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Frédérique Carrier
Managing Director, Head of Investment Strategy
RBC Europe Limited

The global food industry has benefited from many technological innovations in recent years. But, as the world's population grows and consumers demand healthier food options, agriculture and food industries must adapt.

A University of Washington study forecasts that the world population, currently at 7.8 billion, could peak at 9.7 billion in 2064—equivalent to almost six times the current population of the United States. To sustain current food consumption patterns, the Food and Agriculture Organization (FAO) of the United Nations predicts food production would have to rise by a massive 50 percent.

In this piece, we look at some of the innovative solutions in food technology, or FoodTech, that seek to satisfy consumers' new demands and could present investment opportunities for retail investors seeking to diversify into new areas.

The growth of plant-based products

The most talked-about innovation in recent years is the development of plant-based proteins, which stand out for their lower environmental impact.

In a recent report titled, “Uprooting tradition: What plant-based alternatives mean for the future of protein," RBC Capital Markets explored the potential for plant-based proteins. The report noted that concerns about the environment, personal health, and, to a lesser extent, animal welfare have escalated in recent years, thus driving increased interest in plant proteins.

A 2019 Euromonitor survey found that as much as 46 percent of consumers globally restrict their consumption of animal products. Developments regarding taste, availability and price are increasingly enabling consumers to align their purchases with their values, and without compromising their lifestyles. For example, oat milk was once a niche product. Surging in popularity, oak milk is now very creamy and able to froth. It's also taking a share of the traditional dairy market, as well as other plant-based milk, such as rice and soy milk.

Some FoodTech strategies to deliver more with less

Alternative proteins will continue to gain share
Strategies Solutions
Shelf life enhancement
  • Edible coatings
Alternative proteins
  • Look-alike
    • Cell-based or lab-grown meat
    • Plant-based dairy, meat, fish, eggs
  • Non-look-alike
    • Products made from beans, soy, mushrooms, chickpeas
    • Algae and insects

Source - RBC Wealth Management

Plant-based meat substitutes which replicate processed meat products, such as burgers, chicken strips, or sausages, are a particularly interesting innovation. These are often made by altering pea proteins or fermented mycoproteins, also known as fungal proteins, to recreate the texture and appearance of real meat.

Early evidence suggests that such plant-based products have a materially less environmental impact than livestock farming, which is responsible for a significant proportion of methane emissions and water usage. A University of Michigan study on Beyond Meat, a U.S.-based producer of plant-based meat substitutes, estimates that the production of one of the company's identical meat substitute burgers uses 99 percent less water and emits 90 percent less GHGs than that of an equal-sized meat burger. Even allowing for the fact that so far the environmental impact data comes only from the manufacturers, it's unlikely, in RBC Capital Markets' view, that plant products could ever have a greater environmental footprint than animal products.

Despite this potential, the market share of plant-based meat is currently low, as consumers remain very discerning about taste in this “indulgent" category, according to RBC Capital Markets. Plant-based meat substitutes have only achieved low single-digit penetration, paling in comparison to plant-based milk, which enjoys a market share ranging from 10 percent to 15 percent in developed markets, and as high as 40 percent in Asia given the prevalence of lactose intolerance among people in the region.

But its market share should increase, in our view. Accelerating investment and innovation are driving marked improvements in taste, availability, price, and convenience. The category grew by 12 percent annually in the two years to 2019 and, given continued advances as well as consumer interest, RBC Capital Markets thinks brisk growth is sustainable, forecasting an annual growth rate of 10 percent until 2030.

Still, our national research correspondent notes that while market penetration should increase, it's unlikely to reach the market share levels that plant-based milk has achieved, at least in the short term. Milk, after all, is mostly a commodity while meat isn't.

The future of meat

Beyond this, cell-based or lab-grown meat has generated a lot of attention since news broke of the first lab-grown burger in 2013. This food product is grown in labs from animal cells but with a very low environmental impact and without requiring the industrial-scale slaughter of animals. Currently on sale only in Singapore, this type of meat is years away from commercialization elsewhere and isn't likely to have a large impact on the market in the short term.

Barriers to wider adoption of these meat “look-alikes" include the difficulty in replicating whole muscle cuts, with visible fat marbling and muscle fiber textures. The category has been successful mostly at replicating ground or processed products. The often substantial price premium that plant-based identical meat commands is another barrier, though costs should come down, in RBC Capital Markets' view, as supply chain capacity increases and producers scale and consolidate. Finally, while plant-based substitutes that look like meat are vegetable-based, they're highly processed, which somewhat tarnishes their “health food" credentials.

Other than these plant-based look-alikes, there are a number of products that are a substitute for meat but are not meant to taste or look like it. These derive from high-protein vegetables, such as beans, soy, mushrooms, and chickpeas, and have gained consumer acceptance in recent years, with the exception of the soy stand-in. An early leader in alternative protein, soy's market share has declined over concerns regarding potential allergenic and estrogenic effects.

Other protein-rich replacements to meat include algae- and insect-based alternatives, sold whole or in flour. But after years of promise, the new plant-based technologies discussed above make these two sources less compelling as a primary animal protein substitute. This is unfortunate as, according to a paper from McKinsey, insect protein is very efficient in converting feed into edible weight, requiring just over two kilograms of low-quality feed to produce one kilogram of live animal weight. By contrast, beef requires significantly more and better quality feed (close to nine kilograms of feed to produce one kilogram of live animal weight).

In the long term, RBC Capital Markets thinks it's likely that the plate of the future will be a mix of traditional, plant-based, and cell-based meat. Depending on the proportion each achieves, cell-based could eventually pose a threat to the plant-based category, in its view.

Animal protein will likely continue to dominate for now, however, especially as meat consumption increases in developing nations as standards of living rise. But plant-based proteins are likely to continue to gain market share as technology improves and prices fall.

In an attempt to keep up with current trends, many food companies are making the required investments in alternative proteins. Those that saw the opportunity and acted early will likely benefit from a first-mover advantage with regards to recipe, processing technology, and relationship with distribution channels. For global, multi-brand and multi-product food companies, plant-based alternatives have yet to make a sizeable difference to their operating performance, though in RBC Capital Markets' view, as the category expands, it should become more meaningful for sales growth and valuation. It points out that Nestlé's revenues are more than 200 times those of Beyond Meat, a pure-play, plant-based alternative meat producer, but its market capitalization is only 50 times larger.

Last item on the menu

Feeding a growing population in a way that minimizes the demand on the environment is a huge challenge. Technological advancements in the food industry can get us towards that goal. The food industry will see important changes over the coming years. We believe companies that innovate and bring their solutions to the mainstream and those that adopt new technologies early should be in a good position to reap the benefits of their forward-looking strategies.


This article is part of our SusTech series, which explores the confluence of sustainability and technology and why this concept matters as an investment theme.

Read more from the series:


Non-U.S. Analyst Disclosure: Frédérique Carrier, an employee of RBC Wealth Management USA's foreign affiliate RBC Europe Limited, contributed to the preparation of this publication. This individual is not registered with or qualified as a research analyst with the U.S. Financial Industry Regulatory Authority (“FINRA”) and, since they are not associated persons of RBC Wealth Management, they may not be subject to FINRA Rule 2241 governing communications with subject companies, the making of public appearances, and the trading of securities in accounts held by research analysts.


RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.


Frédérique Carrier

Managing Director, Head of Investment Strategy
RBC Europe Limited

Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested.