15 minute read 14 Oct 2021
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When might the term ‘alternative protein’ be obsolete?

Rob Dongoski
By Rob Dongoski

EY Food and Agriculture Leader

Focused on strategy, digital transformation and M&A for EY clients in the agribusiness and food sectors.

15 minute read 14 Oct 2021
Related topics Food System Reimagined Sustainability Future consumer index
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Learn how protein is being reimagined and how that could impact the agri-food system and land use in the US.

Three questions to ask

  • What market share can alternative protein reach in the US by 2040, and what are the primary drivers?
  • What are potential land-use implications in the US?
  • What can protein disruption and land-use changes mean for agri-food stakeholders?

Protein is being reimagined globally, and its availability from alternative sources may have profound and disruptive impacts on the agri-food system and land use. A protein system transformation also has the potential to unlock opportunities for food and agricultural stakeholders to help address some of the world’s most pressing challenges, including decarbonization, restoring ecosystems, producing circular and bio-based materials, and producing enough healthy food for a growing population.

The food system continues to be reimagined as stakeholders place greater emphasis on the planet, consumer demands and greater connectivity across ecosystems. As that reconfiguration progresses, we see organizations innovating in new ways and offering greater transparency and sustainability. This is particularly true within the protein system, where alternative protein adoption and investment velocity are increasing. 

Recent research and scenario modeling by the EY-Parthenon team in alternative proteins sought answers to the following questions:

  • What market share can alternative protein reach in the US by 2040, and what are the primary drivers?
  • In combination with shifts in other agricultural consumption patterns, such as the impact of electric vehicle adoption on corn ethanol demand, how might alternative protein adoption shift the demand patterns of core commodity products in the US?
  • What are the potential land-use implications of these demand shifts?
  • What could these changes mean for agri-food stakeholders?

Advancements in plant-based, fermentation-based and cultivated protein technologies are all accelerating. While sensory and cost parity with animal protein have not yet been achieved, hundreds of innovations are occurring globally in the inputs, ingredients and processes used in alternative protein production. Each innovation is driving the category closer to sensory and cost parity with animal protein — and driving increased consumption and consumer engagement. 

Forecasted alternative protein disruption in the US, 2020–40

The EY-Parthenon team forecasts that alternative meat market share in the US may surpass 9% by 2030 and more than 40% by 2040 — even in the absence of policy-driven tailwinds.

Alternative dairy, which our analysis shows could be upwards of 60% market share by 2040, is a strong analog for alternative meat. The alternative meat forecast of 9% by 2030 compares favorably with the experience of alternative milk, which has penetrated American households and now accounts for 15% of all dollar sales of retail milk.¹ The rest of the alternative dairy category, including cheese, is advancing technologically and continues to attract increasing levels of investment. If social, environmental and regulatory drivers (e.g., water or carbon taxes) are factored into conventional protein production, market shares for alternative meat and dairy could surpass our base forecast considerably.

Plant-based and fermentation-based meat in the US may reach sensory and cost parity by 2024. “Fermentation-based” here refers to biomass fermentation. However, the budding “precision fermentation” industry is creating functional and nutritional ingredients that will be incorporated into all categories of alternative protein products. Cultivated meat, on the other hand, can potentially reach cost and sensory parity by the end of the decade. As the underlying cultivated protein technologies advance, we expect increasing production and consumer adoption of this source of protein and anticipate that by 2040 they could potentially surpass plant-based proteins in popularity. It is important to note that cultivated fats may reach parity sooner and be incorporated into plant-based products in the coming years. To drive our analysis, we considered production costs and advancements in sensory technology while incorporating potential tailwinds and disruptors.


Source: EY analysis, 2021

  • Technology and sensory

    Alternative proteins will need to sufficiently mimic their animal-based counterparts to drive consumer acceptance and broad adoption. For many, eating is no longer solely a matter of sustenance but also an experience. The entire experience, from mouthfeel to smell to cooking properties, is important to consumers.

    Research by the Good Food Institute and Kelton Global in April 2021 found that two of the top three most important functional benefits for alternative seafood products, for both plant-based and cultivated protein, were taste and texture.²

    In the same month, Beyond Meat stated that its newest product, the Beyond Burger 3.0, has a likeability score on par with conventional 80%/20% ground beef, illustrating that consumers already enjoy the functionality and sensory profiles of the company’s plant-based products.³ Producers of alternative proteins of all species, from seafood to poultry to beef, will continue to focus on food science and cooking properties to enhance the consumption experience.

  • Cost and affordability

    Affordability, which remains the most important purchase criterion for consumers when making food choices, influences the size of a category’s addressable market. With many novel and innovative food products, early adopters are typically those with higher disposable incomes or are mission- or innovation-driven.

