Plant-based industries are expected to continue growing, as the global market is estimated at $50.7bn ($46.4bn EUR) and has a CAGR projected of 8.29% for the next decade. (Precedence research).
The sector is still struggling to achieve price parity. A 2022 Good Food Institute study found that, on average, plant-based products were 67% higher priced than those made from animal sources. Plant-based dairy products were also 87% costlier than the animal counterparts.
This cost differential has slowed the growth of plant-based products. The industry has begun to reduce the price gap between animal-based and plant-based products.
What is being done to close the gap in prices?
Plant-based industries invest heavily in innovations to reduce the gap between animal-based and plant-based products.
Recently, researchers discovered the secret of creamy, plant-based, cheeses. Meanwhile, Stockeld Dreamery in Sweden made a breakthrough with melting. All of this is aimed at increasing sales in order to reach economies-of-scale.
FoodSquared, a British brand of plant-based fish, is focusing on costs as well. CEO Frankie Fox said they aim for “at least parity or lower prices at scale”.
Price parity is also a top priority for the industry. According to CEO Zac Allen of plant-based fish brand Pacifico Biolabs, “if people who would normally eat seafood are to replace it once or twice per week, then you need to make sure that they don’t pay twice as much.”
This gap is expected to shrink as more plant-based producers increase their production.
Good Food Institute
A spokesperson for the Good Food Institute said that plant-based price reductions are anticipated, making this category more competitive. “We anticipate this gap to shrink as producers scale up their production and achieve economies of size, while also seeking price parity with conventional competitors.”
In 2022, manufacturers in the Netherlands will have developed plant-based hamburgers which are 78 cents less expensive on average than beef burgers.
Read also: Plant-based Watch: Latest on plant-based food and beverages The variety of products that are available has greatly contributed to the success of this market. (Image: Getty/puhimec)
What prevents full parity of price in the plant-based industry?
The industry is still facing significant production costs despite the strong growth of the sector.
Ananda Roy is a consumer products industry advisor for Circana. She says that plant-based ingredients are often transported from far away countries, resulting in expensive transport. Their shelf life is short, and waste can be high if the demand is irregular.
The question of government priorities is also a big one, as the meat industry receives subsidies which are not extended to manufacturers who use plant-based products.
Mark Cuddigan is the CEO of THIS. In the EU animal agriculture receives up to four-times more funding than plants-based farming. It’s because of this that meat is often cheaper even though it has a higher environmental and social price.
Just last month the EU declared that meat and livestock would be a priority for the EU on a longer-term basis.
It doesn’t necessarily mean that industry-wide parity in prices is impossible, but it does indicate the need for changes, at both an industry and government levels.
Economies of scale are key to achieving full price parity in the portfolio.
Nestle
Circana’s Roy says that manufacturers need to reduce waste and lower production costs. He says economies of scale will bring about this.
The industry knows this all too well.
Nestle’s spokesperson says that achieving full price parity in the entire portfolio is dependent on several factors.
In the meantime, governments will need to restore balance to their support of plant-based producers.
Cuddigan says that if subsidies were distributed fairly and true costs of meat, such as CO2 emissions and water usage, and biodiversity losses, were included in the prices, then the gap could be closed. Government intervention such as taxing meat or shifting subsidies to plant-based producers could also make a difference. This would result in the consumers paying less for sustainable products and plant-based foods.
The meat industry receives subsidies that make it harder for plants to compete on price. (Image: Getty/Milan Markovic)
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