How To Tap into China’s Plant-Based Meat Market: Key Considerations

Posted by Written by Reading Time: 7 minutes
  • Starbucks and KFC are testing China’s market preference for plant-based meat alternatives with new menu offerings.
  • We discuss key market considerations for international food and beverage companies seeking to tap into the meat-substitute segment in China.
  • This article is part of our continuing coverage of new business opportunities in a post-coronavirus China, reflected in changing consumption trends and lifestyle priorities.

This month, Starbucks and KFC will become the latest international food and beverage companies to offer plant-based meat alternatives in China.

Starbucks is partnering with the plant-based meat companies Beyond Meat and Omnipork to offer more vegetarian-friendly food options, such as lasagne imitating the taste and texture of beef. KFC, meanwhile, is also collaborating with the US agribusiness company Cargill to introduce a limited run of plant-based fried chicken in select locations in China.

The new products on offer by Starbucks and KFC represent the latest effort by both food and beverage companies and plant-based meat producers to test the Chinese market’s interest in new types of meat substitutes.

The industry is still relatively young worldwide, and especially so in China. In this article, we look at the state of the plant-based meat industry in the country and offer considerations for food and beverage operators and producers looking to enter the market.

Why plant-based meat?

The concept of imitation meat is not new – especially to China. In the West, meat analogue products like Tofurkey – a tofu-based imitation of turkey meat – have been on the market for decades. In China, vegetable-based imitations of meat products have existed since the 6th century, when Chinese Buddhists created vegetarian versions of traditional dishes.

What makes the new generation of plant-based meat different from previous iterations is its use of technology to engineer tastes and textures that so closely resemble meat that it can be difficult to tell the difference. Beyond Meat, one of the leading companies in the field, uses pea protein as its engineering base, while Impossible Foods – another industry leader – uses a soy base. Some companies, like JUST Meat, develop meat in cultures from animal cells, though these are not the same as plant-based meats and have not yet been released for mass consumption.

Because plant-based meat so closely resembles real meat, producers hope to not only reach vegetarian and vegan consumers, but also meat eaters. To do so, producers use ethical arguments that their plant-based meat is healthier and better for the environment than real meat.

Beyond Meat, for example, advertises than their burger uses 99 percent less water, 93 percent less land, and 90 percent less fossil fuel emissions than a quarter pound of beef. While in practice the health and climate benefits of plant-based meat is still debated by experts, further advancements in the industry have the potential to meet these aspirations.

The COVID-19 coronavirus outbreak has also highlighted some of the potential safety benefits of a pivot towards plant-based meat, including in China. Over 90 percent of the world’s meat comes from factory farms, where animals are held to close proximity to one another in what can be unsanitary conditions, which risk fostering epidemic outbreaks.

Most experts believe that COVID-19 originated from animal to human transition in a Chinese wet market, similar to how the SARS outbreak began in 2003. Though it did not affect humans, China is also still grappling with an outbreak of African swine fever that emerged in 2018 and subsequently decimated the country’s pork supplies, requiring the culling of over a million pigs.

In addition to other ethical considerations, less reliance on the method of factory farming could potentially mitigate conditions that trigger zoonotic disease outbreaks besides providing governments with an alternative source of food in plant-based alternatives.

How does China’s plant-based meat market compare?

Compared to North America, where companies like Beyond Meat and Impossible Foods have become market leaders, the Chinese market is more fractured. Beyond Meat’s partnership with Starbucks, for example, is the company’s first foray in mainland China.

Domestic Chinese startups like Zhenmeat and Starfield have emerged in recent years, offering similar style plant-based meat substitute products, with the former’s products based off string beans and pea protein and the latter’s based off bean protein. However, their food technology is still considered less advanced than their US competitors.

One area where homegrown companies may have an advantage, though, is in offering alternative meat products suited to Chinese dishes and satisfy the local palate. Besides offering products like burger patties and hotdogs, Chinese companies are developing plant-based alternatives for popular Chinese dishes, such as meatballs used in hotpot. Zhenmeat is even experimenting with 3D printed bones to imitate the experience of eating meat off the bone.

While Chinese consumers have had little exposure to new plant-based meat products, there are signs that the market could be receptive.

