Protein as an Ingredient - The Future is Complementary
Explore the transformative journey of plant-based proteins as they evolve to meet consumer demands, improve nutrition, and address environmental concerns. In this post, we delve into the myths and realities surrounding the future of protein, highlighting the path toward a sustainable, affordable, and profitable protein landscape.
Recently, there has been a lot of noise from commentators about “alternative proteins”. It's a topic that generates strong opinions on both sides which has resulted in some myths and misconceptions. You see plant-based ‘meat’, for some time, fell short of consumer expectations in terms of taste, price, and nutrition. Early generation products left an unpleasant aftertaste, carried higher price tags than animal-based counterparts, and often had very long ingredient lists.
The negative plant-based protein rhetoric ratcheted up a notch recently when Beyond Meat, a prominent industry player, reported disappointing earnings, sparking sensationalist claims that plant-based meat was ‘on the brink of extinction’. That’s absurd - plant protein is not fading away; it's evolving into a product that better reflects customer demands, with the potential to improve nutrition and bottom lines - provided we learn from consumers and heed the lessons of innovation.
The "Binary” Mentality
The label “Alternative Proteins” unintentionally created a divisive environment, pitting animal protein against plant protein, and invited judgement of those who like animal meat or have a heritage of livestock production. But plant protein has long had a crucial role in our diets, finding its place in everyday staples like flour, breadcrumbs, noodles and even peanut butter.
At a time when we need more protein, from more sources and with better nutrition, the assumption implicit in “Alternative” is that there must be a clear winner and loser in a dietary tug-of-war. Some have even grown businesses out of creating divisions with the likes of former tobacco lobbyist Richard Berman who took up the fight against meatless protein with his organisation CCF (Center for Consumer Freedom) in the USA - complete with a Superbowl commercial to undermine plant protein.
In reality, both types of proteins are already widely found in our diets and will play an increasingly important role in future nutrition - a point reinforced by Australia’s premier scientific organisation the CSIRO in its recently published report “Australia’s Protein Roadmap” which noted that future protein “demand is significant and can only be met through a combination of animal proteins, plant proteins and novel protein production systems”.
The Broader Economic Impact
Adding to the complexity of the debate is the current economic landscape of rising prices, particularly in the affordability of animal protein. In Australia for instance, rising prices have likely contributed to an increase in shoplifting from grocery stores, significantly affecting the profits of major retailers. In fact, Coles recently reported a 20 per cent increase of stock loss due to theft - with rotisserie chicken as the most stolen item. Is this a sign of the economic strain many consumers are facing when trying to put food on the table? Likewise, restaurants are facing the double squeeze of rising prices at a time when fewer diners can afford to dine out. Australia however is not alone in this challenge, with inflationary costs being felt around the world from the EU to the US and Asia.
The Climate Crisis Imperative
In the background, the Climate Crisis also looms large. While governments must take an active role in addressing climate change, we as an industry, as investors and as consumers, must prioritise our own efforts to support solutions with the greatest impact for emission reduction.
Project Drawdown, a comprehensive climate solutions assessment, is an outstanding resource that ranks reducing food waste and adopting a plant-rich diet as the top two solutions to reduce emissions. A plant-rich diet is estimated to have an emissions reduction impact 10-times greater than electric cars and underscores the urgency of our dietary choices. But the recent results of industry leader Beyond Meat show us the challenges associated with helping consumers eat less meat.
The Realistic Path to Change
How we drive behavioural change toward healthier, more sustainable eating habits will be key. One thing is for sure, leading with a divisive argument will not work, we need to work together. Perhaps our success in replenishing the ozone layer, our natural sun shield, offers a model.
When scientists discovered that CFCs were damaging the ozone layer, businesses weren't eager to change technology - certainly not when the solutions were less effective and more expensive. However, a group of forward-thinking engineers set out to build commercially competitive prototypes that didn't use CFCs. This innovation and affordability spurred industry-wide change. Today, 40 years after the ozone problem was identified, it is on track for a full recovery by 2040 and experts estimate that 2 million people a year will avoid a skin cancer diagnosis as a result.
While a plant-rich diet has initially been pursued for sustainability purposes, behavioural change is likely only to happen when consumers are offered plant-based protein that tastes great and is more affordable - much like the lessons learned from the transition to CFC-free appliances.
Bridging the Plant Protein Chasm and Beyond
Given the recent scrutiny from media and analysts, it's easy to misinterpret the signals surrounding plant protein. Put bluntly, rather than signalling a decline, recent developments signify a healthy transition. The concept of "Crossing the Chasm" identifies a consistent pattern with new innovation where products must shift from meeting the needs of early adopters to satisfying the mainstream.
