Replicate, Differentiate or Innovate? The Quest to Be ‘Meatier Than Meat’
“History doesn’t repeat itself, but it often rhymes.”
– Mark Twain
Alternative proteins are generally discussed in a single sound bite. People may love them or hate them, eat them or avoid them. The sector is starting to encompass a dizzying array of products and approaches as companies create substitutes for meat, seafood, dairy, eggs, and ingredients using a mix of technologies such as plant-based, fermentation, and cultivated. An estimated 4,000 companies are trying to revolutionize the food industry by using different approaches to innovation which broadly fall into three categories:
The Replica: The first set of companies utilise a concoction of ingredients, most often plant-based, to resemble an animal product. Impossible Foods and Beyond Meat are notable examples of this type, which we can call a replica.
The Alternative: A second set of companies is creating products that do not strive to mimic animal products. They create different but similar products that appeal to certain consumer segments. Oatly stands out as the most prevalent alternative.
The Identical: A third set of companies are synthetically creating products that are bio-identical to animal products. Cultivated meat companies such as Upside Foods and Good Meat are among the most prominent examples of companies creating identical products.
In this article, we examine the advantages and pitfalls of each approach and its relative success, though we must acknowledge that from a long-term perspective, most are still in their infancy.
The Tyranny of Scrutiny
Perhaps no segment of alternative proteins is monitored more closely than plant-based meat, which includes the sector’s highest-valued company, Impossible Foods, and its notable public competitor, Beyond Meat (NASDAQ:BYND). Each has created a replica using plant proteins, the former with soy, and the latter with pea protein. This is reflected in their brand positioning, which implies that the very creation of their products is seemingly “impossible” and asks the consumer to go “beyond” meat. Beyond Meat’s products page predictably states, “Imagine a world where we’ve taken the animal off the table, while still delivering the meaty, plant-based, better-for-you meals you crave.” The central message is to move away from meat, to replicate meat. There is no doubt that both companies have established formidable brands with global awareness, but plant-based meat has garnered just 2% market share of the global meat industry despite taking in billions in funding.
Life is hard as a replica, which strives to impersonate the original, at least in certain factors like the taste. When it comes to imitation, two issues emerge. First, imitations very rarely match up to the real thing. As a result, almost by definition, they will be perceived as second best. In addition, using a different set of ingredients with their unique functional properties requires various acts of culinary acrobatics to match the taste, texture, nutrition, and price of the original product. This resulting product is highly processed, which results in a complex range of issues, such as high sodium levels, the use of gums and emulsifiers, utilizing GMOs, and other tactics viewed negatively by consumers. While producing a replica has the benefit of targeting a clear benchmark, achieving it has proven to be challenging, at least with the current technology stacks. Further, if a product is positioned as a replica, the consumer will invariably compare it with the original. This in turn causes consumers to go ‘deep’ to evaluate its taste, texture, and nutrition. A product subjected to this level of scrutiny is effectively guaranteed to fall short in one way or another, limiting its adoption.
Think Different (But Similar)
Throughout the history of the alternative protein movement, the industry has made one fundamental assumption: consumers always want a replica. Consumer adoption tells a different story, which is most prevalent with alternative milk. In the U.S., the leading market for plant-based products, plant-based milk commands a staggering 16% market share and growing. In Switzerland, plant-based milk is posing a serious threat to conventional dairy despite the term “milk” being illegal for foods of non-animal origin. One simple fact stands out: Rather than a replica, plant-based milk is trying to provide an alternative. An alternative simply tries to provide another choice, which may be different than the original but is nevertheless another option. Thus, alternatives can be highly varied once freed from the requirement to mimic the original. Oatly, the market leader, has a product with a taste nowhere close to conventional milk. Why do we never hear of a taste test between Oatly and conventional milk? Yet, consumers are moving away entirely from milk and switching to Oatly, particularly the younger generation. Mintel reported that 33% of the people surveyed aged 16-24 opted for plant-based milk varieties and 37% percent have reduced animal milk consumption. While the rising cost of living has impacted the sales of many food categories, the sales of alternative milk have stayed strong. Oatly tastes great, whether it’s in cereal, a latte, or hot chocolate. It may not have comparable protein levels, but it doesn’t have lactose or cholesterol either.
The brand messaging of the market leader, Oatly, trumpets its own merits rather than contrasting itself with animal milk. The tagline on the website reads simply “the original oat drink company”. Curious, that the leading plant-based milk doesn’t even mention the term “milk” in its top-level messaging. Delve deeper and we see that Oatly is all about oats, whether it’s signing their praises, describing their benefits, or renewing their commitment to the ingredient. The corporate profile states that “For over 25 years, we have exclusively focused on developing expertise around oats: a global power crop with inherent properties suited for sustainability and human health.” Oatly, through its distinct messaging, is making it clear that it is creating an alternative product category and it is disassociating itself from the history or benchmark of its conventional counterpart. In doing so, it is expanding the so-called dairy pie. This also provides latitude in the product development process with a greater license for innovation. As long as the product meets the criteria consumers seek, it’s viable, or even more desirable. Furthermore, it has the benefit of gaining new customers who are willing to try this ‘new’ category. As a result, providing an alternative can have advantages over creating a replica, if consumers bite (or drink).
