For the first time since its launch in 2016, FAIRR’s (Farm Animal Investment Risk & Return Initiative) collaborative engagement found Unilever, Tesco and Nestlé among the best prepared firms to leverage booming plant-based market to prepare for a low-carbon future; Costco and Amazon (owners of Whole Foods) falling behind.
The alternative protein sector, which includes plant-based substitutes for traditional animal‐based foods such as ‘Beyond Meat’ or ‘Impossible Whopper’ burgers and plant-based milks, is expected to capture around 10% of the meat market within 15 years and is now valued at $19.5 billion according to research quoted in today’s ‘Appetite for Disruption’ report by the FAIRR investor network.
The report provides a briefing on long-term sustainability risks associated with livestock supply chains, which account for 14.5% of global greenhouse gases. According to the Food and Agricultural Organisation (FAO), the sector is the largest user of freshwater resources, and grazing and feed production account for 80% of all agricultural land. The sector is also highly exposed to physical risks from climate change.
Over 87% of retailers have ramped up their own-brand plant-based products. It means more supermarket products will come from low-carbon protein sources such as plant-based foods, rather than meat and dairy. Nestlé has said that it expects its plant-based sales to reach $1 billion in ten years.
In 2016, FAIRR’s shareholder engagement was supported by 36 investors managing $1.25 trillion of assets; the clear business case for protein diversification has now attracted 74 investors with combined assets of $5.3 trillion including Schroders, (UK) NN Investment Partners (NL) and Boston Common Asset Management (US).
Other key takeaways from the report include:
· 5 of 25 firms (Unilever, Tesco, Nestle, M&S, Conagra) achieved the top ‘proactive’ ranking, 16 were active, with 4 (Amazon, Hershey, Costco, Saputo) given the bottom ‘reactive’ ranking. [See table in notes]. These categories indicate a company’s readiness to undertake a protein transformation.
· 23 of 25 companies have expanded (or announced plans to expand) their alternative protein product portfolios in the last 12 months.
· 64% of the companies included terms like “plant-based” and “vegan” in their annual reporting and/or quarterly earnings calls in 2018/2019.
· Seven of 25 (28%) companies (including Unilever and Tesco) were awarded higher scores based on official ‘Scope 3’ climate targets that explicitly referenced their efforts to reduce their supply chain emissions from agriculture (either by eliminating mass of emissions, absolute emissions or through science-based targets).
Jeremy Coller, Founder of FAIRR and Chief Investment Officer at Coller Capital, said:
“For too long big food has been playing catch up to consumers and start-ups on alternative proteins, when they should be leading this transformation. This report shows that some food multinationals are seizing the moment by setting clear strategic goals to increase their alternative protein exposure, supported by relevant metrics that are tracked and reported.
That’s a good start, but as alternative proteins go mainstream, investors want more food retailers and manufacturers to capitalise on the opportunity including improving branding, merchandising and tracking of alternative protein products to expand their appeal across a broad swathe of consumers.”
