Can #PlantBased Deliver Sustainability and Business Prosperity for the Food Sector?

@maiagrowthpartners we are looking forward to Plant Based World Expo in London next week. #PBWE2022 It is exciting times for this relatively new category but the outlook is uncertain. We are in unusual times. The UK, and indeed many advanced economies are currently struggling with the contradiction of economic instability, inflation and recession, whilst also seeing a crisis in attracting and retaining enough staff to meet the demand for their services.

How can the food sector use the power of sustainability, and the move towards plant- based in particular to counteract this?

Media coverage of the negative effects of meat production are extensive and are becoming mainstream. This was fuelled in 2021 by Henry Dimbleby’s National Food Strategy which stated that meat consumption will have to go down by 30% by 2032 to meet emissions and health targets.

The anti-meat rhetoric is getting stronger and louder. By default, Plant-Based is seen as a more ethical and environmentally friendly choice.

However, the emissions impact of Plant-Based is yet to be rigorously assessed and there is a long way to go with accreditation and labelling before it will be clear one way or another, but the need felt by the consumer to make a sustainable purchase remains.

There is a strong link between staying relevant and staying in business. Right now, ‘relevant’ means tailoring your product or service, as well as your employee offering to deliver for the planet and the wider good. Plant-Based has the demand momentum and perception of positive sustainable impact to do this. Market Research company iMarc predicts the global plant food market will show annual growth of 12.27% between 2022 and 2027. Others predict even higher growth and the global value is expected to reach $ 52.5 billion by next year. 1

The argument that sustainability makes good business sense is now well documented. It is a route to new markets, to brand loyalty and as buyers seek to stay relevant to their customers, it is a route to preferred supplier status.

 The staff shortage issue is particularly acute in food production and hospitality. During the summer in the UK, it was not unusual to see reduced hours on food service, empty supermarket shelves and even restaurant closures due to lack of staff. A very direct effect on the bottom line.

SuperCritical, the carbon removal platform, published a report last month that states that “53% of 18 – 24-year-olds are willing to consider leaving an employer based on net zero credentials” 2   Source: SuperCritical “Net Zero in a Time of Recession” 19/10/22

When we consider that the UK food and hospitality sector is particularly reliant on Gen Z workers then there is a clear risk to employee retention if action isn’t taken. Businesses and government bodies are already adapting product ranges and menus, switching to accredited suppliers, and in larger organisations taking action internally on canteen choices. At Wagamama, 50% of the menu is now vegan. Stirling University hit the headlines this week as it announced that its entire Student Union catering offering would be 100% plant based by 2025. 

Switching to plant-based can also have a positive impact on margin for food manufacturers and the hospitality sector as the production costs of plant protein are generally cheaper than that for meat production. Alongside the media hype this could explain why new product development in fmcg and in the start-up community is very active in plant-based and the multiples have found shelf space for these new products, especially in the alt meat segment. On the surface we could be confident that these businesses will take the lead in any race for consumer spend and employee attraction. 

So is plant-based in a honeymoon phase or will it last? Is the trend strong enough to become mainstream? The inflationary pressures which cause a margin challenge on one side and yet fuel demand on the other are likely to continue until global markets calm down. And that is medium to long term. And the environmental driver to demand is generally accepted to be here to stay. On the flip side, high inflation is causing shoppers to switch to own label so that could have a negative impact on higher priced independent plant-based brands, especially those who have launched straight to volume sales from the multiples without first building a loyal fan base with a niche route to market.  And there is evidence that the sector is more complex, and the consumer more fickle, than the hype around demand suggests. The online vegan supermarket, The Vegan Kind, went into administration last month. To be mainstream, manufacturers need to understand and appeal to vegans, vegetarians and flexitarians all in one product. This is far from easy when the buying motivations for each group are so different. To date, alt dairy is far more successful than alt meat, with UK sales of vegan milk up 28.3% in 2019 alone. 3. The alt meat market is proving harder to crack.

As with any new product or category coming to market, it is not enough to tick just one box and lessons are being learned. The sustainability credentials of plant-based may be high, but if the price is a challenge, or the flavour expectations are not met, or packaging is poor, then repeat sales will be hard to generate and the multiples will not hesitate to delist.  Manufacturers are also rightly coming under more scrutiny for their environmental impact and ‘vegan washing’ is now in evidence.  Mass produced food has a reputation for long, international supply chains which impacts emissions. My hope would be that we can make plant-based production more country local as a key element of ongoing sustainability.

On balance there are several thorns in the side of plant-based, and questions still to answer. But that is usual for any new category. My gut feel is that the demand momentum is strong enough for it to be a significant opportunity for food companies to continue to innovate on new product development, grow turnover, mitigate cost increases and remain attractive as employers.  And if that contributes to the development of a long-term sustainable food system, then it delivers on one of the biggest challenges of our time.

@maiagrowthpartners

Jo W. David Matthews FIET Tony Britton Jason Loomes

1.     Statista, Global plant-based food market size 2020-2030. Published by Nils-Gerrit Wunsch 9/12/2021

2.     SuperCritical “Net Zero in a Time of Recession” 19/10/22

3.     Speciality Food. The Rise and Rise of Plant-Based Milks. 21/07/2021