Setting Food Consumption Trends: What Role for Asia? 99
Asia is seeing the fastest middle-class expansion the world has ever seen. In 2020, an estimated 2 billion Asians comprised its middle class – and that number is set to increase to 3.5 billion by 2030. Increasingly, this growing market of relatively affluent consumers is both influencing and reflecting global food consumption trends related to health, sustainability and technological innovation.
In recent years, environmental issues, African swine fever and avian influenza have driven global consumer concern about food safety, traceability and sustainability. Covid-19 has also sharpened consumer focus on healthy diet choices and driven an increase in alternative protein sales, with many first-time buyers reporting they are likely to continue purchasing meat-free alternatives beyond the pandemic. Customers are also increasingly paying attention to carbon emissions resulting from the production of the products they consume, including food and other agricultural produce.
In Asia, consumer focus on health is combining with an increase in disposable income, technological innovation in food and beverages, and supportive government policies – especially in Singapore, Japan and China – to fuel accelerated demand growth for plant-based alternative products in Asian markets.
To meet this demand, investment in scientific research to produce innovative foods is growing, and the range of new food products in the alternative protein space is rapidly expanding beyond meat analogues to include plant-based alternatives to seafood, dairy-free substitutes and beverages, and meat-free protein snacks. From November 2019 to November 2020, alternative protein start-ups in the Asia-Pacific region raised more than US$230 million; albeit relatively small, relative to the US$741 million raised in the first quarter of 2020 alone by US plant-based companies, the funds raised in Asia represent over 350% (4.5 times) more than the total funds raised over the previous three years combined.
With accelerated investment, plant-based food in Asia is quickly evolving beyond the traditional ‘mock meat’ market. Increasingly, as investment builds momentum in technology development and product innovation to cater for local tastes and reduce the environmental impacts of production, new products are being formulated from a wider spectrum of locally available plant protein sources: peas, algae, peanuts, millet, lentils and mushrooms.
This is important, because when it comes to food – taste is still king.
According to a global UBS Evidence Lab survey in February 2021, taste profile concerns remain the number one factor deterring consumers who are reluctant to try plant-based meat substitutes, 52% of whom cited “I don’t think it will taste good”, while just 27% cited these products as “too expensive vs. animal meats”.
Asian countries have a long history of plant-rich diets. Asia-Pacific currently accounts for 92% of the world’s meat substitute market, due to strong demand for tofu in the region. India tops world rankings for the highest rate of vegetarianism, with vegetarians accounting for 38% of the country’s population. And across the region, over a third of all consumers have either low or no-meat diets. Vegetarians in Asia have been eating soy-based products as a source of protein for centuries, which has laid a good foundation for acceptance of soy-based meat alternatives and other new protein products in the region.
In global terms, however, vegetarians currently constitute a relatively small percentage of the population, with only 4% of consumers identifying as ‘vegan’ and 6.4% as ‘vegetarian’. On the other hand, people seeking to diversify their diet with more plant-based options without following a strict vegetarian or vegan diet – so-called flexitarians or meat-reducers – constitute a much bigger group, accounting for 42% of consumers globally in 2020.
One motivation cited by flexitarians is an increasing awareness of the environmental impact of land conversion to agriculture, with related deforestation and biodiversity loss. Our World in Data estimates that adoption of a plant-based diet could reduce agricultural land use by 75%. Similarly, a vegetarian diet greatly reduces an individual’s carbon footprint; meat products have larger carbon footprints per calorie than cereal- or vegetable-based products, both because of carbon-intensive transformation of plant energy to animal energy, and due to the methane released from manure management and enteric fermentation in ruminants.
All the world may not have the historical, cultural or religious relationship with vegetarianism that Asia does, but environmental concerns and – following the Covid-19 pandemic – growing demand for healthy food options are encouraging wider adoption of more plant-based diets, particularly in Europe and the US. And this will be encouraged if massive investment in product development in Asia delivers new products that improve perceptions about the taste of plant-based food.
In 2020, Singapore went beyond substituting plants for meat, with the approval of US start-up Eat Just, making it the first country in the world to allow the sale of so-called ‘clean meat’ that does not come from slaughtered animals. Cellular agriculture – the process of creating cultured meat from a single cell – presents an alternative to plant-based food that also addresses the environmental challenges presented by traditional meat production. By being first to grant regulatory approval, Singapore could be leading the way in a global revolution in food production.
