss and reduce body fat without restricting calories.

So, given the myriad of diet options available, the idea of cutting out meat to improve health is one of the simplest to understand, making it a key demand driver of the plant-based diet.

However, the Edison analysts believe consumers will choose diets based on simple headline figures without understanding all the relevant variables, primarily due to the complex and ever-changing nature of nutrition research. “It seems that an individual’s experience rather than research will dictate demand, and this may change over time.”

Competition from cell-based meat

Plant-based foods face limited competition from other commercial products that can act as sustainable substitutes to animal meat. That said, cell-based meat is becoming a prominent alternative – it has the potential to significantly disrupt the market due to its ability to create animal meat without the environmental impact.

The cell-based meat industry is still nascent, where global investments in 2018 totalled $50 million, equivalent to only 6% of the amount invested in plant-based food. However, as cell-based meat producers become revenue-generating businesses, there will be scope for greater investment.

Edison analysts believe cultured meat products are likely to hit the market in 2025, which is when companies in the space are expected to reach industrial scale – products could be sold at a price point equal to conventional meat.

Large-cap public meat producers are among those to have already invested, with names including Tyson, Cargill and Merck.

Cargill, for example, has chosen cell-based meat over plant-based. It invested in Aleph Farms, a cultured meat company based in Israel and focused on growing complex meat varieties such as steak. The company said products are scheduled for launch in the next three to five years.

Dutch cell-based meat producer Mosa Meat has struck commercials deals with fast food company KFC and restaurant chain Yum! that herald the future of the company – they will receive the first batches of products once they become commercially available.

Alternative meat: Regulatory headwinds

Producers of plant-based meat aiming to disrupt the industry face several regulatory headwinds, which will only increase as the subsector grows.

Expansion into regions with tighter GMO regulation is limited, particularly in the EU. On the other hand, novel food and innovative ingredients also undergo regulatory approval in the EU.

Brexit creates an additional unknown as the UK’s stance on GMO imports once it leaves the EU is still undetermined.

Ingredients and novel foods are not the only factors exposed to headwinds; marketing, particularly labelling products as meat, is another area in the regulatory spotlight.

Plant-based food companies in France, for example, face a $370,000 fine for using ‘meat’ or any related terms as it has been deemed misleading to customers.

A YouGov study also showed this could be a potential problem in the UK, with only 47% of respondents agreeing that it would be acceptable to label plant-based products as meat.

Alternative meat market consolidation

Plant-based products’ persistent dependence on innovation forms an underlying headwind, as low-margin sales and high R&D expenses during the development stages typically can result in companies remaining loss-making for long periods.

Subsequently, the difficulty in reaching profitability leaves companies exposed to the threat of acquisition.

Acquirers, including typically large and diversified names such as Unilever, Nestlé and Danone, have the economies of scale and the established market presence and balance sheets to grow these new products quickly and generate a profit. Edison analysts believe there is scope for significant consolidation in the plant-based food market.

Additional benefits for acquirers include creating both diversity and ESG in their portfolios, expanding regional capabilities and providing a faster route to market.

N.B.: This article has been published with data taken from the report ‘Meating demand – the lean, green money-making machine‘ with permission of its author.