According to Euromonitor China’s “free from meat” market which includes plant-based meat products has grown 33.5% since 2014 to reach US$ 9.7 billion in 2019. The industry is forecast to reach US$ 11.9 billion by 2023. Already the world’s largest market for alternative meats, the Covid pandemic could serve as a catalyst to encourage greater numbers of non-vegetarian Chinese to adopt alternative meats as consumers, wary of potential sickness from animal protein increasingly turn to plant-based proteins such as plant-based meat and plant-based eggs. For instance, Just Egg, a plant-based egg alternative reportedly saw sales jump 30% on e-commerce platforms JD.com (HKG:9618) (NASDAQ:JD) and Alibaba’s Tmall since the Covid outbreak.
The potential is enormous; protein demand in China is on a structural uptrend, driven by a growing middle class, rising incomes, and living standards. China is the world’s largest meat consumer, the world’s largest meat importer, the world’s largest meat producer, and the world’s largest soybean importer (demand for which is largely driven by its livestock industry which uses soybean meal as animal food). China’s soybean imports by value are more than 10 times bigger than second-placed European Union.
Yet, there is still room for growth. Although China has caught up with Asian neighbors such as South Korea in terms of average protein supply, China still falls short when compared with Western countries such as the United States and Germany.
However, satisfying this expected protein demand may prove an uphill challenge due to scarce resources; home to 19% of the world’s population but owning just 7% of the world’s arable land, China has very limited arable land. At just 0.086 hectares per person, China’s arable land per capita is lower than India, the United States, the European Union, and Russia.
And with the livestock industry producing just 18% of the world’s calories and 37% of total protein despite occupying 77% of the world’s agricultural land according to figures from Our World in Data, it is clear that animal protein is far more resource intensive than plant-based protein, and so China, already the world’s largest meat producer, likely has very little room for further land expansion for livestock which makes the case for plant-based meats in China is very compelling.
Furthermore, the industry is bound to benefit from support from the Chinese government which reportedly aims to cut down meat consumption by 50% to reduce greenhouse gas emissions. Plant-based meats are an answer to this and the climate-friendly narrative of plant-based meats is a major draw factor, particularly among China’s sustainability-conscious millennial generation. China has about 400 million millenials, compared with about 80 million in the United States.
The opportunity has not gone unnoticed. Global alternative protein players such as Beyond Meat (NASDAQ:BYND), and Impossible Foods have stepped up marketing efforts in China while food and beverage players such as Starbucks, and Yum! Brands’ (NYSE:YUM) KFC, Pizza Hut and Taco Bell have launched plant-based menus. KFC’s plant-based chicken will be supplied by agri-business giant Cargill, while Stabucks’ plant-based menu will see faux meats supplied by Beyond Meat.
Beyond Meat also partnered with Alibaba’s (HKG:9988) (NYSE:BABA) grocery retailer Hema to bring its plant-based packaged meat to supermarket shelves in China.
Competitive landscape: China’s mock meat industry is centuries old, and the country’s has well established players offering a wide variety of plant-based meat products
Imitation meat originated in China, and restaurants in Buddhist temples throughout the country have been serving fake meat as far back as the Song dynasty which lasted until the 13th century. A key pillar of Buddhist principles is respect for all life i.e., all living creatures and hence vegetarianism is commonly practiced among Buddhists. To accommodate the diets of patrons and guests, these temple kitchens mastered the art of preparing mock meats, a tradition which continues to this day in numerous Chinese Buddhist temples not only throughout China but also around the world from Malaysia, to the United States. Over the centuries, restaurants sprung up throughout the Middle Kingdom offering faux meat menus to cater to vegetarian Buddhists. According to China Daily there are more than 300 restaurants offering fake meat in Beijing alone.
Chinese entrepreneurs and merchants brought their expertise with them during their overseas travels and hence countries with a significant ethnic Chinese population such as Malaysia, also have their share of mock meat restaurants and mock meat manufacturers. Notable Malaysian players such as Ahimsa (which literally means “non-violence” in Sanskrit) for instance have been in the business for decades. X% of Malaysian vegetarian meat companies in the LD Investments database are more than 10 years old.
