The food & beverage industry has witnessed a significant shift in recent years. As consumers are becoming more aware of their diets and their impact on their health and wellness, processed foods infused with artificial ingredients are losing their appeal among consumers. Due to these factors, consumers are shifting toward vegan food.
By Vibhuti Gupta, research associate Food & Beverage & Suraj Nagvenkar, Marketsandmarkets.
The plant-based food sector is witnessing significant growth across the globe. Along with the rise in health consciousness, consumers are also concerned about the climatic changes, due to which they are adopting plant-based food products. The rise in instances of lactose intolerant population is also one of the key factors, which is driving the growth of the dairy alternatives market, as dairy products are difficult to digest for such consumers.
The rise in acceptance of vegan food has led to the development of a whole new food ecosystem. This is mainly driven by companies that are introducing new and innovative products, which are healthier and sustainable. The diverse plant-based product portfolio offered by these companies has led to a shift in the food habits of consumers and are offering plant-based food. Meat substitutes and dairy alternatives are not just catering to one specific segment but are witnessing high demand worldwide.
Considering the increase in health awareness among consumers, various food products, such as meat patties and sausages, are being replaced by plant-infused meat products. The production of meat products is constantly witnessing a rise with the increase in the global population. This has led to acute damage to the environment and global warming. In order to mitigate the global-warming issues and cater to the rising demand for meat products, many countries around the world are focusing on encouraging the adoption of plant-based meat products. According to the Good Food Institute, developing countries, such as China, India, and Brazil, are witnessing a rise in meat production and consumption, which offers a high growth potential opportunity for meat alternative product manufacturers. The increase in instances of lactose allergies and a rise in health awareness are the key factors driving the demand for dairy alternatives. Globally, the health benefits of dairy alternatives have led to large-scale adoption of numerous applications. Consumers are shifting from synthetic dairy products to plant-based products, which is further contributing to the growth of the market. Dairy alternatives are manufactured using a wide variety of plant-based sources, including soy, wheat, pea, almond, and hemp. The global dairy alternatives market is estimated at USD22.6bn in 2020 and is projected to reach USD36.8bn by 2025, recording a CAGR of 10.3% during the forecast period.
Convergence of megatrends
Multiple factors have led to an increase in the vegan population, including health, climate, and animal welfare, which is projected to drive the demand for new innovative vegan food products. The rise in the adoption of plant-based products has encouraged food and beverage manufacturers to diversify and update their product portfolios. The vegan food market has witnessed various innovative solutions to offer a wide variety of products to consumers. Some of them are as follows:
- In July 2020, Archer Daniels Midland Company (ADM) (US) entered into a partnership with Imagine Meats (India). Imagine Meats is a newly launched venture that focuses on improving plant-based innovations in India. As the vegan trend is gaining momentum in the Indian market through this partnership, Imagine Meats is all set to expand ADM’s portfolio of protein ingredients to introduce traditional Indian dishes. In the future, through the partnership, the companies are also focusing on global expansion.
- In July 2020, two big corporations Nestlé (Switzerland) and Starbucks (US), came together and launched new Starbucks Non-Dairy Creamers. In 2018, both the companies signed a deal, according to which Nestlé paid USD 7.15 billion to Starbucks for the right to sell and market Starbuck’s products around the world. The new Starbucks Creamers are the addition to the earlier deal. Both the companies are focusing on capitalizing on the growing demand for plant-based products worldwide.
- In April 2020, Cargill (US) and fast-food chain KFC (China) have collaborated to offer plant-based foods to consumers. For the first time, KFC will begin selling plant-based fried chicken in China, over a limited period, whereas Cargill will be the supplier of nuggets. Initially, the plant-based fried chicken will be available at only three outlets. Cargill has taken the step-in response to the growing interest in the Chinese meat-substitute industry. In addition, poultry production in China has been affected by the COVID-19 outbreak.
- Starbucks (US) has announced the launch of its new plant-based menu exclusively in China, which will feature plant-based protein meal options offered by Beyond Meats (US) and Omnipork. The menus will also contain non-dairy beverages from Oatly (Sweden). Starbuck has taken this step, in response to the growing preference among Chinese consumers for healthier choices. In addition, the COVID-19 outbreak has encouraged consumers to reconsider their diets.
Main Markets
The US is one of the major markets, which received an investment of USD 673 million for the plant-based food industry in 2018. According to Good Food Institute (GFI), a total of USD 17 billion has been invested in the plant-based food industry. These investments involved 233 completed deals and 229 unique investors. In 2018, among these investors, venture capital represented 43% of the total number of completed deals. The consumers are increasingly adopting plant-based foods, as they are becoming more conscious about their health and adopting a healthy lifestyle. As per a report by GFI, the US retail sales of plant-based food products have increased by 17% from 2017 to 2018. Plant-based milk is the largest and most popular category, accounting for 13% of the US retail milk market in 2018. Meat alternatives or plant-based meat account for the second-largest market share, recording a value of USD 684 million.
Factors impacting the vegan food market are as follows:
- Rising awareness about health and wellness among consumers
Consumers are witnessing increased inclination toward a nutritional diet. They are becoming more conscious about their health and wellness and are increasingly adopting plant-based food for a healthy lifestyle. Among them, a high percentage of the millennial population is shifting to organic and plant-based food products. According to the Plant-based Foods Association (PBFA), the plant-based retail sales of plant-based food and beverage alternatives in the US was formulated to replace conventional meat, dairy, eggs, and seafood products, which reached USD 5 billion in 2019. Moreover, the COVID-19 outbreak is further contributing to the growing sales of plant-based food & beverages.
- Innovation and developments in the plant-based protein market to encourage the vegan trend
The food & beverage manufacturers are increasingly investing in innovation and development of meat alternatives, dairy alternatives, and protein nutritional beverages. Key factors that are encouraging new product developments in the plant-based food market include the increasing vegan trend. According to a study published by the European Vegetarian Union in 2019, the vegan population in Europe contributes to more than 6% of the European population. In addition, retail food chains are focusing on widening their product portfolios to cater to align with the growing vegan trend.
- Rise in the lactose-intolerant population
One of the major factors that have been encouraging the demand for plant-based products is the prevalence of lactose intolerance. Lactose is a major carbohydrate in milk and can cause abdominal pain, diarrhea, nausea, gut distention, and constipation. The digestion of dairy products becomes difficult, as these symptoms occur among consumers due to the lack of gut enzyme lactase. The lack of lactase leads to difficulty in converting milk sugars into absorbable compounds, due to which lactase remains undigested. Thus, consumers are witnessing an increasingly opting for dairy alternatives.
- Increase in investments and collaborations in the plant-based food market
Government entities across various countries have been promoting the consumption of plant-based food and dairy substitutes due to their functional health benefits. Moreover, the environmental concerns associated with animal-based meats further encourages the authorities to promote vegan food products. Government entities have been actively investing in the research and development activities for plant-based food & beverages. For instance, Beyond Meat (US) has successfully introduced its plant-based burger patty through research conducted by the University of Missouri, which enabled the government to invest further in research activities.
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