In the final part of our three-part blog series on the rise of plant-based proteins, we examine a range of strategies that companies are pursuing to capture this opportunity and propose key questions for them.
Strategies for growth
Investors need to recognise the growth that could result from plant-based investments in large companies and start-ups – particularly those embracing comprehensive product strategies. Some notable recent examples include:
Our approach to engagement
Hermes EOS will engage companies across the agricultural value chain on their approach to consumer demand for plant-based nutrition, and the commercial success and positive sustainability outcomes that could result.
For companies that are shifting strategies to address plant-based growth, we want to see that these successfully manage relevant risks in development, production, marketing, customer satisfaction, quality and safety. We seek to understand how companies are addressing customer needs, scaling production safely and effectively, and disclosing how plant-based strategies address sustainability and natural resource scarcity challenges material to their business.
For companies that are not exploring the opportunity, we ask why. We challenge the validity of existing strategies by asking what might happen if demand for plant-based alternatives accelerates, or if the cost structures of animal protein production are eroded by regulatory or environmental pressures and price increases cannot be passed on. We question whether companies have considered the impact on reputation, brand value and licence-to-operate that could result from a lack of sustainable or plant-based protein products or ingredients.
Key questions to ask
1. What role will plant-based nutrition play in the company’s long-term strategy, and how does this impact capital allocation for animal-based nutrition?
2. Has the company conducted scenario analyses to determine the impact on business-as-usual from rapid increases in plant-based demand?
3. How will R&D and capital allocation be impacted by plant-based foods compared with other strategic priorities?
4. What longer-term advantages or disadvantages do cost structures offer if plant-based foods scale to a significant proportion of sales?
5. By investing in plant-based opportunities, how will the company’s value proposition be differentiated and enhanced for target customers?
6. What consumer quality, safety and consumer acceptance risks has the company identified? How will these be managed or mitigated?