How to Make Meat Alternatives Consumers Want

I am an entrepreneur and angel investor looking to replace animals from all supply chains. This post aims to shed light on how to develop products that are fulfilling unmet nutritional needs.

What does it take to make an alternative protein food item successful?

”The most important single thing is to focus obsessively on the customer. Our goal is to be earth’s most customer-centric company.” — Jeff Bezos.

The answer is to fulfill a consumer need better than anyone else. However, food purchase needs and behavior are challenging to model, as there are so many variables at play. Consumers are influenced by their taste preferences, health goals, ethics, budget, allergies, signaling needs and perceptions and biases about how available food corresponds to their constraints.

Hence it is imperative for entrepreneurs and investors alike to deeply understand customers and market dynamics if they want to launch commercially successful products.

In this article, we’ll cover the following steps to predicting the success of an alternative protein product.

  1. What’s your secret?
  2. Who is driving plant-based food sales and why?
  3. Utility functions to model purchase decisions
  4. Thoughts on Taste
  5. Model to predict the general appeal
  6. What does this mean for plant-based vs. cell-based products?

Secret

In Zero to one [1], Peter Thiel describes how important it is to have a good answer what he calls the “Secret” question.

It reads “Have you identified a unique opportunity that others don’t see?

This can be a combination of market insight and technological innovation. If you are building a product on premises that everyone else already agrees on, you’re unlikely to land a smashing success.

As an example, Tesla knew that fashion drove interest in clean-tech. Most clean-tech companies in the early 2000s focused on building more efficient solar cells and didn’t differentiate themselves from each other. Hence they didn’t build technological superiority and monopolies in niches that could grow.

Sexy Car for Sexy People

However, Tesla knew a ‘secret’, it was that rich and famous people wanted to appear “green”. So it really focused on a high-end market with super cool cars for movie stars like Leonardo DiCaprio and built the best product for that niche market. With that, they not only launched the world’s coolest ‘eco-brand’ but also gained ardent followers they are still benefiting from today.

Thiel further explains to us that ‘competition is for losers’, and that we should aim at building monopolies in order to capture monopoly profits. We can debate the ethics of squeezing customers from owning a monopoly, but what I like about this approach is that it really forces you to think “Which (niche) market can we be so good at, that there are really no substitutes for our product and people keep buying us, providing us with a healthy and sustainable profit margin?

What can be a secret in the food market? Do you have a niche/customer segment whose nutritional and social needs in a specific “job” you can meet better than anybody else? For example, half a secret is likely unmet demand for better vegan cheese. 13% of all milk sales in the US are plant-based [2]. But only about 0.24% of all cheese currently sold is vegan [3] [4]. One possible hypothesis here is that while vegan cheese is available and very good & cheesy animal cheese is available, the desire of “I want to keep eating cheese but also look cool in front of my vegan friends” is not being fulfilled very well by any of the current products.

On the technology side, do you have a technology that can produce a product to satisfy that consumer need? For this post, we are going to focus on the market side. This can drive insight into what technology may be needed to fulfill unmet consumer desires.

The better you answer to those questions, the more likely you are to be successful.

Consumers driving plant-based food sales

Plant-based alternatives to animal products are rapidly expanding, growing 17% in the last measured 12 month period, compared to an 8% growth a year before [5].

While vegans are a rapidly growing part of the population, they still only account for about 1.16% — 3% of the population in the UK[6], [7]. Similar numbers are seen in the US [8].

In contrast, 92% of plant-based food sales are coming from non-vegans [7]. In fact, 9%-14% of Brits adhere to what they call a ‘flexitarian’ diet [7], [9]. Based on a study of 1,500 US consumers from all generations, Datassential says that 22% of people are actively reducing their meat and/or poultry intake [10]. It is, therefore, crucial to understand what drives Flexitarians.

What drives Flexitarians?

A study done in the UK [9] asked Flexitarians what would make them go fully vegan or vegetarian. Here are the results:

Asking consumers what makes them eat plant-based alternatives, Datassential [10] found the following data:

Another study by Lightspeed/Mintel shows the following data.

A 2017 Mattson Study shows this

Finally, data from Nielsen obtained in 2017 [11] show the following motivations to eat more plant-based foods

Conclusions

  • Huge variety in responses. Likely a result of different audiences and ways the questions were asked.
  • Health is likely the single most important driver towards more plant-based diets.
  • Animal welfare important for 15% to 44% of consumers, not even mentioned in two studies.
  • Environmental concerns are important for 14%-35% of eaters.
  • The novelty driver means flexitarians are generally quite open to experimenting with new products

What do Flexitarians look for in alternatives?

In order to successfully develop and position an alternative protein solution, we need to know what attributes are important to flexitarians.

Mintel’s associate director Patty Johnson says that 70% of consumers who buy a meat-alternative product they’ve never purchased look at the ingredient list and scrutinize it before buying it. So ingredients for sure are a key component.

Mintel asked consumers who regularly eat plant-based meat alternatives what they are looking for when they are making purchasing decisions.

Mint also found out that taste is the number one motivator for 52% of people when it comes to purchasing plant-based meats [12].

In a DSM study [13] of 2,500 adults who go meatless or dairy-free at least one day a week in the US, UK, Netherlands, France and Germany reveals that only 52% say the taste is ‘ok’, while 28% think meat alternatives are ‘very good’. One in three would be willing to pay more for more meat-like flavors.

Datassential collected responses to the question “What is preventing people from buying more plant-based alternatives?”

