Why you should not sleep on China's burgeoning vegan meat industry

As Chinese consumers are becoming more health aware, their needs for healthier substitutes of a wide range of consumer goods have had a strong impact on the F&B sector. Among the new industries surfing on the health trend, substitute meat in China has shown a lot of potential. The Chinese plant-based meat industry was worth 6.1 billion yuan (910 million USD) in 2018 with a 14.2% year-on-year increase. Although some European countries and the US are showing faster growth, China is one of the largest consumers of vegan meat, representing about one fourth of the world’s market.

More interestingly, China is also a major plant protein exporter and processor. This situation combined with an unsaturated market allows Chinese plant-based meat startups to benefit from a cost advantage. However, the Chinese substitute meat industry still faces some hurdles: as most producers and distributors are Western based, logistics issues have arisen and the legal framework for vegan meat in China is still at its’ infancy.

What are the determinants of the growth of the Chinese plant-based meat industry and how can it avoid supply issues?

Source: Good Food Institute. The plant-based meat market in China is on the rise.

Health concerns push for lower meat intake in China

Although the vegan movement in China is experiencing fast growth, it is interesting to note that only a small percentage of the Chinese population that identify as vegan. In fact, only 5% of Chinese consumers are vegetarian, which is relatively low in East-Asia, especially compared to nations like Vietnam or India.

Nevertheless, consumption of substitute meat in China is on the rise, mainly thanks to the fact that non-vegan Chinese people are open to vegan meat. According to a study by the Good Food Institute, 86.7% of people surveyed claimed to consume plant-based meat products despite over 90% of respondents not identifying as vegan. This interest in alternative meat is both cultural, as Chinese “meatless” meat culture goes centuries back, and also more importantly comes from an ever increasingly health aware consumer base.

In times when China had less food security, meat was treated as ‘the more the merrier’. But the times are changing and younger Chinese are noticing the negative side of eating an abundance of meat. Nowadays, health and weight concerns are among the main reasons why Chinese people reduce their meat intake. Much of the drive in consumption of plant based meat and fish in China comes from wealthier consumers who want to eat what they consider to be healthier, safer, and more environmentally friendly products.

Source: Denzan Shira. Health remains the main determinant in eating less meat in China.

The largest suppliers for vegan meat are located outside of Asia

Today’s biggest producers and suppliers of alternative meat are situated in Europe and North America. While these companies have factories all across the world and Asia is certainly no exception, logistical issues may and have resulted in bottlenecks leading to product shortages.

Impossible Foods, one of the market leaders in the substitute meat industry, bases their product on soy protein, of which half of the worldwide production is made in China. Nevertheless, Impossible Foods would need APAC suppliers to avoid shortages.

In that regards, Beyond Meat, another market leader, is better poised to take on the Chinese market. One of its main suppliers is the pea protein Chinese giant Shuangta (双塔), with whom they signed an 85% pea protein sales contract. Beyond Meat went even further by opening their first Chinese production plant near Shanghai. By opening this new facility, the company’s stated goal is to “significantly increase the speed and scale in which the company can produce and distribute its products within the region while also improving Beyond Meat’s cost structure and sustainability of operations.”

The major vegan meat suppliers are based outside of the APAC region which can lead to supply chain issues.

Domestic suppliers and producers of alternative meat are developing

While US based Beyond Meat and Impossible Foods have been very successful in creating plant-based ground beef for burger patties, China based providers have focused on Chinese cuisine and have lagged behind in ground beef innovations. Many of the larger international chains continue to source ingredients from US based suppliers (KFC, Starbucks, Burger King, and McDonalds).

However, in the last 5 years numerous plant-based raw ingredients providers have sprung up in China, thanks to investment and incubator programs. On top of this, fast growing domestic brands such as Z-Rou are also looking to source all ingredients domestically, to become recognized as being a local brand, this adds value to the brand’s plant-based pork products. Z-Rou sources their soy from China’s north-east and their coconut oil from Hainan. When releasing new products, they look for new China-based suppliers. Also, China already produces many of the plants needed for raw ingredients in large quantities.

There was a notable increase in online sales and revenue for all plant-based meat brands in the past 3 months. The top selling brand of substitute meat in China on Alibaba platforms for the last 6 months was 植物教授 (Plant Professor). Their main product is plant based dumplings. Nestle’s Harvest Gourmet brand has also performed exceedingly well. They accounted for the highest number of sales in the plant-based meat sector in February. 拉面说 (La Mian Shuo) – a popular instant noodle brand – collaborated with Vesta Food’s brand HUICUI to introduce a plant based pork option. This was one of the top selling products online for the last 8 months.

The Chinese legal framework around alternative meat is still in its infancy

Until recently, vegan meat in China was in a legal grey area. It’s only on 25 December 2020, the Chinese Society of Food Science and Technology released the Group Standard For Plant-based Meat Products "植物基肉制品", giving a clear definition of plant-based meat, as well as packaging & labelling specifications. Although this legal definition is a victory in itself for China’s plant-based meat industry, the recent nature of this text means that substitute meat in China doesn’t benefit from many from governmental plans, which are game changers in many Chinese industries.

For now, the development of substitute meat in China is supported by legislation from 2019 aiming at developing the Chinese soybean industry as well as the 14th Five-Year Plan which highlights carbon neutrality measures. Indeed, plant based meat could help the Chinese government to reach its emissions target and is in line with its ambition to reduce meat intake to reach it.

Image: Getty. Although vegan meat in China is becoming more popular, the legal framework is still lacking.

Key takeaways about vegan meat in China

• Substitute meat in China is a very promising market, with a year on year increase rate of 22.6% in 2019, the industry benefits from a relatively high penetration rate as most Chinese consumers are willing to try out vegan meat even if they are not vegan or vegetarian.
• Among a growing demand for healthy products, vegan meat in China positions itself as the perfect healthy meat substitute.
• While most producers and suppliers of plant-based meat are foreign, the Chinese substitute meat industry is booming. One contributing factor is the fact that China is a major producer of plant-based protein, especially when it comes to soybean, a key ingredient in many vegan meat products.
• Legislation in China around plant-based product is still very new. However, as the country pushes toward sustainability, the industry is expected to benefit from future government incentives.

This article was originally published on Daxue Consulting's website, written by our marketing team's intern Camille Gaujacq additional research by Dylan O’Hanrahan

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