In the second part of our series on alternative protein in China we wanted to dive deeper into the question of competition. Headlines like KFC selling its entire supply of plant-based fried chicken within an hour raise the question who will have an edge in the Chinese market. Foreign or local players?
To get a better understanding of the market dynamics governing alternative protein in Asia, we spoke to David Yeung, founder and CEO of Green Monday Group. He witnessed the Hong Kong launch of the two US industry leaders Beyond Meat and Impossible Foods first hand and has been active in the field since 2012.
Background Green Monday Group
Green Monday Group is committed to promoting a plant-based lifestyle since 2012. The group consists, among others, of two key entities, OmniFoods, the umbrella for its plant-based protein products and Green Common, a retailer for their own and third party plant-based products. The group employs 300+ people across China, Singapore and Canada.
David Yeung, founder and CEO of OmniFoods and the most recent product, plant-based luncheon meat
The company’s press coverage skyrocketed in recent months - announcing not only a new product, luncheon meat (to most Western consumers known as Spam, or spiced ham), but also a cooperation with the retail giant Aldi and with Starbucks - adding to its existing partnerships with Taco Bell China and Wagas, a Chinese chain of cafes and eateries with over 115 stores. The group also plans to launch its first Green Common store in mainland China during the 2nd half of 2020.
Overall OmniFoods has already developed a strong product portfolio. Besides the basic minced pork consisting of peas, soy shiitake mushrooms and rice, there is luncheon meat and pork strips, both commonly consumed processed meats in APAC. In addition, OmniPork hosts a set of pre-packaged meals ranging from dumplings to full pre-packaged dishes such as stir-fried noodles.
Within the first minutes of the interview, it became very clear that David has humble motives. Much like Vince in our first article on alternative protein in China, he is driven by the ambition to reduce animal agriculture and the strain on the environment it entails. Long before plant-based meat made its way to a mass-market phenomenon, David promoted the advantages and the necessity of relying more on plants in order to achieve a sustainable lifestyle.
David Yeung during a TEDx Talk in 2014 presenting the mission of Green Monday and the threats of animal agriculture to our environment
What can we learn from Beyond Meat’s and Impossible Food’s entrance in Hong Kong?
Beyond Meat and Impossible Foods launched in Hong Kong in 2017 and 2018 respectively. David experienced the market entrance first hand as Beyond Meat sold its product through Green Common’s outlets. Given this experience, we asked what inferences can be made about the developments in mainland China, with more foreign companies entering the market.
According to David, Hong Kong makes a sufficient testing ground to prove that products like plant-based burger patties can have a stable consumer base in APAC. Nevertheless, it is not a great case for making inferences on market dynamics in mainland China. As a global trading hub, Hong Kong consumers are used to a much broader variety of foods and cuisine compared to other Chinese regions beyond the likes of Shanghai.
Another point, however, David Yeung hopes will unfold similarly in China, is the constant change in consumer sentiment towards plant-based protein. Green Monday conducted three surveys on food consumption in Hong Kong in 2014, 2016 and 2018. The numbers are showing a clear trajectory: people in Hong Kong are increasingly embracing plant-based diets.
Why are Chinese companies not afraid of competition?
With foreign companies entering the Chinese market, observers have increasingly been asserting a toughening in competition for plant-based meat producers. David does not share this view. Rather than worrying about competition from other plant-based meat alternatives, David is preoccupied with “the common foe”: animal agriculture. His goal is to eat into the 99.X% market share of meat (figuratively - David is vegetarian). He gave us five reasons why he is not worried about competition.
Low Market Penetration - The market penetration of plant-based meats is so low that companies still have a vast room to expand. Current alternative protein suppliers offer their products only in a fraction of places, focusing on big hubs, such as Beijing and Shanghai. David is convinced that companies will be busy capturing the existing and growing unaddressed demand for alternative protein across all regions of China before entering a serious competition for specific locations.
Abundance Of Product Types - The Chinese market for meat products is highly fragmented. As outlined in our first article on alternative protein in China, varieties of the ways meat is being consumed are so vast that focusing on a specific product leaves enough opportunity to grow significantly within that “niche” product category. OmniPork just made a great case for this dynamic. Just a few weeks ago, OmniPork launched Luncheon Meat, a type of processed meat, also referred to as Spam. The global market for just this type of product was $3.1bn in 2019 and is estimated to grow to $4bn by 2025 according to an analysis by global info research. China alone accounts for $459m in that market.
Another case for this dynamic could recently be observed with Starbucks China’s launch of plant-based products. Rather than focusing on a single provider of plant-based protein, they launched their new product range incorporating both products from Beyond Meat and OmniFoods.
High Variability in Consumer Taste - With China’s huge size and population comes a good amount of regional variability in consumer preferences and tastes. Focusing on catering to the tastes in a specific region opens up yet another way to create a unique standing in the market. He expects that some companies will specialize on certain products, especially when it comes to pre-packaged meals. Some producers may choose to focus on creating spicy dishes, catering consumers that for example prefer Chongqing and Sichuan cuisine, while others may focus on getting the sweetness commonly found in Shanghainese dishes right.
Multiple Distribution Channels - Yet another dimension to play is the choice of distribution channel. As outlined in our first article on alternative protein in China, companies such as Impossible Foods focused on bringing their stand-alone products (patties, sausages) to consumers via restaurant partnerships, while Beyond Meat was the first to bring their products to the supermarket. Zhenmeat’s partners with producers to bring ready to eat products such as dumplings to the consumer.
Unknown Consumer Preferences - This is probably the most important aspect for David. As outlined above, China has a very strong food culture that differs from other countries, making inferences on the preferences of Chinese consumers a risky endeavor. Neither do Chinese consumers have a long history interacting with new solutions to plant-based meats nor has it been observed how products customized to Chinese palates will be accepted by consumers. There is still much to learn and probably dozens of product and branding iterations on the way. Companies need to do some heavy lifting here before focusing on taking on other plant-based protein suppliers.
This leaves us with some open questions. Will it be local startups or developed foreign entrants that will win the lion share of this market? What degree of localization is needed and (most interestingly for consumers) what new products will be introduced to serve Chinese buyers on the way?
Regardless of the many variables, the publicity introduced by the entrance of companies like Beyond Meat and Impossible Foods and headlines like KFC’s lightning sale raise a lot of attention and will be helpful in further expanding the market and the infrastructure for alternative protein in China. Thus, David, much like his peers, is welcoming the entrance of more players.