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TRANSCRIPT
A
OUR FOOD SYSTEM’S FUTURE THROUGH THE LENS OF SUPPLY AND DEMAND
FOOD FORTHOUGHT
B
CONTENTS
ABOUT THE AUTHOR ...................................................................................... 1
INTRODUCTION ................................................................................................2
DEMAND SIDE DRIVERS .................................................................................3
SUPPLY SIDE DRIVERS .................................................................................14
SUMMARY ..................................................................................................... 31
APPENDIX .................................................................................................... 32
BIBLIOLOGY ................................................................................................. 38
OOUUR R FFOOOOD D SSYYSSTTEEMM’’S S FFUUTTUURRE E TTHHRROUOUGGH H TTHHE E LLEENNS S OOF F SSUUPPPPLLY Y AANND D DDEEMMAANND D
FOOD FORTHOUGHT
BY ALIsON LEE
1
ABOUT THE AUTHOR
ALISON LEETropical Landscapes Finance Facility Analyst
Alison Lee is in her second year working as a Tropical Landscapes Finance Facility
Analyst for ADM Capital Foundation and provides ESG integration advisory for ADM
Capital funds. Alison co-developed ADM Capital’s proprietary ESG toolkit that has
been rolled out to all ADM Capital’s analysts. She was involved in various aspects
of ADM Capital’s role in the US$ 95 million Tropical Landscape Finance Facility’s
financing of RLU’s sustainable rubber plantations in Indonesia. Post investment,
Alison has been deeply involved in monitoring and reporting on ESG issues linked
to the project. Prior to joining ADMCF she was an Equity Research Associate at
CLSA covering Hong Kong discretionary consumer and China education listed
equities. She has a BA (Hons) from The University of Strathclyde Business School
in International Business and an MSc from The University of Manchester in
Industrial Relations.
2
SUPPLY
INTRODUCTION
The World Resources Institute (2018) forecasts that 56% more crop calories will
be needed above 2010 levels to feed a projected 9.8 billion population in 2050.
To produce the additional calories, 593 million hectares of additional crop land
is required. To put this in context, this is around twice the size of India. Yet, the
additional calorie target must be achieved without the needed agricultural land.
How can we address this challenge?
This paper aims to understand the future of our food systems through the lens of
supply and demand in the global space. The table below shows the key themes.
Global aging population
Millennials
Emerging middle class
Religion and meat
Global meat and dairy demand projections
Current food supply chain
Imagining our future food supply chain
Alternative protein technologies
The yuck factor – cultured meat
Protein diversification investments
Milk alternatives
Raw materials for protein alternatives
CRISPR/CAS9
Dealing with food waste and food loss
Appendix: Quick facts on alternative protein key ingredients
DEMAND
FIGURE 1 Illustration of the Key Themes
3
DEMAND SIDE DRIVERS
Macro Trends – Demographic Shift
In this section, the major demographic movements in the near future is discussed.
This include an aging population and a millennial dominated workforce.
Population age sixty-five and above will outnumber young children below the
age of five for the first time and millennials will dominate the global workforce,
raising GDP in developing countries and strengthening religions’ impact on food.
Over 65 and Thriving
In 2020, we will face a mind-blowing demographic shift for the first time in
human history. Globally, people ages sixty-five and over will begin to outnumber
children under the age of five. These two generation groups will continue to
grow in opposite directions (Figure 2). How will this demographic shift impact
demand for meat and dairy?
FIGURE 2 Young Children and Older People as a Percentage of Global Population, 1950-2050
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
(%) 18
16
14
12
10
8
6
4
2
0
Under 5
65 and over
Source: United Nations, 2013
4
According to research conducted by Schutz and Franzese (2018), by using data
from the Survey of Health, Ageing and Retirement in Europe and existing
research on age and animal protein consumption, there is no strong correlation
between meat consumption and old age. Where there is one, it is heavily country
dependent. For example, Spain’s beef consumption decreases with old age
but this is due to the negative health image of beef and conservative eating
habits of older cohorts. In Denmark, Netherlands and Belgium, however, the
share of people consuming meat products on a daily basis increases with age. In
Austria, younger men consume more meat than older men. In Britain there are
no correlation between age and meat consumption (Schutz and Franzese, 2018;
Public Health England, 2016; Kanerva, 2013).
Interestingly, gender plays a role in meat consumption. Gender disparities can be
observed in all countries in the study, where men consume more meat products
than women. Although the linkages between meat and dairy consumption
and old age in current research are inconsistent, we may assume healthcare
and complementary options such as healthier food will grow in importance. A
University of Oxford study (2016) found that a ‘healthy’ diet (i.e. one containing
less meat) could prevent 5.1 million deaths a year globally by 2050, indicating that
health concerns could lead to a decrease in demand for meat products.
The Avocado Toast Generation
World Data Lab (2018) forecasts that by 2020, millennials (people born between
1981-1996 as defined by Pew Research Center) will overtake Gen X (1965-1980) in
terms of “spending power” (Figure 3). The largest proportion of millennials can
be found in developing countries, including 33% in India, 31% in China and 33%
in Indonesia (Figure 4).
DEMAND SIDE DRIVERS
5
DEMAND SIDE DRIVERS
FIGURE 3 Global Millennials Spending Power is Set to Overtake Gen X by 2020 and Will Continue to RiseForecast annual aggregate income, by generation
2020 2025 20352030
(US$tn) 25
20
15
10
5
0
Millennials
Post-millennials
Source: World Data Lab, FT
Generation X
Baby Boomers
FIGURE 4 Millennials Make up a Large Portion of EM Countries’ Population
India
(Millions)
500
400
300
200
100
0
(%)
50
40
30
20
10
0China Indonesia US Parkistan Philippines Vietnam
Millennial population (Left scale)
Millennial population (Percentage of total)
Latest available data. Definitions of millennials vary from country to country and data availability differs by region. Based on 2014 figures from China, 2016 figures from the US and 2015 figures from the remaining countries shown.
Source: A.T. Kearney, Goldman Sachs and AB
6
DEMAND SIDE DRIVERS
David Dobbin, chairman of Diary UK, says he fears a “demographic time bomb” as
“young people” increasingly choose plant-based alternatives over diary. Only 10
years ago, there were around 21,000 diary farms in the UK. Analysts believe there
could be fewer than 5,000 left by 2026. Furthermore, a study by GlobalData (2018)
states that 70% of the global population is either reducing meat consumption
or excluding meat from their diet. Fiona Dyer, consumer analyst at GlobalData,
explained that the “shift towards plant-based foods” is mainly being “driven
by millennials”, who are most likely to consider the food source, animal welfare
issues, and environmental impacts when making their purchasing decisions.
A 2019 Global Deloitte survey found that the top personal concerns for both
millennials and Gen X revolve around climate change and that could impact meat
and dairy consumption.
Whilst these figures are impressive, and suggest that we may be heading towards
a “less-meat world”, it is important to note that the heaviest proportion of
millennials is located in emerging countries and their perspectives may differ
greatly from counterparts elsewhere. An interesting white paper by eShop
World highlights differences in millennial perceptions between developed and
developing countries (Figure 5). According to the eShop research, developed
countries’ millennials value authenticity and sustainable products, and are
concerned with ethics and social issues. Conversely, in developing countries,
millennials are more materialistic than previous generations as they have grown up
in a rapidly growing economy and have experienced the transition from poverty.