    The EY Future Consumer Index, a global consumer survey of more than 14,000 consumers globally, indicates that 34% of consumers will pay a premium for products that promote health and wellness, and 27% will pay a premium if the company reduces water usage or greenhouse gas emissions. While certain consumer segments may be willing to pay a premium for food products, most consumers can’t afford to do so.

    The cost of alternative protein products is currently considered a barrier to adoption, but as prices reach parity, an inflection point may occur when alternative protein products move down the income distribution curve and are more widely chosen by price-sensitive consumers. In recent efforts to drive towards price parity for consumers, alternative protein producers have been reducing prices to channel partners.⁴

    EY-Parthenon analysis reveals that plant-based meats in US retail locations were within 37% of conventional meat prices in the second half of 2020. Depending on the future price points of alternative protein produced at scale, the entire protein category could expand.

     

     

  • Other product-related factors

    Alternative protein technologies not only have the potential to reach sensory and cost parity over the next several years, but they may also offer additional benefits that are relevant for industry stakeholders. Those benefits may include time-to-market reduction, volatility and external shock risk reduction, shelf-life improvement, and carbon- and water-footprint improvement.⁵,⁶ Consumer-facing organizations (e.g., food service providers and retailers) are evaluating these additional business benefits today, which could further accelerate the adoption rate for alternative protein.

  • Tailwinds

    Social, environmental and regulatory variables will influence market size over the coming decades and potentially provide considerable tailwinds. These may come from changing consumer purchase drivers (e.g., products’ carbon footprints) and policy and regulatory measures (e.g., shifting subsidies, federal research budget allocations and sustainability labeling requirements).

    The EY Future Consumer Index research shows that 64% of consumers are prepared to change behavior for the benefit of society, and 78% of consumers consider sustainability when purchasing fresh meat, poultry and fish. In March 2021, more than 60 organizations, including multinationals, petitioned Congress to direct federal funding toward alternative proteins. Some Congressional leaders have called for alternative protein research to be a priority. Tailwinds from social, environmental and regulatory variables could push alternative protein market share beyond our forecasts.

And soon, the word “alternative” may be obsolete and no longer appropriate. 

Data released by the Plant Based Foods Association shows plant-based milk is already purchased by more than 39% of households in the US.⁷ Furthermore, in June 2021, David MacLennan, CEO of agribusiness giant Cargill, said that plant-based products would eat into consumer demand for meat. The company’s analysis indicates that plant-based protein will be perhaps 10% of the market in only three to four years.⁸

Research by the University of Pennsylvania shows that 25% of people adopting a new norm can trigger and catalyze widespread behavior change.⁹ Adoption of alternative proteins at levels of 25%, or even less, would create significant impacts on the food system. Those impacts are not limited to the opportunities presented by a new and growing market. There are also impacts in the potential displacement of current markets for animal-based meat. This is an industry that is built on significant infrastructure investments in both animal production and processing, and much of our agricultural system has developed to grow feed grains for animals. The increased consumption of alternative proteins has the potential to create significant pressure and potential disruption on this entire system.

Impact on land-use and crop patterns in the US

For example, when we look at crop production in the United States, corn and soybeans make up more than 56% of cropland.¹⁰ Between 70% and 80% of demand for these crops comes from animal feed and biofuel production. A shift towards alternative protein, estimated to use 95% less land than some animal-based protein production systems, could, therefore, significantly impact the demand for corn and soybeans.¹¹

To fully understand the implications to US agricultural land use from emerging alternative protein technologies, it is important to consider the protein transformation in addition to several other drivers. Our scenario analysis also included expectations about the penetration rate of electric vehicles, which will impact the demand for corn and soybeans. Roughly 40% of the US corn crop is used for ethanol.¹² Other dimensions considered in our analysis include estimated increases in crop productivity (yield per acre), alternative feed potential for production animals, and potential substitute demand drivers for corn and soybean crops (e.g., novel bioplastics). It is the compounding effects of these drivers that could disrupt land use in a relatively short period.

In our base scenario, we assume our baseline alternative protein consumption estimates stated above (40% by 2040), increasing electric vehicle displacement of internal combustion engines (by 2045, non-EV sales will shrink to less than 1% of overall sales¹³), and USDA crop productivity forecasts (1%–1.5% yield growth per year).

Source: EY analysis, 2021

Note: These graphics illustrate the acreage equivalent of the US animal feed and biofuel demand impacts from alternative protein and electric vehicle penetration.

Under this base scenario, our analysis suggests that the offset in animal feed and biofuel demand from the penetration of alternative proteins and electric vehicles in the US would be equivalent to 30 million to 35 million corn and soybean acres by 2030 and 70 million to 80 million acres by 2040.

