The meat market, like any other market, is now going through a change, adapting to a new reality. Against the backdrop of the pandemic, the world (and in particular the American) meat industry faced great difficulties: the closure of factories and production facilities due to illness of employees, trade wars with China, and in addition, a piece of profit from the common pie began to be eaten off by alternative meat production.
If in 2019 the food retail grew by 2.2%, the segment of vegetable products increased by 11.4 (data from the Association of Vegetable Products). The largest concentration of deals in «alternative» meat occurred in the United States, a country with a highly developed food and beverage sector. The European and Asian regions also have developed fast growing lean meat markets.
Who wins — the meat we all are used to or its substitutes? What development scenarios does the market have in the current situation? What are the reasons for the change in purchasing behavior and the choice in favor of artificial meat instead of natural?
Currently, natural meat is the king of the category. It is estimated that on average 30% of calories people get from meat products (chicken, beef, pork). According to CB Insights’ Industry Analyst Consensus, the global meat market could reach around $ 2.7T by 2040.
Over the long term, consumption has grown steadily and by 2018 the Americans consumed nearly a record of 220 pounds of red meat and poultry per capita, about 1.5 times more than the 1960 number (167 pounds, USDA data).
Globally, the dominant livestock species are poultry, cattle (including beef and buffalo meat), pork and, to a lesser extent, lamb and goat meat. However, the balance of power has changed over the past 50 years. In 1961, poultry meat accounted for only 12 percent of world meat production; by 2013, its share had approximately tripled to about 35 percent. By comparison, the share of beef and buffalo meat in total meat production has almost halved to about 22 percent. The share of pork remained more or less constant at around 35-40 percent. Beef production declined the most, while poultry consumption increased.
In terms of consumption, the world average per capita consumption of pork is the highest among meat products; in 2013, the average person consumed about 16 kg of pork; followed by 15 kilograms of poultry; 9 kilograms of beef / buffalo meat; 2 kilograms of lamb and goat meat; and only a part of other types of meat.
But you need to remember that consumption trends vary significantly around the world. In China, pork accounts for about two-thirds of per capita meat consumption. Argentina is dominated by beef and buffalo meat, accounting for more than half of consumption. New Zealanders have a much stronger preference for lamb and goat meat compared to the global average, consuming almost 20 kilograms per person in 2013. Whereas other types of meat (eg game, horse and rabbit meat) account for a very small share of the world’s meat consumption.
Interestingly, global crises have already affected the meat industry and consumption in the past. For example, after the 2008 financial crisis, Americans cut their meat consumption in favor of eggs, nuts and legumes. By 2012, the average bill had dropped from over 200 pounds of meat per year to about 185 pounds. Beef and pork fell significantly in favor of cheaper chicken. Ultimately, by 2018, meat consumption returned to pre-crisis levels, although beef never recovered. Meat consumption is likely to decline this year as well, and the choice will be made not only in favor of eggs and legumes, but also an alternative protein. It will be interesting to look at the percentage, but we won’t find out until 2021.
For now, let’s look at a few macro trends that show interest in replacing natural meat with artificial ones.
Lean Meat: 5 Macro Trends
1) Phenomena such as population growth as well as a global increase of the middle class can lead to meat consumption growth. Roughly 55% of the world’s population lives in cities and this figure will raise to 68% by 2050. The population is expected to reach 9.7 billion by 2050 which should lead to a significant increase in food production. This growth is also fueled by wealthy emerging markets: China, in particular, is already the world’s largest meat consumer. Experts say that in China protein consumption will grow by about 4% per year in direct proportion to the increase in the middle class. Numerous people of the future will inevitably face the fact that resources are not limitless. Rising demand can create nutritional challenges, and lean meat companies are looking to fill the gap.
2) The second reason for the growing interest in alternative proteins is health. Fast food and processed meats consumed in large quantities cause obesity and health problems. To reduce disease rates, consumers are looking for healthy alternatives — in particular, switching to artificial protein. 95% of people surveyed in the Mckinsey study say health is the primary reason for consuming artificial protein.
3) Alternative sources of protein can reduce the negative environmental impacts associated with animal husbandry. Reducing livestock numbers can free up global arable land, reduce soil erosion, and reduce pressure on water supplies. And since the percentage of eco-conscious consumers also grows every year, the consumption of alternative protein can be an “eco-indulgence”: if there is any environmental benefit or positive impact on sustainable development during consumption, people will happily choose this option, because so they generally do not harm, and even in some way benefit from their conscious consumer choice.