If these categorisations are correct, what does it imply in terms of dietary choices?
7
DEVELOPED DEVELOPING
These millennials grew up in a booming economy, and watched Gen X (their parents) lose everything.
Grew up in a rapid growing economy, and have experienced transition from extreme proverty.
Considerably poorer than their parents. The wealthiest generation their country has seen.
The US has the third largest millennial population in the world.
World’s largest millennial populations are in India and China.
Other key markets include: Japan, France, UK, Germany and South Korea.
Other key markets include: Indonesia, Brazil, Russia and Mexico.
Value authenticity and sustainable products; concerned with ethics and social issues.
Often more materialistic than previous generations, having grown up in a culture of so little and only recently have the ability to afford more.
Anti-materialistic, but will spend on good quality, ethically sound products and are concerned with being seen as leaders in this respect.
Keen to display status and wealth and are likely to invest in luxury brands. Happy to save for premium clothing and technology.
Key documenters of their own lives; they purchase experiences and products that complement their values.
Value social status and individuality above social concerns.
High youth unemployment and less able to invest in cars/houses.
Young people are better employed and better paid than previous generations.
Face crippling student debts, unaffordable housing, low wages and unstable jobs.
Moving from a collective culture into a more personalised one and therefore value customisation.
Source: eShop World
FIGURE 5
DEMAND SIDE DRIVERS
FIGURE 5 Differences in Millennials’ Perception Between Developed and Developing Countries
A Very Hungry Emerging Middle Class
The connection between wealth and meat consumption has been identified
in many academic studies. According to Our World in Data (2019), the share of
calories from animal protein vs. GDP per capita indicates that as we get richer, we
consume more animal-based foods, (Figure 6 and 7). However, there is a turning
point for meat consumption and wealth. As our income reaches a “very high
level”, we start to observe an inverted U-shape curve, where we see a decline in
meat consumption (Vinnari, Vehema, and Luukkanen Jyrki 2006; Vranken et al.
8
GDP per capit ($)567 1,000 10,000
Share (%)
0
2
4
6
8
10
China
India
United States
Indonesia
Brazil
Pakistan
NigeriaBangladesh
RussiaJapan
Mexico
Philippines
Ethiopia
Egypt Iran
TurkeyThailand
United Kingdom
South AfricaMyanmar
South Korea
Spain
Kenya
Argentina
Poland
Uganda
Canada
Iraq
Morocco
Nepal
Venezuela
Peru
Saudi Arabia
Ghana
Mozambique
Australia
MadagascarNiger
Mali
Netherlands
Ecuador
TunisiaHonduras
Bulgaria
Hong Kong
Tajikistan
Denmark
KyrgyzstanSlovakia
Norway
Central African Republic
Ireland
Liberia
Lithuania
Albania
Jamaica
Botswana
Djibouti
Montenegro
Saint Lucia
DEMAND SIDE DRIVERS
FIGURE 6 Share of Calories from Animal Protein vs. GDP Per Capita, 1963-2013
FIGURE 7 Share of Calories from Animal Protein vs. GDP Per Capita, 2013
Share of calories in the average diet sourced from animal protein (which includes meat, seafood, eggs and dairy products), measured as the percentage of daily caloric intake, versus gross domestic product (GDP) per capita, measured in 2011 international-$
Source: World Bank - WDI, UN FAO
2014; Cole and McCoskey 2013). Few countries, however, have reached the GDP
level required for a decline in meat consumption.
AfricaAsiaEuropeNorth AmericaOceaniaSouth America
-2 0 2 4 6
-1
0
1
2
3 China
India
United States
Indonesia
Brazil
PakistanNigeriaBangladesh
Philippines
Ethiopia
Egypt
Turkey
Thailand
United Kingdom
South Africa
Tanzania
Spain
UkraineKenya
Poland
Algeria
Sudan
Canada
Iraq
Afghanistan
MalaysiaSaudi Arabia
Uzbekistan
Taiwan
Sri Lanka
Cote d'Ivoire
Angola
Niger
Malawi
Cambodia
ZimbabweChad
Czech Republic
Haiti
Serbia
United Arab Emirates
Honduras
Hong Kong
Tajikistan
Togo
Slovakia
Central African Republic
Georgia
Kuwait
Mongolia
Jamaica
Namibia
LesothoBotswana
Swaziland
Djibouti
Dominica
Average annual change in GDP per capita (%)
Ave
rage
ann
ual c
hang
e in
sha
re o
f to
tal c
alor
ies
from
ani
mal
pro
tein
(%)
AfricaAsiaEuropeNorth AmericaOceaniaSouth America
9
DEMAND SIDE DRIVERS
According to research by ARE in 2018 (supported by ADM Capital Foundation),
total meat and fish consumption in Asia will grow by 73% by 2050 to 233 million
tonnes. It is projected that Indonesia’s total meat and seafood supply will grow
by nearly three times between 2018-2050, a much faster pace than India over
the same period (Figure 8). Thus, Indonesia’s meat consumption is expected
to overtake India’s by 2036 (7.5 million tonnes), despite India’s much larger
population size.
FIGURE 8 Meat and Seafood Consumption Drivers in Indonesia and India
1961
2049
1969
197
7
1985
1993
2001
200
9
2017
2033
2041
1961
2049
1969
197
7
1985
1993
2001
200
9
2017
2033
2041
Population Per Capita GDP 2,000
1,000
0
(Million inhabitants)
15,000
10,000
5,000
0
(Constant 2010 US$)
Per Capita Animal Protein
Meat and Seafood Consumption
1961
2031
196
8
1975
198
2
198
9
199
6
2003
2010
2017
2024
2045
203
8
1961
2021
196
7
1973
1979
1985
1991
1997
2003
200
9
2015
2045
2039
2033
2027
IndonesiaIndia
Source: FAO Statdata (1961-2013), World Bank, OECD, ARE estimates (2013 onwards)
50
40
30
20
10
0
(g/capita/day)
50
40
30
20
10
0
(Thousand tonnes)
India’s population stays at around 5 times that of Indonesia, with both countries growing over 20% by 2050
...but Indonesia’s income level grows 2.5 times compared to 1.5 times for India over the same period
Higher income levels enable a stronger shift towards higher consumption of discretionary food
...leading to Indonesia’s total meat and seafood consumption overtaking India by 2026
10
DEMAND SIDE DRIVERS
Consumption changes towards a “meaty” diet could also be influenced by
globalisation (Popkin, 2003; Popkin et al, 2012), meaning wealthier populations
from emerging markets eat a more “Western diet”. This shifting pattern can
be observed in China, where Chinese consumers have drastically increased
consumption of dairy products and are decreasing their consumption of grain-
based foods (Dong and Fuller, 2010). Indonesia has also shifted from a fish-
based diet to a diary-heavy and meat-heavy diet (Fabiosa, 2005). Furthermore,
the establishment of supermarket chains and easy access fast food restaurants
has made it more convenient for emerging market consumers to follow a
Western diet.