While this particular analysis ignores the impact of exports, preliminary assessments suggest that export markets may face similar offsets between expanding global protein demands and the potential offsets from alternative protein sources, renewable energy production and crop productivity. Social, environmental, and regulatory headwinds or tailwinds, as well as increasing electric vehicle adoption, can drive these figures higher or lower.

As demand for corn and soybeans is potentially disrupted, it could create an opportunity or provide a catalyst for a multitude of potential alternatives for land now used in corn and soybean production. This could include opportunities for new uses of these two crops, growing other crops for domestic use or a new export mix as global shifts in consumption patterns evolve, and adoption of different production practices or alternative uses of the land besides commodity feed and ethanol production, inclusive of stewardship or environmental services outcomes. Included here are a few land-use options we envision, but the ultimate outcomes will depend upon advances in technology, public policy decisions and economics for local geographies.

  • New uses of these crops

    A portion of the land currently used for growing feed corn and soybean meal today could be diversified to grow specific corn and soybean varieties that are geared for their end use (e.g., ultra-high protein content, ability to create bioplastic polylactic acid (PLA)). Bio-based solutions, from plastic bottles to cosmetics to car tires, may become key demand drivers for these crops. According to Mordor Intelligence, bioplastic is a potentially promising non-feed and non-fuel demand driver, with a global market value of $8.3 billion in 2019 and an estimated annual growth rate of 16% through 2026.¹⁴

    Additionally, many alternative protein companies, including Impossible Foods, already use soybeans in their products.  Startups across the globe are leveraging soybeans in different ways for the plant-based protein market. We expect to see more specialized crop production over the coming years as new technologies to use corn and soybeans advance for alternative protein ingredients and novel uses such as bioplastics.

  • Other crops (protein and non-protein)

    While bioplastics and high-protein crops destined for plant-based foods are two potential replacement demand drivers for corn and soybeans, our scenario analysis shows that a subset of disrupted land may shift toward other uses, and there are many potential options. One example is to grow other crops for protein and non-protein uses. Crops for alternative protein markets would include peas, other legumes and oats, for example. Crops such as wheat, cotton and rice, most of which are destined for human use, are strong options for traditionally non-protein crop bases that could be expanded (note: wheat is also used in alternative protein products). These crops could be grown for domestic use or a new export mix, and we could begin to see similar specialized production as corn and soybeans.

  • Alternative land uses inclusive of stewardship or environmental services outcomes

    Lastly, disrupted land presents an opportunity for an array of uses that could help the world decarbonize and stay within a 1.5°C temperature rise. This land could be used for farm- and soil-conservation programs, other carbon sequestration programs or reforestation. The Biden administration recently stated its goal of conserving 30% of land and water by 2030, with one of the six priority areas being “incentivizing voluntary conservation efforts of fishers, ranchers, farmers and forest owners.” Smaller subsets of this disrupted acreage could be used for urban development or other sustainability initiatives (e.g., high-speed and sustainable transportation infrastructure and renewable energy operations).

While there are several benefits from a protein system transformation and the resulting land-use shifts, there’s a valid worry that growers and rural communities will be hurt in the process. These concerns include reduction in jobs, household income and total value-added. For example, according to a 2019 study, Iowa had roughly one in five people employed in ag-related activities, over a $22 billion contribution to household income, and over a $39 billion contribution to total value-added in 2017.¹⁵ Ag-related industries in this Corn Belt state contribute significantly to employment and tax bases for the state, and disruptions to major economic drivers such as livestock and feed crop production will have an impact on those values.

These concerns may be offset by potential opportunities created by these new technologies, which could include new products, markets and value streams. In one early example, research from Purdue University’s February 2021 Producer Survey provides early perspectives on this opportunity set. Its research shows that 40% of farmers believe farm income will stay the same or even rise if plant-based meat alternatives have a 25% market share, and 39% of farmers are already interested in pursuing opportunities to contract to grow crops used in meat alternatives.¹⁶ These findings illustrate that some farmers already see potential opportunities to increase farm income and diversify operations. Crops will be needed as either ingredients or feedstocks for the three major alternative protein production technologies (plant-based, fermentation and cultivated protein). As organizations, growers and governments form their strategies, it’s imperative to conduct a complete stakeholder assessment to help ensure unintended consequences are minimized.

Disruption from alternative protein adoption will not just impact current animal protein production. As described above, the footprint of agriculture may shift considerably, impacting many players throughout the agri-food value chain, including, but not limited to, seed and crop input production, equipment manufacturing, grain processing and animal feed production. The impacts from some scenarios warrant strategic discussions at the executive level for many value chain players.

