More consumers are now conscious of the health, animal welfare, and environmental benefits of a plant-based diet, and are changing their diets accordingly. In the UK, for example, the number of vegans increased to 600,000 in 2018, up from 150,000 in 2006 (as reported by The Vegan Society). Leading research from the UN and the prestigious medical journal The Lancet, as well as star-studded documentaries such as 2019’s The Gamechangers, all advocate for the benefits of plant-based eating. With scientists and celebrities on board, plant-based eating has become a trend with wide and growing appeal. 

Global demand for protein is accelerating 

Accelerated  by urbanisation and the westernisation of diets in developing countries, consumer demand for protein is growing. Global protein demand was estimated at 226 million tons in 2018, having grown by around 40% since 2000. Driven further by a growing consumer class in emerging countries, this demand is expected to increase further to 271 million tons by 2025.1

This demand for protein presents a significant opportunity for plant-based meat, which currently accounts for only 1%, or USD 0.7bn (2018), of the USD 73bn US meat market. Comparing this with the dairy sector, where plant-based products already account for 13% of overall purchases, illustrates the exciting growth potential for plant-based meat.2 

Plant-based protein for the environment and health

With lower CO2 emissions and less land and water use than meat, the environmental benefits of plant-based proteins are enormous. The figures show that producing animal protein is an inefficient way of meeting global protein demand. Meat, aquaculture, eggs, and dairy use 83% of the world’s farmland and are responsible for 56-58% of food emissions, despite providing only 37% of our protein and 18% of our calories.3 According to Beyond Meat, their plant-based burger (made from pea protein) generates 90% less greenhouse gas emissions and requires 92% less land and 99% less water than a standard beef burger.

In addition to the environmental benefits of plant-based food, most experts agree that overconsumption of meat can be directly linked to a number of cardiovascular diseases as well as different types of cancer.4 Studies have shown that there is a 16% higher cancer risk and a 21% increased heart-disease risk associated with consuming processed meats.5

There’s also growing evidence that the current COVID-19 crisis is related to the sourcing of animal protein. Alongside previous outbreaks of avian flu and swine flu, people are waking up to the fact that producing food more safely would help avert the threat of pandemic shocks to the food and economic systems.

The growing accessibility of plant-based protein

As things stand, plant-based meat is more often than not the pricier option on the supermarket shelf, but this looks set to change. Plant-based meat is currently priced at an average premium of 200% compared to traditional meat alternatives.6 As a result, consumers of plant-based meat are usually from a higher income bracket. According to Beyond Meat, almost 40% of households with incomes above USD 100,000 per year buy plant-based protein products, with this number dropping to around 10% for households earning less than USD 50,000 per year.

As an increasing number of players enter the market and production is scaled up, it’s expected that plant-based meat will eventually reach price parity with regular meat, resulting in significantly more people from lower income segments purchasing plant-based meat, and further growth of the sector. 

What’s the smartest way to invest in plant-based meat?

So far, investors have focused on the early movers in the plant-based meat space, such as Beyond Meat. Looking ahead, there are attractive investment opportunities further up the value chain. The key components of a Beyond Burger, for example, are pea protein, fats, and flavours. The producers of the ‘raw materials’ – equipment, protein, fats, and flavours (including spices) – required by plant-based meat companies will benefit from the growth in plant-based demand, and the resulting shortage in materials.

It’s also worth noting that, due to the more cost-efficient process of producing plant-based meat when compared with traditional meat production, retailers are able to make considerably more money by selling a veggie burger than a quarter pounder. As well as the health and environmental credentials, we knew there was a reason why IKEA jumped on the bandwagon to sell their veggie meatballs!

A bright future for the plant-based protein sector

The IPO success of Beyond Meat captured the imagination of both the market and consumers, similar to what Tesla achieved when launching its electric car, the Model S. The economic incentives for retailers, along with the rational benefits for health and saving the planet, explain the growing appeal of plant-based protein.

When it comes to food, taste and pleasure are ultimately where the money is, and it will take some trial and error before these are perfected in plant-based meats for mainstream consumers. The industry is still a fraction of food-and-beverage global spend, but if current growth rates continue, plant-based alternatives may replace 2.5% of meat consumption by 2022.  What’s clear, is that the plant-based meat revolution has begun.