The impact of veganism on the Consumer Goods industry
10th January 2020
In 2018, the UK launched more vegan products than any other nation, making it the country’s fastest growing culinary trend, driven by increasing health, ethical and climate concerns. Veganuary 2020 has seen a record 350,000 people sign up, whilst restaurants, supermarkets and many traditional brands are also getting involved. Vegan food has gone mainstream and shows no sign of letting up. The target market is no longer a very small and niche section of society. We are now seeing many meat-eaters consciously trying to reduce meat consumption and turning to plant-based alternatives. We are hearing more and more people say that they are ‘flexitarian’, pescatarian, vegetarian and vegan than ever before. Thus, plant-based alternatives can now target a substantial mainstream audience.
“I would hope that in the next few years, [veganism] will be where vegetarianism is now if not stronger,” Brian Jacobs, founder of the Vegan London meet-up group
This wider, more expansive market is driving product innovation. Producers are looking to remove the main barriers, taste and texture, to regular consumption of plant-based alternatives by meat-eaters and by doing so, as these ‘substitutes’ become more similar in taste and texture to real meat, the market will expand further. The risk for traditional food companies is that they are left behind in favour of start-ups and smaller brands, who are more agile and have more capacity to match the changing demands of consumers. Moreover, millennials prefer newer, smaller and more digital-friendly food brands, generally believing them to be more innovative, ethical and environmentally friendly. A recent survey by ADHB has highlighted the growing number of younger audiences who are now choosing to be vegan.
(source: Consumer Insights – ADHB)
Whilst the emergence of innovative start-ups may pose a problem for larger, more traditional food producers there are also many opportunities in this fast-growing market for the larger food companies. They have a big advantage in terms of their supply network, capital and scale, and if they combine this with a progressive strategy, either by innovation or through mergers & acquisitions (M&As), then they can also ride the vegan wave.
‘…the UK launched more vegan products than any other nation, making it the country’s fastest growing culinary trend of 2018 with a market worth of £310m’
Pioneers such as Beyond Meat and Impossible Foods have created products that “bleed”, mimicking the taste and texture of meat. This has prompted many traditional food producers to respond and invest in this area. General Mills was a major investor in the start-up of Beyond Meat whilst Tyson Foods also had a 6.5% stake in Beyond Meat, before selling it and launching their own plant-based product, making it the largest US meat producer to enter the alternative-protein market with a brand of its own. New Product Introduction, however, is fraught with difficulties and failure can be very expensive and time-consuming. Procurement, involved from the start of the process and done properly, can play a critical role in the success of an NPI. The importance of finding the right suppliers and subjecting them to robust assessments is often overlooked. Without this, avoidable problems may occur further down the line such as inadequate quality, insufficient capacity or unsustainable practice which is especially important in this topic. And with more and more ‘requests’ coming in from the consumers for restaurants, bars and even fast food chains to provide quality vegan products it is essential for a company that is moving into this market to take all the necessary steps, one bad review could dent the prospects of a products popularity for good.
Source: MCA Menu Tracker: Product analysis based on consistent set of 31 leading chain restaurants, managed pubs/bars and fast food brands.
Another factor to consider for traditional food producers who are diversifying into the plant-based alternative sector, is shortening their supply chain. Environmental and sustainability concerns are two key drivers behind the growth of veganism and flexitarianism. This means that consumers are increasingly considering the end-to-end traceability and environmental effect of a product. Environmentally friendly suppliers, packaging and supply chain should be considered essential from the start of the procurement process in order to position your product in the right way to this growing audience. Buying is becoming a political act almost with consumer activism and conscious consumerism more people are buying from brands they agree with — and boycotting ones they don’t.
Aside from innovation and NPI, there has been increasing M&A activity, from which both start-ups and traditional food producers can reap the benefits. Start-ups need investment in order to expand and achieve economies of scale, whilst traditional food producers want to gain access to an increasingly large and profitable market without the risk of creating their own product. Examples of this include Unilever’s acquisition of The Vegetarian Butcher in 2018, and Danone’s acquisition of dairy-alternative producer Alpro in 2017, their largest since 2007. However, stratospheric valuations of plant-based companies are causing concerns of an emerging bubble in the industry. High valuations mean that it is even more essential that M&As are a success; that supply chains and procurement functions are integrated and their strategy aligned.
source: google trends, the Vegan Society
Veganism is on the rise and clearly here to stay. Traditional food producers will have to continue to act to stay relevant and retain their market share. Whether that is through creating their own product or by partnering with a product that has already hit the market, effective procurement and supply chain management will greatly increase the chances of their venture being successful in an ever changing and volatile market place.