Other impacts resulting from land-use disruption may include:

  • Revised or reallocated agricultural subsidy programs and federal research funding toward areas like alternative protein
  • Shifting theses and portfolios for investors, particularly those focused on agri-food
  • New agricultural banking and insurance offerings and terms
  • New grower-driven crop-planting decisions as demand and price economics shift and other options potentially become more profitable
  • Labor and economic impact assessments and subsequent actions by federal, state and local regulators for their jurisdictions

In summary, increased alternative protein adoption, which we estimate as up to 40% in the United States for alternative meat by 2040 in the absence of policy-driven tailwinds, has the potential to disrupt the current agri-food landscape over a short period. These technologies can deliver many business, societal and sustainability benefits without compromising consumer demands for safety, health, affordability, taste and experience. It can be difficult to keep up with daily alternative protein headlines, from new investments and funding to new partnerships and product launches, but organizations must see and grasp the big picture. Many disruptive innovations land on S-curves and agri-food organizations and governments must act proactively and intentionally to make the jump.

Alternative protein can create a win-win situation for all stakeholders — agri-food organizations, growers, consumers, governments and the environment. But this will require coordination, innovation and agility. Agri-food stakeholders must assess their role in a changing protein matrix and understand where strategies need to be revisited and capabilities gained. Organizations, including those in adjacent markets, must consider deploying their capabilities and assets toward the growing alternative protein markets and investing in new capabilities, technologies and partnerships. 

Organizations upstream of conventional protein production must focus less on the farm and more on the entire food system. Downstream organizations must prioritize future consumer demands and behaviors, as well as navigate likely changes in food and climate policy and regulation. Our firm is actively working on additional scenarios and continuing to invest in our understanding of this space and its implications to clients and stakeholders.

A reimagined food system is beginning to emerge, and a protein system transformation will be a core driver of the system’s sustainable future. Soon, the term “alternative protein” may be obsolete.

How EY can help

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Contributors: 

  • Paul Ritch, Manager, Food and Agriculture, Ernst & Young LLP
  • Mark Holland, Principal, Food and Agriculture, EY-Parthenon, Ernst & Young LLP

  • Show References#Hide References

    1. SPINS via The Good Food Institute.

    2. “Choosing alternative seafood: Key insights from research on consumer needs, preferences, and motivations,” The Good Food Institute, 30 April 2021.

    3. “Meatier, Juicier Beyond Burger to Hit Stores in May,” Food Manufacturing, 28 April 2021.

    4. Food Dive, Restaurant Dive, U.S. Department of Agriculture.

    5. CE Delft.

    6. Quantis LCA Analysis.

    7. “2020 Retail Sales Data Announcement,” Plant Based Foods Association, 6 April 2021.

    8. “Plant-based protein to cannibalize meat demand, Cargill CEO says,” Reuters, 4 June 2021.

    9. “Experimental evidence for tipping points in social convention,” Damon Centola, Joshua Becker, et al, Science, 8 June 2018.

    10. “Past and Current Dynamics of U.S. Agricultural Land Use and Policy,” Kaitlyn Spangler, Emily Burchfield, et al, Frontiers in Sustainable Food Systems, 21 July 2020. 

    11. “Here’s how the footprint of the plant-based Impossible Burger compares to beef,” Adele Peters, Fast Company, 20 March 2019.

    12. “Ethanol market is disturbing to American farmers. And now there’s COVID-19,” Carson Vaughn, Successful Farming, 30 March 2020.

    13. EY Global Advanced Manufacturing & Mobility, Mobility Consumer Index, November 2020

    14. “Bioplastics Market — Growth, Trends, COVID-19 Impact, and Forecasts (2021–2026), Mordor Intelligence, accessed 13 August 2021.

    15. 2019 Iowa Agricultural Economic Contribution Study (commissioned by the Coalition to Support Iowa’s Farmers).

    16. “Producers Bullish About Farmland Values Amid Strong Current Conditions,” James Mintert and Michael Langemeier, Ag Economy Barometer, 2 March 2021; “What Do Farmers Think About Plant-Based Meat Alternatives?” Jayson Lusk, Jaysonlusk.com, 2 March 2021.

Summary

  • The EY-Parthenon team forecasts that alternative meat may reach up to 40% market share by volume by 2040 in the US, and, with additional social, environmental and regulatory tailwinds, those values could reach considerably higher.
  • Under the base scenario, EY-Parthenon estimates the acreage equivalent of these demand disruptions to be between 70 and 80 million acres of corn and soybean by 2040. Regulatory changes and accelerated electric vehicle (EV) adoption could drive this higher.
  • Alternative protein disruption may provide opportunities to diversify land use, as well as shift food and agricultural subsidies. Agri-food companies’ strategies must focus less on the farm and more on the entire food system, sustainability and future consumer demands.

About this article

Rob Dongoski
By Rob Dongoski

EY Food and Agriculture Leader

Focused on strategy, digital transformation and M&A for EY clients in the agribusiness and food sectors.

Related topics Food System Reimagined Sustainability Future consumer index
Upvote