The initial wave of plant-based innovation, led by pioneers like Beyond Meat and Impossible Foods, introduced plant protein products that were designed largely for vegan, vegetarian or climate conscious consumers. Recent earnings data from one such pioneer which showed a 30 per cent year-over-year revenue decline laid bare the challenges with this first mover approach and the difficulties it encountered to reach beyond its early adopters and vegan/vegetarian consumers.
The challenge with mainstream adoption of plant-based protein in our current economic climate isn’t surprising with plant-based meat pricing still running at A$40/kg to consumers - a price that is hard to swallow for the average consumer. To fully unlock the emission reduction benefits of a plant-rich diet, the future requires us to seamlessly blend high-protein plant elements into our dietary fabric - at a cost that is less than animal protein paired with the added benefit of improved nutritional value. This evolution promises to boost nutrition, affordability and sustainability, while ensuring that plant protein can bridge the chasm between early adopter and mainstream, while extending its positive impact to a broader audience.
The Profit Imperative - Unlocking the Potential for Both Plant and Animal Proteins
In the world of protein - like any business - profitability is a critical factor that cannot be overlooked. Beyond Meat's recent earnings release shed light on a stark reality—after 14 years in operation, it reported a gross margin of just 6.7 per cent. These fundamentals would hinder most businesses' ability to secure funding from the outset, let alone nearly 15 years down the track.
Meanwhile, the dynamics of the animal meat market are evolving. Poultry, for instance, continues to gain market share over red meat, in no small part due to the cost savings it offers to consumers compared to beef. Over the last decade, the global population has increased by 700M, increasing protein demand. OECD data shows that beef/veal meat consumption (kg/capita) over this period was flat whereas poultry meat consumption increased by 19%. This shift is occurring even before we factor in the true cost of emissions associated with animal protein production. And the consequence of this increase in demand has no doubt played a large part in driving up prices of chicken all over the world - 225 percent over the last three years alone.
Beginning next month, the EU is set to implement its Carbon Border Adjustment Mechanism (CBAM), a groundbreaking tool designed to fairly price in the emissions associated with the production of carbon-intensive goods entering the EU. It's a move that reflects a growing awareness of unsustainable business practices. In fact, Compass Group, one of world's largest food service providers, anticipates an additional 5-7.5 per cent carbon tax applied to animal proteins over the next 5-10 years. The writing is on the wall: any protein provider of the future must consider pricing pressures and profitability to remain viable.
We believe plant proteins can be profitably delivered today at costs up to 30 per cent below those of animal proteins. Considering global meat consumption of approximately 350 million metric tons per annum, amounting to a US$1.3 trillion category value, the potential for transformation is enormous. Moreover, as plant-based protein currently represents a small fraction—1.3 per cent—of this market, the growth potential is substantive.
In the face of pricing pressures and environmental considerations, solutions that seamlessly weave more plant proteins into animal proteins might offer a compelling pathway forward. Just imagine if 10 per cent of the current animal meat market transitioned to blended solutions. The resulting eightfold expansion of the current plant-based meat market would have an immense impact on emissions reductions. In essence, the profit and consumer cost imperative holds the key to unlocking the full potential of both plant and animal proteins, forging a more sustainable, affordable, and profitable future - albeit redefined.
Charting a Plant-Forward Future
As we navigate the complex landscape of dietary choices and environmental challenges, it's crucial to recognise that the future of protein hinges on a collaborative ecosystem of partners that are delivering on consumers' demands. At Harvest B, we've embarked on a journey to commercialise plant proteins that not only rival the affordability of animal proteins but also offer versatility for use as vegan/vegetarian options, or in combination with traditional animal proteins. This is why we firmly believe in a future that's complementary.
To forge this path, we must work together—coexisting with the animal protein industry and partnering with, not alienating, consumers who cherish their meat-based diets. Just as every parent seeks ingenious ways to ensure their children eat more vegetables, we aim to make it convenient, healthy, affordable, and nutritious for meat enthusiasts to embrace a plant-rich diet.
This endeavour isn't a solitary one; it requires industry, investors, research institutions, and government to work together. It demands the collective effort of food creators across manufacturing, retail, and food service, as well as visionary leaders in agriculture, spearheading innovation at the very roots of our food system. Within this collaborative network, climate-conscious investors like our recent partners—Alberts Impact Ventures, Mandalay Venture Partners, and Aura Ventures—will fuel our journey.
Moreover, it will succeed with the forward-thinking guidance of institutions such as CSIRO and the Advanced Manufacturing Growth Centre Ltd (AMGC), alongside dedicated leaders like Australian Federal Minister for Industry & Science, Ed Husic MP who have already put their money where their mouth is. Together, they will champion change through the Future Protein Roadmap and the A$15B National Reconstruction Fund Corporation bringing sovereign manufacturing capabilities back to Australia.
Together, we must sow the seeds of a more sustainable and nourishing world for all. This is the future of protein.
