The plant-based industry is promised to grow, with an estimated global market value of $50.7bn (€46.4bn), and a projected CAGR of 8.29% over the next decade (Precedence Research).
Despite the optimistic outlook, the sector has struggled to reach price parity with animal-based products. In fact, a 2022 study by the Good Food Institute found that plant-based meats were on average 67% more expensive than their animal-based counterparts, while plant-based milks were 87% more expensive than animal-based milks.
And it’s this cost disparity, which has continued to slow plant-based growth. But circumstances are shifting and the industry is starting to close the gap on animal based products.
How is the plant-based industry closing the price gap?
The plant-based industry is investing heavily in innovation to close the price gap with animal-based.
Researchers recently discovered the secret to creamy plant-based cheeses, while Swedish start-up, Stockeld Dreamery, made a melting breakthrough. This is all aimed at boosting sales to achieve economies of scale.
British plant-based seafood brand FoodSquared is also focussing on cost, with CEO Frankie Fox saying they aim to achieve, “at least price parity, or lower, at scale.”
What’s more, the industry is making price parity a priority. As plant-based seafood brand Pacifico Biolabs' CEO Zac Austin says, “if you want people, who would otherwise eat fish, to substitute that once or twice a week, it needs to not cost them twice as much.”
We anticipate this gap shrinking as plant-based producers increasingly scale up production
Good Food Institute
Plant-based prices are expected to come down, making the category more competitive, with a Good Food Institute spokesperson saying, “we anticipate this gap shrinking as plant-based producers increasingly scale up production, achieve economies of scale, and seek price parity with their conventional competitors.”
Some makers have already reached price parity and beyond, with manufacturers in the Netherlands doing so in 2022, developing plant-based burgers that were 78 cents cheaper on average than meat burgers.
What is preventing full price parity in plant-based?
Despite strong growth in the plant-based sector, the industry continues to face significant additional costs at the production stage.
“Plant-based ingredients often travel from distant countries to where they’re processed and consumed resulting in high transport costs,” says Ananda Roy, consumer goods industry advisor at Circana. “Their shelf life is limited, and waste is high if demand for the product is inconsistent.”
There’s also the big question around government priorities, with the meat industry often receiving subsidies that aren’t extended to plant-based manufacturers.
“The playing field isn’t level,” says Mark Cuddigan, CEO of THIS. “In the EU, animal agriculture gets up to four times more funding than plant-based farming. That’s why meat products are often cheaper, even though they have a bigger environmental and social cost.”
In fact, just last month, the EU announced that livestock and meat would remain a long-term focus for the bloc.
That doesn’t mean industry-wide price parity is not achievable, just that changes need to be made, both at an industry and government level.
Achieving full price parity across the portfolio depends on various factors, especially economies of scale
Nestlé
Manufacturers need to focus on reducing waste, as well as lowering production costs, says Circana’s Roy. Something he says will happen with economies of scale.
And this is something the industry is all too aware of.
“Achieving full price parity across the portfolio depends on various factors, especially economies of scale,” says a spokesperson for Nestlé.
Meanwhile governments would need to redress the balance in terms of support it provides to plant-based manufacturers.
“If subsidies were fairly distributed and the true cost of meat - like CO2 emissions, water use, and biodiversity loss, were reflected in the price, the gap would close,” says THIS' Cuddigan. “Government intervention, such as taxing animal proteins or shifting subsidies toward plant-based production, could make a big difference too, and result in consumers not being forced to pay more for making sustainable choices and buying plant-based products.”