Thus, China has a very long history of manufacturing plant-based protein and the country has several players producing mock meat products out of a variety of plant-based foods such as tofu skin (known as yuba), soybeans, wheat gluten (sometimes called seitan), mushrooms, peanuts, and vegetables such as potatoes and carrots.
These well established players offer much more than just burghers and sausages, with their product range covering a wide breadth of faux meat and seafood products from ordinary staples such as beef, pork, lamb, chicken, crab meat, roast duck, and cuttlefish, to exotic meats such as eels, puffer fish, shark’s fin, and abalone.
It has been noted however that a number of these companies’ products are targeted at China’s vegetarian population, and the products often do not mimic the taste, texture, and color of authentic meat very well. Hence, while they satisfactorily serve the needs of China’s vegetarian population, the products may need some tinkering before China’s mammoth non-vegetarian population will be sufficiently persuaded to make the switch and consume plant-based meats on a regular basis. Impossible Foods’ burgher for instance uses a patent-protected lab-grown heme which makes its vegetarian burgher look, taste, and “bleed” like the real thing, and thereby differentiates itself from competing burghers.
This probably explains why despite having a centuries-old and well-established mock meat industry, Chinese still favor animal meat over plant-based options and animal meat’s popularity has only grown along with the country’s affluence-driven protein demand. China’s vegetarian population is just about 3.8% of the total population.
And in absolute terms, China’s vegetarian population is dwarfed by Asian neighbors India, and Indonesia.
Nevertheless, these established players will seek to expand beyond their traditional target market of vegetarian Buddhists, which suggests competition will be fierce.
Overseas players will be up against local upstarts and established domestic players
Overseas companies Beyond Meat, JUST, and Impossible Foods will be up against local upstarts such as Zhenmeat (often touted as China’s answer to Beyond Meat), and OmniPork who are also beefing up their businesses to carve out their slice of the market.
While Beyond Meat and Impossible Foods’ product offering is heavily skewed towards the western palate with products such as burghers and sausages, China’s domestic players are heavily focused on Chinese taste buds with a focus on pork rather than beef (given that pork is China’s most popular meat) and with a product range covering local delicacies such as dumplings, mooncakes, and meatballs.
Zhenmeat for instance offers local delicacies such as plant-based meat mooncakes, and konjac-based crayfish. Hong Kong-based OmniPork offers a line of pork products tailored to Chinese taste buds such as pork buns and pork strips. Pork makes up 80% of China’s meat market, and China is the world’s largest pork consumer accounting for nearly half of global pork consumption.
With domestic demand outstripping domestic supply, China has also held the position as the world’s largest pork importer for a few years, before being overtaken by Japan in 2018 but expected to regain the leading position in 2019 according to data from the United States Department of Agriculture (USDA) as the African Swine Fever (ASF) disease reduced China’s domestic pig herd by at least 40%, leading to a spike in imported pork from all China; China’s pork imports by dollar value jumped 117.4% in 2019.
The ASSF outbreak has also pushed up meat prices such as pork helping further push interest towards plant-based pork. The current conditions prevailing in China’s pork market suggest apt timing for OmniPork to capture its share of China’s alternative protein market.
Established domestic mock meat players to watch include Whole Perfect Food and Godly. Founded in 1993, Whole Perfect Food has been in the industry for decades selling faux meat to Chinese consumers shunning meat for religious reasons. Now they are looking to expand that market and the company could emerge as a strong contender armed with a product range of more than 300 vegetarian/plant-based meat and meat product alternatives including vegetarian versions of oyster sauce, tailored to the Chinese palate.
Founded in 1922, Godly 功德林is considered to be one of the pioneers of plant-based meats. And like Whole Perfect Food offers a plethora of faux meat products from mock meat chicken, duck, ham and traditional meats such as vegetarian dried intestines, to local delicacies such as mock meat buns, dumplings, traditional Chinese cakes, and mooncakes. Their official store on JD.com has over 200 reviews, most of which are positive.