Satyajeet Mohanty – Senior Consultant, Business Research & Advisory, Aranca talks about plant-based alternatives
With the world engaged in fighting the COVID-19 pandemic, believed to be a zoonotic pathogen, consumers are shifting their dietary habits to plant-based alternatives. This is also leading companies, especially in the food sector, globally to make necessary changes to business models in their bid to grow in changing times.
In his Oscar acceptance speech, Joaquin Phoenix expressed his views on the need for veganism, “We feel entitled to artificially inseminate a cow and steal her baby, even though her cries of anguish are unmistakable. Then we take her milk that’s intended for her calf and we put it in our coffee and our cereal.” The thought resonated deeply with netizens world over.
Veganism, a niche concept until some time back, has become mainstream with many followers. The growing vegan population includes celebrities such as Natalie Portman, Beyoncé Knowles, Bill Clinton and Virat Kohli. Amid its growing popularity, The Economist declared 2019 as ‘The Year of the Vegan’, while November 1st came to be known as the ‘World Vegan Day’.
Veganism refers to a way of living which seeks to eliminate all exploitation and harassment of, and cruelty towards animals for food or any other purpose. It rejects the idea of using animals as raw materials and instead encourages love and respect for them.
A vegan diet typically includes grains, beans, legumes, vegetables and fruits. As substitutes to dairy and meat products, there are vegan ice-creams, yoghurt and even meat. In fact, vegan dishes are a regular feature on the menus of local and internationally acclaimed restaurants and cafes—control your diet, not taste!
Awareness about veganism has risen considerably of late, amid growing curiosity among consumers to understand its pros and cons. As per historical data from Google Trends, the search popularity score of veganism rose from 13 in 2009 to 76 in 2019 (100 indicates peak popularity, while 50 implies medium popularity). Australia, Israel, New Zealand, Canada and the UK are the top 5 countries, with score above 80.
Surprisingly, the concept is picking up in primarily meat-eating countries such as the US and UK. While the vegan population in the US has crossed over a million (~0.45% of the total population), it stood at just above 3.5M in the UK as of 2018.
The global vegan food market is witnessing exponential growth. According to Grand View Research, the market, valued at ~$12B in 2018, is expected to record a CAGR of ~10% until 2025 and reach ~$24B. In this sector, the dairy substitute segment accounted for more than 50% of the vegan food sales globally, followed by vegan meat.
People embracing a vegan lifestyle also gravitate toward non-food vegan items. As per a beauty industry report, the vegan cosmetic market is witnessing an uptrend in demand. It is projected to grow to ~$21B by 2025.
Besides being environment-friendly, vegan lifestyle is also healthy. Stories of defeating autoimmune diseases and stomach ailments by following a strictly plant-based diet abound.
Increase in zoonotic diseases around the world is another factor driving people toward vegan lifestyle. The recent outbreak of COVID-19 (a global pandemic) has triggered strong fears about meat products as the virus is believed to be zoonotic. While investigations to identify the source are on, the pandemic will certainly have a psychological impact, prompting consumers to shift to a vegan/plant-based diet. Bearing the brunt of the impact, the Indian poultry industry is currently witnessing its worst crisis. Per kg prices have declined by over 700% as consumers stay away from purchasing chicken and eggs in the midst of the COVID-19 scare.
The repercussions of COVID-19 are evident on the supply side as countries prohibit the sale of meat in certain pockets. As a precaution, some cities in China and India have already banned the sale of meat and related products. Last month, Lucknow, one of the key cities in India, banned open sale of meat (including frozen, semi-cooked and half-boiled) across the city. Similarly, in February, China banned the trade and sale of exotic animals such as snakes, bats, pangolins and civets across the country. Shenzen went a step further to add cats and dogs to the list. This is expected to dent the supply of meat and meat products in the market, further prompting consumers to switch to plant-based diet.
Plant-based alternatives are emerging as a popular choice among consumers opting for a vegan lifestyle. Over the years, the market has performed notably well, especially in predominantly meat-consuming countries such as the US and France, which is striking. In the US, the plant-based meat market grew 18% YoY in 2019 vis-à-vis the conventional meat market, which grew just 3%. Similarly, its domestic plant-based eggs market increased 192%, while the animal-based eggs market recorded negative growth of -10%.
The consumption of plant-based alternatives is increasing significantly amid the ongoing COVID-19 crisis. According to data provided by Nielsen, the alternative meat market in the US witnessed a sudden spike in sales at +280%, +454% and +255% for the weeks ended 14th, 21st and 28th March, 2020, respectively. Beyond Meat, a leading producer of plant-based meat, registered a staggering 478% increase in YoY sales (reported for the week ended March 21st).
These statistics make the case for veganism. It is time that businesses accept this massive shift and adapt their operations accordingly, especially in FMCG sector.
Certain aspects of businesses need to be cognizant of while planning their entry in the emerging consumer goods category are:
Where to play: A consumer product business should analyze which product segments in the market are growing and at what rate. This will help the business zero in on categories that are most attractive and markets with the highest potential.
Route to market via acquisition: A sizeable increase has been observed in M&A activity in the plant-based alternatives sector in the recent years with F&B companies trying to capitalize on the potential opportunity. Some of the recent deals include Absolem Health Corp acquiring One Up Pure Energy Inc. in September 2019 and Goode Partners LLC investing in Strong Roots in August 2019. An established company can evaluate the M&A route to enter the lucrative vegan business.
Consumer insights & foresight: Before introducing new products, it is important to understand a vegan individual’s mindset. Their demographics and preferences differ from those of non-vegan customers. Labelling, packaging, distribution and marketing activities too should be geared accordingly.
Regulations and industry standards: Certifications from agencies such as Certified Vegan Logo (confirming that the ingredients have been sourced without harming any animal) and NSF International (attesting the product is plant-based) are important to build credibility. However, authenticity of information on labels remains a concern. As the industry matures, stringent standards and compliance norms would be required.
The world is increasingly turning to sustainable and ethically sourced products. Startups in the domain have attracted investors. For instance, Google co-founder Sergey Brin invested $272,000 in Dutch startup Mosa Meat for the production of the world’s first lab-grown hamburger.
Veganism is, therefore, no longer a fad or passing trend—it is mainstream.