The plant-based craze sparks the appetite of companies and investors

No more frankfurter sausages for Nestlé.  The group will separate from its subsidiary Herta, a flagship brand present in eight out of ten refrigerators in France. In the absence of meat products, Nestlé has decided to retain the brand’s ready-to-bake pie crusts and vegetarian products in order to "position the portfolio in attractive categories with high growth," according to the group.

The group is now turning to plant-based food manufacturer, Sweet Earth. "Vegetarian diets are becoming more popular, consumers are looking for different ways to balance their protein intake in their diet and reduce their environmental footprint," says Nestlé, who now prides itself on having 'a much clearer strategy'.

Strong pressure from consumers and investors

It must be noted that the global food giant was pressured from all sides. The American activist fund, Third Point, took a stake in Nestlé’s capital in June 2017, putting the group under pressure. Especially after Daniel Loeb, the American billionaire at the head of the hedge fund did not hold back in labeling Nestlé’s policies as a "messy strategy" for having maintained unprofitable activities, particularly in cold cuts meats. Consumers are just not fond of the product.

Ham, the main product in Nestle’s meat portfolio, is declining by 2% each year. A decrease explained in part by studies and reports showing the health consequences of sausage products. In 2015, the International Agency for Research on Cancer estimated that consuming 50 grams of processed meat a day, or two slices of ham, increased the risk of colorectal cancer by 18%. Add to it an increasing interest in animal welfare and awareness that livestock is the most polluting aspect of agriculture, a significant decrease in demand for meat products is to be expected. In general, meat consumption fell by 10% over the past 12 years in France.

Extraordinary fundraising for plant-based startups

Data is pushing actors in the agribusiness to evaluate their strategies, at varying different scales. The fast-food giant McDonald's is set to standardized vegetarian burgers in their Happy Meals. Additionally, the meat in their McMuffin breakfast sandwiches can be replaced by eggs. Danone is also taking part in the trend by offering alternative "dairy" products made from soy, almond, and coconut.

In 2017, Danone bought the American food company White Wave for €11.3 billion and created the brand Alpro. Their goal is to compete with Bjorg, leader of the plant-based food market in France. It is important to note that the growth of vegetarian and vegan products attracts many actors. The Xerfi Research Institute recorded a 24% rise in the sale turnover for these products at various French distributors in 2018.

An undisputed marker of this plant-based craze is the extraordinary fundraising by startups specialized in these products. The American startup Motif Ingredients, which makes plant-based protein alternatives, raised $90 million! This is an unparalleled amount in the foodtech sector. "For every plant-based company looking for financing, there are two or three investors, I've never seen anything like it in Silicon Valley," says Olivia Fox Cabane, founder of the startup Kind Earth and leader of the International Alliance for Alternative Protein.

Even Jeff Bezos, the richest man in the world and founder of Amazon, thinks the future is plant-based. He participated in the €30 million fundraising campaign for the Chilean startup NotCo, via his company Bezos Expedition.  NotCo uses artificial intelligence to create alternatives to animal protein.

Despite manufacturers and consumers having an appetite for plant-based products, the meat lobby is trying to weaken the movement. They are currently funding advertisements on “flexitarianism”, which is a term used to signify decreased meat consumption. Many meat and livestock companies, however, defend a flexitarian diet as "eating better" and not "eating less", meaning: eat better quality meat and vegetables!

Marina Fabre, @fabre_marina