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Let’s imagine that the next time you are digging into your favourite chicken biryani – you are told that the juicy tender chicken on your plate is not really chicken. In fact, it is what’s called the ‘meatless chicken’. Before you push your plate away hurriedly in distaste – hear us out.

‘Meatless meats’, especially the plant based meats of any kind implies meat or protein sourced from non-animal sources. These include those that are made from grains, legumes (soy, lentils) and a variety of other vegetables.

Plant-based meats gained impetus due to biotechnological developments that mimicked the taste and mouthfeel of actual meat. That way everyone from vegans to meat-eaters can find something that they can equally relish upon. So no more awkward conversations and Youtube videos that brandish the mundane conflicts between someone who eats meat v/s someone who doesn’t.

But why are we talking about it now? What makes this the perfect subject in the middle of a pandemic caused by a zoonotic virus? It’s because despite the six largest meat companies representing $60 billion in market capitalization, COVID stripped-down supermarket aisles to its bare bones with reduced stocks of meat produce. Now more than ever, the intricate link between animal virus, industrial meat production, and supply chain deficiencies has become apparent.

As one vegan private equity veteran quotes, “The thesis of alternative protein has been strengthened by COVID-19″

A Plant-Based Meat Future

As we try to look through the murky periscope into a ‘meatless’ future it’s understandable to be confused and lost. So what exactly would a plant-based meat future look like? Who would be the big guys calling shots? More importantly, what the hell will we be eating? 

Plant-based meat is chiefly sourced from soya, wheat, peas, and other beans/seeds. Textured soya protein has been widely used historically, owing to its high protein content and meat-like texture. 

Plant-based food startups of all sorts have begun to diversify their product offering. No longer are the consumers restricted to burger patties, but today one has plenty of choices like vegan sausage, plant-based pork mince, meatless chicken strips, meat-free lambs, and even shrimps.

The plant-based meat market is projected to reach a value of $27.9 billion by 2025, growing at a CAGR of 15% since 2019.  This market interestingly was born due to intricate business, ethical and environmental concerns voiced by customers and other lobbying parties. It could have been Sinclair’s stomach-turning description of the meat industry in the 1906 expose novel “The Jungle” or France Moore Lappe’s environmental concerns raised through “Diet for Small Planet” in 1971 or the work of several other research bodies that boldly voiced out the negative consequences of dependence on animal protein.

As consumers changed their behavior slightly in relation to these stimuli, the big meat processors like Tyson, Smithfield, and Hormel foods were able to tap into it, by intentionally diversifying into the segment, even before COVID19. Tyson that had a 6.5% stake in the unicorn BeyondMeat, exited the company to introduce its own line of alternative protein brand called Raised & Rooted. Both Smithfield and Hormel have introduced plant-based protein directly in their portfolio, through Purefarmland and Happy Little Plants, respectively.

The Major Leagues

A big reason for the traction associated with plant-based meats can be attributed to the success stories of the forerunning duo, Beyond meat and Impossible foods.

While both the burgers look equally mouthwatering – foodies and investors alike, have their own favorites. We would like to lay out all the ingredients that make these entities absolutely delectable to the investors and why these companies in turn crave a piece of China.

Beyond meat debuted in 2016 and went through an IPO valued at $1.5 billion. In a matter of just 3 months post going public, it was worth more than $13 billion, which meant an ~8.6x increase in its value. As you can imagine, this went down in history as one of the most successful IPOs. As of today, it operates in 50 countries around the world, with a net revenue increase of 239% at $297.9 million and a gross profit of $99.8 million (2019). With a continual focus on innovating across its three main platforms (rolled out 3 new products in 2020 itself), it makes complete sense as to why everyone has pinned their hopes on Beyond meat.

Impossible Foods, on the other hand, entered the plant-based meat scene in 2011 and has since raised a behemoth total of $1.4 billion. To put this into perspective, it has 11x more funding compared to Beyond meat, before it went public. The cherry on top of icing is that it boasts of an impressive list of investors ranging from blue-chip institutional investors to angels like JayZ, Mindy Kaling, Katy Perry, Trevor Noah, Jaden Smith, Serena Williams, Jay Brown, etc.

