Fake meat, real opportunity

The food industry is currently undergoing a meaty transformation. Plant-based dining is surging and major fast-food chains, CPG business and retailers are scrambling to keep up. According to Kantar, a total of 4.4 billion meat-free dinners were consumed in 2018, an increase of 150 million meals on the year before. In fact, last year the UK launched more vegan products than anywhere else in the world, making it the country’s fastest growing culinary trend worth approximately £310m.

We debate internally at MBS and it is the proverbial chicken or the egg when it comes to consumer choice versus industry innovation, however what it clear is that the market has shifted. Whether the decision to eat a more plant-based diet has been driven by widely documented health benefits, the improved environmental footprint, celebrity endorsement or a simple desire to mix up our lunch options, consumers are no longer willing to accept business as usual and the hospitality and CPG industries have had to react.

But which of the sectors are leading the way? As a member of the HTL practice, and Huw as leader of our CPG practice, we are yet to agree as to which sector is leading the revolution. Is it the on-trend restaurateurs in hospitality or the cerebral FMCG-ers with their innovation pipelines? I will bring the case for hospitality, whilst Huw will argue in favour of the CPG industry.

Mildred’s, Dalston. Photo credit: Mildred’s

Within the hospitality sector, it is arguable that despite the recent surge in popularity, plant-based dining isn’t anything new. There have been specialist restaurants operating in this space for decades. Mildred’s, for example, has been serving vegetarian and vegan dishes for over 30 years. Earlier this month, the group received backing from private equity firm Encore Capital to expand from four sites to a portfolio of 10 to 15. However, the ever-growing consumer demand for greater innovation around plant-based dining and the requirement for greater corporate social responsibility has seen a surprising response from some of the larger hospitality players. As an industry defined by service, it has had to!

Given the obvious commercial opportunities, large hospitality chains are now wishing to appeal to a growing number of plant-based diners. To bolster its plant-based strategy, Pret recently purchased EAT from Horizon Capital, with the intent of converting EAT’s estate into more Veggie Prets. Greggs, who, initially capitalised on “veganuary” launched the vegan sausage roll in January of this year, resulting in a 58% rise in first-half profit. Changing consumption trends have also provided healthy-eating concept Leon with a boost. In 2019 vegetarian options are accounting for 64% of Leon’s sales and more than half of all food sold is vegan.

But the most publicised and far-reaching response has, perhaps, come from the market giants; McDonald’s, KFC and Burger King, who have all embraced the shift towards plant-based dining and introduced alternative burgers to their menus. Initially trialled in Finland and Sweden in 2017, the McVegan burger saw great success, with Germany now able to get a bite of the action. In June of this year, KFC announced the trial of a the “Imposter Burger” which replaces the finger-licking good chicken fillet with Quorn, accompanied of course, by vegan mayonnaise. Similarly, Burger King has recently introduced the “Impossible Whopper” to its menu – which in test markets outperformed the chain’s foot traffic average by 18.5% in April – perhaps now living up to their slogan of “Be Your Way”.

Interestingly, this is where we see a cross over into the consumer goods industry and increased levels of NPD. Fresh plant-based burgers that closely mimic meat continue to gain momentum from purist established brands like Lightlife and Quorn as well as industry giants like Nestlé and Unilever. Operators in this space, particularly American companies like Beyond Meat and Impossible, are undisputedly rocketing. They have successfully partnered with fast-food chains to gain a faster roll-out than they might achieve in retail, but have also managed to get themselves on many a grocery shelf. Huw is adamant that it’s the suppliers who are leading the revolution, as opposed to hospitality, because a product must exist before the seller. My natural bias towards the hospitality sector means I may need a little more convincing.

Photo credit: Burger King

There have been pioneers like Linda McCartney and Quorn who have been stalwarts of the CPG industry for many years, but there has been a definitive broadening of purist plant-based suppliers entering the market. So much so, that the big bluechip FMCG businesses have all started to launch their own plant-based offerings. Unilever’s acquisition of The Vegetarian Butcher and Nestle’s Sweet Earth brand drive of their new pea-based burger attest to this. Just this week, dairy business Arla announced an upcoming vegan range following a similar move by rival Danone.

As we discuss the disruptors, what of the disrupted? The meat industry itself has had to sit up and take notice of this trend in a very serious way. Clearly total volumes of meat consumption could come under pressure, although as long as meat producers act with agility, then these threats could become opportunities. We’ve met a number of leading meat industry executives in the last few months who have shared their own activity in moving quickly to invest in more gluten-free and vegan manufacturing sites. The fastest of these will surely see the benefits.

Sainsbury’s meat alternatives. Photo credit: Sainsbury’s

We may have not focused as much, however, on the savvy retailers as, arguably, the last to embrace the growing trend surrounding plant-based meat alternatives are the grocers. However, our aisles are starting to see an increased presence from newcomers like Heck, BeFries, and The Brook who are all making a bid for the shelves. Importantly retailers have started to mainstream the conversation with Sainsbury’s being one of the first to include non-meat alternatives in their meat aisle – overcoming a crucial hurdle in the shopper’s mentality. They have been one of the most enthusiastic retailers when it comes to plant-based items. Thanks to the intelligent integration of vegan/veggie alternatives alongside traditional products, Sainsbury’s saw a 65% increase in sales of plant-based products this year compared with 2018.

After lengthy debate, I am not sure whether Huw and I will ever agree over which sector adopted this trend first and who is truly leading the way. I would argue that historically, the hospitality, CPG and retail industries have set trends that consumers have willingly followed. However, this is a new consumer-driven age. One that is far more discerning in taste and informed lifestyle choices. In turn, the likes of KFC, Nestle and Sainsbury’s have taken note. As these sectors have started to get their substitute-ducks in a row, do join our debate and let us know who you think is setting the pace.

huw.llewellynwaters@thembsgroup.co.uk | scarlett.mayne@thembsgroup.co.uk | @TheMBSGroup