This report encompasses FAIRR’s four-year engagement (2016-2020), with 25 food retailers and manufacturers examining their approaches to alternative protein diversification. The report reveals how the alternative protein market is increasingly perceived by global food companies as a climate-related risks mitigation tool and a driver for growth. The report also highlights the growth in venture investments in alternative proteins, having almost doubled since 2019, reaching $1.1 billion in 2020.

FAIRR identifies four primary growth drivers for companies to diversify existing protein portfolios toward alternative, sustainable proteins:

• Extensive market opportunity
• High innovation potential
• Positive environmental, social and governance (ESG) impacts
• Increasing advocacy and regulation

The engagement points to nutrition, taste, and affordability as key factors in diversification practicality and long-term success in the market. These factors are projected to be prioritised differently across regions. Nutrition is predicted to show challenges for global region expansion, for instance in sub-Saharan Africa where nutrition is paramount. Evidence reveals a reduction in purchasing and consumption of meat, due to the COVID-19 pandemic as well as severe disruptions for traditional meat supply chains. In contrast, US alternative protein products experienced a 200% sales growth from April 2019 to April 2020, amid the pandemic. The fragility of these supply chains are leading protein diversification in Asia, with food supply and safety in mind.

Company progress of 25 companies toward protein diversification was analysed by FAIRR’s evaluation framework which comprised of six assessment categories:

• Materiality
• Strategy
• Product expansion
• Consumer engagement
• Tracking and reporting
• Investor engagement

The framework evaluated company approaches to supply chain risk mitigation in animal protein products. It also assessed their approach to expanding alternative protein portfolios through research and development and consumer engagement. Companies were categorised across five levels from ‘inactive’ to ‘pioneer’ indicating their readiness to undertake a protein diversification strategy.

Two of the 25 companies achieved pioneer status, Tesco, and Unilever. Costco performed dismally and was called out for inadequate response and Amazon and Kraft Heinz were also among the poor performers. Almost all companies had a sustainable sourcing programme in their plan or build phase for at least one key animal protein, as at 2020. Most of the companies also put aside capital for research and development and are in collaboration with external partners, including universities.

This engagement is the first and largest global investor engagement focused on motivating the transition from animal products towards a more sustainable food system. This report reveals the growth of the alternative protein market and indicates that companies are scaling up their capacity to research and develop sustainable protein products. The data is indicative of the evident global shift in the way consumers think about food security and safety, and the way companies are learning to respond.

1. The total combined assets of investors engaged in FAIRR's sustainable proteins engagement has grown from $1.25 trillion to over $13 trillion. This growth indicates the progression of the alternative protein market and its capacity to mitigate the risks of the global protein value chain.
2. The alternative meat market represents approximately 1% of the total proteins market and is projected to grow to 3% by 2025 and 60% by 2040. Analysis by FAIRR shows that the global protein market is valued at around $1.5 trillion as of 2020.
3. Supply chains for alternative protein are shorter, more flexible and less labour intensive than their animal protein counterpart. This shows that investments in alternative protein can be easily scaled up or down to meet market demand.
4. 72% of the 25 companies in FAIRR’s engagement have referred to ‘vegan’ or ‘plant-based’ in their quarterly and annual reports to investors and other stakeholders in 2019-2020, compared to 64% in 2018-2019.
5. Demand for plant-based dairy alternatives has risen 23% since 2016, and currently represents approximately 12% of the total global dairy market, as of 2020.
6. The alternative protein market is most mature and expanding across Europe, North America and Australia. Protein diversification in Asia is still in its infancy with large projected growth post-COVID-19.
7. China has experienced a 33.5% growth from 2014, for their ‘free from meat market’, which was valued at $10 billion in 2018.
8. Companies are investing more in research and development, marketing, their internal capabilities and creating more meaningful partnerships to ensure long-term profitability and supply chain resilience.
9. Consumers are rethinking about the way they perceive food and are purchasing more health-consciously and sustainably. This is reflected in the reduction of traditional meat purchasing and overall profitability of traditional meats pre and post-COVID-19.
10. FAIRR's six-part evaluation framework can be applied as a sustainable finance tool, offering the capacity for individuals to assess best approaches to the risks of animal protein and opportunities of alternative protein. The Coller FAIRR Climate Risk Tool 2.0 can also be employed as a conceptual tool to engage investors and encourage meat companies to be prepared for a low-carbon transition.