How Plant-Based Businesses Can Survive The Cost-of-Living Crisis
The cost-of-living crisis, whether caused by low wages, austerity, rising costs of energy and ingredients, COVID-19, Brexit, or all the above, poses a threat to food businesses and especially plant-based ones. According to a UK Office of National Statistics report from July 2022, around half of adults are buying less food, and around three quarters were very or somewhat worried about the cost of living. So how well will plant-based businesses weather the storm, and what can they do to survive these multiple crises intact?
For established vegan consumers there are plenty of ways to spend less. The Vegan Society website has lots of tips on how to make the most of affordable ingredients like lentils, oats and chickpeas. There are also recent studies showing eating plant-based can be more affordable than eating animals. An Oxford University study from 2021 found that in the US, UK, Australia and Western Europe eating more plant-based dishes could cut food bills by a third. It has also been reported that in the Netherlands plant-based meat has become cheaper than the animal equivalent. The research shows that in the Netherlands discount supermarket options at Aldi and Lidl offer great benefits for those who exchange meat for meat alternatives, with savings of €6 per kilo.
However, in the UK, with many plant-based products coming from younger, less-established businesses, and plant producers getting less government support than meat producers, the uncertain economic climate is likely to cause issues. We spoke to Indy Kaur, plant-based food consultant, founder of Plant Futures and former plant-based food strategy lead for Tesco. She says the area most likely to struggle is chilled meat-alternatives: “There is no real incentive for somebody who’s not currently buying plant-based meat alternatives to now start buying it when they’re facing a cost-of-living crisis. We know from Kantar consumer data that consumers are also now struggling to afford to eat healthily, which is one of the key drivers in switching to plant-based food. I think we need to be sensible and understand that there are a lot of people that don’t earn a lot of money and they are going through a hard time. I think getting new people to buy chilled meat-alternatives is going to be difficult right now unless brands can invest in promotional mechanics and leverage Veganuary’s campaign where plant-based sales always spike. It must also be said that veg-led products like pulses, lentils and legumes may do better if consumers can learn how to cook with them.”
There has been a flurry of innovation in the chilled meat-free category in recent years, with companies competing to produce the most realistic and tasty substitutes. Indy Kaur believes it will be a difficult time for these products. “Compared to the chiller space given to meat, the room for plant-based meat alternatives is small. This means retailers are having to arrange many brands and formats into just two or four chiller bays. Over the past four years there has been a strategy from retailers to embrace new product development, but with sales starting to plateau as consumer demand flattens, retailers are having to reassess and justify the space against retail sales. Ultimately, the consumer will decide which brands and products will thrive. It will be a turbulent year, and I expect next year is going to be difficult too. This is not triggered just by the cost-of-living crisis. It is the natural dynamic of an emerging market but made harder by the cost-of-living crisis.”
Just as retailers are creating value meat ranges to ride out the cost-of-living crisis, there is a need for more value plant-based items. This has already emerged within supermarket own labels. Tesco Plant Chef, Aldi and Lidl have successfully pushed down the price of vegan ranges. Another example is Alpro, widely available and relatively affordable yoghurt, which for a large pot is the same price as its dairy equivalent.
Indy Kaur believes there is an appetite for more value mainstream ranges: “There is a need for more commodity-style unbranded components. Dehydrated textured vegetable protein chunks are cheap but are mainly found in health food shops. Canned jackfruit and banana blossom are good base ingredients that could be used to create new dishes, but they’ve not been adopted by the mass market yet. There are also opportunities for more frozen bulk-buy ranges. Quorn does well with its big bag format that is ready the freezer when needed, and there is room for more value pack options.”
A look at the demographics of plant-based shoppers suggest that they tend to be more affluent than average. A 2021 survey published by the Good Food Institute found that compared to the average consumer, buyers of plant-based products tend to be younger, higher earning and are more likely to have a college or graduate degree. Indy Kaur says there are still some market segments that could be better served: “Products tend to be aimed at single or double higher-income households, young professionals, and empty nesters. There are fewer branded products targeted at families and children at affordable price points. That’s the whole area that hasn’t been explored at all.”
Despite the harsh economic climate Indy Kaur believes it is right for mission-driven innovators to focus on meat-alternatives: “animal-free proteins are key to getting where we need to be in the long term. In 2020, the market share of meat substitutes in European retail was just 0.7% of the meat market. If we want a more sustainable food system in which, let’s assume, 50% of meat is from plants and 50% from animals, we’ve only just scratched the surface. I think we’ve benefited in the industry with a short-term boom that saw real growth very early on, driven by vegans and flexitarians. To get those products into the mainstream is a whole different ballgame. We need to understand it is a long-term transition not a short-term win.”
Supermarkets are still crying out for new products and one necessary area of innovation is around costs. One area to explore is the use of by-products as ingredients. This has been done by Israeli company More Food that makes a white label high protein meat-alternative from by-products from sunflower oil production. Integrated supply chains is something that the meat industry does well, with by-products routinely become ingredients. Indy Kaur says this is not yet embedded into the plant-based industry: “We still have a long way to go. It’s difficult because there’s such a buoyancy in innovation. We’re still learning and developing new products all the time. But it absolutely needs to be part of the strategy.”
One thing needed for plant-based businesses to thrive is a consolidated voice to push for government support, like the way the meat industry lobbies for support. The UK Plant-based Food Alliance campaigns on behalf of the sector. The coalition, whose members include Oatly, Alpro, Upfield, The Vegan Society and the Good Food Institute, are calling on the government for recognition in policies around food production. The organisation’s CEO Marisa Heath says supporting farmers to shift to producing more ingredients for plant-based food would help to reduce costs and prices: “Government subsidies have supported the production of meat and dairy and now that the objectives are changing around public funding for farms to try to support biodiversity and other environmental goals there is an opportunity to support more regenerative systems where there can be multiple outcomes. Being able to source ingredients close to the manufacturer should help to reduce costs.”
The group would like to see the government set targets for the public sector procurement of plant-based food, which would help producers: “It would give the sector some financial stability in receiving a proportion of the £2b+ spend on food for schools, prisons, local authorities, and the NHS. Scaling up is important as the bigger a business gets the costs per unit should reduce. Government support through foreign investment and export opportunities would also help with this.”
The organisation would also like to see food included as a key factor in net zero planning. Marisa Heath adds: “If the government made that the case, all food strategies being developed across the country by large business, local authorities, universities and so forth could include plant-based in their sustainability plans. This would boost plant-based companies and help with scaling up. It would be great to see the Government come out with a public campaign to nudge people to think about their diet and indicate their faith in the plant-based sector to deliver good, nutritious food through wider policy. Other countries are doing this, and it is proving successful.”