“Cash Cow”: The Growth of Plant-Based Alternatives
Veganism and vegetarianism have gained substantial popularity in the past few years due to both diets’ numerous health and sustainability benefits. 2.3 million Canadians are vegetarians while 850,000 are vegans. In fact, 6.5 million Canadians, about 20 % of the population, are reducing or entirely eliminating their meat consumption. This trend is not unique to Canada, the number of people that are reducing their consumption of animal products has risen globally thanks to an increasing number of grocery stores stocking dairy and meat alternatives which were once only available at nice organic food stores. Also, many people have started shifting to plant-based dairy alternatives due to debate around their advertised health benefits, greater awareness of the dairy industry’s environmental impact and increased diagnosis of lactose intolerance.
These products are even key growth drivers at grocery stores, outpacing overall food growth by more than 5 times. In the United States, while sales of animal products have remained flat or even declined, the sales of dairy, egg and meat alternatives has grown 29% in the past two years, constituting a growing market of $5 billion. The most successful alternative, plant-based milk constitutes 14% of all dollar sales of retail milk with 41.3% of American households buying non-dairy milk. The demand for plant-based milks and other dairy alternatives is expected to continue to grow, reaching a $37.5 billion market by 2025.
The rise of plant-based milk and lower cow milk prices pose a substantial threat to dairy farmers. In 2019, cow milk sales in the United Sates fell to $12 billion from $15 billion in 2015. As a result, two of the largest American dairy producers filed for bankruptcy protection. Similarly, in the United Kingdom, lower demand and lower prices led to the closure of 1,000 dairy farms. The lower demand for milk is by no means solely driven by vegans. Around two thirds of Americans have difficulties or are unable to digest lactose, which substantially contributes to the demand for non-dairy alternatives. This demand is also exacerbated by the rising belief among consumers that dairy is not necessary for a balanced diet. This belief was furthered by the Canadian government’s decision to remove dairy requirements from Canada’s Food Guide.
The lower demand has led some dairy companies in the past five years to invest in non-dairy alternatives, either by growing nut trees, producing oat milk, or buying plant-based milk brands. Early adopters of this trend have made up the decline in cow milk sales by the exponential increase in plant-based milk alternatives. In an environment where even the largest traditional dairy companies struggle with profitability, dairy farmers must immediately begin adopting plant-based alternatives or risk becoming obsolete.
Not as developed as the plant-based milk market but rapidly growing, the plant-based meat alternatives market is also enjoying the same trends as its plant-based milk alternatives counterpart. Plant-based meat currently accounts for only a mere 1% of retail sales of meat, but is expected to grow by 28% each year, reaching a market of $85 billion by 2030.
The increasing amount of people that are reducing their meat consumption has led to a substantial increase in the number of restaurants that offer plant-based meat alternatives. Even traditional fast-food chains who have built their whole franchise based on offering the most delicious beef or chicken meals have started testing plant-based meat alternatives on their menus. This includes, with plant-based meat company, Impossible Foods, selling products to Burger King, Disney, Applebee’s and the Cheesecake Factory. Similarly, its major competitor, Beyond Meat, has secured partnerships with global names such as KFC, Subway, McDonald’s, Starbucks, Denny’s and Dunkin’ Donuts.
Fearing ending up bankrupt like the largest milk producers, the meat and poultry processing giants have taken note of the substantial growth of meat alternatives, creating plant-based products of their own. Tyson, one of the largest meat producers worldwide, started a plant-based product line called “Raised & Rooted”. Other large meat producers that have jumped to the market of meat alternatives include Smithfield and Hormel. Others such as Tyson and Perdue have introduced blended meats, a product that mixes meat and vegetables. Large meat producers’ decision to incorporate plant-based meat products indicates the growing threat that plant-based alternatives pose to meat sales.
Surprisingly, COVID-19 has benefitted the plant-based meat sector. Despite the drop in revenue from restaurant sales, plant-based meat company Beyond Meat saw its shares soar as the United States is likely to face meat shortages due to the difficulty of keeping processing plants open. Several meat, pork and poultry producers have halted production as their plants have become hotspots for COVID-19,with 5,000 workers testing positive for the virus. As a result, America’s beef and pork capacity has reduced by 30%. In contrast, plant-based meat companies have not faced any problems in their supply chain as their production is more automated and their products have a longer shelf lives.
The lower meat supply will prompt many consumers to try out plant-based meat alternatives. This presents a unique opportunity for plant-based meat producers to convert first-time COVID-19 buyers into repeat customers. Several companies have seized this opportunity, such as Beyond Meat which decided to discount its products to compete with meat prices.
Plant-based meat and dairy alternatives have drastically changed the market, forcing traditional dairy and meat companies to produce plant-based alternatives of their own. The market for plant-based alternatives will continue to display double digit growth due to consumers’ growing health and environmental concerns. This extraordinary growth is driven by flexitarians who seek to reduce but not fully eliminate their meat and dairy consumption. Oat milk lattes, dairy-free ice creams, cashew cheese sandwiches and soy sausages are becoming the new normal faster than we know it.
Editor’s Note: All values mentioned are in USD unless stated otherwise.