The growing demand for animal protein by volume from major “new money”
nations such as China, India and Indonesia will heavily impact the world’s resources
and our current supply chain will not be able to support demand.
Religion and Meat
In the previous section, we have discussed Indonesia’s meat and seafood
consumption overtaking that of India’s. A key reason is the predominantly Hindu
culture’s relationship with meat. Religious practices may restrict an individual’s
consumption patterns and dietary choices. For example, Hinduism prohibits the
consumption of beef, while Islam forbids pork. Some Buddhist monks are allowed
to consume meat, whilst for others meat is forbidden. Adventists, meanwhile,
follow a vegetarian diet.
Figure 9 displays a breakdown of country, religion, and types of meat consumed,
providing overall meat consumption trends.
11
DEMAND SIDE DRIVERS
An interesting working paper by Hong (2018) on “The Effect of Religion on Meat
Consumption and Greenhouse Gas Emissions” discovers that Hinduism and Islam
significantly affect meat consumption and GHG emissions. The author estimates
that for every 1% increase in Muslim population, GHG emissions per capita from
pork consumption decrease by 3.45%.
Global Meat and Dairy Demand Projections
In the last 15 years, global consumption of beef, veal, poultry and pork is
estimated to have risen by 30%. OECD and the FAO project that demand for
meat will continue to grow, primarily due to rising population and income levels
in developing countries. In developed economies like the US, demand is also
expected to increase, albeit at a slower pace. Overall, global meat consumption is
projected to rise by over 13% in the next ten years (OECD/FAO 2018). Meeting this
demand will continue to exacerbate environmental, health and social impacts as
producers scale up and intensify their production.
In terms of dairy products, the OECD/FAO (2018) projected a 22% increase in
world‘s milk production for the period of 2018-2027. The largest contribution to
demand will be from India and Pakistan. In 2027, these two countries are expected
to jointly account for 32% of the global milk consumption.
FIGURE 9 Per Capita Meat Consumption, 2013
India (Hindus)
(kg) 70
60
50
40
30
20
10
0China
(Buddhists)Indonesia (Muslims)
US (Christians)
Israel (Jews)
Meat (other)
Mutton and goat
Beef and buffalo
Pig meat
Poultry
Source: Google Trends
12
DEMAND SIDE DRIVERS
Dairy demand in developed countries has been shifting for several years towards
butter and dairy fat and away from substitutes based on vegetable oil like
margarine. This trend can be attributed to a more positive health assessment
of dairy fat and a change in taste. As income and population increase, and diets
become more globalised, more dairy products are expected to be consumed in
developing countries.
In developed countries, per capita consumption of milk solids is projected to grow
from 22.2 kg in 2015-17 to 23.1 kg in 2027, compared to an increase from 10.6
kg to 13.5 kg in developing countries. There are, however, significant regional
disparities amongst developing countries, where predominantly fresh dairy
products are consumed; this contrasts with developed countries, where consumer
preferences tend towards processed products.
FIGURE 10 Global Meat Consumption
2006
370,000
330,000
290,000
250,000
2011 2016e 2021e 2026e
Source: OECD-FAO Agricultural Outlook 2017-2026 Statistics
Consumption is projected to increase 13% in the next ten years
FIGURE 11 Per Capita Consumption of Processed and Fresh Dairy Products in Milk Solids
(Million Tonnes)
2015-17
Note: Milk solids are calculated by adding the amount of fat and non-fat solids for each product; Processed products include butter, cheese, skim milk powder and whole milk powder
Source: OECD/FAO (2018), ”OECD-FAO Agricultural Outlook”, OCED Agricultural Statistics (database)
(kg) 60
50
40
30
20
10
02027 2015-17 2027 2015-17 2027 2015-17 2027 2015-17 2027 2015-17 2027 2015-17 2027
EU US Brazil India Pakistan China MENA
Processed products Fresh dairy products
13
DEMAND SIDE DRIVERS
The reason for China’s low per capita consumption of dairy products is partially
due to the fact that 90% of the population is lactose intolerant. The correlation
between lactose intolerance and per capita consumption could be observed in
the maps below (Figure 12 and 13)
FIGURE 12 Map of People with Lactose Intolerance
FIGURE 13 Per Capita Milk Consumption, 2013
Average per capita milk consumption, measured in kilograms per person per year. This includes the milk equivalents of dairy products made from milk ingredients, but excludes butter. Data is based on per capita food supply at the consumer level, but does not account for food waste at the consumer level.
Source: UN Food and Agricultural Organization (FAO)
No data 50 kg 100 kg 150 kg 200 kg >250 kg
0-20%20-40%40-60%60-80%80-100%
14
SUPPLY SIDE DRIVERS
A Reality Check – Our Current Food Supply Chain
One of the UNFCCC’s key goals is “to ensure that food production is not
threatened” and that production happens within a “time-frame sufficient to
allow ecosystems to adapt naturally to climate change”. In a report by Break
Through (2018), the authors critique The Paris Agreement’s recognition of the
“fundamental priority of safeguarding food security”. So how does our food
production system look today? Is it in a “time-frame sufficient to allow ecosystems
to adapt naturally to climate change”?
WRI (2018) predicts a 56% calorie gap between crops produced in 2010 and
those needed in 2050. Currently, our agricultural system is already extremely
resource intensive, covering around 43% of the world’s ice and desert free land.
Of our arable land, 87% is for food production whilst the remaining is used for
bio fuels, textile crops or allocated to non-food uses such as leather and wool
(Poore & Nemecek, 2019). There exists a 593 million-hectare gap between global
agricultural land area in 2010 and expected agricultural expansion by 2050.
Regarding GHG mitigation, there is an 11-gigaton gap between expected
agricultural emissions in 2050 and the target level needed to stay below 2 degrees.
The current production and consumption chain, which includes transportation,
waste, fertilizer manufacturing, agriculture, processing, retail and household
food management, contributes to 19–29% of all anthropogenic greenhouse gas
emissions. Based on 2008 levels, that is a total of 9,800-16,900 million tonnes of
carbon dioxide (CO2) emitted each year (Vermeulen et al. 2012). These emissions
can fundamentally alter the species composition of the earth’s natural ecosystems,
reducing biodiversity and ecological resilience.
Breaking down the food supply chain, the farming stage contributes 61% of
overall food production GHG emissions. If related deforestation activities are
included, contribution rises to 81%. Looking beyond GHG emissions, the farm
stage contributes to 79% of acidification and 95% eutrophication, which is caused
by an increased deposit of nutrients to estuaries and coastal waters which leads
to harmful algae blooms, poor water quality, loss of marine animals and dead
zones (Poore & Nemecek, 2019).
15
Greta Thunberg recently criticised rich countries for using ‘creative carbon
accounting’ to claim ‘net zero’ status. Creative carbon accounting can also be
used for companies when reporting their GHG emissions. When talking about
food supply chain, it is important to acknowledge companies’ accountability for
scope 3 emissions. For food and beverage companies, scope 3 emission represents
89% of total GHG emission (Ceres, 2019). Simply put, scope 1 emissions refer to
the direct emissions from owned resources, such as factories, offices and company
vehicles. Scope 2 includes the energy purchased to power such owned assets.
