The world reckoned with COVID-19 over the last several months as lockdowns were instituted, and as people globally experienced drastic changes to their daily lives, consumers’ spending habits changed in stride. Among these changes include an increase in spending on groceries, while spending on other categories, such as entertainment and travel, naturally decreased. Not only has spending on groceries increased overall, but specific food categories have seen remarkable e-commerce growth as consumers stock up their pantries with shelf-stable items. Of the top 15 product categories that saw the highest e-commerce growth in the year since March 2019, one-third are food items, which include soups, rice and dried grains, and packaged foods. In terms of habits, the pandemic has certainly changed the way we think about, engage with, and prepare our snacks and meals, according to the 2020 Food and Health Survey. This survey was conducted during a week in April 2020 and found that over 80% of respondents changed their eating habits due to the pandemic. The most common change, by far, is that people are cooking more than before, as well as snacking far more than before.
Shift Towards Ethical and Sustainable Eating
So, how exactly have our diets changed temporarily, if not permanently? Here at Big Idea Ventures, we are particularly curious about the increased interest in and consumption of plant-based and alternative protein products. In fact, some experts believe that the pandemic has accelerated growth in the adoption of vegan diets. As such, it’s no surprise that two of the largest companies in the alternative protein space have performed well during the pandemic – Impossible Foods increased its retail and supermarket presence from 200 stores in January of this year to over 3,000 by May, and Beyond Meat has experienced a strong financial performance, with revenues up 141% from the previous year.
According to the Food and Health Survey conducted in April 2020, 28% of consumers had increased their consumption of plant-based proteins and 24% had increased their intake of plant-based dairy at that point in time, as compared to a year ago. Interestingly, individuals who were following a diet or were under the age of 35 were more likely to have increased their consumption of either plant-based proteins or dairy this past year. This highlights an interesting opportunity for companies in this space to develop products for and target individuals that follow diets, in order to achieve greater traction and increase customer loyalty.
What’s Driving the Increased Interest in Plant-Based Protein?
Several reasons explain why we’re seeing shifts in consumption habits towards a greater intake of plant-based protein, including global food supply chain inefficiencies and a newfound desire for consumers to do something altruistic in times of significant global stress and uncertainty. The coronavirus originated from animals, and that, too, has been a driver for greater consumer awareness regarding meat alternatives. Meat shortages across the country, as well as the negative health impact on employees at crowded meat processing facilities, have also inspired consumers to search for alternatives. And finally, the environmental effects of the pandemic, which include the largest drop in greenhouse gas emissions in history, continue to highlight and reinforce the meat industry’s notoriously high environmental cost. These reasons will drive consumers’ decisions to continue or discontinue the changes in diet made during the pandemic, and as such, it remains to be seen whether the changes in diet brought upon by the health crisis will last.
Negative Impacts of COVID-19 on Plant-Based Protein
While there’s been a greater interest in plant-based products over the last several months, there are still several challenges the industry must overcome if these products are to become a staple in people’s kitchens. First, the demand for traditional meat remains exceedingly high, even during the current health crisis. Additionally, plant-based alternatives typically have a higher price point than traditional meat, and while consumers are currently spending more on groceries than they normally would according to a recent McKinsey study, it remains to be seen whether this pattern will continue post-pandemic, especially if and when people return to their normal spending levels for discretionary, non-essential items as well.
Furthermore, prior to the pandemic, restaurants were expected to play a central role in bringing plant-based proteins to consumers nationally, following the increasing popularity of meat-free options when dining out. The National Restaurant Association’s Restaurant Industry 2030 report found through its national survey of restaurant experts that plant-based proteins would be the second most important trend in the restaurant industry over the next ten years. The pandemic, however, has devastated the restaurant industry. A recent report by Yelp found that of all the restaurants that have closed due to COVID-19, 60% have closed permanently. Whether these closures were a direct result of the pandemic or due to larger trends in an exceedingly tough industry, the restaurant industry has faced one of its more significant setbacks. This, in turn, limits plant-based companies’ ability to expand and increase consumer awareness through restaurant channels.
For the time being, however, the FDA has loosened food labeling guidelines that now allow restaurants to sell their excess inventory directly to consumers, which has been a much-needed additional revenue stream for many restaurants and a way to minimize food waste. For instance, large plant-based companies like Impossible Foods have been able to see their restaurant partners successfully sell bulk quantities of their flagship plant-based protein directly to consumers. However, this policy is in effect for the duration of the public health crisis, and as such is not a long-term solution for plant-based companies looking to easily reach consumers through restaurants.
Moving into the post-pandemic world, plant-based and alternative protein companies will likely need to reevaluate and rethink fundamental aspects of their business, including their understanding of their target consumers, the sustainability of their supply chain, and the optimal channels through which they hope to reach the maximum number of consumers.