FAIRR report says alternative proteins on the rise

By Jim Cornall

- Last updated on GMT

The report praises Unilever, Tesco, Nestle, Sainsbury’s and Conagra for being “pioneers” on sustainable protein research and innovation. Pic: Getty Images/klenova
The report praises Unilever, Tesco, Nestle, Sainsbury’s and Conagra for being “pioneers” on sustainable protein research and innovation. Pic: Getty Images/klenova

Related tags FAIRR alternative protein Alt dairy Dairy alternatives Nestlé Kraft heinz Costco Amazon

A five-year investor engagement with 25 leading global food retailers and manufacturers on protein transition finds evidence of clear leadership and reports the number of firms adopting formal targets to grow their alternative protein offerings is on the rise – growing from 0 in 2018 to 28% of companies in 2021.

However, the FAIRR Initiative also warns that the majority (72%) of food companies are yet to adopt protein diversification targets as part of their decarbonization efforts. That’s despite booming consumer demand for meat and dairy alternatives, and recent warnings from the IPCC that atmospheric methane gas has hit an 800,000-year high and “strong, rapid and sustained reductions”  in methane emissions (32% of which currently come from livestock) are urgently needed to achieve the goals of the Paris Agreement.

‘Appetite for Disruption: The Last Serving’, is the latest research launched by the $40tn-backed FAIRR Initiative, which assesses how 25 food companies are responding to the rise of alternative proteins.

FAIRR said there are signs of progress.

This includes seven of 25 global food retailers and manufacturers now have targets to expand their alternative protein portfolio, up from zero in 2018. It noted Unilever has committed to reaching $1.2bn in sales of meat and dairy alternatives between 2025 and 2027.

Five companies (Unilever, Tesco, Nestle, Sainsbury’s and Conagra) were praised for being “pioneers” on sustainable protein research and innovation.

The organization said 48% of companies now track and publicly disclose their emissions from animal agriculture (Scope 3), up from just 21% in 2019; and 52% of the companies in the engagement now have a net-zero ambition (up from 8% in 2019).

FAIRR said UK retailers Tesco and Sainsbury’s have shown global leadership on protein diversification and innovation, in contrast to their US and European peers. Tesco has committed to a 300% increase in sales of meat alternatives by 2025, and pledged to halve the environmental impacts of the average basket in the UK. Sainsbury’s has publicly endorsed the need to re-align diets in order to reduce emissions, and has plans to grow the volume of sales of plant-based protein and dairy – following a 40% increase in plant-based diets in the UK in 2020.

Both supermarket chains also have ambitious science-based targets to reduce their emissions in line with a 1.5-degree pathway. M&S is also highlighted for its partnership with ENOUGH, a mycoprotein start-up, and commitment to increase sales from its Plant Kitchen.

FAIRR added that 68% of firms have Scope 3 targets for reducing agricultural emissions in their supply chains. Scope 3 emissions represent, on average, 92% of each company’s total GHG emissions, which FAIRR said is from animal protein supply chains at both the farm level and in feed production.

However, FAIRR said areas of concern include 72% of food brands having yet to establish formal targets to diversify their protein sources despite high consumer demand. This is spite of what FAIRR said are plant-based foods sales growing 43% in the last two years, and the US meat and dairy alternatives market rising by 300% from 2019 to 2020.

FAIRR said US companies underperform in comparison with their global peers. Amazon (Whole Foods), Costco and Kraft Heinz are the poorest performers in FAIRR’s ranking. It added US retailers Amazon, Costco, Kraft Heinz and Kroger do not report their Scope 3 emissions relating to animal agriculture, which FAIRR said is a critical measure of the environmental footprint of their meat supply chains.

Furthermore, it said Costco grew its beef sales by 34% in 2020 in contrast to 2019, and does not disclose how it is addressing the environmental impacts of its meat supply. Meanwhile, consumer demand for alternative protein products in North America is soaring: plant-based milk alternatives are already purchased by 39% of US households and plant-based food sales rose nearly twice as much as overall US retail food sales last year.

Jeremy Coller, chair of the FAIRR Initiative and chief investment officer at Coller Capital said, “As we approach COP26, the impact of agriculture and the largest food companies must be center stage. 23% of emissions come from agriculture, forestry and associated land use - but plans to address this footprint are notably absent from most national emission reduction plans.

“Food retailers and manufacturers have a vital role to play in the transition to a low-carbon economy, but FAIRR’s report shows that the majority of leading food companies still lack concrete targets to address climate risks in their protein supply chains or to meet booming consumer demand for alternative meat and dairy products. 

“Whilst many companies are lagging, we are pleased that FAIRR has seen visible leadership from 28% of the largest food retailers and manufacturers, including leading UK supermarkets, as well as remarkable innovation in sustainable protein. This has been the year of cultivated meat with a record $506m invested in lab-grown meat alternatives, which is now taking its place alongside plant-based protein on investment agendas.”

FAIRR said its research also indicates 2021 is “the year of cultivated meat,” animal protein produced by culturing animal cells in a lab and then using a bioreactor to replicate the cell tissue structure of meat.

FAIRR said 2021 has already seen two public listings from cultivated meat companies MeaTech and BioMilk, as well as the world’s first approval for Eat Just’s cultivated meat subsidiary brand, GOOD MEAT to sell cultivated meat on restaurant menus by Singapore’s food agency. In July 2021, food giant Nestlé announced a collaboration with Future Meat Technologies to explore cultivated meat technology. This is the first time a company in FAIRR’s engagement – a large food manufacturer – has partnered with a new entrant start-up in the field of cultivated meat. 