Scope 3 includes everything else, such as raw material production, transportation,
and waste generated from leased assets.
Ceres (2019) conducted a study to analyse the top 34 public American and
Canadian food and beverage companies to assess the disclosure of their GHG
scopes. Out of the 34 companies only 9 companies have accounted for scope 3
emissions and have set explicit targets to reduce them.
GHG emissions aside, agriculture is also highly water intensive. According
to China Water Risk (2019), producing a 18 oz steak requires 17 bath tubs
worth of water. Water is used to produce not only agriculture but also
electronics, energy, clothing and other consumables. In fact, agriculture
SUPPLY SIDE DRIVERS
GHG EMISSION BY SCOPE
Scope 1 Scope 2 Scope 3
6% 5%89%
Source: Ceres, 2019
16
water use accounts for 70% of all water withdrawal globally (World Bank,
2017). According to China Water Risk (2018), China and India will not have
sufficient water to ensure food and energy security in their current export-
led economic growth model. Renewable water resource is defined by the FAO
as “the average manual flow of rivers and recharge of aquifers generated
from precipitation”. In order for China and India to achieve a per capita GDP of
US$50,000 and above (around where US sits today), at least 1,543m3 of water/pax
is required. While US has an abundant renewable water resource of 9,538m3/pax,
China and India only have a total of 2,018m3/pax and 1,458m3/pax respectively.
While US’s current water use is only about 16% of its total water available, to
achieve the same GDP per capita, China would have to use three-quarters of its
total water resources and India, all of it (Figure 14).
SUPPLY SIDE DRIVERS
FIGURE 14 Limited Water Resources Per Capita Contraint Development Choices
(m3) 10,000
8,000
6,000
4,000
2,000
0China
Water resources per capita
Water use per capita
India Pakistan US
Source: China Water Risk (2018)
2,0181,458 1,306
9,538
1,5431,034
602432
17
SUPPLY SIDE DRIVERS
If all things remain equal, the supply and demand for agriculture product will
look like Figure 16. The supply curve for agriculture would shift from S1 to S2 due
to limited resources, resulting in a higher price and lower output. The shift in
the supply curve would be caused by climate factors such as reduction in land
availability, extreme weather, flooding and water scarcity. When prices are high,
cheaper alternatives will be needed to close the gap in the market for other
protein sources. The supply and demand chart doesn’t show what an increase
in demand would do to the demand curve. If increase in demand is considered,
the price would be even more inflated than the current P2 level. In other words,
food will be very expensive in the future and we need to come up with cheaper
options that are affordable to all.
Having a balanced economic mix is important in helping water stressed countries
manage their water resources. Looking at Figure 15, agriculture heavy sectors
are represented in the lower left quadrant, while service economies have higher
GDPs. Countries with high GDPs varies drastically in water usage, due to trade.
US, Canada and Australia, for example, are self-sufficient in water use, whilst
UK, Germany and Japan have a low footprint due to imports of water intensive
goods from other countries.
FIGURE 15 Water Use Corresponds to Economic Development – Changing GDP Mix MattersG20 Per Capita Water Use vs. GDP
Source: China Water Risk based on FAO Aquastats, World Bank, NBSC
1,600
1,400
1,200
1,000
800
600
400
200
0
Water use(m3/pax/year)
GDP (US$/pax/year)
5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000
US
Canada
AustraliaItaly
Japan
France
Germany
UK
Argentina Saudi Arabia
South Korea
MexicoTurkey
China
South AfricaRussia
India
Indonesia
GDP Mix
INDUSTRY
SERVICES AGRICULTURE
18
SUPPLY SIDE DRIVERS
Imagining Our Future Food Supply Chain – Biotech Revolution
It is clear that drastic action is needed to meet the overwhelming demand
projections for the next couple of decades and it is difficult to imagine what
our future food system will look like. One thing is clear – we can no longer keep
calm and carry on. Winston Churchill (1931) stated in an essay that there are two
processes we adopt when we try to prophesy:
“We can seek a period in the past whose conditions resemble as closely as
possible those of our day, and presume that the sequel to that period will, save
for some minor alterations, be repeated. Secondly, we can survey the general
course of development in our immediate past, and endeavour to prolong it into
the near future.”
The first way of thinking is the method of a historian and the latter is that of a
scientist. Our current agriculture systems were established around 11,000 years
ago, when we entered the agricultural revolution and went from hunting and
gathering to farming. The scientific revolution began around 500 years ago
when mathematics, astronomy, physics, chemistry and biology transformed the
way society view nature. The information revolution 50 years ago led us to the
“internet of things”. 11,000 years later, our method of producing animal protein
is still highly inefficient, with a feed-to-animal-protein conversion rate at merely
15% for beef, 30% for pork, and 60% for poultry (Post, 2014).
Could science bring about another drastic agricultural revolution as we deplete
our resources and reach the maximum production limit? In the same essay,
Churchill predicted scientists growing cultured meat. Could this be our future?
FIGURE 16 Supply and Demand of Agricultural Products
(Price)
(Output)
S2
S1
Y2 Y1
D
P2
P1
19
SUPPLY SIDE DRIVERS
Current Alternative Protein Technologies
Currently, bio-technology for alternative protein can be grouped into three
categories:
Advanced plant-based – this category uses novel plant sources and/or novel
processing methods (such as shear-cell technology) to optimise taste, nutrition
and texture of plant-based products to mimic meat.
Companies in this category are:
Impossible Meat
Algama
New Wave Foods
Kite Hill
Ripple
Fermentation – using brewing processes to turn yeast organisms into proteins.
This category expands beyond food products and includes vegan chemical
alternatives for cosmetics and consumer products. For example, Impossible Meat
uses a process to make soy leghemoglobin (heme), where yeast is grown then soy
leghaemoglobin (containing heme) is isolated from the yeast to create a blood-
like iron flavour. This process of creating heme is a type of genetic engineering
(GMO). This star ingredient has gained media attention due to a weaker regulatory
process passed by U.S. Food & Drug Administration (FDA) for this GMO process
called “GRAS” (Generally Recognised As Safe).
Companies in this category are:
Geltor
Quorn
Prime Roots
Beyond Meat
Sea Co
YoFix
Hampton Creek
The Vegetarian Butcher
Clara Foods
Perfect Day
Impossible Meat
Cell Culture – this category is the most high-tech and uses stem cells to grow meat
cells (muscle and fat) in a nutrient-rich culture medium to create whole pieces of
tissue. This category is not yet commercialised.
20
SUPPLY SIDE DRIVERS
FIGURE 17 Comparison of Environmental Impacts of Cultured Meat with European Livestock Meat
Energy Use
120
100
80
60
40
20
0
Source: New Harvest (2014)
(% of Highest Impact)
GHG Emissions Land Use Water Use
Beef
Sheep
Cultured Meat
Pork
Poultry
Companies in this category are:
Hampton Creek
Finless Foods
Integriculture
In the cell culture category, studies on the real environmental impacts compared
to traditional agriculture are still lacking. The economic and environmental results
for cell expansion in terms of spent material resources are heavily dependent on
the methods used to scale the production process (Post, 2014).