With dairy, there are also other factors at play. Accordingly to a Cargill survey, 35% of the people cited lactose intolerance as the main reason to move away from milk, with another 28% indicating dairy allergy or sensitivity as the culprit. These are clearly significant tailwinds. It is also worth noting that Oatly’s distinctive marketing approach is invariably influenced by packaging and labelling regulations that dictate how brands can market their products. For example, a 2017 ruling in the EU dictates that plant-based products such as oat milk, for example, were not allowed to use ‘regulated dairy designations’. This context is essential as Oatly is a Swedish company and is thus required to follow these regulations. Nonetheless, the brand identity is driven by leadership vision and not regulation. When similar regulations and labelling restrictions targeted the plant-based meat industry, the tactic used was to continue using unrestricted words. Examples include Impossible Nuggets and Beyond Meat Tenders. However, the plant-based milk sector used this as an opportunity to create a league of its own.
At the end of the day, consumers want great tasting products that are good for them and the planet at a reasonable price. Who said anything about a replica? An alternative may not just be good enough – it may be better because it tastes great but provides other features that consumers care about, such as nutrition and sustainability. It is also more likely to be easier to create, market and scale, and less likely to draw a challenge from conventional producers. That’s not to say that comparison can’t be made for the purposes of educating consumers. Even Oatly takes on the animal products industry with phrases such as “the post milk generation” and highlights its similarity with slogans such as “it’s like milk but made for humans”. But, there is no desire to create a replica.
Embrace and Extend
A third approach to innovation, best exemplified by cultivated meat companies such as Upside Foods and Good Meat, is to create an identical version of the product. Consumers don’t care if it’s ‘lab-grown’; they simply want tasty, healthy, and economical products. Consumers can easily calculate the trade-off with an identical product, like they do when they choose between conventional and organic, which are fundamentally the same, just with different characteristics. At the most basic level, it’s just meat. However, the potential ‘upside’ of better nutrition, and sustainable production, along with a clean, hygienic, transparent process allow consumers to disassociate these identical versions from the horrors of the conventional meat industry, thereby appealing to both existing and new consumers alike.
However, creating a bio-identical version requires a specific, highly sophisticated, and effective approach that is not cheap. After all, it’s a near-perfect copy that consumers can’t tell apart from the real thing and that will understandably cost more to make. The novel processes and approaches also require regulatory agencies to weigh in on their safety, not to mention labeling guidelines. To compensate, these companies are approaching the market in creative ways. The first, most straightforward approach is to focus on premium products, so there is more leeway to utilize technology. Food manufacturers recognize that similar to companies like Tesla, it’s better to start at the top and work their way down with improved technology, increased scale, and optimized processes. Second, these companies are utilizing a ‘hybrid’ approach, mixing lab-grown animal cells with plants, fungi, or other edibles to provide the taste of conventional meat at a reasonable price.
The arc of innovation for these companies is compelling. After all, once a bio-identical version is created, it is natural to think about how to optimize it. Perhaps there is a version with improved nutrition, for example by reducing cholesterol content or saturated fat, or another that improves the taste profile, perhaps with a taste that is “meatier than meat”. It remains to be seen whether these products are positioned simply as meat or a form of ‘fortified meat’ that adds nutrients that come from plants or fungi. Regulatory success in markets such as Singapore, the Netherlands, and the United States provides hope for the future of this segment, but it’s early yet.
Together We Stand, Divided We Fall
Central to the growth of plant-based products is the flexitarian movement, which now encompasses approximately 42% of consumers worldwide. One of the benefits of being a flexitarian is naturally that you can experience a range of offerings. We don’t yet understand what these consumers want in addition to conventional meat. Do they prefer a replica, alternative, or something identical? It is easy to jump to a conclusion that it is the latter. But product categories evolve by meeting new consumers in their new life to create new meaning. Ask the younger generation about what milk they prefer, and they will speak about animal and plant-based milk interchangeably. Other categories are heading in a similar direction. More than 50% of Gen Z reported consuming plant-based meat at least once a week whereas only 20% of the Baby Boomers did the same. When Perfect Day produces bio-identical whey and puts it into ice cream which the United States Food and Drug Administration categorizes as vegan, what will be our future view of authentic ice cream? For a toddler that grows up on cultivated meat or alternative milk, conventional products will be part of history that they never experienced. We are heading into a new era, where the very definitions of these products and our conceptions of them will change. It will take time, but we are on our way.
Let’s be clear. Today, plant-based products often have questionable nutrition and complex ingredient decks at high prices that don’t deliver on consumers’ preferences. This must change. But do all future products in each segment need to strive toward the same taste and macronutrients to satisfy consumers? We are just starting down the path to answer this question. Perhaps the race should simply be about creating the best product using whatever approach works. The innovation cycles could then shift toward focusing on consumer preferences such as taste, price, and nutrition, rather than an all-out effort to create a replica with ingredients that don’t exhibit those functional properties.
A replica inherently leans on history. As a result, we will always look to the past to see what the product was and try to bring that into the present. Alternatives look to the future to see what it might become in the face of what consumers demand today, whether it tastes different or identical. It is not hard to see, for example, that Gen Z consumers already have a very different conception of milk than the previous generation. A survey by Arla reported that 49% of Gen Z are ‘embarrassed’ to consume animal milk around their peers. In that sense, a replica will always remain fossilized since it refers to an old version of the product. It is worth considering then, that maybe we don’t want to re-create the original, but rather compelling products that rhyme.
Mintel, UK Dairy and Dairy Alternatives Market Report
Green Queen Media