For one, the Chinese government has an ambitious goal to halve meat consumption by 2030 in a bid to slash emissions and tackle obesity. If the government is to achieve its goals, it will need to take dramatic measures to reverse current trends.

China is already the world’s largest meat consumer – responsible for 27 percent of the world’s total –   and though it lags behind developed countries in per capita meat consumption, this continues to grow. As such, the meat alternatives industry may benefit from supportive measures to allow the government to meet its targets, including by offering incentives and cutting restrictions.

Moreover, Chinese consumers are now more open to the idea of plant-based meat products.

China represents 53 percent of the world’s meat substitutes industry already, compared to just 5.5 percent for the US, though this segment is dominated by traditional meat substitutes. Further, according to research conducted by the academic journal Frontiers in Sustainable Food Systems, close to 96 percent of respondents in China say they are “somewhat” or “extremely” likely to purchase plant-based meat, compared to about 75 percent of American respondents.

Many Chinese consumers are actively seeking to reduce their meat consumption. A 2018 report from the New Zealand Institute for Plant & Food Research, for example, found that 39 percent of Chinese consumers are reducing their meat consumption, opting instead for more vegetables, tofu, and vegan meat substitutes. Already, China has over 50 million vegetarians, who offer an immediate consumer base that do not need to be convinced to experiment with meat alternatives.

Young urban Chinese consumers in particular have expressed openness to plant-based meat, seeing such products as contributing to a healthy lifestyle. According to research conducted in 2019, over 80 percent of consumers who had eaten plant-based meat within a six-month span were born after 1990.

If plant-based meat products gain traction in China, the prospects are lucrative.

According to the market research firm CB Insights, protein consumption in China is growing at a rate of 3 to 4 percent per year. By 2025, China is projected to account for 35 percent of all protein consumption. If plant-based meat products make just a small dent in China’s total protein consumption, the size of the market will translate into significant returns.

What are key considerations for new F&B market entrants?

Here we briefly breakdown essential market entry considerations for food and beverage producers and distributors looking to enter the Chinese market.

Finding the right partner

For multinational food and beverage operators, finding the right local partner is key. Different companies have different bases for their products, and the right fit may depend on the cuisine and other products offered by rival competitors.

This is particularly a concern for foreign companies that offer localized Chinese menu options, as they may find a Chinese company better suited to their needs than a US one with superior technology. Food and beverage operators may have to sign exclusivity agreements with the plant-based meat providers, making it more of a challenge to find a partner that meets all of the operator’s needs.

Licensing and trademark concerns

Further, food and beverage operators need to negotiate licensing and trademark concerns with their partners. Plant-based meat products are often listed on menus with the producer’s trademark, but the specific recipe may be developed by the food and beverage operator. As such, the two parties need to agree on the product’s quality and presentation, as well as the rights to the recipe.

On the other side of the relationship, producers must also find food and beverage operators that will showcase their products effectively, which is particularly important for new entrants looking to develop their brand’s reputation. If the brand becomes attached to an unappealing product, it may permanently sink its prospects in the market.

Both food and beverage operators and plant-based food producers should conduct thorough due diligence on their partners to ensure each side has all the necessary licenses and enforces rigid food safety standards.

Food safety and quality standards

Due to a history of major food safety scandals, Chinese consumers are highly discerning over the safety of food products, especially new ones they may be unfamiliar with. Food safety violations, whether in meal preparation or in the production of the plant-based meat itself, can also permanently bring to an end a brand’s chances to succeed in China.

Securing regulatory approvals

Obtaining regulatory approvals for plant-based meat products can prove a challenge. China bans genetically modified ingredients for human consumption, which some plant-based meat producers rely on for their products.

Impossible Foods, for example, relies on a genetically modified protein to give its products meat flavor and for imitating the juices found in real meat. Such a product would be challenged to gain approval from China’s State Administration for Market Regulation (SAMR), the key body in charge of food and beverage product regulation.

For more information on the market outlook in China, conducting due diligence on potential partners, and obtaining regulatory approvals, please contact our specialists at Dezan Shira & Associates or email us at china@dezshira.com.

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China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com

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