According to Post’s (2014) preliminary assumptions, cultured beef will be six-fold
more efficient than conventional livestock beef. It takes 225g of nutrients to
produce 200g of cultured beef as compared to 1.33kg for livestock beef.
New Harvest (2014) evaluated the potential for cultured meat to mitigate
environmental degradation (Figure 17). Energy use will increase significantly due
to the energy intensive bioreactors in which cultured meat are produced. However,
renewable sources could be used. GHG emissions are very low compared to
traditional animal protein production. Water use will be less when compared to
most traditional animal protein production. However, these assumptions are highly
preliminary.
SuperMeat
MosaMeat
Menphis Meat
21
SUPPLY SIDE DRIVERS
The Yuck Factor – Cultured Meat
It will take time for consumers to fully accept these new food technologies.
Cultured meat or the rebranded “clean meat” can be foreign and can certainly
trigger the “yuck-factor”. Considering the number of people who can’t even eat
meat on the bone, food neophobia is common.
A study by Wilks and Phillips (2017) suggests that the awareness of the
environmental impact and ethical outcomes of meat consumption is rising but
there is still a resistance to removing meat from our diets. A survey (Bryant et
al, 2019) found that consumers in different geographical regions exhibit varied
preference for cultured meat. Consumers in China and India are more likely to try
cultured meat than those in the U.S. (Figure 18).
FIGURE 18 How Likely are You Willing to Purchase Cultured Meat?
India
China
US
Not all all likely
Somewhat or moderate likely
Very extremely likely
10.7% 37.7%
6.7% 33.9%
48.7%
59.3%
23.6% 46.6% 29.3%
Source: Bryant et al, 2019
Gender also plays an interesting role. Men are more receptive to cultured meat
than women. People following a vegetarian or vegan diet were less likely to try
cultured meat than meat eaters. A couple of barriers were identified: 1) taste
appeal of the product (79% of respondents were cited); 2) ethical concerns
(24%) and 3) price (20%). Taste and appeal are the key barriers against consumer
acceptance.
22
SUPPLY SIDE DRIVERS
FIGURE 19 Investments in Plant-Based Food Brands
Protein Diversification Investments
Since 2010, plant-based meat alternatives sales have grown an average of 8%
per annum globally. The growth of plant-based meat is around twice the rate of
processed meat, with annual sales of about US$2bn (Bloomberg, 2018). Research
and Markets (2017) estimates that the sector will expand 8.29% CAGR globally
(2017-2021), and that the plant-based meat market will reach US$5.2bn by 2020.
Protein diversification is increasingly recognised by institutional investors as
a relevant ESG theme as it is intrinsically linked to multiple environmental and
social issues. It helps investors to improve portfolio contribution towards SDGs.
It also helps to increase a company’s competitiveness, climate readiness, and,
ultimately, financial and operational resilience. With the growing concerns of
climate change-related risks, investors are assessing both the risks associated
with intensive production and consumption of animal proteins as well as the
opportunities associated with such risks.
As of May 2019, investments in plant-based food brands have topped US$17bn.
The investments include 233 deals and 228 investors, with the largest share of the
investments happening in the past two years (GFI 2018, Figure 19).
PLANT-BASED MEAT, EGGS & DAIRY(US-based or selling in the US)
CELL-BASED MEAT(Global)
$ Invested Total US$17.1 billion US$73.3 million
$ Invested 2018 US$673 million US$49.4 million
# Completed Deals 233 22
# Unique Investors 229 70
% Change - Deal Count (2017-2018)
+39.4% +160%
Biggest Deal $12.5 billion $17 million
The largest share of deals are from venture capitals and high net worth individuals.
Corporate investments are limited but there could be an increase in upcoming
years as we start to see larger names such as Danone and Unilever acquiring
alternative protein companies (Figure 20).
23
SUPPLY SIDE DRIVERS
FIGURE 20 Deal Count by Investment Type, 2009-2018
50
40
30
20
10
0
(Deal Count)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Venture capital
Individual
Debt
Other
The table below summarises recent deals by large MNCs in the alternative protein
space by category:
ACQUISITION VENTURE INVESTMENTS PRODUCT DEVELOPMENT
Danone's US$12.5bn acquisition of WhiteWave
Tyson Venture's 5% stake in Beyond Meat
Ingredient maker ADM developing plant-based ingredients and protein ranges for B2B
Campbell's US$700m acquisition of Pacific Foods
Cargill and Tyson investment in Memphis Meat
Unilever developing plant-based steak with shear cell tech
Pinnacle’s US$158m acquisition of Gardein
Kellogg’s US$100m investment fund, which led a fundraising round for plant-based smoothie-maker Bright Greens and its investment in Kuli Kuli, makers of plant protein products
Kroger, Ralphs, Target, Trader Joe, Wegmans and Wholefoods developing multiple meat replacements
Maple Leaf’s acquisition of Lightlife and Field Roast
General Mills’ incubator ‘301 Inc.’ and investment in Beyond Meat and Kite Hill
Unilever acquisition of The Vegetarian Butcher and Sir Ensington
Nestle acquiring Sweet Earth Foods
Keystone Nature Holdings acquiring WestSoy
Corporate
Private equity
Source: GFI custom PitchBook analysis of plant-based food companies based in the U.S. and/or selling in the U.S.
24
Milk Alternatives
The dairy alternatives market was valued at US$15.4bn in 2018 with half of that
concentrated in China (biggest market because of high lactose intolerance). It
is expected to grow at a CAGR of 12.2% and reach US$41.8bn by 2026 (Reports
and Data, 2019). The chart below summarises the key companies producing milk
alternatives across various markets (Figure 21).
SUPPLY SIDE DRIVERS
Analysing consumer internet search patterns can provide us with a guesstimate
of future sales patterns and market opportunities. According to Google Trends,
from 2004 to 2019, searches for the five popular plant-based milk alternatives (Oat,
Soy, Almond, Cashew, Coconut) have gained popularity worldwide. Coconut and
almond milk are the top two most popular search terms out of the five, whilst
oat milk gains traction in late 2017 (Figure 22).
FIGURE 21 Largest Producers of Milk AlternativesMarket share by sales, 2016 (%)
Asia Pacific
Hebei
WhiteWave
Coconut Palm
Vitasoy
Nestlé
Wanxiang
Coca-cola
Blue Diamond
Fujian
Kikkoman
AustralasiaEastern Europe
Latin America
North America
Western Europe
Middle East & Africa World
30% or more
10% < 30%
Source: Bernstein, FT
Less than 10%
Not available
25
SUPPLY SIDE DRIVERS
The below chart shows emissions, land use and water use for each type of milk
(Figure 23).
