Beef's Market-Share Muscle

If anything about 2020 gave cattle producers a reason to chuckle, it was images from grocery stores of empty meat counters next to plentiful supplies of what the beef industry commonly calls "fake meat." It certainly said something about consumer preference.

While we all needed a laugh, the push for growth of the plant-based, and even the synthetic beef market, continues.

Microsoft co-founder Bill Gates, a publicly reported investor in synthetic meat companies, shared his views on the importance of eliminating beef as a protein, in an article published by the MIT Technology Review in February 2021. It was the subject of a lot of coffee-shop talk, and not in a nice way.

Gates said Americans will have to get used to eating 100% synthetic beef to affect climate change. He even called for governmental policies to move rich countries in that direction. Some believe cattle add significantly to greenhouse gas emissions and that reducing their numbers will positively affect climate change.

Specific to beef, Gates complained about labeling bills that "say it's got to be called, basically, lab garbage to be sold. They don't want us to use the beef label." The interview was in the context of promoting Gates' new book, "How to Avoid a Climate Disaster."

Aside from the hyperbole and the partisanship around the issue of whether plant-based or synthetic meats are good or bad for the environment, what do these products mean for beef market share moving forward? A Kansas State University study, "Impact of New Plant-Based Protein Alternatives on U.S. Beef Demand," takes a deep dive into not only consumer preference, but what consumers are willing to pay for their choice of protein.

The study was authored by KSU agricultural economists Glynn Tonsor and Ted Schroeder, and Jayson Lusk, distinguished professor of agricultural economics at Purdue University. It included a nationwide survey of more than 3,000 consumers, with nearly 70% identifying as regular meat consumers and the remainder identifying as alternative dieters, such as vegan, vegetarian, flexitarian, etc.

Tonsor reports regular meat consumers surveyed said they were willing to pay $1.87 more per meal for a beef burger in a restaurant and up to 29 cents more per pound for store-brand 80% lean ground beef at the grocery. By comparison, those who preferred an alternative diet said they would pay $1.48 more per meal for a plant-based burger in a restaurant and up to $2.32 more per pound for that product in the grocery.

The setting where the consumer bought the burger made a difference in behavior. In a food service setting, about 5% of regular meat consumers would select a Beyond Meat Burger meal and 23% of alternative diet consumers would choose the Beyond Meat Burger. In a retail grocery setting, however, about 2% of regular meat consumers would select a Beyond Meat or Impossible Burger and 25% of the alternative diet consumers would choose the Beyond Meat or Impossible Burger.

There is a strong preference either way -- even if sheer numbers of meat consumers significantly exceed those who prefer the alternative.

Tonsor said that looking at the study as a whole, it suggests plant-based items already have a place in today's protein marketplace, even though beef is consumed three times more often than plant-based proteins.

"The majority of consumers continue to hold favorable views for beef. Taste and safety, in particular, are key drivers of U.S. beef demand," he explains. "It is further worth noting beef's own price, and the price of chicken, have a much larger impact on consumers selecting beef than do the price of plant-based proteins."

Lastly, regarding value, the study showed changes in the price of beef have a much larger impact on consumer decisions to buy or not buy than do changes in the price of plant-based offerings. The report's authors interpret this to mean that in the eyes of consumers, "plant-based burgers are relatively weak substitutes for beef."

For example, in food service, a 1% increase in the price of a beef burger meal reduced the overall probability the consumer would choose beef by 2.5%. But a 1% decrease in the price of a Beyond Meat burger meal only lured consumers to walk away from beef and eat the plant-based protein by 0.21%.

MARKET EFFECTS AHEAD

Using retail prices for beef, pork and chicken since 1970, and considering quantity changes, Tonsor says correlations can be drawn that show to what extent demand for beef has fallen. They also show how much of that decline is due to changes in the prices of substitute proteins.

Comparing 2019 to 1970, the economists were able to show the per-capita U.S. quantity of beef is 36.3% lower in 2019 as compared to 1970. About one-third of this demand decline was due to falling prices for pork and chicken. The economists conjecture that even without the price changes relative to pork and chicken, beef per capita demand would have fallen some 26% over that same timeframe, explained by non-price factors, including concerns about fat and cholesterol.

Future potential market share is the key question today surrounding plant-based proteins. Tonsor says various survey-based experiments all show that if pitted with a binary choice between a plant-based alternative and traditional beef, about 25% of consumers select a plant-based alternative. This means there is room for market growth relative to the current position of plant-based proteins, today at less than 1% market share.

"Our estimates suggest we will likely continue to witness significant growth in the plant-based alternatives market, even if the only thing that changes is increased availability of these products," he reports.

Anne-Marie Roerink, principal of 210 Analytics LLC and author of the annual "Power of Meat Report," draws a parallel to this theory. She notes that in most cases, the plant-based protein and beef discussion is not centered around an "either-or" mindset.

"Almost all households who buy alternatives also buy meat, usually in the same basket," she writes.

Randy Blach, CEO of CattleFax, often addresses the market for plant-based proteins in presentations by the group before cattle producers.

"Yes, they've made some inroads, but they are less than 1% against beef," he reported at a National Cattlemen's Beef Association meeting, referring to the plant-based proteins market. "Today we have population growing around the world, and to feed them, we will need more alternatives. I don't think we should be threatened by these alternatives, but we do have to stay focused. We just need to tell our story, and there is a great future for animal protein over the next 20 to 30 years."

ANIMAL WELFARE AND ENVIRONMENT

Beef was perceived by the KSU survey respondents as better overall for farmers, consumers, rural communities and food prices than plant-based alternatives. However, the findings also looked at how consumers scored plant-based proteins when it comes to issues like animal welfare, health and environmental concerns.

Here, plant-based proteins had a better showing, also ranking higher than beef on average for cholesterol, fat and dietary fiber.

Consumers more likely to select plant-based proteins included those who were younger, with children under the age of 12, having higher household incomes, residing in a Western state and being affiliated with the Democratic party.

MOVING FORWARD

Authors of the KSU study, which was prepared for the Cattlemen's Beef Promotion and Research Board (CBB), note that given the impact beef price has on purchases, the industry would be "well served to persistently seek supply-side gains that enhance beef's competitiveness." But they stressed these moves could not compromise core beef demand drivers of taste, safety and freshness.

If prices for plant-based proteins decline, the study notes, regular beef eaters will likely incorporate more plant-based protein into their consumption choices. Since the market share for plant-based protein is still small, this is not currently seen as a large threat to the beef industry. However, it suggests keeping the valued attributes of beef in front of consumers who regularly eat meat will remain important.

What about those aspects of plant-based meats consumers see as negatives for beef, such as health? Tonsor points out marketing and consumer communication strategies are beyond the scope of the report. However, given the fact that plant-based proteins are perceived as lower in fat and cholesterol and higher in fiber, the beef industry "may wish to consider strategies to boost beef product image around these areas."

This could lead to more lean beef product availability and easily accessible information on how those products compare to plant-based proteins.

But Tonsor offers this caution: "Don't over-invest in this strategy to enhance a small segment of the overall beef consumption pie," he says. "To be clear, changes in chicken breast prices have a larger impact on beef demand than do plant-based price adjustments."

On the whole, the KSU report paints a picture where threats from plant-based proteins to the beef industry are "small at this time." It does note, however, that because younger generations tend more often to find plant-based proteins more appealing, if price points decline and the products begin to be viewed more favorably by a growing number of consumers in taste and appearance, they could become a stronger beef substitute.

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