Cheaper Mock Beef Raises the Stakes
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For UBS marketing purposes To compete with traditional meat, plant-based meat makers have to not only be price competitive but continue to raise the bar from a product innovation standpoint. (ddp) Longer term investments Cheaper mock beef raises the stakes 14 January 2021, 6:46 pm CET, written by UBS Editorial Team Imitation meat, once considered a niche market segment aimed primarily at vegetarians and vegans, is well on its way to becoming mainstream. Sales of plant-based “meat” got a boost during the pandemic after coronavirus outbreaks caused several meat processing plants to shut down. Riding on that momentum, producers of alternative meat appear to be taking on the next challenge – moving closer towards price parity with traditional meat. Impossible Foods, which produces the popular “Impossible Burger” meatless patties, recently announced that it will cut the wholesale prices of its burger and sausage alternatives by 15%, its second price drop in a year. With the latest cut, the lowest possible price to distributors for the Impossible Burger would be USD 6.80 per pound. But this is still significantly higher than ground beef prices which range from about USD 2.00 to USD 3.00 per pound for low fat and non-organic varieties, Reuters reports. Their steep price notwithstanding, plant-based meats have seen explosive growth in the last couple of years and are now widely available in grocery stores and restaurants, appealing to consumers who have concerns about the way traditional animal-based meat is produced and processed and its impact on the environment. The popularity of Impossible Foods and rival Beyond Meat stems from their ability to replicate the taste, texture and flavor of meat like never before. But that also means that they compete more directly with traditional meat rather than with other vegetarian or vegan alternatives. This makes their premium pricing more of a challenge in the long term. “They try to make it taste like traditional meat so as to convince those consuming animal products to try their product,” says UBS Chief Investment Office Strategist Wayne Gordon. “To increase market share from here, not only will they have to be price competitive but also continue to raise the bar from a product innovation standpoint. Continued advances in taste, flavor and healthiness are needed to incentivize a greater share of the supermarket basket.” For UBS marketing purposes Trend, not fad Those gains could come with economies of scale as the companies expand production. Lower prices are also more likely with increased competition. Some of the world’s biggest food and meat companies including Cargill, Tyson Foods and JBS have entered the alternative meat market, developing their own versions of plant-protein based meats and exploring new technologies including lab-grown cultured meat. “The big players control the supply chain. Their involvement will bring in some economies of scale,” says Gordon. Their entry also suggests that the big players view the alternative meat market as a growing trend and not a mere fad. A food revolution, accelerated by Covid The pandemic also accelerated the trend towards sustainable food, in Gordon’s view. First, it disrupted the traditional meat supply chains. “The pandemic made the license to operate in the traditional meat business more difficult. Now companies must build in social distancing and shift towards greater automation. The industry has to respond to the criticism of how they have handled health concerns and rebuild brand trust.” Second, it accelerated the focus on supply chain transparency. The coronavirus outbreaks at meat processing plants put the spotlight on the way meat is processed in America, raising questions on the way animals are bred and slaughtered in addition to the poor working conditions of employees. Reports of transmission of disease from animals to humans also added to concerns, driving consumers to seek alternative meats. This momentum should be sustained in the post-pandemic world too in Gordon’s view. UBS CIO expects the plant-based meat market to reach a size of at least USD 85bn by 2030. Lab-grown meat, a nascent cell-based meat technology, is also starting to make headway, with the Singapore government approving the sale of cultured chicken . Lab-grown meat has significant potential in the long term as it is able to provide a sustainable food option and simplify supply chains while also limiting land use, thereby addressing climate change concerns more robustly than even plant- based meat. “It checks off all the boxes”, says Gordon. But scalability and cost issues mean that plant-based protein alternatives are likely to continue to account for the majority of traditional meat alternatives over the next decade. But the development of alternative meat products is only one of the ways food innovation is helping address big issues such as climate change, biodiversity loss as well as improve our health and wellness. For more on the future of food, read The food revolution, March 2020. 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