Consumer Interest in Alternative Foods Picking up
The authors are analysts of NH Investment & Securities. They can be reached at mj27@nhqv.com, jack.baek@nhqv.com and kyeongkeun.kang@nhqv.com, respectively. – Ed.
Alternative meat market to expand at three-year CAGR of roughly 80%
Consumer interest in new types of food (including alternative foods) is picking up, with an increasing consumer appetite for better, healthier lifestyles showing companies the direction to take. We now draw attention to alternative foods. Alternative proteins are classified into five groups: plant-based, insect-based, seaweed-based, microorganism-based, and lab-grown. Plant-based food (eg, plant-based meat, eggs, and milk) takes up the largest portion (a whopping 87.2%) of the alternative protein market, followed by seaweed-based and insect-based foods. While the alternative food market has so far focused on meat production related to cows, meat produced via poultry and seafood cell cultures is also expected in the future. As a country well-known for seafood, Singapore has invested at the country-level to bring lab-grown shrimp to diners’ plates. Such efforts to produce new meat alternatives promise to widen consumers’ choice options.
According to Euromonitor, the alternative meat market is estimated to expand at a CAGR of 78.6% from W4,862.8bn (or US$4.2bn) in 2017 to W8,684.3bn (or US$7.5bn) in 2020. While alternative foods were once the exclusively property of vegetarians, the market is now expanding strongly on increasing consumer demand. We note that the term ‘Reducetarian’ has recently been coined to refer to a person committed to eatingless meat in order to improve their health, protect the environment, and spare farmed animals from cruelty. A reduction in meat consumption also bodes well for the environment. As the conventional livestock industry is linked with global warming, the wasting of resources, animal cruelty, and a variety of diseases, alternative meats offer an ingenious solution to such problems.
Leading players: Beyond Meat and Impossible Foods
The global alternative meat market is broadly divided into: 1) plant-based meat, led by Beyond Meat and Impossible Foods; and 2) lab-cultured meat, led by Memphis Meats (US) and Mosa Meats (Netherlands). Established in 2009, Beyond Meat attracted investment from Bill Gates and Tyson Foods, and was listed on the Nasdaq in May 2019. Beyond Meat’s sales have risen 4x since 2017, and global fast-food chain McDonald’s is selling burgers made of its patties at some locations. Also supplying its products to KFC, Pizza Hut, and Alibaba Super (China), Beyond Meat has established its presence as a global company. Impossible Foods was founded in 2011 by Patrick Brown, a biochemistry professor at Stanford University and also a vegan. In 2019, Burger King began selling an Impossible Whopper containing Impossible Foods’ meat-free burger patties. Turning to the cultured meat market, major market producers include Mosa Meat (Netherlands), Memphis Meats, Just (US), and SuperMeat and Aleph Farms (Israel). We also note that the development of a tuna alternative has been underway at US-based Ocean Hugger Foods (tomato based) and Finless Foods (cell-cultured).
We have witnessed of late that global food companies are entering into the alternative food market via M&As of small ventures in the sector. At the forefront of such movements are Unilever, Nestle, Danone, and China’s Beijing Sanyuan Foods.
In Korea, although R&D on alternative meats is underway, we have yet to see news of tangible R&D achievements or the emergence of market leading companies. The first to enter the market in Korea is Zikooin Company, a food tech startup for plant-based meat development. And, Cellmeat and SeaWith are food technology firms developing lab-cultured meats. Among domestic listed food companies, Lotte Foods is the only one currently producing alternative meat in-house. We also draw attention to iNtRON Bio (ingredient R&D), Kyung Nam BioPharma, and Dongwon F&B (exclusive contract with Beyond Meat).