Industry Insight: Meat and Dairy Alternatives
With an estimated two billion more mouths to feed by 2050 and increasing prosperity in emerging markets leading to growing demand for protein, there is an urgent need for more sustainable food production to balance the demands of humans with the negative impact that animal-based meat and dairy consumption has on the environment.
According to the Food and Agriculture Organisation (FAO) of the United Nations, the “Agriculture, forestry and other land use” sector is responsible for 24% of global greenhouse gas (GHG) emissions, with agricultural emissions alone accounting for 11%, a bigger driver of global climate change than exhaust emissions from the entire transportation sector. Livestock farming represents the bulk of emissions within agriculture, driven both directly through the methane released from cattle through enteric fermentation (or burping) as well as from the nitrous oxide emitted by the application of fertiliser, which is used to help grow animal feed, mainly corn. At any one time, there are around 1.4 billion cows, each producing c.100kg of methane per annum, and this makes livestock the largest contributor to GHG emissions from methane.
“There are around 1.4 billion cows, each producing c.100kg of methane per annum.”
DSM, a material and life science company headquartered in the Netherlands (and a key holding in the Killik Sustainable Global Equity Service), has come up with a solution called “Clean Cow”, which inhibits the methane-producing bacteria in a cow’s stomach, reducing potential emissions by over 30%. As well as being a big polluter, industrial scale livestock farming also requires vast swathes of land, with wildlife-rich habitats like forests and grassland making way in the Amazon and elsewhere. It also exerts a significant strain on water resources, with low feed conversion rates for beef in particular meaning it requires a disproportionate amount of water for feed production.
Consumers, particularly millennials and younger generations, with increased access to information via the internet, social media, and documentaries on popular video streaming services like Netflix, are becoming increasingly aware of the sustainability issues surrounding the consumption of meat and dairy products and are increasingly turning to plant-based alternatives. According to the Good Food Institute, a non-profit that promotes alternative proteins, plant-based meat production could yield median savings of 88.5% in GHG emissions, 93% of land use, and 95.5% of water use, when compared to conventional meat production. This has led to the emergence of companies like Beyond Meat, another holding in the Killik Sustainable Global Equity Service, which has led the growth in plant-based meats in the United States, Europe, and elsewhere and could play a pivotal part in helping to lower our reliance on animal protein and thus reduce the environmental burden.
“Companies like Beyond Meat can play a big part in preventing further increases in GHG emissions, land usage and water usage.”
According to analysis carried out by Euromonitor and Bernstein Research, meat alternatives have grown from 2.2% market share in the United States in 2015 to 4.5% in 2020, propelled by an increased acceptance of new-generation meat alternatives like the Beyond Burger, an innovative product which tries to emulate the taste and texture of real ground beef, even going so far as using beetroot juice to create the effect of bleeding meat. The product is stocked in the refrigerated meat section of supermarkets, thus enjoying much higher foot traffic than the frozen vegetable aisle where your run-of-the-mill veggie burger is usually kept, increasing awareness of the product among meat-eaters and so-called flexitarians – those who eat mostly plant-based foods, with the occasional inclusion of meat. By targeting a much bigger market than those that identify as solely vegetarian or vegan, we believe that companies like Beyond Meat can play a big part in preventing further increases in GHG emissions, land usage and water usage, as well as offering an alternative for consumers who are concerned about animal welfare issues.
Not surprisingly, major food companies are also looking to take advantage of the significant revenue growth opportunity that the shift to plant-based meat and dairy alternatives offers. Nestlé, the world’s largest consumer staples company, also offers meat-free burgers and sausages, however it sees a much bigger opportunity in “downstream offerings”, like frozen pizza with plant-based toppings or plant-based lasagnes, where the margins are higher, and the company can leverage its existing brands. Although Nestle’s plant-based meat and dairy alternatives portfolio is less than 1% of overall sales, it is growing much faster than its broader portfolio, with CEO Mark Schneider seeing it as a “once in a generation” opportunity to reinvigorate the food industry.
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