The capital-positive but competitive Chinese plant-based meat market remains to be proved as a revenue generator for brands. For China’s local emerging brands, could a more mature and fast-growing overseas market be a place to stand out amidst growing competition?
By Zhou (Shawn) Yu, strategic communications advisor of The Foote Group; and Xinwei (Stella) Zhang, a doctoral researcher at the University of Helsinki
The trend of plant-based meat has been on the rise in China since 2020; Beyond Meat, the “first plant-based meat stock”, was the first overseas brand of plant-based meat to enter the Chinese market in July 2020, and has started trial sales and cooperation with western fast food brands such as Starbucks and KFC1, which have already entered the Chinese market. In the same year, Harvest Gourmet from Nestlé and Unilever’s plant-based meat brand ‘The Vegetarian Butcher’ have been trying to capture the potential of the Chinese meat market earlier.
China has been considered by the industry and investors as the next most promising market for the development of plant-based meat. Even though traditional Chinese vegetarian food has become very sophisticated, there is still a big gap between the texture, taste, and other levels of animal meat2. Plant-based meat, on the other hand, can simulate the texture, taste, and flavour of animal meat to the greatest extent possible with plant protein. Therefore, the emergence of plant-based meat is an optimisation of food choices for the Chinese market3, accounting for about 20% of China’s population where vegetarianism has been a mainstay.
At the same time, due to the huge demand for meat consumption in China and the impact of African swine fever in 2019, the Chinese market presents a deficit in demand for meat4, which may make plant-based meat an opportunity for the Chinese people to choose.
In this situation, local Chinese meat and food brands are quickly focusing on this market under the influence of overseas plant-based meat brands entering the region, developing their plant-based meat brands, and competing with overseas brands for the Chinese market.
Slow domestic growth
Is China, with its influx of capital, really the best market for plant-based meat’s next growth step? This might only be so for overseas plant meat majors, and not for locally born Chinese start-ups who are looking to achieve rapid sales growth and performance on the ground
To date, meat has been a symbol of prosperity and status in most parts of China5. The appetite for meat emerged with the reform and opening up of the 1970s. In recent years, meat consumption has also been linked with the maintenance of the Chinese middle-class image6. To date, China has accounted for 28% of the world’s meat consumption7. However, these figures do not necessarily translate directly into a potential market for plant-based meat.
Although China’s meat consumption market share is large, China’s current meat consumption per capita is not as high as that of Western countries, and according to the Food and Agricultural Organization (FAO) of the United Nations projections8, China’s annual meat consumption per capita will grow modestly until 2028. At the same time, China has a rich daily dietary structure with many vegetarian alternatives. Tofu and beans, for example, have been a common source of plant-based protein in the Chinese diet, but choosing plant-based protein does not mean they will use it as a substitute for meat protein, and the vast majority of Chinese do not identify as vegetarians as their identity label9. It is, therefore, a huge challenge for plant-based meat brands to convince Chinese consumers to choose plant-based meat instead of meat protein.
More importantly, the imagined plant-based meat boom did not come as quickly as expected. This may be due to the failure of the product to meet consumers’ taste expectations. At the same time, its higher price has also deterred repurchases10.
Furthermore, those trying to capture the Chinese plant-based market share are not only overseas plant-based meat brands that already have market experience and more mature products but also local players from China. This includes many Chinese meat industry leaders and emerging brands. Therefore, it might be challenging for both alternative protein brands and tastes to develop quickly and acquire faster returns than Europe and America in the Chinese market.
The growing overseas market
According to The Good Food Institute, plant-based foods in the US have grown into a US$7 billion market, with a plant-based product penetration rate of 56.8%, indicating that the general household acceptance of plant-based products far exceeds that of the Chinese market. Between 2019 and 2020, retail sales of plant-based meat increased by 45% to $1.4 billion. With a penetration rate of only 17.6%, and accounting for only 1.4% of overall meat sales, the potential for plant-based meat products in the US is clear.
The Good Food Institute reported that there are still market and product gaps for plant-based meat products, such as vegetarian seafood products. A market research report by Changing Tastes, a restaurant strategy consulting firm, also showed that US consumers are looking to further reduce their consumption of red meat in their daily meals, with seafood products ranking first in popularity among a variety of alternatives. In addition, the current product and consumer groups of plant-based meat are still relatively homogeneous in the general direction, and competition is still focused on limited consumption scenarios, such as specific menus in the general retail and fast-food restaurant industries, which still have room for improvement compared to the development of consumption scenarios for traditional meat products.
In the face of the massive US market, US-based brands are becoming more competitive. In the past year, Beyond Meat launched its third iteration and secured a three-year strategic partnership with McDonald’s to roll out the McPlant veggie burger, while Impossible Foods not only introduced new products such as chicken nuggets and sausages but also partnered with several offline restaurants to launch special menus to expand brand reach.
