See no evil. To meat or not to meat. Is there a correlation in our ever-changing society between these unique but different concepts? The intermingling thread between these two ideas, technological companies, and meatless alternatives will be explored to discover their relationship.
The Silicon Valley technology companies that dominate the time we spend on our smartphones have lost some of their mystique as the year ended, but another industry is on the cusp of going mainstream. Four companies are making inroads into the $1 trillion dollar meat industry via either plant-based proteins or through animal cells known as ‘clean meat’. Big food is backing some of them as these companies take flight. Does this signal an opportunity or a threat to traditional industries and countries that rely on meat exports? To meat or not to meat?
There are two different approaches. Two companies are going the plant-based route: Beyond Meat and Impossible Foods. They’ve raised $300 million dollars between the two of them, with notable investments from Bill Gates, Richard Branson, the former CEO of McDonald’s, Don Thompson, and food manufacturer Tyson Foods.
The other two companies are creating clean meat via animal cells that don’t require the traditional ecological footprint of raising livestock. Memphis Foods and Hampton Creek have raised nearly $250 million between them to go after this market and include investments from food manufacturer Cargill, Gates & Branson.
What’s interesting is that these companies haven’t been targeting vegans or vegetarians. They’ve found success in people who still like meat, but who want to reduce their footprint either for health or for environmental reasons. Furthermore, of all of them, Impossible Foods has developed a plant-based burger that may most resemble beef in that it bleeds, and has received mostly positive reviews on its taste. It may be the first meat alternative company to export its products in a meaningful way.
A rising global middle-class with growing disposable income puts more demand on protein-rich diets. Food security is one of a country’s most basic human needs. The fate of several trade deals are presently uncertain in these increasingly protectionist times, but opportunities remain to merge into this new market. Let’s take China as an example. What role can North America play in order to fulfill China’s rising demands to supplement their citizens’ food requirements?
China has 17% of the world’s population, but only 7% of the world’s arable land, and a growing appetite for Western-style diets that include meat and dairy. For the past 20 years, China has been the fourth largest beef producer, and for much of that time, it has also been the fourth largest consumer. In 2016 it became the third largest consumer and the second largest in 2017. Consumption has outpaced demand and China became the second largest beef importer in 2016. In 2016 the top suppliers were as listed below.
- Brazil – 29%
- Uruguay – 27%
- Australia – 19%
- New Zealand – 12%
- Argentina – 9 %
(Meat & Livestock Australia)
China opened up its borders again to Canadian beef in 2012, and in June China opened up its borders to beef from the US after a 13-year hiatus. Progress won’t be quick, but by all accounts, the US is leading the world in developing markets for exporting meatless meats.
China’s looking to accelerate the transition from a manufacturing-based economy to one that is consumer driven. That provides opportunities for a growing middle-class consumer of food products. China’s 5-year plan focuses on urbanization, consumption, healthcare spending, and infrastructure. It may even become the world’s largest Agrifood importer by 2020, so what role can we play in China’s growth strategy with existing resource-based products while developing sustainable and desirable products for the future consumer? The Belt and Road Initiative (BRI) is a multi-faceted strategy to boost trade, capital, and services between China, the Middle East, and Europe over land and trade routes, and it is expected to generate $2.5 trillion in trade over the next decade. The Asian Infrastructure Bank has committed $100 billion in capital to fund projects on the belt road, but the infrastructure in Asia alone will be $800 billion per year until 2020 (HSBC).
As mentioned above, Singapore’s State Fund, Temasek led the most recent $75M investment in US-based Impossible Food’s growth. A portion of the fund focuses on products that cater to a growing middle class in developing countries, and when Impossible Foods launches in China this year, it may be one small step towards China achieving food security.
China is Canada’s second largest two-way trading partner after the US. The Canadian government was in China last month to discuss free trade. While some industries fear Canadian job losses, lax employment and environmental standards, and state subsidies the beef industry was used as an example of trade between our two countries. Much of our beef is still exported south of the border to the US, but a portion goes to China since trade was re-established in 2012 (as noted in the chart above) and it’s safe to assume the industry would like that figure to grow. We may get more access to the Chinese market as a result of those discussions, but China imposes a 12% tariff on Canadian beef, while Australia has an 8.4% tariff that will be eliminated by 2024 under the free trade agreement they implemented with China in 2015. Our countries are frequently compared to one another given our relative size, population and the vast natural resources in our respective economies, and in the case of beef – the products aren’t equal in the eyes and wallets of the consumer.
Richard Branson and Bill Gates aren’t strangers to industry disruption. Both have made investments in these Silicon Valley companies that look to transform the meat industry. How can traditional and alternative meat industries work together to facilitate the trade of goods and services between countries? We have a responsibility to support both. Today that is meat, tomorrow it may be meat alternatives.
Canada has a role to play here too in supporting old and new worlds. Our largest meat producer, Maple Leaf Foods has acquired two companies to expand its portfolio of meat alternatives in the past year to meet future plans and this is a means of meeting its food sustainability targets. Lightlife Foods, acquired for $140 million, is a plant-based company that makes vegan sausages and burgers, and vegan based Field Roast Grain Meat was just acquired for $120 million.
Ten years ago smartphones promised to change the way we think and act. And, for the most part, they have transformed our world in ways that are immeasurable. Not all of them are good. Some of the plant-based meat alternative companies are almost a decade old and they need to respond to the ever-changing frontiers of improving their products. It will be interesting to see what another ten years brings to these two sectors once ‘clean meat’ is also available.
Branson imagines a future in the span of 30 years where no animal needs to be killed for animal protein, and one in which we will all have clean or plant-based alternatives. Is that a stretch of the imagination? I think there will always be a market for sustainable farming, but I also wouldn’t bet against Silicon Valley edging out their competitors.
Hampton Creek’s eggless mayo came from a Canadian yellow pea, but we have a much greater opportunity to find creative solutions by working alongside traditional meat industries to market and sell their products – as some of the largest food manufacturers are in the process of realizing this goal. Our schools, our pension boards, and venture capital firms can also invest in promising new companies that look to meet future demand. The meat is irrelevant, it’s time to meet and strengthen industries and build new alliances. The phrase “See and do no evil” refers to being in a static state but as a country, we cannot afford to adopt this attitude. Industries that make investments in long-term trends in order to eliminate losing market share is simply good business.