When Impossible burger debuted in 2019, it was continuously ranked as the number one item sold, across grocery stores in the U.S.A. Currently, it’s available across all 50 states, in more than 8000 grocery stores and has witnessed a 60x increase in retail footprint, in the first half of 2020. In many ways, Impossible Foods appears to be more than prepared for an IPO.

Both these companies have garnered the support of multinational restaurants, delivery partners and grocery chains, within and beyond the U.S.A. As they look to tap into global markets, the question arises as to why they are focused on China (中国) and what exactly makes the Chinese market so alluring.

The Middle Kingdom and Alternate Meat

In what might seem like an obvious choice, the plant-based meat brands are attempting to address the food preference of a very large population. But would these consumers actually want to adapt to plant-based meat alternatives?

Chinese consumers have a historical record of adopting imitation meat dishes that date back to the 10th century Song dynasty. Many claims that this has been due to the confluence of Buddhist teachings of vegetarianism and preferential choice of protein-rich food, including tofu.

The global meat production volume is 325 million metric tonnes. That being said, an average person in China consumes more than 60kg of meat in a year. The Chinese government in its attempt to control meat consumption changed the framework for recommended daily meat consumption (40g instead of 75g). This was also to reinforce the country’s commitment to curbing greenhouse gas emissions. While the outcome of the framework can be debated, it is vital to factor in business forces that drive the transition to plant-based meat alternatives.

To account for changing consumption partners, China today has become hugely reliant on food imports, which exceeded exports by ~$45 billion (2017). Subsequently, this overreliance on imports also makes it vulnerable to supply chain disruptions caused due to trade wars and viruses.

Consider, for example, the U.S.A – China Trade War which resulted in halving of soybean imports (also a key source of plant-based meat alternatives) from the U.S.A. China prematurely chose Brazil to satisfy its soya demands. It’s soybean imports of 97 million tonnes (2017-18), was equivalent to total production in the U.S.A and Brazil, and much to the chagrin of its officials, China was confronted with its own supply chain vulnerability.

China is no stranger to the havoc caused by viruses. Last year, even before COVID, swine flu had plunged domestic pork production by 21.3%, resulting in an increase in beef (60%) and pork imports (75%), when compared to 2018. COVID further added to its woes of dependency on the global food chain, especially in matters of meat.

Get Ready for Meatless Revolution

As China looks to overcome its meat supply chain fragility and achieve food sustainability, its promising plant-based meat market of $910 million (2018) growing at 14%, only seems like an inevitable next step.

Recently, Beyond Meat obtained approval for a manufacturing facility in the Jiaxing Economic and Technological Development Zone. This approval piggybacks on distribution agreements with both Sinodis and Alibaba’s FreshHippo. In fact, Beyond Meat’s primary entry to China was possible through Starbucks, which introduced its products across its stores in the country. On the other hand, Impossible foods is yet to pass through certain regulatory hurdles for entering the Chinese market.

Apart from the classic duo, there’s been a flurry of activity in the space. In early 2020 PepsiCo acquired Baicaowei, a Chinese plant-based sausage snack company for $705 million. Late last year, Zhenmeat, a Beijing-based startup that sells mince meat alternatives derived from pea protein raised $730k in funding. Hong Kong-based startup Green common, famous for its plant-based pork substitute debuted during TMall’s Black Friday event to sell to mainland China customers.

With many such exciting prospects, China’s own abundance of soybeans, and a huge capacity to process plant-based raw materials, the question remains as to whether the new players will truly capture this market or will China develop its own competency in the space? No matter what one thing is crystal clear, China will have a pivotal role to play as the world embraces plant-based meat. 

Where does India stand in all of this? In a recent study conducted by the University of Pennsylvania, it was evident that among different Indian consumer groups all of them were willing to pay a premium for plant-based meat, in comparison to animal meat.

Home to 1.3 billion people, with upwards of 70% being meat-eaters (Yes! you heard it right), increasing disposable income and acquired global taste, we think that it’s only a matter of time before the plant-based meat alternative startups in India (read GoodDot, EvoFoods, MisterVeg, OhVeg, and others) become more mainstream.

This piece is contributed by Keerthana.

Disclaimer: The purpose of this post is to not disproportionately propagate any type of eating preference.

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