4) Consuming meat without meat can also mitigate the ethical issues associated with meat consumption, as the meat industry has long been exposed to ethical issues related to the conditions in which animals are kept.
5) During the onset of the coronavirus pandemic, the meat industry was struggling with a shortage of raw materials caused by rising prices and a growing number of sick workers — conditions that potentially open up new opportunities for companies working on plants and producing alternative sources of protein. Traditional distribution channels such as restaurants, schools and other public spaces were closed. Declining production volumes and rising prices left fewer options for consumers, and plant-based meat alternatives began to rise.
4 Scenarios for the Development of Alternative Meat Production
At the moment, there are several most probable scenarios for the development of the alternative meat market: the prevalence of vegetable meat without animal proteins; laboratory-grown meat; meat based on proteins of animal origin (insects) and local production in small batches. Let’s analyze each scenario separately. Currently, there are several most likely scenarios for the development of the meat market: this is vegetable meat without animal proteins; laboratory grown meat; meat based on animal proteins (insects) and local production in small batches.
With growing consumer interest and meat processing shutdowns caused by the pandemic, more startups are innovating in the meat industry. Not only are they competing with cooked and frozen meats, but they are also exploring other methods of incorporating non-meat protein sources into a variety of snacks and snacks.
The first and one of the most visible phenomena in this market is vegetable hamburgers. The startups that make these burgers target both meat and plant-based diets: 1) they empower vegetarians and vegans, and 2) use meat-like flavors to entice meat lovers to consume organic protein.
8, one of the biggest players in the field, uses molecular engineering to create plant-based “bleeding” burgers that the company claims are virtually indistinguishable from meat.
The company’s use of heme, an iron-fortified animal protein molecule, has allowed it to reproduce the «meaty» flavor in its plant foods.
The company has an unusual go-to-market strategy: Rather than targeting consumers directly, Impossible Foods has entered the commercial and restaurant market with its lean burger. In 2017, Impossible Foods could only be found in about 40 U.S. restaurants. By 2018, that figure had grown to over 3,000 restaurants. In early 2019, Impossible Foods launched its largest restaurant partnership, the Burger King Impossible Whopper. Burger King also recently announced that it will add Impossible Foods sausage to its menu. And in June 2020, Impossible Foods signed another major deal with Starbucks — the latter announced they would add the Impossible Sausage sandwich to their menu from the United States.
Beyond Meat is another major player in this market, producing plant-based hamburgers and other imitation meats such as plant-based chicken and sausage. The company, which is mainly sold directly to consumers in grocery stores, has started its own retail partnership by partnering with Dunkin ‘Donuts to launch a plant-based sausage sandwich in 2019.
Seeking to expand beyond the US market, the company announced a partnership with Starbucks to sell its products in China from March 2020. The artificial meat maker plans to open production in Asia by the end of 2020 and already sells its products in Taiwan, Singapore and Hong Kong.
Meat from the Lab
Lab-grown meat is another alternative meat product, but unlike other offerings on the market, this approach is not imitation and plant-based meat — it is real meat.
Memphis Meats of San Francisco produces meat from self-reproducing cells, thereby raising meat that is «animal», but avoids the need to breed, raise and kill huge numbers of animals. The company debuted in 2016 with its first synthetic meatballs, followed in 2017 by the world’s first caged chicken and duck.
Meat Based on Animal Protein
In addition to meat and dairy substitutes, some startups are developing innovative solutions using alternative protein sources such as algae or insects. Algae is rich in protein and grows rapidly, something that entrepreneurs have paid close attention to in recent years. Algae farms do not need to use the vast amounts of land and water that most farms face when growing traditional crops or raising livestock. A relatively niche market, companies like Algama Foods or Odontella use algae to make a variety of food and beverage products such as eggless mayonnaise or salmon.
While the idea of eating insects is taboo in some countries, insects are becoming a nutritious and environmentally friendly source of protein. According to the UN Food and Agriculture Organization, people eat insects around the world, and more than 80,000 species of insects are consumed in 80% of the countries of the world. … European cultures have obvious psychological limitations, although the “everyone eats insects” scenario would be very favorable, since insects have a much lower carbon footprint than cattle. In addition, there are many species of edible insects — variations are possible. To make insect consumption more psychologically acceptable, startups are using insects as alternative ingredients, such as making flour from crickets, mealworms and other insects that can be grown at scale, or used to make snacks, protein bars, and even insect-enriched pasta.