At LDC, we recognize the vital role that innovation will play in meeting growing demand for safe, nutritious and sustainable food. This is why we have put innovation at the heart of our transformational strategy, with several important strides in this area over the past year, with more developments and investments in store for 2021.
In June 2020, we launched LDC Innovations, our corporate venture capital program to invest in innovations and technologies with the potential to transform the food and agriculture industries. Through this program, we are investing in early stage companies pursuing technology-enabled innovation to create healthier and more sustainable food, feed and ingredient options, including investments in several startups and companies working in the plant-based foods space, like Benson Hill (breeding highly productive, nutritious and better-tasting plants), Motif FoodWorks (using fermentation to produce ingredients that improve the nutritional value, texture and taste of plant-based foods), Comet Bio (producing prebiotic fibers from upcycled agricultural by-products) and Gathered Foods (producing, packaging and selling plant-based seafoods).These investments, and others to come, reflect our commitment to sustainability, upcycling in the agricultural supply chain and a lighter environmental footprint for agricultural and protein value chains in general.
As a major and fast-growing consumption region, Asia is an undeniable force in leading new food consumption and innovation trends, and we will therefore be looking to invest in the region in the near future.
In 2020, we also signed an agreement with Chinese partners to build Rongchuan aquatic feed facility in Tianjin, as well as a food industrial park in Nansha, Guangzhou, encompassing feed protein processing, high-tech ecological aquaculture, food innovation, plant-based clean energy production and other sectors. We also formed a research partnership with Temasek Life Sciences Laboratory to develop optimal aquatic feed formulations for the commercial rearing of barramundi fish, as an alternative source of protein.
In Asia, new technologies are being used not only to produce more plant-based, high-quality protein alternatives to meat, but also to enable food traceability. With consumers increasingly careful about what they eat, demand is growing for guarantees of safe and transparent supply chains. A 2020 survey by McKinsey & Company found that 60% of consumers in large cities in China, home to a majority of the country’s growing middle class, said they now always check packaged food ingredient labels and will not buy a product unless it seems healthy.
This concern reflects consumer behavior worldwide, and resonates deeply with LDC’s own vision to help shape a safe and sustainable future of food, guided by our company purpose to create fair and sustainable value for the benefit of current and future generations.
As we pursue our strategy to add more value to products ourselves, integrating further across the value chain from farmer to end consumer, we have both an opportunity and a duty to drive traceability and sustainability across our diverse product lines. Embracing new technologies is essential to this effort, and we are doing so across our business by using blockchain, DNA tagging, satellite monitoring and other technologies to increase traceability in coffee, cotton, juice, palm and soy supply chains.
For example, our joint initiative with industry peers to modernize agri-commodities trade operations by means of cutting-edge technologies set up as a legal entity in Switzerland in 2020 as Covantis S.A. The entity launched its new blockchain platform in February 2021, with an initial focus on grains and oilseeds, and growing uptake by a wide range of industry participants. This initiative is driving the necessary optimization, digitization and standardization to drive greater data security, efficiency and transparency in agri-commodities trade transactions.
New technology is also changing the way Asian consumers and retailers interact. Consumers in many parts of the world have moved away from cash as their primary form of payment. But in china, with 90% of consumers now using mobile money on e-commerce platforms such as Alibaba and WeChat, the country has by-passed credit cards, which remain Western consumers’ preferred payment method.
In 2020, LDC launched several new high-end cooking oils under our Mastergold brand to meet Chinese consumer demand for high-quality edible oils. We then embraced e-commerce through several partnerships for the distribution of cooking oil products via leading Chinese e-commerce channels, including JD.com, Alibaba, Pinduoduo, Taobao and WeChat Shop. Mastergold’s own e-store was launched on JD.com in June 2021.
Fundamentally, consumption trends come down to numbers. In 2030, Asia’s estimated 3.5 billion middle class consumers will account for 66% of the global middle class. The sheer number and economic sway of solvent Asian consumers will give them massive influence on global food consumption trends, whether or not they export national consumer behaviors.
We believe LDC’s transformational strategy, with its focus on food and feed innovation, and long-standing commitment to safety, traceability and sustainability, resonate with consumer expectations and position us well to address and help shape current and future food consumption trends, in Asia and the wider world.