I asked some industry insiders with first-hand knowledge of China market to comment on these recent developments.
Graham Miao, General Manager of GFIC
, a Shanghai-based consultancy focused on plant-based and cell-ag believes it is an important milestone:
“The early momentum of plant-based meat in China has been building in the last year and now these two big, almost simultaneous announcements [KFC & Starbucks] send a strong message to the mainstream market. Various QSRs [quick service restaurants] will now likely accelerate efforts to source and test plant-based products for their own customer bases.”
An industry insider who used to work directly with Starbucks China, but prefers not to be named, agrees:
“Starbucks is a trendsetter brand in China - and one could expect other QSRs to follow their lead when it comes to new product categories.“
Matilda Ho, founder and managing director of Bits x Bites
, pioneering food tech VC in China offers additional perspective:
“The question is whether this attention has legs, whether a one-off buy for the novelty translates into repeat purchases and product loyalty. Especially in top-tier cities, Chinese consumers are known to be eager experimenters when it comes to adopting new trends, yet only some turn into sustained behavioural change.”
My ex-Starbucks contact points out the taste will be crucial in gaining mass-market popularity:
“This is still rather new category to Chinese consumers, so it’s important that first movers get it right when it comes to taste.“
Matilda from Bits x Bites agrees and talks about the nutritional profile as well:
Most plant-based foods underperform in their nutrition and taste profile. You can see this from meat eaters’ complaints about plant-based products not meeting their expectations in taste, specifically flavor and texture. Others focus on the sodium level, not-so-clean-label ingredients. Unless environmental concerns are your main driver, if these products can’t match or exceed the taste or the health value of meat products, why bother to switch? And this is true for both Chinese local companies and international players.
Lastly, there is a lot of chatter in the media about Covid-19 impact on the plant-based based sector - it is at times difficult to get to the bottom of it given PR spin of some of the players and to some degree a bias (or more often low journalistic standards) of some media outlets.
For China context, it is worth looking into the recent consumer sentiment research done by advocacy group Food Industry Asia and AI Palette between Jan and March (prior to the launches described in this newsletter), as reported by AgFunderNews
. Two key conclusions:
- The analysis suggests that "wet markets”, a topic widely commented in the Western media in the context of the pandemic, are not in any significant way connected by Chinese consumers with food safety and hygiene (the only criticism focused on lack of availability and distribution since the markets were temporarily closed during the lockdown)
- The research seems to show no significant spike in interest in plant-based proteins in China related to Covid-19 (Impossible Foods has seen a +15% spike in January, but that’s like due to NYT article and local media backlash, as explained before)
Our own sentiment analysis indicates that the recent product launches by major brands in China have not been viewed by the public in a context of the pandemic - very few comments referred to it or other health & food safety concerns like ASF.
It is still too early to say how the virus might affect consumer behaviour long-term. In my view, there will be other major factors in play when it comes to wide-spread acceptance of plant-based proteins in China: namely taste&texture and price.
I also think the jury is still out when it comes to international vs. local plant-based brands in the mainland. While local brands might have a deeper understanding of the market, international players do not lack the appetite (driven by their global mission - and pressure from markets/investors), while they enjoy disproportional funding, economies of scale and can work with local Chinese corporate partners to accelerate the entry. The market is surely large enough to sustain multiple players, so likely it will end up with a mix of both.
Let me close with my personal perspective.
In my previous roles
, I had a chance to work closely with some of China top technology startups
- and to watch first hand how incredibly fast
some of the concepts can take off in that market when consumer enthusiasm, technical readiness and significant funding align.
While there are many challenges ahead, I believe we are at the brink of that ‘perfect storm’ in the new protein sector in China. More local entrepreneurs and international players will launch ventures inspired by recent developments in China and the growth abroad, investors will be excited enough to pump millions and billions required to scale these projects and consumers will happily choose products that are certainly an improvement over the what the current food system offers.
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