February 19, 2019 / 5:24 PM / 3 months ago

Breakingviews - Veganism may prove a more durable diet fad

By Aimee Donnellan and Peter Thal Larsen

An activist from the People for the Ethical Treatment of Animals (PETA) demonstrates in front of the Louvre Museum Pyramid in Paris, France, February 7, 2019. Placard reads: "Vegan, for animals, the planet and future generations".

LONDON (Reuters Breakingviews) - The latest diet trend may prove more durable than previous fads. Concerns about climate change and animal welfare - as well as healthy eating - are prompting more consumers to embrace veganism. Like the low-carb trend of the early 2000s, companies are scrambling to keep up with changing consumer tastes. But the shift to shunning animal products looks more than a flash in the pan.

Like other diet crazes, veganism has shifted from the culinary choices of a dedicated minority to the mainstream. Prompted by endorsements from screen stars like Joaquin Phoenix and Ellen DeGeneres, big companies have responded. In the past few months, McDonald’s has added a vegetarian happy meal to its menu of fast-food burgers and chicken, while Unilever, acquired meat-free food company The Vegetarian Butcher. Meanwhile private equity giant KKR played up the plant-based credentials of margarine when it snapped up the Anglo-Dutch food giant’s spreads business for 6.8 billion euros last year.

Consumers are receptive. British baker Gregg’s, whose sandwiches and sugary cakes can be found on most high streets, sparked a social media storm when it started selling vegan-friendly sausage rolls in January. The company said on Tuesday that publicity around the meat substitute had helped attract more customers, boosting like-for-like sales by almost 10 percent in the first seven weeks of the year.

Investors have seen such sudden shifts before. In the early 2000s, consumers embraced the Atkins diet, which advocated losing weight by shunning carbohydrates in favour of proteins like - ironically - meat and eggs. Rob Lowe and Jennifer Aniston endorsed the lifestyle. Brewers scrambled to develop low-carbohydrate beers. SlimFast blamed the diet for denting sales of its shakes. However, the craze gradually faded.

Veganism looks to have staying power, though. The diet is more about living an ethical lifestyle - sparing animals and eschewing farming techniques that generate greenhouse gases and consume excess water - than it is about shedding pounds. Demographics also point to continued growth. Vegan, vegetarian or so-called flexitarian diets, which involve cutting back on meat, are more popular with young and relatively well-off urban residents than with their older and less affluent counterparts. Some 60 percent of UK students expect vegan and vegetarian food at their university in 2017, according to Sodexo’s International University Lifestyle Survey.

And while Britain and Germany have led the charge, big meat-loving countries are catching up. According to Nielsen, 39 percent of Americans are trying more meat alternatives. In France, the home of foie gras, sales of vegan and vegetarian products grew by 24 percent to 380 million euros last year, and are expected to grow by a further 17 percent each year until 2021, according to research firm Xerfi.

Yet ordinary investors may find it difficult to cash in on the trend. Though UK supermarkets have dedicated more shelf space to vegan products, the contribution to overall sales is minimal. Companies like Tofutti Brands, which sells dairy-free cream cheese, and Hain Celestial Group, known for its almond milk, are not entirely vegan-focused.

Meanwhile millions of people in less-developed countries for whom meat was once a rare treat remain eager to consume more milk, eggs, chicken and beef as they grow wealthier. So global consumption of animal products looks set to keep expanding.

Even so, dedicated vegan companies can benefit. Beyond Meat, a U.S. purveyor of burgers and sausages made from plants, is planning an initial public offering. The business, which attracted Microsoft founder Bill Gates as an early investor, in November reported sales jumped 167 percent to $56.4 million in the first nine months of 2018 from a year earlier. Finland’s Golden & Green Foods is pushing boundaries with its pulled oats - an alternative to pulled pork or chicken that is made out of oats and beans. The market for these plant-based proteins is expected to reach $16.3 billion by 2026, according to Persistence Market Research.

Launching such products is far from easy. It took Gregg’s 18 months to develop its flaky vegan sausage roll. Quorn, which makes the meat substitute used in the roll, says it often takes around five years to produce vegan products that are palatable to consumers. But companies should be able to tap new sources of financing, since vegan products appeal to investors looking for sustainable investments.

There’s always a risk that consumer tastes swing back towards meat and dairy products. But vegans can say they are helping to save the world, one bean burger at a time. That’s not a claim previous diet fads could make.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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