Nestlé and Tesco best placed to reap plant protein profits, says FAIRR

By Niamh Michail

- Last updated on GMT

Not enough companies are diversifying their protein portfolio, the report found. © GettyImages/marilyna
Not enough companies are diversifying their protein portfolio, the report found. © GettyImages/marilyna

Related tags Livestock Whole foods

Nestlé and Tesco are the best prepared in terms of meeting consumer and investor demands for having diversified protein portfolios, according to a FAIRR report.

The Farm Animal Investment Risk & Return (FAIRR) is a values-led network whose investors have over $4.1 trillion of assets under management participating in its activities.

In a bid to understand how companies are set to cash in on the rising demand for alternative proteins, FAIRR evaluated 16 multinationals were evaluated on areas including business strategy, monitoring processes, R&D investment levels and consumer engagement.

To download the report, Plant-based profits: Investment risks and opportunities in sustainable food systems​, click here.

These companies it looked at were General Mills, Kraft Heinz, Mondelez International, Nestlé, Unilever, Ahold-Delhaize, The Co-operative Group, Costco, Kroger, Marks & Spencer, Wm Morrison Supermarkets, Ocado, Sainsbury’s, Tesco, Walmart and Whole Foods Market.

Overall, it found UK retailer Tesco and Swiss manufacturer Nestle to be the best prepared. While all 16 companies it looked at had at least one own-brand alternative protein product, it-said only three – Marks & Spencer, Nestlé and Unilever - had established internal targets to increase this.

Despite the food industry being one of the planet’s biggest sources of pollution, the report found a lack of “meaningful programmes​” to track, report and reduce supply-chain emissions related to agriculture. Less than half – M&S, Tesco, Walmart, General Mills, Nestlé and Unilever – have targets to reduce supply-chain emissions.

It criticised Costco and (perhaps surprisingly) Whole Foods 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.

 “We clearly recognise that Whole Foods is a pioneer in this space. Unfortunately, they were the only company not to respond to investor requests for information," ​head of research and corporate engagement Aarti Ramachandran told us.

“The alternative proteins market is increasingly competitive […] and as investors, we’d like to learn more about Whole Foods’ plans to retain its leadership in this space.

“As Amazon and Whole Foods integrate, customers will benefit from lower prices and better access to Whole Foods’ private label products. However, a larger customer base will also increase the company’s environmental footprint and associated risks.

“For investors, it will remain important to have enough information to understand the company’s exposure to and management of risks linked to animal agriculture. So far, we haven’t seen a robust discussion of those risks from either company.”

Europe is the largest market for meat substitutes, accounting for 39% of global sales, according to Allied Market Research 2016.

With 8% annual growth rates in the EU and flat consumption for traditional meat products, alternative proteins could represent a third of total EU protein demand growth in the next five years, a 2017 Rabobank report suggested.

 “It is becoming clear that business as usual is not an option for the meat industry given that its environmental impacts, including emissions and resource use, are becoming increasingly apparent and difficult to ignore," ​head of investor engagements at FAIRR Rosie Wardle said.

Nestlé: 'The early days of a sector-wide response'

In a foreword to the report, assistant vice president for stakeholder engagement in sustainability at Nestlé Duncan Pollard said industry was bearing witness to “the early days of a sector-wide response to the challenge of increasing exposure to alternative proteins”.

“For food companies and their investors, no roadmap exists to help us navigate the complexity associated with protein diversification,” ​he said. “A key first step will be to evolve a shared understanding of what corporate best practice in this area looks like across four strands: strategy, innovation, engagement and metrics.”

Pollard said that building up Nestlé’s vegetarian portfolio was one of its strategic priorities, which led to its acquisition of plant-based food firm Sweet Earth in the US and has been driving its decision to reformulate existing products to swap animal-based ingredients for plant-based ones.

In the past FAIRR has published reports on the probability of meat​ ​taxes and against factory farming methods.

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1 comment

Good work Nestle - but still much work to be done by companies like Nestle threatened by climate change

Posted by Stuart,

Nestle has a strategic plan to swap out animal-based protein ingredients and replace them with plant proteins. Hear, hear!! Good work Nestle as consumers are watching.

I would also mention that the FAIRR report doesn't really analyze on the enormous singular threat that the greenhouse gas methane hangs over all dairy and beef-based food and beverage producers and manufacturers. Methane (mainly belched out the mouth, not from the rear end or manure) is at least 25X more effective than carbon dioxide at trapping heat and causing climate change. When a carbon tax comes in, the methane tax on dairy and beef should be 25X more (to be fair - otherwise, we're subsidizing dairy and beef producers). What will that do to product prices?

One good thing is that methane drops out of the sky in just 10 years, as opposed to the 100 years it takes CO2. Once consumers realize that dairy and beef are a major culprit cause of climate change and also that they can have a positive personal effect by cutting back their consumption of dairy milk, cheese, whey protein, casein and beef products, they will reduce or stop consuming these products. Cutting back or eliminating dairy and beef would be a hugely popular and productive personal step to battle climate change. Benefits will be seen in just 10 years.

As climate change continues year by year and its influence on the weather and threat towards civilization builds, a tipping point will be reached and consumers will react with boycotts against products based on these animal proteins. It might be as little as a year or two before that tipping point is reached.

Those companies being proactive now will suffer the least. FAIRR should analyze which of these companies are most exposed to methane (dairy and beef focused) as they will suffer the most. This is FAIRR's next report. Meanwhile, companies like Nestle and these others need to accelerate their change to plant proteins or face the consequences from investors.

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