Industry’s Appetite for Veggie Burgers

Some of the world’s biggest food companies including Cargill, Archer Midland Daniels and Nestle are investing in the lowly yellow pea, creating what has been called by the food industry website Civil Eats a “feeding frenzy” in the search for designer proteins.

That looks like creating what looks like yet another Silicon Valley growth industry by figuring out how to give plant protein the taste and mouth feel of meat. (The other exploding California agricultural industry is, of course, cannabis.) Interest in pea protein has grown at a combined average rate of 30 percent from 2004 to 2019, signaling growing consumer interest in protein products consistent with a plant-based diet, according to a recent study by the international consulting firm McKinsey.

Pea protein is the main ingredient in the artificial hamburger along with canola oil and refined coconut oil – and beet juice extract to make the hamburger “bleed” on the barbecue. Some estimates suggest the market value could reach US$360 million by 2022.

Today, 15 fast-food chains are offering either the Beyond Burger, which is pea protein-based, or the Impossible Burger, which is made of wheat, potato and soy protein, both of which taste remarkably like meat. Among the biggest chains offering them are Burger King, producing the Impossible Burger, and Carl’s Jr the Beyond Burger.

Beyond Meat, which produces the Beyond Burger, was founded in 2009 with venture funding from Silicon Valley giant Kleiner Perkins as well as Bill Gates and poultry production giant Tyson Foods. Impossible Foods, also Silicon Valley-based, has raised at least US$675 million in outside funding.

Demand, which has accelerated sharply in the past decade, is being driven by changing consumer behavior and interest in alternative-protein sources “due in part to health and environmental concerns as well as animal welfare,” according to the McKinsey study, titled “Alternative Proteins: The Race for Market Share is on.”

That, McKinsey analysts Zafer Bashi, Ryan McCullough, Liane Ong, and Miguel Ramirez write, is expected to cut the overall growth rate of aggregate consumption of meat-based products by half. Plant-based food sales using alternative protein rose 17 percent in 2018 to US$2.2 billion in 2018, marginal when compared to global meat market sales of US$1.7 trillion.

As nearly as can be determined, pea protein production is considerably more environmentally sound than for meat. As has famously been reported, the average global water footprint to produce a kilo of beef is 15,000 liters and requires roughly 130 hectares of land plus 55 kg of forage. Plant protein production thus avoids the feed-to-food conversion loss typical of other protein forms.

Several including increased consumer interest in health, price, and ethical considerations such as where meat is sourced from and animal welfare around different types of protein. These “hamburgers” have achieved escape velocity to break out of the realm of vegan diets.

In general, overall protein consumption is increasing faster in developing markets as income levels and urbanization rise, according to McKinsey, particularly in China and India. China’s protein consumption, particularly of pork, is expected to grow to 70 million tonnes by 2025, up from 57 million in 2018, responsible for 31 percent of the global increase. India’s protein consumption is expected to reach 38 million tonnes in the same period up from 30 million tonnes in 2018. Between them, the two countries are expected to account for 47 percent of global protein consumption.

US residents, however, still consume almost twice the amount of beef protein compared with the global average although consumer views on alternative protein products are changing. A 2018 McKinsey survey found that 82 percent of respondents rate plant protein as healthy compared with 74 percent for animal protein.

Released products touted as vegan surged along with dairy-free and “ethical,” meaning producers do not contribute to animal cruelty). The most popular types for consumers are soy, followed by pea and several niche types, such as chickpeas, rapeseed, and lupin, among others.

Soy protein, which was an early leader in alternative protein, has declined at an average compounded rate of 6 percent, due partly to the development of other production options such as pea protein and concerns over allergenic and estrogenic effects from the soybean. Soybean sales have also been hit hard by President Donald Trump’s tariff war with China, which in mid-2018 almost stopped importing US soybeans, also partly because of an African swine fever outbreak that decimated swine herds.

However, with the projected growth of meat consumption in major developed markets, such as China, animal protein will likely maintain a significant market share. This type of protein has advantages: poultry, pork, and dairy-based proteins are relatively efficient in feed conversion compared with traditional meat protein (though not as efficient as plant-based proteins) and offer products and tastes that are familiar to most consumers. Nonetheless, producers should not discount alternative proteins, as they do have the potential to capture a share of the growing protein market.

Pea protein, however, does face certain challenges. Supplies are limited because of a shortage in processing capacity, which is on the way to being remedied. Roquette, a France-based firm that produces byproducts from corn, wheat, potatoes, and peas, announced a US$400 million project in Manitoba, while Archer Daniels Midland announced its own facility in North Dakota.

For production to be economically feasible, the McKinsey report notes, food developers must identify a high-value application for pea starch, a byproduct that makes up 60 percent of the pea volume but is not used in pea protein–based products. If the protein is sold but not the starch, or if the starch is sold at a low price point, then it becomes difficult for the process to be economically feasible.

Thus, producers could make a profit by selling this protein if they don’t lose money on the starch. Producers of mainstream products such as veggie burgers who rely on soybean protein are likely to enjoy lower input cost and more stable feedstock supply. However, high-end products will likely use pea protein to cater to consumer expectations of a niche ingredient, which is a product that touts health claims and is on sale at a premium price.

The demand for pea protein is expected to continue growing, not only providing a product consumers want as an alternative to meat, but for investors, who have seen an annual combined growth rate of from 2004 to 2019.

Cultured meat – actual meat grown in the laboratory – is another study. The first lab-grown hamburger cost US$325,200 in 2013, according to McKinsey. That fell to around $11 in 2015. One company told McKinsey that by 2020, costs are expected to fall to US$2.30 to US$4.50 a pound. Industry leaders expect the product to enter the retail market in the next three to five years, with a preliminary introduction to consumers through high-end restaurants.

“However, the product may appeal to a limited segment mainly concerned with animal welfare and the environment rather than health, limiting the potential consumer market,” the report notes. “If mass production is successful, this technology is best positioned to replace beef, since it is not as cost-effective as conventional poultry production.”