Despite considerable growth, the market share of alternative proteins in the European Union will remain modest during the next fifteen years. Consumer behaviour is changing only gradually: without government intervention and innovations that drive down prices, it will not work.
Just getting started
Despite the significant interest in meat and dairy substitutes, the market for plant-based alternatives remains very small in Europe for the time being. In the Netherlands – a frontrunner – the consumption share of meat substitutes last year was 2.5 per cent, and that of dairy substitutes 4 per cent. However, the market has doubled since 2017. Belgium, Spain, the UK and Sweden also score above average, but most other European countries lag far behind. In the EU, the average share is 0.5 per cent for meat substitutes and 3 per cent for dairy alternatives.
In a new report titled “The protein transition has only just begun”, Rabobank analysts map out the anticipated growth. Sales of meat alternatives will increase eightfold by 2035: from 214 kilotons in 2020 to almost 1,700 kilotons, or an impressive annual volume growth of 15 per cent. However, the share of consumption for meat substitutes in Europe will still be “only” 4 per cent in 2035. Dairy alternatives – which have been on the market for some time – will grow more slowly, reaching a share of 9 per cent.
Limited impact
On the consumer side, demand is rising due to growing concerns about issues such as health, climate and animal welfare. At the same time, the supply is also increasing: large multinationals are investing in this segment, supermarkets are freeing up more space for a growing category with good margins, and the foodservice industry is following suit. However, there are also curbing factors: relatively high consumer prices, concerns regarding the nutritional value of plant-based alternatives, and expectations regarding taste and texture – even though the quality has improved enormously.
As a result, the impact on the market for animal products is still limited. Rabobank expects the demand for milk as a raw material for dairy products to continue to grow by about 0.2 per cent a year until 2035. Consumption of fresh milk will decline somewhat, but the cheese market will continue to grow. The demand for meat will also continue to rise, thanks to a slight increase in the population and economic growth. However, analysts expect a shift from red meat to white meat and eggs.
Conservative market
Why is that? Meat and dairy have been on the menu for centuries, and consumer behaviour changes only slowly. The food market is conservative: there are very few examples of innovations that have revolutionised food within two or three decades. Light soft drinks took nearly half a century to grow to 32 per cent market share in Europe, and alcohol-free beer only has 4 per cent market share after 20 years.
Consumer prices will need to drop significantly to achieve a 25 per cent market share for plant-based products by 2035. This will require pioneering innovations, for example, in protein fermentation or perhaps even cultured meat, Rabobank analysts believe. Government measures could also be considered, such as a VAT rebate on plant-based alternatives or some form of meat tax. But these are not on the agenda in the short term. In conclusion: after a flying start, alternative proteins have reached a good niche position but do not (yet) pose a threat to the dairy and meat industries.
