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Time to strategize for meat producers

The high baseline demand of China on the pork side, due to ASF, will hide how plant-based meats creep up on traditional meat product demand.

Tuesday 12 November 2019 (26 days ago)
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Plant based meats could learn a quick lesson from the dairy industry battles with so-called “almond milk” which has now proliferated along with soy milk, cashew milk, oat milk and other nut milks of various kinds. The Dairy industry fought to stop these products from using the term “milk” in their names. Current packaging and labeling laws in the USA restrict the use of the term milk to products from animals that lactate. The head of the agency which will determine whether almond producers/processors can continue to call their products milk by enforcing current regulations seems to be gearing up to crack down after revealing his leanings with the recent quote, “AlmThatcher don’t lactate!”

It is reported that during the period 2012 to 2017, sales of “milk” from plant-based sources grew over 60% while sales of dairy milk dropped 15%. Part of that is due to changing demographics. By far, the greatest amount of fluid milk is consumed by kids under 19 years of age and baby boomers (people born between 1946 and 1964) were a massive demographic which is now largely in retirement but still dominating much of purchasing. All age groups drink less cow’s milk than they did 30-40 years ago for a variety of health reasons, including the rise of allergic reactions to foreign proteins (including peanuts, egg white protein and milk proteins) and fears about additives like BsT. In addition, almond milk has lots of key vitamins, omega-3s and a heck of lot more protein than cow’s milk plus it is much lower in calories compared to milk with a comparable taste profile (excluding fat free skim milk which tastes to many like water).

The jury is starting to come in on demand for the Impossible (plant-based) Whopper® sandwich, the flagship large-sized hamburger served by over 7,000 Burger King restaurants in the US. Remember they were one of the first to test market it in the St. Louis, Missouri area in 50+ establishments and ended the trial with such success that they rolled it out throughout the United States immediately. Restaurant Brands, the parent company reported the best increase in overall sales for the hamburger places in over four years with a 10% increase.

If you have ever been to Canada you have certainly seen or had a morning coffee and doughnut at a Tim Horton’s quick service restaurants (competes with Starbucks, etc.). Sales of a breakfast sausage product and biscuit combination made with the plant-based meat substitutes did not impress western Canadians and has already been withdrawn. However, eastern side residents of Ontario and British Columbia get to keep the item on the menu due to strong demand.

The western half of Canada is prairie, small grains and cattle production which could explain why folks out there turned their nose up on “fake meat”. Restaurant Brands is reporting that much of the increase at its hamburger places in the US has been driven by new demand from Millennials and the return of older customers who had enjoyed the burgers in younger years but had quit eating there due to diet restrictions. Their stock is up about 30% on the year, ahead of all the major publicly traded competitors like McDonalds or KFC (YUM brands).

The best bet on what happens from here is a similar story of increasing total demand for establishments which serve these products but not all of the demand for the plant-based products will be directly matched by losses in sales of meat based burgers. This is a good omen for restaurants and fast food companies as well as producers as it offers the possibility of totally new customers adding to the current demand for meat offerings. It is difficult to increase total demand in these restaurants since when a new product is offered, its sales are often offset by decreased purchases of another product, i.e., existing customers simply switch from an old favorite to trying the new products. Since early evidence is suggesting that plant-based meats bring in the customer segment most difficult to capture for meat based sandwich restaurants, namely the social justice and vegan segments, when you add Millennials of all stripes and returning older customers, now more health conscious but having a strong nostalgic tie to the restaurants, it is driving big shifts by major food players to invest in new product development and taste and texture improvements.

Think of the difference in being able to fire up the fermenter and crank out enough new plant-based burgers to jump from the demand by 50 stores in a test market to 7,000 stores nationwide virtually overnight. Now think about the gestation length of a cow and the subsequent grow-out period to harvest. These new products are quickly scalable and their footprint of almost every kind (carbon, water use, sustainability of various kinds, pollution, etc.) is dramatically less than current beef, pork and chicken production.

Right now they are premium priced in grocery stores but the target audience has a largely inelastic demand for the food they desire. Currently, millennials have little demand for home or auto ownership but choose to spend heavily on tech and specialty foods, often with preparation steps removed. Price points could be coming down fast and only the imagination is currently limiting their entry point in most other food products using real beef, pork and poultry. The high baseline demand of China on the pork side, due to ASF, will hide how plant-based meats creep up on traditional meat product demand. Could be a blood bath when ASF begins to be subdued. Time to strategize about that is now. Remember, the French company Danone (Dannon in the USA), the big yoghurt maker made a multi-billion investment in a US soymilk company. They saw the handwriting on the wall early, what are you seeing?

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