The report includes a case study on plant-based cheese alternatives.

The report notes the global cheese market is projected to continue growing from $72bn in 2020 to $100bn in 2025, but that cheese is the third highest carbon intensive sub-category of all animal food products. It observes that non-dairy producers of cheese alternatives have struggled to match their traditional dairy counterparts and compete on price, nutrition and taste.

It points out some vegan cheese brands such as Miyoko’s utilize legumes, but most use water, coconut oil and starch as the main three ingredients, and argues this results in products low in protein, high in saturated fat, and lacking the taste, texture and meltability when compared to dairy-based cheese.

The US plant-based cheese alternatives category is worth $270m and has experienced 42% growth over the past year, however, it currently represents only about 3% of the $34.3bn US cheese space, whereas plant-based milk alternatives account for 15% of total milk sales.

In spite of this, the report said the global plant-based cheese market was worth $2.5bn at the end of 2020 and is projected to reach $7bn in 2030 – a compound annual growth rate (CAGR) of approximately 11%.

FAIRR said pant-based alternatives matching the taste and texture profile of dairy cheese is vital to help shift mainstream consumers to a more sustainable plant-based diet. The casein and whey milk proteins in dairy cheese are integral to its unique texture, taste, and mechanical properties such as meltability. It said startups are working with new technologies to emulate these properties in non-dairy products, citing as examples Perfect Day, which is using precision fermentation to make whey milk protein without animals, and New Culture, which is also using precision fermentation to produce large quantities of casein protein and aims to launch its mozzarella in collaboration with pizzerias by 2023.

Also mentioned is Nobell Foods, which produces casein through genetic modification of soybeans and aims to release a cheese alternative by 2022.

Other companies include BioMilk, which became the first publicly traded cell-based milk company.  FAIRR said its lab-produced dairy milk could be used to produce cheese using traditional fermentation methods.

Global food companies are also looking to expand into the plant-based cheese space, according to FAIRR. Thirteen retailers in FAIRR’s engagement now sell plant-based cheese alternative products.

Canadian retailer Loblaw expanded its internal plant-based cheese alternatives offering with several new products, in addition to now providing them at its deli counters. UK retailer M&S expanded its plant-based range for Veganuary 2021, launching new feta- and cheddar-style plant-based products, while Tesco launched Norseland’s Applewood vegan cheese and Mexicana vegan cheese, as well as a vegan halloumi-style plant-based product.

For large manufacturers, expansion into plant-based alternatives can be enabled via internal R&D or through the acquisition of plant-based brands.

FAIRR noted Canadian dairy giant Saputo is the latest manufacturer to enter the market following the acquisition of Bute Island Foods in May 2021, and the introduction of a new plant-based mozzarella to some foodservice partners in the US.

The report also refers to Woolworths and Morrisons: both introduced plant-based mac’n’cheese offerings, while Nestlé introduced the plant-based bacon cheeseburger – Triple Play – under its Sweet Earth brand.

Investment in cultivated meat technology also grew sixfold from 2019 to 2020, a total already exceeded in 2021 which so far has seen investment of $506m into cultivated meat firms. FAIRR said the conversation on protein transformation has so far focused on plant-based protein options, yet the rise of cultivated meat looks set to disrupt the market in the years to come.

 FAIRR’s report also highlights how European policymakers are increasingly recognizing reduced meat consumption and protein diversification as effective climate mitigation and health tools. The UK National Food Strategy recommends a 30% reduction in meat consumption by 2030, Denmark’s dietary guidelines recommend a 30% reduction in meat, whilst France’s recommendations include meat reductions of approximately 28%. 

Jenn-Hui Tan, head of stewardship and sustainable investing at Fidelity International said, “The shift towards sustainable proteins will prove an essential tool for addressing serious climate risk, whilst also meeting the demand for nutritious food in a resource-scarce world. We're seeing increased regulation to facilitate that shift: Canada, Israel, and Singapore have positioned themselves as first-movers in alternative protein development and investment, with Singapore this year becoming the first country in the world to approve cultured meat for sale.

“With other countries poised to follow suit, investors should be aware of the impacts and opportunities within this shift and food companies should be innovating at pace. Fidelity has engaged with a number of food companies on their plans for diversification, and we continue to promote innovative solutions to drive transformation and build resilience against climate change."

Rebecca White, responsible investment analyst at Newton IM, said, “For the first time, leading food companies are making concrete commitments on protein diversification and innovation. FAIRR’s findings that seven companies in their engagement have now set such targets will come as encouraging news to investors concerned about increasingly material animal agriculture risks within the food system.

“Newton Investment Management Ltd has engaged with both food retailers and manufacturers where we have fixed-income and equity investments on corporate strategies around alternative proteins and product portfolios. But there is still work to do. Companies must continue to mitigate climate risk and meet consumer demand expectations through protein diversification.”

DairyReporter reached out to the companies mentioned in the report as the ‘poorest performers’ (Amazon, CostCo and Kraft Heinz) for comment. CostCo declined to comment on the report, Kraft Heinz did not respond, and an Amazon spokesperson told DairyReporter, “We are committed to building a sustainable business for our customers and the planet.

“Amazon and Whole Foods offers a range of sustainable food and grocery options and uses many third-party certified products and ingredients across our selection.

“Our Climate Pledge Friendly program helps customers find products that have earned at least one of more than 20 sustainability certifications and help preserve the natural world.”

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