FIGURE 23 Environmental Impact of One Glass (200ml) of Different Milk
Source: Poore & Nemecek (2018), Science,. Additional calculations, J. Poore, BBC
Emissions (kg) Land Use (m2) Water Use (L)
Dairy Milk
Rice Milk
Soy Milk
Oat Milk
Almond Milk
0 0.2 0.4 0.6 0 0.5 1.0 1.5 0 40 80 120
FIGURE 22 Popular Plant-Based Milk Alternatives Searches, 1/2004-5/2019
100
80
60
40
20
0
(No. of Searches)
1 Jan 2004 1 Jun 2009 1 Nov 2014
30
20
10
0
Average
Almond milkCoconut milkSoy milk
Oat milkCashew milk
Source: Google Trends
26
What are the Raw Materials Used for Protein Alternative Production?
For a long time, soy protein and wheat gluten have been the dominant raw
materials for meat substitutes. Over recent decades, protein products from other
plant based raw materials such as peas, chickpeas, lupins, rice, maize and canola
have gained popularity. Although, the bulk of the harvest is still used for livestock
feeds (Figure 24).
SUPPLY SIDE DRIVERS
Trendy ingredients such as jackfruit and banana blossom have also gained traction
in recent years due to their natural textures that mimic pulled pork and fish.
Major supermarket chains such as Asda and Traders Joe’s have recently added
these ingredients to their own-brand range.
As for milk alternatives, coconut and almond are the most popular currently. Oat
is starting to become more popular, whilst soy has been a staple. Other notable
mentions include cashew and rice milks.
FIGURE 24 Livestock Feed Consumes a Large Fraction of the Total Harvest
Worldwide Production 2018in million metric tonnes (mmt)
Worldwide Consumption 2018in %
* Industrial consumption and deterioration Source: OECD, FAO, A.T. Kearney Analysis
Wheat
Maize
Rice
Soy Beans
Others Total
755
1,074
510
356
506 3,201
Total3,201 mmt
46%
37%
11%
6%
Feed
Food
Biofuel
Others*
27
Grandview Research (2018) highlighted the key companies in the plant-based
protein sector, which include Dupont, Bunge, Cargill, Archer Daniels Midland
(ADM) and Mead Johnson. In July 2018, ADM acquired Neovia, which has 72
production facilities of animal nutrition solutions across 25 countries. The market
is led by integrated participants such as ADM and Cargill. Major manufacturers are
focusing on strengthening their presence in Asia Pacific due to low manufacturing
cost and availability of raw material.
Quick facts on commodities complementary to the production of alternative
proteins are provided in the appendix.
Using CRISPR/CAS9 to Improve Yields, Health and Efficiency of Crops
Due to the restricted resources we have on earth and a growing population,
genetic engineering could help to improve the yield, resilience and efficiency
of crops. The versatility of CRISPR/CAS9 stretches beyond medicine and can be
applied to the crops in our fields today.
CRISPR/CAS9 is a technique of genetic engineering but depending on which
country it is used in, the GMO title and tight regulation may or may not be
enforced. In the U.S., regulators argue that as CRISPR/CAS9 does not contain
foreign DNA, thus it does not fall under the GMO umbrella. On the other hand,
the European Union has subjected CRISPR/CAS9 plants to the stringent GMO laws
and regulations (Nature, 2018, National Geographic, 2018).
In very basic terms, CRISPR/CAS9 is a molecular tool used to delete (remove)
or introduce (knock in) a specific gene into cells. CRISPR/Cas9 is an extremely
accurate and cost-effective gene-editing tool. It can be used to remove bad genes
that cause poor health or death in an organism. Conversely, it can be used to
introduce beneficial or good genes into organisms and plants.
The conventional genetically modified organism (GMO), on the other hand is an
organism whose genetic material is altered using recombinant DNA technology.
Recombinant DNA technology can combine DNA fragment/gene with a vehicle
(such as an adenovirus) to transport the DNA into cells. After delivering the
DNA, the adenovirus remains in the genome of the transfected cells. This makes
GMO problematic.
SUPPLY SIDE DRIVERS
28
An example of the differences between these technologies could be explained
with the application of glyphosate resistance plants. Glyphosate is an herbicide
commonly used in row crops (soybeans, maize and cotton). The substance
inhibits the enzyme 5-enolpyruvylshikimate-3-phosphate synthase (EPSPS) from
converting acids essential to the biosynthesis of vital plant compounds which will
kill the plant. In the 80s, glyphosate tolerance was introduced through genetically
engineering the plant to producing more EPSPS in the chloroplast of the plant’s
cells, so it won’t die when glyphosate is applied. Scientists inserted a wild variant
(foreign DNA) of the enzyme so the plant would produce 40-80 times more
ESPSP to stay alive. Hypothetically, if CRISPR/Cas9 were to be used to knock-in
more EPSPS genes to create a highly glyphosate resistance plant, no “vehicle”
(adenovirus) will remain in the host plants.
CRSPR/Cas9 also helps to improve yields and health of plants. The Cavendish
bananas, for example, could benefit from this technology. 95% of bananas are
produced from this single cultivated variety. These bananas are sterile and can
only reproduce by cloning, as they do not have seeds. The lack of genetic diversity
makes them extremely vulnerable.
Currently, there is a powerful banana fungal strain called Tropical Race 4 (TR-
4) that is devastating the Cavendish variety worldwide. Colombia declared a
National State of Emergency in August 2019 due to this TR4 pathogen. Scientists
in Brisbane and agritech companies in the U.K. are experimenting with CRISPR/
Cas9 to create TR-4 resistant Cavendish bananas. If no actions are taken, the
Cavendish bananas could go extinct, like the Big Mike bananas which were wiped
out by the Tropical Race 1 (TR-1), an earlier strain of the TR-4 fungus in the 50’s
(National Geographic, 2019).
Dealing with Food Waste and Food Loss
Better waste management is another way to improve the future of our food
system. The latest available food waste data is from researchers at the Swedish
Institute for Food and Biotech hired by FAO in 2011. It is estimated that one-third
of the food produced in the world for human consumption is lost or wasted,
amounting to 1.3 billion tonnes per year. The global food loss and food waste
cost about US$1 trillion per year (FAO, 2014).
SUPPLY SIDE DRIVERS
29
In developed economies, retail level food is wasted due to quality regulations
and aesthetic standards. In developing economies, food is wasted due to a
lack of suitable infrastructure and poor harvest techniques. Over consumption
(consumption in excess of nutrient requirements) also contributes to GHG emissions
(Alexander et al., 2017). According to Hadjikakou (2017), over consumption
contributes to around 33% GHGs associated with food in Australia. According
to IPCC (2019), changes in consumption patterns and over consumption have
contributed to about 2 billion adults being overweight while 821 million people
are currently undernourished.
SUPPLY SIDE DRIVERS
Food loss and food waste not only result in waste of consumables, but extends
to a loss of resources used in production such as water, labour, energy, land and
other inputs. Unnecessary CO2 emissions are also realised, according to data from
WRI and FAO (2011). If food wastage were a country, it would be the third-largest
emitting country (excluding land use, land-use change and forestry) in the world.
