Institutional Asset Manager, 13 February 2018.
A new report entitled ‘Plant-based profits’, backed by a USD2.4 trillion coalition of 57 large investors, has urged global food companies to diversify their protein sourcing away from a reliance on animal proteins.
An analysis of 16 multinationals concluded that Nestlé and Tesco were best positioned to benefit from a transition to alternative plant-based proteins. Other companies engaged included Kraft Heinz, General Mills and Unilever.
The investor coalition is coordinated by the FAIRR initiative, founded by private equity pioneer Jeremy Coller (pictured), and includes pension funds such as AP2, AP3 and AP4 and institutional investors such as Aegon, Aviva Investors, Coller Capital and Nordea.
The report highlights projections that the market for alternative proteins, including innovative foods such as the ‘Impossible Burger’, which use plant-based ingredients to produce more sustainable, healthy foods that emulate meat, is set to expand at a compound annual growth rate of 8.29 per cent in the next four years, and could reach USD5.2 billion by 2020. Just 18 months after launch, the Impossible Burger is now available in over 500 US restaurants and has received funding of over USD250m from mainstream investors including Singaporean sovereign wealth fund Temasek. Prominent meat industry players Cargill and Tyson Foods recently announced investments in cultured meat start-up, Memphis Meats.
The 16 multinationals were evaluated on areas such as business strategy, monitoring processes, R&D investment levels and consumer engagement to understand how companies are positioned to capitalise on the rising demand for alternative proteins.
The report finds: that Nestlé and Tesco are best prepared, all companies market at least one own-brand alternative protein product; only three companies have set some type of goals to increase their portfolio of alternative proteins (M&S, Nestlé and Unilever); and all companies lack a coherent strategy for how to market and promote alternative protein products on supermarket shelves to drive sales.
Sasja Beslik, Head of Group Sustainable Finance, Nordea, says: “Sustainable protein is a fast-emerging issue for the food industry, and it is important for long-term investors to know if the companies they invest in understand the related risks and opportunities. FAIRR’s sustainable protein engagement offers practical guidance to companies to ensure they have a business strategy that is robust enough to respond to a changing food supply chain. For us as investors, this engagement also helps us to be on top of the developments in this space as well as to identify food companies that proactively invest in innovative solutions.”
Jeremy Coller, Founder of the FAIRR Initiative and CIO of Coller Capital, says: “Today’s Plant-Based Profits report shows that alternative proteins are rapidly going mainstream. From meatpackers to supermarket stackers the global food sector is rapidly taking notice of plant-based alternatives to animal protein products, and that is driving 8 per cent annual growth in the alternative proteins market.
“It’s significant that all of the food producers and retailers engaged by investors now market at least one own-brand alternative protein product.
“Ultimately, this trend is driven by the inability of the global meat industry to manage the environmental, public health and animal welfare challenges that the world’s current demand for animal protein creates; and that is generating remarkable opportunities for food companies and their shareholders.”
Duncan Pollard, AVP, Stakeholders Engagement in Sustainability, Nestlé, says: “At Nestlé, we recognise that for a business like ours to be successful, we must take a long-term view. We have the responsibility and the opportunity to shape the sustainable production and consumption of food to preserve our planet for future generations. The development of the protein supply chain is an issue with the potential to radically reshape the supermarket shelf of the future. We very much welcome the support of those investors who want to act today to stay ahead of the curve in the economy of tomorrow.”
Tesco and Nestle were praised for their livestock emission targets, with both companies having targets to reduce GHG emissions in supply chains containing high levels of livestock. Tesco has set a target to reduce agricultural emissions by 15 per cent by 2030.
Both companies also gave detailed answers to the investor coalition’s questions and held candid discussions with investors, while Nestlé monitors the proportion of R&D investment dedicated to discovery projects on plant proteins, and tracks what percentage of its proteins are derived from plant-based ingredients.
In January 2018, Tesco introduced 20 ready meals with plant-based options under a wide consumer brand, created by their director of plant-based innovation.
Costco and Whole Foods were both criticised for failing to adequately respond to investor requests for information or further meetings. Costco, which has a large footprint from its meat sales, was singled out by investors for failing to recognise protein diversification as a material issue.