Meat-substitutes are still in the niche phase – but numbers are growing. What makes consumers choose plant alternatives over meat? And what should investors consider?
Around the world, an increasing number of restaurants are offering dishes made of alternatives to animal-based proteins. Protein substitutes for meat – especially soybean-derivative products – have been around for a long time, but when it came to taste and texture, consumers had to compromise significantly. Times have changed, however, and innovations have helped meat substitutes live up to sophisticated culinary standards.
The headline numbers suggest these new products are still in the niche phase. For example, according to UBS Investment Bank, the annual retail sales of meat in the United States is approximately USD 79.4 billion. In 2018, the new plant-based meats generated sales of USD 600 million. While these sales figures are small on a relative basis, the Swiss bank forecasts considerable growth ahead: By 2025, plant-protein meats could account for 2.5% of global meat sales. Considerations of animal welfare, ethical standards and sustainability certainly play a role in these growing numbers.
Let us focus on consumers' preferences in terms of taste, texture and the health benefits. This is when the new plant-based proteins become interesting. Taking the plant-based and meat-based hamburgers offered by a global chain as an example, let us assume that the taste and texture between the two variations are equivalent. Is it in fact healthier to eat the plant-based protein alternative? A close analysis shows that the two options are effectively the same when it comes to calories. The plant-based burger contains less fat, but more sodium. Still, what makes the meat substitute a healthier choice are its low levels of cholesterol and almost equal levels of protein.
What options exist for investors who are interested in meat substitutes? An interesting approach is to focus on the supplier of arguably the most critical factor that will grab consumers' attention: the flavoring that mimics animal-based protein. Names such as leading Swiss chemical company Givaudan stand out, as it sells the flavouring used in some of the leading plant-protein burger brands. Another name to consider is the British-Dutch company Unilever. The consumer goods company has reportedly signed a deal with major hamburger chains to supply alternative meats. Owing to their superior marketing and distribution channels, it is probable that the world's large chemicals and food companies will eventually dominate the market of plant-derived meats. Or will start-ups stand a chance too? Only time will tell.
Image: Unsplash, Laula Vermeulen
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