Beyond Meat, Impossible Foods look to Chinese market for growth

Photo by Brenna Huff on Unsplash

In the Wangjing neighborhood of Beijing, ZeroGo is one of the city’s few vegan restaurants. It offers pizza, protein bowls and Asian-fusion fare, and online reviews rave about the menu’s creativity, which includes a vegan Big Mac, complete with vegan cheese and dairy-free special sauce. The “burger” is made from scratch, an original, pea-based recipe.

If the American fake-meat darlings Beyond Meat and Impossible Foods have their way, chef Raymond Xie will soon be able to use their meatier patties. The problem is, he doesn’t want to. “I want to use real fruits and vegetables,” he said. “Not products made with the intention of being a direct meat substitute.”

Plenty of Chinese people share the skepticism about American-style, plant-based imitation meat, a fact Beyond Meat and Impossible are about to confront. Both are hungrily eyeing China, which accounts for 27% of the world’s meat consumption by volume. The recent outbreak of African Swine Fever has driven up the price of pork and primed consumers for alternatives, and if the American companies can win over even a small fraction of the country’s 1.4 billion people, the opportunity is massive.

“We want to be as aggressive as we can,” Beyond Meat Chief Executive Officer Ethan Brown said in an interview with Bloomberg in October. The company, whose shares have tripled in value since a May IPO, wants to have production running there before the end of 2020. The response at SIAL, a major food industry trade show earlier this year, was encouraging, the company said.

Impossible Foods also recently made a splashy trade show debut in China. In November, the company brought almost 50,000 samples of its eponymous meatless beef to attendees at the China International Import Expo in Shanghai. Chief executive officer Pat Brown told Bloomberg that it already had a “very good” prototype of plant-based pork. China has “always been the most important country for our mission,” he said.

But neither Beyond nor Impossible has shared a detailed game plan, and the obstacles are at least as significant as the opportunity. The Chinese already eat plenty of plant protein. Restaurants prominently feature tofu, seitan and “mock” meats, and local startups are offering more novel iterations. Plus, for newly middle-class Chinese consumers, meat is a status symbol. When consumers do choose to eat less meat, they, like Xie, are often looking for more natural products. And as with all other foods in China, there’s always a question about safety.

Impossible will also need government approval for heme, its “magic ingredient” that’s made from genetically modified yeast. When might that come? “We can’t comment on behalf of the Chinese state,” company spokesperson Rachel Konrad told Bloomberg.

While Beyond has announced a partnership with Taiwanese online retailer momo.com Inc., its Asian expansion is still in early phases. The day after an earnings call in which Beyond’s Brown touted the company’s presence in countries like Hong Kong, Thailand and Singapore, he told Bloomberg that Beyond is still “seeding the markets.”

“There’s not a lot of sophisticated work with the Asian palates and things like that,” he said. “We gotta get better on that.”

Like Beyond, Impossible frequently touts its presence in other Asian markets and says its “meat,” while usually served as a patty in the U.S., nimbly features in dumplings or banh mi tacos. But while American restaurants haven’t always been able to keep the meat-substitutes in stock, thanks to their skyrocketing demand, Asian consumers have been less excited. Several Hong Kong restaurants sold the Impossible burger for short promotions then decided not to make it permanent after lackluster sales. One purveyor said the product had spoiled in the fridge.

“The market will determine whether the company is successful,” Impossible told Bloomberg, “so we deeply respect the decisions of customers and consumers.” It added that “internal customer sentiment in Asia remains high” with more than 500 restaurants serving its product internationally.

Animal-free foods have long been prominent in Chinese cuisine. “Mock meat” dates to the Chinese Buddhists of the Tang dynasty, and tofu is only slightly more recent. Today, vegetarian mock meats, called surou, are typically made of wheat gluten, beans and mushrooms, and they’re not solely used on strictly vegetarian menus. Almost three out of four Chinese people said they’d be willing to swap meat for a plant-based substitute, according to one 2018 survey, more than any other country.

High quality and global reputation give Beyond and Impossible an advantage, said Graham Miao, general manager at GFIC, a Shanghai-based consulting firm focused on sustainable food and agriculture. But the marquee products are based on ground beef and variations, which aren’t typical in Chinese cuisine. “If leading international brands are prepared to localize swiftly and effectively as Chinese market response may demand, they stand strong chances to dominate initially,” Miao says. “Otherwise, ambitious Chinese companies focusing on Chinese-designed, high quality products could quickly build a lot of momentum and consumer resonance.”

Several Chinese companies are already starting to make headway with their own new meat alternatives. Zhenmeat, for example, used social media to launch vegan meat mooncakes just before the Mid-Autumn festival in September and quickly sold out. Hong Kong-based Green Monday has also unveiled Omnipork, an imitation pork product, made from mushroom, pea, soy and rice.

With partnerships with a number of American companies, Green Monday also sells other plant-based products, including Beyond Meat, throughout Asia on its Green Common website. Co-founder and CEO David Yeung points to the success of the company’s Beyond Burger Curry Rice, which marries a standard burger patty with Japanese ingredients and flavors.

