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The Protein Problem: Sustainable Proteins as a Solution for Emerging Markets

7 September 2020
Key Topic(s)
Alternative Proteins

Rapid population growth, urbanisation and increasing incomes in emerging and developing economies have driven up protein demand in recent years – creating what some are calling a “perfect storm” for protein production. Animal agriculture is already responsible for at least 12% of greenhouse gasses, and 30% of anthropogenic-caused biodiversity loss. With protein consumption set to double between 2017 and 2050, we cannot expect to meet this demand with animal proteins alone without incurring devastating environmental costs.

So, how can we address this soaring demand while ensuring consumers in both developed and emerging markets can affordable, high-quality and sustainable proteins into their diet?

Investors, retailers, food manufacturers and consumers alike are turning to plant-based proteins as the answer.

Though alternative protein products are now growing in popularity (and market cap) in North America and Europe, the protein demand problem is a global one. This means it’s important to analyse the relevance and accessibility of sustainable proteins for emerging and developing markets too – where malnutrition has long been an issue and eating meat can be seen as a symbol of success, especially amongst the growing middle classes. This article will explore the uptake of sustainable proteins beyond developed markets as a nutritional, socio-economic and environmental solution.

The Path to More Nutritious and Resource-Efficient Proteins

We live in a world where 65% of the global population is either malnourished or obese/overweight. This has huge economic costs globally (see figure below). Malnourishment is most prevalent in emerging and developing markets and is often the result of diets that don’t include sufficient essential proteins, vitamins, minerals and other nutrients. Societies have historically relied on animal proteins because they contain high-value protein alongside other macronutrients, such as iron, calcium and vitamins.

However, plant-based alternatives are now just as nutritious as their animal-sourced counterparts and offer a more sustainable and efficient way of meeting protein demand long-term. In fact, feeding livestock to produce animal protein is extremely inefficient. For every 100 calories fed to animals, only 17-30 calories are produced in the form of meat.  Whereas, per unit cropland, nutritionally similar plant-based replacements produce 2 to 20 times more food than animal-based categories.

In particular, grains, pulses and beans present real opportunities for providing nutritious alternatives to animal proteins that simultaneously help fight malnourishment in emerging markets and reduce the impact of protein production on the planet.

If the Price Is Right: the Growing Financial Accessibility of Plant-Based Alternatives

In addition, plant-based alternatives can offer a more affordable protein source than animal products – especially in developing economies where some animal protein products may be inaccessible to many. Currently, beans, nuts, peas and wheat are cheaper than beef, pork and sometimes chicken, though alternatives such as tofu and fermented protein being more expensive.

Currently, the price points of some sustainable proteins may still prove a barrier to uptake outside of European and North American markets. Though brands like Beyond Meat and Impossible have entered the market in China, Singapore and Malaysia, their product offerings are still too expensive to be a realistic option for most.

That said, the International Food Policy Research Institute (IFPRI) has suggested that fermentation-based meat alternatives present opportunities for financially-accessible protein options for developing and emerging markets in future. Similarly, the Food and Land Use Coalition also highlights that insect protein could help meet protein demand affordably. Insect protein is already prevalent in sub-Saharan Africa and well accepted in Asia, with the global market currently being valued at $1 billion.

As the price gap between traditional protein products and alternatives continues to narrow, sustainable proteins have great potential to offer a cost-effective solution to the world’s protein demand. The rate of innovation and investment in this sector will only enhance its accessibility to emerging markets in the years to come.

Accepting the Alternative: Changing Consumer Attitudes

Consumer acceptance is perhaps the most important obstacle to the success of the protein transition. Meat and dairy products have high cultural value within human diets and livelihoods and are seen as most attractive by the emerging middle classes. A demand-side intervention to shift customer perception is needed to facilitate protein diversification – and it will need to happen quickly if we are to remain within the ‘well below 2°C’ scenario outlined in the Paris Agreement.

Food manufacturers and retailers are well-placed to help develop and disseminate new narratives that increase the cultural value of plant-based protein to drive consumer acceptance. Although it is unlikely that we will see a complete shift away from meat in the coming years in emerging markets, a considerable consumer shift isn’t impossible. Indeed, 2020 has been a watershed year for the uptake of plant-based proteins in the US, Europe and other developed markets, largely driven by consumer demand as a result of widespread awareness of the environmental footprint of animal protein, and accelerated during the COVID-19 crisis.

An Innovation Intervention: the Role of Investors in Protein Transition

Emerging and developing markets make up 2/3 of the world’s population. How protein consumption trends develop in these markets will shape the future of our food systems. In order to facilitate the change towards a sustainable food system and enable long-term food security, intervention from governments, food retailers and manufacturers as well as local organisations will be critical. Companies should ensure high quality, affordable and accessible plant-based proteins are available to the public in these areas whilst actively encouraging consumers to diversify or replace their protein choices using creative, innovative and strategic product development. By not doing so, they bring their sustainability targets and credentials into question.

Investors have a key part to play in communicating this pressing need to the companies they invest in. They can ask vital questions about how companies are addressing potential risks and opportunities presented by the rising demand for protein in emerging and developing markets and whether they are diversifying their protein sources to build resilience and lessen environmental impacts. FAIRR’s Sustainable Proteins Hub offers a valuable resource for assessing the progress of companies in this area. As we reach the end of our blog series on sustainable proteins, we encourage investors to consider their pivotal role as stewards of capital within the global protein transition that’s already underfoot.

FAIRR insights are written by FAIRR team members and occasionally co-authored with guest contributors. The authors write in their individual capacity and do not necessarily represent the FAIRR view.