Trend sectors that appear to stay here. Despite many people reluctantly abandoning traditional preferences, European sales of plant-based meat and dairy alternatives have increased by around 10% per year over the past decade.
According to Thijs Geijer, senior economist at ING (AMS:INGA) Food and Agri, this change is led by a combination of tasty, more costly, effective plant-based alternatives entering the market, along with growing consumer trends such as health, animal welfare and sustainability.
Despite these growing considerations in shopper decision-making, plant-based alternatives still represent small bases, with alternatives accounting for just 0.7% of the meat market and 2.5% of the dairy market.
Most of the demand for these new products differs greatly from region to region, with the UK being the most developed market in Europe with sales of around 1 billion euros, bringing France and Germany closer. However, per capita consumption is highest in Scandinavian countries and Veneluxembourg (Netherlands, Belgium and Luxembourg).
To see the plant-based market grow, Geijer identifies three challenges its products have to overcome: cost, user experience, and availability. Not only does plant-based alternatives remain relatively expensive, but perhaps due to trend status, they often have fewer undesirable preferences and textures than meat and dairy products, and few outlets offer a vast range of different brands and products.
Milk alternative prices, Tesco, Carrefour data, graphics
With the UK’s plant-based markets becoming more mature, prices are already beginning to decline, increasing the range of options and creating a “very competitive” retail environment. This is very different from markets like Italy. These alternatives are sold by consumers who are willing to pay beyond the odds to access plant-based products.
Despite these challenges, the prevalence of sustainable themes, and the level of investment and innovation that these trends are attractive, means that plant-based alternative disorders are likely to sink “substantially” over the next five years.
For this reason, ING estimates that the meat and dairy alternative market will be able to maintain an annual growth rate of 10% in 2025. As a result, retail sales of meat alternatives could increase to 2.5 billion euros, but by 2025 it will increase to 5 billion euros.
Plant-based alternative markets, Euromonitor data, graphics
Speaking about the growth of plant-based alternative sectors and the work they still need to do, Tribe Impact Capital CIO, Amy Clarke, commented:
“Combined with increasing awareness of the role of plant-rich diets in addressing some of the key ecological and health impacts of the current global food system, changing consumer preferences has led standalone and existing businesses to pivot into this area. At Tribe, we have seen a clear increase in the number of opportunities to support this transition as an investor over the past few years.”
“Currently, plant-based meat and dairy products are disrupting the food production industry in the same way that renewable energy has disrupt the energy market over the past 30 years. Annual growth rate of 10% meat and dairy alternatives between 2010 and 2020 Europe’s retail sales have been compared with 3.3% growth in renewable energy over a similar period, indicating the scale of potential opportunities for investors in new food development.”
“As this shift continues, we must also commit to managing and reducing the impacts that such wholesale changes in agriculture may produce. For example, the issues of soy production that lead to deforestation have been documented. Investors should also be aware of the impacts and sustainability issues associated with plant-based foods to identify which companies manage themselves for this transition. Companies that employ complex issues embedded in agriculture, such as a framework that helps navigate natural capital protocols and regenerative organic certification schemes, are more suited to manage the sustainability issues associated with this transition.”