Meanwhile, overseas brands are jumping into the market. Future Farm, from Brazil, has launched a product portfolio including burgers, sausages, patties, and meatballs at a price advantage, and is leveraging its partnership with food distributor Superior Foods to enter multiple channels including retail, clubs, and foodservice. Singapore’s NextGen Foods, which has long focused on the poultry market, hopes to open up the US market with its chicken products. Next Meats, which focuses on Japanese food, has further expanded its product portfolio following the success of its e-commerce channel by introducing special products such as Japanese roast ribs. These brands have a global vision from their inception and are equipped with experienced overseas leadership teams, but the overall brand strategy is more convergent.
A case study: Chinese alternative protein brands abroad
Unlike other overseas brands that have entered the US market with great fanfare, Chinese plant-based meat brands have focused on the domestic market and kept a low profile overseas. After testing in Australia and UK, OmniFoods announced to enter the US market with their OmniPork products. Founder David Yeung also expressed a desire to launch a new seafood line in the US in 202211. As of now, 15 operating countries and regions are available on the OmniFoods website, with each market having a slightly different product matrix.
In general, OmniFoods has adopted a product development strategy that combines basic products and special dishes. OmniPork, which includes minced meat, shredded meat, and luncheon meat, and New Seafood, which includes fish fillet, tuna, and fish burger, form the basic plant-based meat products. The OmniEat series, which covers a variety of local dishes, is the largest innovation vehicle for product innovation and localisation.
Localisation efforts can be seen even in the basic products: OmniPork Ground, for example, is available exclusively for the UK and US markets. The shredded meat product, for example, is named Omni Strips in the US, UK, and Australia, and is accompanied by a burger image on its packaging, while in the other Asian markets it is named Omni Strip and uses the picture of an Asian dish, even though the same ingredients and technologies are used.
OmniPork has four sets of brand names, OmniMeat and OmniPork, which are further divided into OmniPork(Meat) and OmniPork(Meat) Mince. This strategy of omitting or detailing the specifics of the products shows the consideration of the composition of consumer groups, cultures, and corresponding regulations in the local markets.
Meanwhile, Qishan Foods has been operating in overseas markets for the past 30 years, setting up offices in more than 30 countries. Unlike OmniFoods’ inclusive vision and relatively concentrating product matrix, Qishan Foods, as an established manufacturer, focuses on Asian cuisine and has a more diverse and decentralised product portfolio, favouring Asian-inspired mock meat products. With more than 500 products, Qishan is expanding at a rate of 50 product tests and five products launched every year.
Qishan Foods’ overall strategy is to quickly fill in emerging markets through agile product development. In recent years, Qishan Foods has also rolled out products such as burgers, to compete with international manufacturers including Beyond Meats and Impossible Foods in the Chinese market. Qishan has also taken some attempts to localise its products sold overseas, including using Western ingredients such as rosemary and onions to replace the herbal ingredients in some locally sold products. However, the image of Qishan Foods in China and overseas markets has always been that of traditional Asian cuisine, This is in stark contrast to the positioning of OmniFoods, which uses different product names and brands in each market, but the underlying technology, ingredients, and ingredients do not differ.
The difference is also reflected in channel cooperation. OmniFoods is rapidly expanding through Western fast-food brands in markets such as the UK and Australia, and in its entry into the US, it has also announced partnerships with local retailers to expand its product offerings. Qishan Foods’ overseas target consumers were mainly Chinese12, focusing on Chinese restaurants and supermarket retails, with no major marketing efforts. Zhou Qiyu, senior marketing manager of Qishan Food, expressed the company’s strong desire to become an international brand, stating that overseas sales currently account for 8% of overall results and that it has already set up a dedicated team to drive overseas growth13.
In an increasingly competitive yet exploratory Chinese market, China’s emerging brands still face a lengthy consumer education effort and the challenge of navigating their way to success. The growing battle has seen the emergence of more sophisticated product formats and marketing strategies, including a variety of vegetarian snacks, as well as competitive strategies such as Z-Rou’s groundbreaking community marketing and entry into school tables to cultivate future customers.
For China’s local emerging plant-based meat brands, it is difficult to invest a lot of energy and time in the promotion and exploration of the Chinese market at this stage to obtain predictable returns. OmniFoods and Qishan Foods have already provided two different approaches to going overseas. If more local Chinese small and medium-sized plant-based meat brands can combine their selling points, either flavour or cultural, and integrate the diverse competitive strategies practised in the Chinese market, instead of running blindly in the Chinese market, they may find a way out overseas.
This article was first published in the April/May 2022 issue of Food & Beverage Asia.