Catering to local tastes isn’t easy. To sell more Oreos, Mondelez has not only offered special promotional flavors like red bean cake, chili chicken and spicy pepper pastry, it made the regular cookies less sweet too; the company also owns Pacific, a local biscuit brand. After Chinese focus groups reported participants found Spam too salty, Hormel reformulated its tinned meat with less sodium. It also offers a 25% less sodium version on top of that.

Plenty of companies have learned the hard way. The caloric, sweet doughnuts at Dunkin’—a chain that has rolled out Beyond breakfast sausage across the U.S.—didn’t appeal to Chinese customers, and its coffee failed to excite in a tea-drinking culture already loyal to Starbucks, Costa and local favorite Luckin Coffee. Dunkin’ is now slowly opening cafes in Beijing and Shanghai, and has tried selling pork and seaweed doughnuts to localize the menu. On the marketing side, Dolce & Gabbana, Mercedes-Benz, and the National Basketball Association have all had to apologize for advertising or comments that Chinese people found offensive.

Beyond’s Brown is optimistic that he can stick to his company’s principles of climate, animal welfare, human health and natural resources. “I don’t take political positions,” he said. “I’m not saying that I’m Jordan— ‘Republicans buy sneakers too’ — I’m not saying that. But it’s really important that we stay narrowly focused.”

The global rise of plant-based meat has dovetailed with an overall concern about diet and health. But a meatless burger isn’t any healthier in China than it is in the U.S., and the food chemistry that creates the meat-like texture and flavor requires a lot of processing. That, says Mia Chen, a research associate at Euromonitor International, runs “against the trend of being natural and simple.”

As Xie’s ZeroGo menu shows, more traditional ingredients like beans and mushrooms can be satisfying too. Plus, while some American consumers are willing to look past higher prices and less tasty patties for a meal they think is better for their health, for animals and the environment, Chinese consumers, Chen says, aren’t there yet.

But while “highly processed” turns consumers away, technology and novelty lures them in. Just Inc. framed its plant-based egg products as innovations and found an audience across Chinese online retailers, high-end hotels and restaurants, and brick-and-mortar supermarkets. The target consumer is the same as in the U.S.: a young woman who cares about health and wellness, says CEO Josh Tetrick. They’re already familiar with Just’s top ingredient—the mung bean, he says.

Finding a balance between healthy plants, processed ones, and exciting innovation won’t be easy. The Grand Hyatt Singapore hotels, for example, offer Impossible, Beyond and Just products. The plant-oriented menus in the region are getting more popular, but the meat alternatives aren’t in the spotlight. “Our key focus is more on natural products,” said Andreas Stalder, senior vice president of food and beverage operations and product development, in an email.  “Our goal is to use more locally sourced fruits and vegetables in our menus cooked in innovative and exciting ways.”

Underlying all of these preferences is a real worry for Chinese consumers: They want their food to be safe. A series of contamination scandals have made shoppers particularly cautious, and this could create a problem for Impossible. Over the summer, it announced a co-manufacturing partnership with international food processor, OSI Group, to help it meet demand sparked by its Burger King rollout. In China, though, a 2014 TV news report revealed the company had had repackaged and sold expired products, prompting Yum! Brands Inc. and McDonald’s Corp. to drop the supplier.

OSI says its “goal of providing safe, wholesome, quality food items is at the forefront of what we do,” and Impossible’s Brown notes that the company is “rebuilding its reputation.”  The two have had discussions about the Asia market, without any firm agreements as of now, Brown said. “We’re still just building a plan and finding partners.”

Impossible will also have to wait for Chinese regulatory approval for heme. “Public debate on GMO never comes to an end, and Chinese consumers remain doubtful to the technology,” Euromonitor’s Chen says. As recently as 2018, only 12% of Chinese people said they held a positive view of genetically modified food products.

Impossible sees it differently. “Chinese consumers are well aware of the extraordinary safety record of GMOs, as they are well aware of the urgent need for food system sustainability and security,” spokesperson Konrad told Bloomberg.

The last hurdle, in China and elsewhere: Price. Beyond Meat and Impossible still cost more than beef in the U.S., but the gap is closing. An Impossible Whopper at Burger King, for example, costs only $1 more than a beef Whopper. “We’re gonna price it as affordable as we possibly can,” Impossible’s Brown says, adding that the company expects to be able to compete on price when the firm is at “full scale” — whenever that day comes.

Beyond declined to comment directly on price, but Brown has been confident that the company’s roster of globally famous superfans can sway Chinese consumers, and maybe even convince them that his products connote a high status, just like meat. “Look at some of the investors we have, some of the early advocates—whether it’s Leonardo DiCaprio, NBA players—just pick your favorite,” he said. “Those carry a tremendous amount of weight globally.”

Impossible’s Brown, meanwhile, outlined a Chinese version of its American rollout, driven by star chefs and fancy restaurants: “If you look at the precedence of every other market that we’ve entered—we launched in Hong Kong and Singapore—we’ll follow a similar strategy, which will involve working with highly respected chefs in restaurants to make it clear to consumers that this is an uncompromising product.”

For Birdy Gao, a 29-year-old native Beijinger and die-hard vegan, the possibility of trying American meat substitutes makes her eyes light up. “Having given up meat many years ago, I’d love to see if it lives up to its promise of replicating the taste,” said Gao.

Of course, she said, there’s a catch: “If it’s too expensive, I won’t buy it.”

Bloomberg 

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.