FIGURE 25 Total GHGs Emissions Excluding LULUCFTop 20 of Countries (2011) vs. Food Wastage
12
10
8
6
4
2
0
(Gtonnes CO
2 eq)
Chi
na US
Foo
d W
asta
ge
Indi
a
Russ
ia
Japa
n
Braz
il
Ger
man
y
Indo
nesi
a
Mex
ico
Can
ada
Iran
Sout
h K
orea
Aus
tral
ia
UK
Saud
i Ara
bia
Ital
y
Fran
ce
Sout
h A
fric
a
Turk
ey
Ukr
aine
If food wastage were a country, it would be the third largest emitting country in the world
Source: WRI and FAO (2011)
30
According to a white paper by The Economist Intelligence Unit (2016), on a
per capita basis, the following three countries produce the most food waste/
loss globally: Saudi Arabia (427kg/ per person/ year), Indonesia (300kg/ per
person/ year), and U.S. (277kg/ per person/ year). Companies such as Greenbelt
Resources Corporation has begun implementing its “ECOsystem process” in
Indonesia to convert food waste into bioproducts such as high value protein,
potable water and bioethanol. Furthermore, the Food and Land Use Coalition
is currently building a cross-sector programme to reduce food loss and waste in
Indonesia by 50% by 2030 (WBCSD, 2018).
A report published by the World Economic Forum in collaboration with McKinsey
(2018) estimates that food-sensing technologies for food safety, quality and
traceability could reduce food waste by 5%-7% by 2030. Fresh food is most
vulnerable to loss. Optimal technology will not only help retailers but also
smallholders to prevent food loss.
Around the world, supply chain technology is also helping to reduce food loss.
For example, CoolAsia, a Singaporean fleet management technology company,
offers multiple tracking solutions, such as temperature and humidity tracking at
different locations within a refrigerated container. This helps companies make
better decisions to prevent food spoilages. Traceability in the supply chain also
provides additional benefits such as transparency for smallholder farmers.
SUPPLY SIDE DRIVERS
31
SUMMARY
This paper has looked at the future of our food supply chain through the lens of
supply and demand. It is clear that the demand for animal protein from emerging
markets will not be sustainable. If we want to meet UNFCCC’s key goal “to ensure
that food production is not threatened” in a “time-frame sufficient to allow
ecosystems to adapt naturally to climate change”, radical measures are needed
from both the supply and demand side.
From the demand side, consumers will need to be educated on the impact of
animal protein on the environment. This needs to be extended to emerging
markets, which are large drivers of demand. Culture is also a driver of diet
choice, thus, education needs to be tailored to specific cultural needs. For aging
populations, the health benefit of a plant-based diet will need to be advertised
as this demographic will grow in importance. Reducing domestic food waste will
also make a drastic difference.
From the supply side, companies are working hard to create plant-based
alternatives, but this is limited to Western markets, apart from milk alternatives
due to lactose intolerance in the East Asia, Africa, South America. China, India
and Indonesia will be the key markets to introduce protein alternatives to due to
the volume of demands. Biotech (including CRISPR/CAS9) in food production will
increase in importance and we will continue to see investors picking up interest
in this sector. Food loss and waste in the supply chain cannot be overlooked as
our resources tighten.
32
APPENDIX QUICK FACTS ON ALTERNATIVE PROTEIN KEY INGREDIENTS
UNDERSTANDING SOY (Sources: USCUSA, WWF, USDA, FT, IPCC)
• 6% soybeans grown worldwide are for direct human consumption, while 70-75% ends up as feeds for cattle, poultry, etc.
• Brazil (31%), US (32%), Argentina (19%) are the largest producers of soy. The largest importers are China, EU-28 and other Asian countries.
• China was the largest importer of US soybeans, buying around 25m-30m tonnes annually. Shipments have plummeted recently due to US-China trade war (5.3m tonnes first five months of 2019 vs 15.2m tonnes same period in 2018).
• According to Grandview Research (2018), Soy protein concentrate was the highest consumed form of plant-based ingredient, accounting for over 34% of the global demand in 2018. The key reason for the high market share of this segment is the fact that soy has a negligible amount of cholesterol and saturated fats. Soy protein isolate was the second largest segment accounting for over 30% of the global demand in 2018. It is a refined form of soy protein, comprising of 90% protein content. It is utilised in meat products for improvising the quality and texture. Also, these are rarely found in stores and mostly used in food industry.
• In the 20 years from 1993 to 2013, a production increase of 141% can be observed (117m tonnes to 284m tonnes), while the agricultural area only increased by 88% (60m ha to 113m ha). Besides a massive increase in soy production over this period of time, there was also a significant increase in productivity.
• Soy has been associated with significant deforestation in Brazil. In the new IPCC Special Report on Climate Change and Land (2019), government data has revealed that three football pitches are deforested per minute in the 7 months since president Bolsonaro came to power.
• Argentina and Brazil are reported to export
60 percent of their production and the USA about 16 percent. The market for non-GM soy seems to be growing and may be increasingly important in the future.
• Genetically modified soy has reached 50% of global GMO crop area in 2017.
Soy Production
USBrazilArgentinaChinaIndia
ParaguayCanadaRussiaUkraineAfrica
Bolivia Rest of LATAMOther countriesIndonesiaEU
Harvest 1,000 tonnes
2014
32%
31%19%
4%
3%3%
2%
each 1%
each <1%
33
APPENDIX
UNDERSTANDING VITAL WHEAT GLUTEN (Sources: Mordor Intelligence, Grand View Research, FAO)
• Wheat gluten is widely used in meat alternative products. Wheat gluten is made by washing wheat flour dough with water until all the starch granules have been removed, leaving the sticky insoluble gluten as an elastic mass, which is then cooked before being eaten.
• Wheat gluten emerged as the largest product segment in 2015 and is estimated to generate over US$840.1 million in revenue by 2025.
• According to latest research, the global wheat gluten market is expected to register a CAGR of 8.21% during the forecast period, 2018 to 2023.
• The industry in Asia Pacific is projected to witness substantial growth over the next decade owing to various developments across major economies. The regional market is expected to grow at a CAGR of 4.8% from 2016 to 2025.
• Archer Daniels Midland (ADM), Agridient, MGP Ingredients, AB Amilina, Cargill Inc. and Manildra Group are few of the key players in the global wheat protein market.
• From the latest available data in 2014, China produces the most wheat at 126m tonnes (17%), followed by India at 96m tonnes (14%) and Russia at 60m tonnes (8%).
Wheat Production, 2014Annual agricultural production of wheat, measured in tonnes per year
Source: UN Food and Agriculture Organisation (FAO)
No data 0 5 million 10 million 25 million 50 million 100 million 200 million
(tonnes)
34
UNDERSTANDING ALMONDS (Sources: Almond Board of California, Almond Board of Australia, International Dried Fruit Council, Absolute Report, IPCC)
• The global Almond market is valued at US$6,140 million in 2018 and will reach US$8,930 million by the end of 2025, growing at a CAGR of 4.8% between 2019-2025.
• The US produces 82% of almonds worldwide, largely in California. Of this, 33 per cent is consumed in the US and Canada, while 67 per cent is exported to 90 countries.
• The majority of growers are small family farmers (91% in California).
• California’s drought, wildfires and increase in temperature caused by climate change could heavily impact the world’s almond production. The water intense crop also faces high risks from California’s increasing droughts.
