Affordability and innovation drive record commitments on protein diversification, FAIRR study reveals

A new report from the US$68 trillion-backed FAIRR investor network, drawing on a six-year engagement with 23 leading food manufacturers and retailers, has revealed increased focus by retailers to provide more affordable plant-based meat and dairy alternatives to meet consumer demand for alternatives and to meet retailers’ own climate goals.

FAIRR’s Sustainable Protein engagement is supported by 84 investors (collectively managing US$23 trillion in assets) and engages with companies including Walmart, Tesco, Unilever, Kraft Heinz and Nestlé. Participating investors include Columbia Threadneedle Management, Amundi, and Canada Post Corporation Pension Plan.

Alternative proteins present a unique investment opportunity, combining environmental stewardship with financial return. This is reflected in the increasing numbers of investors joining FAIRR’s engagement, and in the fact that alternative protein companies raised US$1.7 billion in the first half of 2022, demonstrating a stable growth rate (2%) compared to H1 in 2021.

Reports predict that plant-based products could reach parity in taste, texture, and cost between 2023 and 2031, with the alternative protein marketsize forecasted to represent 10-45% by 2035 and 25-50% by 2050 of the total protein market. Rising inflation is also driving closer price parity. In the UK, for example, FAIRR finds the cost of Oatly oat milk has fallen from almost 2.5 times higher than dairy milk in 2019, to just 12% higher per litre today. Research shows the average price per unit of plant-based meats has increased by 3% this year, compared to a much greater 6% increase for conventional (frozen and refrigerated) meat.

Companies involved in FAIRR’s engagement have collaborated directly with food tech start-ups to incorporate novel technologies into their portfolios. Findings from the engagement suggest that fermented-enabled protein could become the next preferred alternative food technology, with companies allocating significant amounts to R&D budgets to allow for more innovation.

Consumer engagement continues to be the lowest-performing area for engagement companies, given the lack of an overarching strategy to accelerate consumer uptake. However, once seen as a premium-priced indulgence, engagement companies are now increasingly making concerted efforts to increase alternative proteins’ accessibility and affordability.

Mondelez has launched plant-based Philadelphia cheese products at the same price range as the dairy versions, Walmart has incorporated plant-based products into its affordable ‘Great Value’ brand and, in the UK, Tesco‘s vegan ‘Plant Chef’ range is 11.6% cheaper per kilo than comparable own-brand meat products, according to FAIRR research.

More innovative and affordable sustainable proteins are likely to become a key resource in tackling future climate related food security issues. The IPCC’s chapter on Food Security states that projected future climate changes will increasingly impact food security. It points to the reduction of meat consumption as an adaptation measure as it reduces pressure on land and water.

FAIRR’s Sustainable Protein engagement encourages companies to diversify their portfolio, by reducing their exposure to animal-derived products and increasing sustainable sourcing practices across proteins. This aligns with the long-term recommendations of the EAT-Lancet Commission, which recommends a macronutrient intake split of 60% plant-based protein sources and 40% animal-derived (including meat, fish and eggs). The number of engagement companies setting targets continues to increase. In 2022, 35% of the engagement companies have committed to increasing the volume or sales of meat and/or dairy alternatives. This figure is up from 28% in 2021 and 0% in 2019.

Another key ask of engagement companies is to set Scope 3 emission targets and disclose progress metrics and many (65%) have set SBTi-approved Scope 3 goals as well as net-zero commitments (70%). However, only 50% of these net-zero commitments cover Scope 3 emissions, and with animal agriculture accounting for approximately 33% of total GHG emissions, companies must robustly address GHG emissions linked to animal-derived products if they intend to reach their carbon reduction goals.

“From precision fermentation to plant-based meatballs, innovation in alternatives to meat is disrupting the commodities market and bringing new, more sustainable choices to consumers," said Jeremy Coller, Chair & Founder of the FAIRR Initiative. "Combined with inflation that is driving the price of traditional meat and dairy up at a quicker rate than alternatives, we are starting to see a world where plant-based meat and dairy is just as affordable as conventional animal-based products. Over the six years of FAIRR leading this investor engagement, we have seen the conversation with leading food brands change from whether to consider alternative protein products, to how to scale up quicker to keep pace with consumer demand.”

“This year, FAIRR has provided an outlook for each company as opposed to a score," added Sofia De La Parra, Sustainable Protein Engagement Lead, the FAIRR Initiative. "The outlook reflects a company’s progress since the last phase of the engagement and FAIRR’s view on its expected trajectory for the next 12-18 months.

FAIRR and its investor members are pleased with the companies’ progress since this engagement began in 2016. However, more must be done, with 48% of companies scoring a ‘neutral’ outlook indicating they will maintain rather than accelerate their improvement. With so many companies publicly declaring net-zero commitments, product portfolio diversification away from animal agriculture will be essential to meet these without resorting to offsetting.”

“Over the past few years, FAIRR has been a supportive partner and advisor on Unilever’s plant-based journey in Nutrition and in Ice Cream," revealed Hanneke Faber, President Nutrition, Unilever. "We have accelerated our portfolio shift and innovations to plant-based, as well as setting an annual €1 billion sales target from plant-based foods by 2027. We are delighted that we have maintained our top scoring position in FAIRR’s 2022 Sustainable Protein ranking. As one of the largest food companies in the world, we believe we can and must help redesign the global food system by diversifying food consumption towards a more balanced, plant-based diet that supports human and planetary health.”