Local Production in Small Batches
Another of the possible scenarios is rather relevant for the United States and those countries where the majority of residents live in their houses, rather than apartments. Factory farming will be phased out and meat will become available in small portions. Farms, slaughterhouses and butchers will all be local, producing meat for their communities, city blocks and cities. Then the price of meat will increase, but at the same time it will be of exceptional quality and more environmentally friendly. Due to the price, consumption will decrease.
This scenario seems to take us back into the past, although in fact it is more geared towards the future, because most of the current urban spaces are very cleverly used. Many houses have their own backyards and apartments have a roof garden, free land is adapted for gardening, and many families raise chickens at home.
Each of these scenarios for the future development in the meat industry has its own difficulties and disadvantages. While the consumption of plant-based foods is only growing, the lab-derived meat market faces several significant barriers. The first and most obvious of these is the psychological barrier. The meat from the laboratory is still strange and many are not ready to replace the usual natural meat with it. The second reason is still very expensive production and, as a consequence, the price on the shelf, so far only very wealthy consumers can afford it. The third question is whether the production of such meat can scale and feed the entire population, or is this a new wave of molecular gastronomy.
Meanwhile, nothing prevents the development of meat market based on vegetable protein. One sign that plant-based nutrition may be driving the future is that venture capital firms and corporate giants like Nestlé are pouring millions into it. The Swiss food giant recently predicted that its vegan business, including its forthcoming Meatless Incredible Burger, will be worth a billion dollars over the next decade.
Experts agree that the plant-based meat industry is following the trajectory of the market for alternative types of milk (from cow to plant) — for example, almond, oatmeal or soy, which now account for 13% of total milk sales in the US market. 14% of US consumers, more than 43 million people, regularly use plant-based alternatives such as almond milk, tofu and veggie burgers, while 86% of these consumers do not consider themselves vegan or vegetarian.
And There is Also Worldwide Evidence of the Relevance of the Growing Popularity of Alternative Meat
The world’s 2nd largest chicken and beef processor Tysons Foods has invested in New Wave Foods to create a plant-based version of shellfish.
The Happy Cow app contains a database of vegetarian restaurants around the world, giving travelers the opportunity to eat a plant-based diet while away from their familiar surroundings.
Gourmet Grubb opens the first restaurant in South Africa, where all dishes are made with insects, as the company hopes to inspire people to consume insects in their basic diet.
Plant egg company Just was established in Hong Kong and Singapore. About 250 sandwiches with these eggs were sold in the first half hour after opening.
Northern Texas University has built a vertical farm that offers students a variety of healthy, plant-based food choices.
The traditional meat market has not been without innovations either, but rather they relate to a new form of consumption and packaging.
For example, following coffee and tea by subscription, meat by subscription is also becoming popular: now you can receive meat with a customized frequency. You can choose the type of meat, know exactly where and in what conditions the cattle were kept, make sure that there are no harmful substances in the diet. Some services allow you to directly contact butchers and order a customized set. The most commonly used vacuum packaging made from biodegradable materials and freezer bags in which you can store meat for a long time. The meat itself is delivered free of charge in convenient and beautiful boxes.
Another unusual type of meat product that has been developing in recent years is beef jerky-based bars. They have created an alternative to superfood, granola and fruit bars. Initially, such products were focused exclusively on men, but later they were repositioned for athletes, athletes, women and men — anyone who needs to eat quickly on the go and preferably without chemical additives in the product. The result is a nutritious protein snack from «understandable» products. The global market for cold cuts in 2019 was valued at $ 7 billion with an expected growth of 7-8% over the next five years. In the United States, sales of meat appetizers rose 6.7% in 2018. And around the world, including India, China, Brazil and Turkey, there is a rapidly growing interest in convenient meats on the go.
Despite two different directions within the same market, natural and alternative lean meat, there are supporters in both camps. So do the market experts who give conflicting assessments. For example, Julian Mellenthin, a consultant to the food and beverage industry, argues that while meat substitutes receive a lot of media attention, they represent a tiny niche. Sales of organic meat are higher than sales of meat substitutes. This is confirmed by the numbers. In the US and EU, meat sales have increased in recent years. Americans spent $ 850 million more on beef alone than the previous year and $ 350 million more on snacks. In contrast, their additional spending on meat substitutes was only $ 100 million — a significant contrast.
Let’s see if the expert forecasts come true, but we will definitely see changes in this industry in the foreseeable future.