• Wonderful Pistachios and Almonds, Blue Diamond, Panoche Creek Packing, Spycher Brothers, Select Harvest, Mariani Nut Company, Waterford Nut Co, Treehouse, Belehris Estates, California Gold Almonds, Hilltop Ranch, The Almond Company, D.V.Enterprise, Harris Woolf California Almonds, Patrocinio Lax and Sran Family Orchards are the key players in the global almond market. These 15 players took up about 60% of the global market in 2016/2017.
• Almond hulls and hash are used for animal feeds.
APPENDIX
Almond Tree Fruit Weightcrop year 2017/18
Hulls 4,527 billion lbsKernels 2,264 billion lbsShells 1,593 billion lbs
54%
27%
19%
World Almond Productioncrop year 2017/18
USAustraliaEUAll othersChileTunisiaMoroccoTurkeyIran
82%
6%5%
2%
each 1%
Top Global Destinationscrop year 2017/18
US
Spai
n
Indi
a
Chi
na /
HK
Ger
man
y
Japa
n
Ital
y
UA
E
Can
ada
Vie
tnam
Net
herla
nds
Top 10 export markets represent 71% of total export shipments
735
203 200170
13479 68 64 58 55 52
(million lbs)
Sources: Almond Board of California, Almond Board of Australia and International Dried Fruit Council
Sources: Almond Board of California, July 2018 Position Report
35
APPENDIX
UNDERSTANDING OATS (Sources: Research and Markets, USDA)
• Oats are predominantly used as animal feed, cosmetics and consumer food. Majority of the produced oats is used as animal feed (95% in the United States and 70% in Germany), while cosmetics constitute a minute fraction of oats consumption.
• The global oatmeal market was valued at US$10,475 million in 2017, and is projected to reach US$11,907 million by 2027, growing at a CAGR of 1.3% from 2018 to 2027.
• According to USDA, in 2018/19 (preliminary) the total world production for oats is estimated to be 22.01 million metric tons. The EU produces 35% of the world’s oats (USDA doesn’t provide the breakdown of the countries), Russia produces 21% and Canada 16%. US, Brazil and Australia produce 4% each.
• In case of the demand for oats, US companies have gained preference over multinationals due to the strong market power. The global leaders in the oats market are The Quaker Oats Company, Grain Millers Inc., Blue Lake Milling, Avena Food Ltd and Richardson International, among others. Food market giants like Pepscio are trying to enter the market in an effective way. Pepscico opened its first Quaker Oats plant in China in October 2015 in an effort to expand its nutritional business in the country. Companies, both at local and international levels, are focusing on addressing specific challenges, such as crop protection, sustainable protein production, food processing and manufacturing efficiency, among others.
UNDERSTANDING COCONUT (Sources: FAO, Gro-intelligence, APCCSEC, USDA)
• Coconut is grown in over 90 countries worldwide, but the majority of global supply comes from Asia.
• Asian and Pacific Coconut Community (APCC) is an 18-member intergovernmental organisation covering >90% of global production.
• 72% is produced by Indonesia, the Philippines and India. 2016 global production was 59.3 million metric tonnes, of which Indonesia produced 17.7 million metric tonnes, Philippines 13.8 and India 11.1.
• Copra production was ~5.5 million MT globally in 2017, of which ~4.2 million came from Asia.
• Coconut oil production was around 3.4 million MT in 2017. Philippines is the largest producer and exporter of coconut oil (~1.1 million MT, 36% global market share), followed by Indonesia (~0.9 million MT, 29% global market share).
• FAO data is commonly referenced, but significant discrepancies in statistics is evident. FAO can underestimate.
• Approx. 12.2 million hectares of coconut plantations were harvested globally in 2016.
• Over 95% of this was farmed by smallholders
of 0.5-4 Ha each, with no cooperative structures.
• Some state & private industrial plantations
using monoculture do exist, but are not generally commercially viable.
• There are approximately 16 million smallholder coconut farmers worldwide.
36
APPENDIX
• 80-100 million people globally depend on coconut and its processing for livelihoods.
• Area harvested has steadily increased over time, but production has stagnated in the last decade.
• Yields have fallen by ~10% in the last 10 years.
• Worldwide demand for coconut is growing at a rate of ~10% a year due to the rising popularity of coconut water, coconut milk and virgin coconut oil.
• Increasing publicity over numerous health benefits with “superfood” status (e.g. coconut water as a healthier sports drink substitute, virgin coconut oil as a treatment for Alzheimer’s, among many other health claims).
• Main importers of raw coconuts are China and the US.
• Main importers of coconut oil are the US, the Netherlands (distribution point for across Europe, but also has large major food companies such as Unilever, Mars and Friesland Campina), Germany (mainly in production of cosmetics) and Malaysia.
• Demand for organic virgin coconut oil is projected to grow at ~11% CAGR between 2019 and 2022.
• Demand for coconut milk is projected to grow at ~15% CAGR between 2019 and 2020, largely driven by the US.
Global Coconut Production 2016
Source: FAO Data
IndonesiaPhilippinesIndiaBrazil Sri LankaVietnam
Papua New GuineaMexicoThailandTanzania Others
30%
23%
19%
11%
4%4%
3%
each 1%
each 2%
37
UNDERSTANDING PEA PROTEIN (Sources: Grand View Research, FAO, Fior Markets)
• Pea protein is a food with a neutral taste that is used in dairy alternatives such as cheeses and yogurt. It is extracted from the yellow pea, Pisum sativum, and has a typical legume amino acid profile.
• Green and yellow peas are used as raw materials for processing pea protein. Rising importance of organic farming owing to strong regulatory scenario in U.S., Australia, and Brazil will provide incentives to farmers, increasing the production of pea crops and enhancing raw material availability. This in turn, is expected to boost the market growth during the next few years.
• Canada is the largest producer of dry peas followed by Russia and the US.
• Majority of manufacturers are located in U.S. and Western Europe owing to easy access to raw materials and equipment.
• North America held the largest market share for consumption of 37.6% in terms of volume in 2018. Europe was the second-largest consumer in 2018. Asia Pacific is likely to witness the fastest growth during the forecast period. It is likely to expand at a CAGR of 15.3% till 2025.
APPENDIX
• According to Fior Markets, the global pea protein market is expected to reach US$189.3m by 2025 at a CAGR of 24.3% (2018-2025).
• Key players in the pea protein market are A&B Ingredients, Roquette Freres Le Romarin, Burcon Nutrascience Corporation, Cosucra Groupe Warcoing SA, Glanbia, Plc. Nutri-Pea Limited, Sotexpro SA, Axiom Foods, Inc., Farbest Brands/Farbest-Tallman Foods Corporation and Shandong Jianyuan Foods Co., Ltd.
• In December 2018, Axiom Foods introduced Cannatein, a hemp protein ingredient, and Vegotein N, a pea protein ingredient. Because of the ingredients’ neutral taste, flavor-masking agents are not needed in applications containing the ingredients.
Global Pea Protein Market Share by Application 2018
Source: Grand View Research
Dietary SupplementBakery GoodsMeat SubstitutesBeveragesOthers
38
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November 2019
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