Plant-based products growing more popular with US consumers

23 May 2018 Authored by Consulting.us

With US consumers increasingly concerned with health and wellness, as well as environmental sustainability and animal welfare, the market for plant-based food substitutes and alternatives is growing. A recent report estimates that the market grew 8% to $5 billion in 2016, and can expect even greater growth if concerns over taste, nutrition, over-processing, and labeling are addressed.

Plant-based products: it’s what’s for dinner, apparently. US consumers, driven by concerns over health, food safety, sustainability, and animal welfare are increasingly choosing plant-based food products – tofu, almond milk, vegan cheese, veggie patties, etc. Though the products are increasingly popular, the sector is still in its infancy – and issues with taste, over-processing, nutritional value, and labeling are likely holding back higher growth.

In a recent study from L.E.K Consulting titled ‘Plant-Based Products – Not Just for Vegans Anymore,’ the management consultancy examines why more consumers are eating plant-based food products, and what manufacturers can do to drive greater growth in the sector.

Though the market remains difficult to accurately size, LEK reports that plant-based products presently account for about 1-2% of most categories, such as meat, cheese and yogurt. An outlier, however, is the milk category, where plant-based substitutes like soy, almond, and rice milk make up approximately 9% of sales. LEK estimates that market for plant-based substitutes and alternatives was $5 billion last year – an increase of about 8% from 2016.

Consumer Trends

The report points to a number of consumer trends fueling the growth in demand for plant-based substitutes and alternatives. Concerns over health and wellness top the list, with more consumers gaining a greater appreciation for plant food sources – which often boast more fiber, healthy fats, and vitamins than animal sources. Additionally, medical studies linking the consumption of processed meats to colon cancer, as well as the linking of meat consumption to the development of chronic degenerative diseases, has likewise caused many US consumers to reconsider the amount and types of meat products they eat.

Growing concerns over food safety, with the prevalence of hormones and antibiotics in meat and dairy products, has also prompted consumers to supplement their diets with a larger proportion of plant-based options. Animal welfare, long a key reason for switching to plant-based substitutes, also continues to be important, as more people respond to the often hellish conditions in which animals are raised.

Some consumers are also becoming more concerned about the environmental sustainability of the food they eat – with, for example, beef production being a particularly land, water, and energy intensive enterprise, while also releasing a large amount of methane into the atmosphere. Gen X-ers and millennials are particularly interested in the environmental sustainability of their food choices – including the carbon footprint of food transportation (and locally sourced trends etc.). It is, however, important to note that some plant-based products can be incredibly environmentally taxing: almond milk, for example, uses water-intensive almonds, each of which take 1.1 gallons of water to grow.

Further, more than half of Americans have adopted restrictive diets that focus on increased plant-based consumption. While some of the restrictive diets are driven by food intolerance or allergies, others, like ‘paleo’ or ‘flexitarian’ diets, are lifestyle choices aimed at healthier living.

Evolving landscape driven by ‘Big Food’ mergers and acquisitions

In 2017, there was a strong trend of ‘Big Food’ consumer packaged goods companies diversifying their portfolio in order to meet the growing demand of customers for plant-based products. Having emerged from the negative fallout of a listeria outbreak in a Toronto plant in 2008 which killed 22 people, deli meat manufacturers were then hit by the widely circulated report that processed meats (bacon, hot dogs, cold cuts etc.) are carcinogenic, and eating 50 grams a day increases the risk of colorectal cancer by 18%. As such, the firm has released cold-cuts made with all-natural ingredients like lemon juice rather than traditional preservatives like nitrites, while also purchasing meat and cheese alternative product manufacturers Field Roast Grain Meat Co and Lightlife Foods.

Rather than trying to fight the tide, firms are diversifying as consumer preferences shift to ‘more-natural’ and plant-based products. In addition to the shifting strategy of Maple Leaf Foods, other high-profile food companies have looked to open up their portfolio to plant-based alternatives. 2017 saw acquisitions including yogurt maker Danone’s purchase of milk alternative manufacturer WhiteWave, as well as Nestle USA’s purchase of meat alternatives maker Sweet Earth.

Product adoption of select plant-based products

According to LEK’s report, how quickly the plant-based products market grows will depend on how effectively and quickly companies can improve product taste, nutrition, and create acceptable product labeling. Perhaps the biggest hurdle to wider adoption of plant-based alternatives – particularly in the category of meat and cheese substitutes – is that they have generally terrible taste and texture.

As can be seen in the graph, higher adoption basically correlates to how delicious the product is: plant-based dips, tofu, protein powder, artificial sweeteners, and milk alternatives are generally quite tasty and thus at the higher end of adoption. Unsurprisingly, vegan meat and vegan cheese are at the lowest end of adoption. Firms are, however, trying to make them tastier – incorporating soy leghemoglobin, for example – which contains iron-rich molecules found in red meat.

Another hurdle is that many plant-based products lack the nutritional content of their animal-based counterparts. Milk alternatives contain much less calcium and protein than milk, while meat alternatives lack the essential and nonessential amino acids that meat has. This can be mitigated by more effective vitamin enrichment of products.

Additionally, certain plant-based products – like vegan meat and cheese – are heavily processed, leading health-conscious consumers to ask “what’s the point?” A host of chemicals, oils, and fats are pumped into cheese substitutes in order to (ineffectively) replicate the taste of the animal-based products. Finding ways to reduce processing will help make the products more palatable to consumers.

Lastly, plant-based products need to figure out effective labeling strategies as incumbent dairy and meat industries block them from using labels like ‘butter’ or ‘milk.’ As such, manufacturers will have to come up with effective marketing and classification terms that will resonate with consumers, while not inciting the ire (and lawsuits) of animal-based food industries.

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