Food giants muscle in on booming alternative protein market, reveals US$ 13 trillion investor coalition engaging with 25 food manufacturers and retailers
- Nestle to build a US$ 100m plant-based centre in China and Unilever have built a US$ 94m innovation centre in the Netherlands as “protein transition” goes mainstream.
- 2 of 25 companies (Tesco and Unilever)achieve top ‘pioneer’ statusas best placed to benefit from growing meat alternative market. Costco and Kraft Heinz falling behind. Amazon, which continues to expand its presence in the grocery market, remains silent on its approach to enabling a climate-aligned protein transition.
- Venture investments in plant-based proteins have already reached US$ 1.1bn in 2020, almost double the total investment in 2019, as Covid-19 leads to ‘watershed year’ for plant-based market capitalisation.
- FAIRR’s engagement on sustainable proteins rockets to US$ 13 trillion in assets, growing ten-fold since its launch in 2016, including Northern Trust Asset Management, BMO Global Asset Management and Amundi.
A four-year investor engagement with 25 giant food retailers and manufacturers, led by the FAIRR investor network, has found that two in five global food giants with combined annual revenues of US$ 459 billion now have dedicated teams to develop and sell plant-based alternatives to meat and dairy, with Tesco and Unilever ranked top.
Tesco and Unilever were praised by investors for their commitment to shifting food portfolios to more sustainable protein sources, demonstrating board-level support for a climate-aligned protein transition (the shift away from animal proteins towards plant-based and new protein sources), and completing a climate ‘scenario analysis’ on their commodity supply chains. In total 7 of 15 retailers now sell, or plan to sell plant-based meat alternatives ‘on the meat aisle’.
Investors also welcomed a 57% increase from 2019 to 2020 in food companies with Scope 3 emissions targets including emissions from animal agriculture. Despite agriculture accounting for around 30% of global greenhouse gas emissions along with forestry and other land-use, corporate targets have historically failed to address the emissions footprints of animal agriculture and its supply chains.
The data comes from the new online Sustainable Proteins Hub for investors, and ‘Appetite for Disruption: A Second Serving’ report, launched recently by the FAIRR Investor Network. Since it began in 2016 (with 40 investors managing US$ 1.25 trillion of assets), FAIRR’s Sustainable Proteins Engagement has grown ten-fold to include 88 investors, managing over US$ 13 trillion in assets in 2020. The coalition of investors includes Amundi, Northern Trust Asset Management and BMO General Asset Management. It aims to encourage 25 global food retailers (15) and manufacturers (10) – including Nestle, M&S, Sainsbury’s, Carrefour, Costco, Amazon and Walmart – to diversify their protein sources to drive growth and reduce risk in a post-Covid, resource-constrained world.
The report highlights new research showing that over US$ 1.1 billion of venture investment has flowed into alternative proteins in the first half of 2020, more than doubling last year’s total investment (US$ 534 million). The alternative protein market is expected to grow to US$ 17.9 billion by 2025. Amidst public concern over the link between meat production and the ongoing Covid-19 and African Swine Fever crises, retailers and manufacturers are facing a surge in demand for plant-based products.
This has been felt most acutely in China where pork consumption is estimated to drop by 35% this year, while plant-based pork brand, OmniFoods, saw record growth across China and other Asian markets. Brands like Impossible Foods and Oatly have set their sights on the region while Nestle is to build a US$ 100m plant-based centre in China.
Jeremy Coller, Founder of the FAIRR Initiative and Chief Investment Officer at Coller Capital, said, “The company data published today is hard evidence that big food brands are vying for their slice of the plant-based pie. They are drastically scaling-up and skilling-up their capacity to research and develop plant-based alternatives to meat and dairy. Tangible goals for a protein transition are being put in place.”
He added, “The post-Covid landscape has made 2020 a watershed year for the sustainable protein market: the sector has attracted double the investment of last year in just six months. This engagement shows which food companies are putting in place the infrastructure and innovation to benefit from this seismic shift in the ways we shop and eat; and those that will lose out. Investors are watching closely.”
Leading food companies are responding to alternative protein growth by growing specialist teams to accelerate the development of plant-based technologies and products:
- Kroger, Coles, Marks & Spencer, Sainsbury’s and Tesco all have dedicated human resources focused on plant-based product development.
- Half of the engaged manufacturers (Conagra Brands, Kerry Group, Nestle, Saputo, Unilever) said they have dedicated individuals or teams focused on alternative protein development, such as new product development or new protein sources.
- 10% of all Nestlé’s R&D employees are now dedicated solely to the development of plant-based products, while Unilever has invested US$ 94 million in a new innovation centre housing 500 employees with a focus on plant-based innovation for brands like Knorr and Hellmann’s.
Nina Roth, Director of Responsible Investment at BMO Global Asset Management said, “Changing consumer attitudes, food tech innovation, environmental and health risks – also for workers – are set to reshape the protein production industry as we know it, with the alternative protein market expected to grow to US$ 17.9 billion by 2025. This brings sizable opportunities for companies that implement strategic goals for managing a robust protein transition. BMO has led discussions with leading food retailers on how they’re preparing for this shift, and investors will be watching closely to identify the leaders and laggards in this sustainable food transformation.”
Julia Kochetygova, Head of EMEA Stewardship at Northern Trust Asset Management said, “The Covid-19 crisis has exposed the fragility of supply chains, and illuminates the need for innovative and alternative proteins to be explored as a potentially more resilient solution to the issue of soaring global protein demand. That’s why Northern Trust Asset Management has joined FAIRR’s initiative to engage food companies on their long-term strategy to address human needs and consider alternative proteins. With the US plant-based sales up 200% from April 2019 to April 2020, investors are interested to see supermarkets and food retailers diversify their protein sources to fortify their supply chains in a resource-constrained, post-Covid landscape.”
Caroline le Meaux, Head of ESG Research, Voting & Engagement at Amundi said, “The switch to more sustainable diets has become a powerful tool for reducing GHG emissions and improving global health, as confirmed by the IPCC. The animal protein supply chain is highly vulnerable to the material impacts of a warmer world. Therefore, investors are increasingly seeing diversification into alternative proteins as an opportunity to mitigate potentially disastrous climate risks whilst building resilience for the widespread market disruption ahead. Amundi has engaged leading European retailers on how they plan to reduce their dependence on increasingly volatile animal protein sources and seize the opportunities presented by more sustainable proteins in the long-term.”
