Plant-based meat popular with Aussie diners despite cost-of-living crunch

The report, titled Food Frontier 2023 State of Industry, found that sales growth for plant-based meat was driven by increased demand from the foodservice sector, which grew by 59 per cent each year to generate $123.6 million in FY23. Sales more than quadrupled in FY23 compared to FY20, when the foodservice sector accounted for only $31 million.

Meanwhile, retail sales fell by a compound annual growth rate (CAGR) of 1.1 per cent between FY20 and FY23 as consumers tightened their belts when grocery shopping.

“The category has been affected by lower retail sales, attributed to inflation and the increased cost of living, which has impacted all food products perceived as either premium or discretionary,” says Food Frontier CEO Dr Simon Eassom.

"Some products were not meeting consumer expectations around taste, and the higher price point compared to conventional counterparts has reduced repeat purchases, leading to a revised forecast value."

The report notes that in times of increased cost-of-living pressures the price of products becomes a deciding factor for consumers, with many still viewing plant-based meat products as luxury or occasional purchase. Both plant-based meat companies and retailers report stronger retail sales during price promotions, indicating that the regular retail prices for plant-based meat are still too high for many consumers.

According to the Reserve Bank of Australia (RBA), between 2021 and 2023, general inflation rose 6.1 per cent annually, with Australian Bureau of Statistics (ABS) data showing that total food inflation was even higher at 9.2 per cent.

Fifty-two per cent of households felt they were financially worse off than they were 12 months previously and 37 per cent believed the next 12 months' economic conditions would be bad. As a result, spending on discretionary retail remained low towards the end of 2023.

On the upside, increased consumer interest in health and plant-based eating coincided with a rebound in the foodservice sector.

Australian consumers returned to dining out, producing record growth and sales for the plant-based meat category. Per capita consumption increased by 28 per cent in total since FY20, from 280 grams to 360 grams in FY23. Expenditure also rose from $8.40 to $10.20.

Data from CommBank iQ found that while consumers were cutting back in several categories of essential and discretionary spending in late 2023, spending on dining out increased, as did spending on travel and entertainment.

“The plant-based meat industry still has room to grow in the foodservice sector, as foodservice distributors and venues are in the early phases of adopting plant-based meats in their offerings,” says the report.

“There is evidence to show that although consumers may be cutting back on their grocery spend, many Australians are still willing to dine out.”

YouGov data from January 2023 found that 39 per cent of Australians are looking to reduce their meat intake. In a survey held OCT nine months later, it also found that roughly 19 per cent of Australians follow a flexitarian diet pattern - defined as mostly vegetarian but occasionally consume meat or seafood - with a further 6 per cent either vegetarian or vegan.

The data did not contain information on meat reducers, who still consume meat but are eating less than they have in previous years.

Looking to the future

According to the report, processing is spread across three commercial-scale plant-protein fractionation facilities and companies in Australia: Australian Plant Proteins (APP), Unigrain and Integra Foods. There are also smaller companies working with emerging crops lupin and hemp, these being Wide Open Agriculture, Eighth Day Foods and Hemp Harvests.

Australia has one manufacturer of soy TVP, Ben Furney Flour Mills, and one company producing wheat TVP - Harvest B.

The industry estimates that Australia will need at least 10 processing facilities to meet the projected global demand for plant proteins and could support even more facilities with the right settings in place.

“The ideal location for these facilities would be across Australia’s major grain and pulse growing regions, bringing with them regional development and economic and employment benefits,” says the report.

“Demand for plant proteins is strong internationally as well as domestically, with a strong export market for high quality, Australian-grown ingredients. Beyond applications in plant-based meats, plant proteins have uses in plant-based dairy products, sports nutrition, bakery goods, snacking products, health foods, cereals and more.”

Founded in 2020 by Riordan and Alfred Lo, Harvest B has raised more than $7.1 million from backers such as Woolworth’s venture capital arm, W23 Ventures, Aura Ventures, Mandalay Venture Partners, Alberts Impact Ventures, as well as received a $1 million grant from the Advanced Manufacturing Growth Centre (AMGC) Commercialisation Fund.

Riordan explains that for Australia to meet the broader opportunity in plant protein ingredients, innovation and collaboration is required across the supply chain.

“There remain many areas across the supply chain from field to fork where innovation and commercialisation needs to advance,” Riordan says in the report.

“The challenge in manufacturing is that it’s not where venture capital has been putting its money for the last 20 years. Government has a huge role to play in early ecosystem building to help create the right incentives for private capital to come in and support scale.”

The report has found a slight contraction in domestic manufacturing occurred in the first half of 2023, which stemmed from difficulties in securing funding from private investors and government grant programs, in addition to a sharp increase in manufacturing and labour costs and reduced consumer expenditure. One example provided was the closure of v2food’s Wodonga manufacturing facility in early 2023.

The State of Australian Startup Funding Report 2023 found a year-on-year decline of 54 per cent for investment in Australian startups, compared to the global reduction of 38 per cent.

While it was a difficult economic environment for Australian food manufacturers, plant-based meat startups aimed to avoid increasing prices, instead opting to improve efficiencies in their supply chains or vertically integrate operations to reduce overall costs.

The report revealed that the prices of plant-based meat products have inched closer to conventional meat prices, reducing the price disparity. The average price premium for plant-based meats has reduced from 49 per cent in 2020 to 33 per cent in 2023.

In January 2024, there were 275 plant-based meat products for sale in Australia; in FY23 this number was higher - peaking at almost 350.

“Across the 2023 financial year and into the start of 2024, the plant-based meat category experienced consolidation, with SKU rationalisation occurring in the two major supermarkets,” says the report.

“The shelf space for plant-based meats in these retailers has reduced from the highs in 2020 - 2021, particularly in regional stores. Retailers note that the demand for plant-based meats is much higher in capital cities than in regional areas, aligning with the wider availability of products on shelves in city stores.

“Independent supermarkets such as IGA, Foodworks and Harris Farm often stock a broader variety of plant-based meat products than Coles and Woolworths, however these retailers have a smaller overall market share.”

At the same time, several international plant-based meat brands withdrew products from the Australian market, notably Nestle’s Harvest Gourmet brand as well as NotCo, Future Farm, Oumpf and Moving Mountains. But the past year has also seen several New Zealand brands enter the Australian market, with Off Piste, Plan*t and Grater Goods launching products into Australian retail and foodservice channels in 2023.

“I believe we will start to see a stronger ecosystem develop where the expertise and infrastructure across the supply chain is better leveraged to meet market needs on taste, nutrition and cost,” says Riordan.

In Australia, US$14.3 million ($16.75 million) was raised by plant-based meat companies in FY23. Of this, the largest raise was by Fable Food Co, raising US$8.5 million ($12.3 million) in February 2023 to help fund its expansion plans in the UK and US, as well as research and new product development.