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The Next Economy
Tesco, Nestlé Poised to Benefit Most from Impending Plant-Based Protein Surge

A shift in consumer awareness around sustainability is causing a surge in demand for plant-based proteins — an emerging market opportunity that global food companies won’t want to miss.

Prepared by the FAIRR initiative — a collaborative forum for investors aiming to raise awareness of the risks and opportunities associated with livestock production, in collaboration with 57 large investors worth a combined $2.4 trillion — the report urges food companies to diversify their protein sourcing away from a reliance on animal proteins.

The report highlights projects that the market for alternative proteins — including foods such as the Impossible Burger — is set to expand at a compound annual growth rate of 8.29 percent in the next four years and could reach $5.2 billion by 2020. Just 18 months after its launch, the Impossible Burger is now available in over 500 US restaurants and has received funding of over $250 million from mainstream investors including Singaporean sovereign wealth fund Temasek. Meat industry giants Cargill and Tyson Foods recently announced investments in cultured meat startup, Memphis Meats.

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,” said Sasja Beslik, Head of Group Sustainable Finance at Nordea.

Sixteen multinationals were evaluated for the report on areas such as business strategy, monitoring processes, R&D investment levels and consumer engagement to understand how companies are positioned to capitalize on the rising demand for alternative proteins. The findings revealed that Nestlé and Tesco are best positioned to benefit from a transition to alternative plant-based proteins. M&S, Nestlé and Unilever were the only three companies analyzed to have set goals to increase their portfolio of alternative proteins. The analysis also revealed that all companies lack a coherent strategy for how to market and promote alternative protein products on supermarket shelves to drive sales.

“At Nestlé, we recognize 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,” said Duncan Pollard, AVP of Stakeholders Engagement in Sustainability at Nestlé. “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 Nestlé were praised for having set clear targets to reduce GHG emissions in supply chains containing high levels of livestock, as well as their willingness to provide detailed information to the investor coalition. Nestlé was further recognized for monitoring the proportion of R&D investment dedicated to developing plant proteins and what percentage of its proteins are derived from plant-based ingredients.

Costco and Whole Foods were both criticized 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 recognize protein diversification as a material issue.

FAIRR’s sustainable protein engagement was originally launched in September 2016 and has engaged with 16 large food retailers and producers. The investor coalition backing the engagement has grown from 40 investors managing $1.25 trillion in 2016 to 57 investors with over $2.4 trillion in AUM today. Over 42 percent of investors backing the engagement were from the US.