Main Conclusions

  • Taste rules with 35–47% who want their meat-alternatives to taste as close to meat as possible and taste is also a large reason 34% of people don’t repurchase plant foods.
  • Protein matters: 28%-45% want high protein alternatives
  • “Natural” is better 30–43% prefer their products do not have artificial ingredients.
  • A lower price than a meat product can play a role for up to 37% of consumers. However, many are also willing to pay more for the right product.

Consumer Perceptions and Reality

There are definitely gaps between what consumers know and believe and what the facts are.

For example, many consumers believe they need to eat more proteins.

In reality, things are more complicated, as what you really should be looking for is to get right the amount of digestible and bioavailable indispensable individual amino acids [14]. Most consumers right now are likely not aware of this and there is no easy way to assess this anyway, so going with a high protein content in your product is probably a good start. With raising awareness, having a product that has high Digestible, Indispensable Amino Acid Score, DIAAS, however, could become a competitive advantage when selling to the health conscious consumer in the future.

Building a model of customer appeal

In reality, the different motivations and constraints are in tension with each other.

Consumer behavior can be modeled as a constrained optimization problem.

For each individual who’s making a purchase decision, He will likely be constrained through some rules in the following categories. In other words, the consumer is running an implicit utility function on the available options.

Here are some of the inputs that can pass the consumers mind

Traditional Questions

  • Convenience — How easy is it to purchase, prepare and eat this product?
  • Experience — How good will this taste?
  • Financial — How much do I have to pay for this?

Emerging Questions

  • Health — Perception: How healthy is this product for me?
  • Animal harm — Perception: How much animal harm am I causing?
  • Climate — Perception: How much harm to the climate am I causing?

Utility function for food purchase behavior

We can write out the inputs above in a more formal way. For example, a vegan customer may have the following utility function running as she compares the various options in a supermarket

#returns a score between 0 and 1. Higher score means higher likelihood of purchase.
def food_score(Item):
    if (Item[‘NoAnimals’] == False)
        return
    #How important are the different attributes to me?
    preferences = [
        “Climate”: 0.1,
        “Health”: 0.5, //may include protein, fat, artificial ingredients etc
        “Experience”: 0.3, //may include quality, taste, texture etc.
        “ValuePerPrice”: 0.1;
]
    #How does this item score with regards to my preferences?
    score = 0
    for(key, value) in preferences.items():
        score = score += value * Item[key]
    return score

When she is facing a purchase decision, she’ll run through the checklist implicitly (am I feeling this product will taste great?) or explicitly (what are the ingredients?). A high score predicts a high likelihood of purchase.

The food_score function above shows that if a product for example scores very high on health and taste, a consumer may be willing to pay more for a particular product than another, less tasty or healthy one.

The utility function will also look very different if the consumer has purchased the product before or not. As we’ve seen above, the novelty driver means that flexitarian consumers are likely very open to get consumers to try a new product. There the packaging, ingredients, etc. play pivotal roles in getting the consumer to try the food.

After the consumer has tried the product, she’ll store the taste experience in her memory and can decide to keep buying the product or to never touch that piece of fake meat again. In other words, taste evaluation will likely be a much stronger component in the evaluation going forward.

Utility functions for food attribute scores

But hoes do the various item attributes get evaluated?

For example, Item[‘Health’] will be evaluated differently for different consumers.

For a bodybuilder exclusively looking at protein content, we could imagine a utility function on the health attribute as follows

#linear elasticity of protein content on health_score
def item_health[Item]:
    score = Item.protein_percentage
    return score

In this function scoring function, there is a linear, one-to-one correlation between the score and the item’s protein percentage.

Someone who is afraid of GMOs and is trying to lose weight may have such a function

def item_health[Item]:
    lean_score = MAX(0, MIN((500-Item.calories)/250), 1)
    score = Item.gmo_free * lean_score
    return score

For this consumer, the fewer calories the better. Anything that either has a GMO in it or is above 500 calories will get a score of zero. Anything without GMOs below 250 calories will get a perfect score of 1 .

Visualizing utility functions

For simplicity sake, let’s assume for a minute that experience (=E) and ethical productions (=EP) are the only two variables that consumers consider when making a purchase decision.

A vegan (such as the author) has two conditions when considering a food item to purchase:

def food_score(E, EP):
    if EP < 1:
        return 0
    else:
        return E;

EP = 0 if animals are involved. EP > 1 if no animals. The score then can depend on the taste/sensory/convenience experience E, with items scoring higher in that area being more likely to be purchased.

These are the minimal requirements for a purchase:

EP > 1 (Needs to not have animal ingredients)

E > 1 (Needs to taste & feel ‘good enough’)

We can draw a chart with a Y-axis of Ethical Production (EP) and an X-axis of Experience (E).

In order to sell me some food, you want your product to be in my upper right quadrant.

Flexitarians Purchase Conditions

Flexitarians are more complex. They are willing to trade some ethics for the experience and vice-versa.

def food_score(E, EP):

return E+EP

In order to see whether we’d buy a product, we might model this as follows

E+EP > 1

The sum of experience and ethical production need to be above the flexitarian’s threshold. For example, she may believe that grass-fed cattle have been treated more nicely. Given that it tastes so nice, she concludes it’s ok for her to eat. However, she will abstain as much as she can from factory farmed beef, and the experience she gains from it isn’t high enough to make her purchase it.

Thoughts on Taste

As we’ve noted above, taste is a key driver for alternative protein sales. Let’s look at two important concepts when it comes to taste of the product you are offering.

Are you an ingredient or a stand-alone item?

A meat alternative can either be a stand-alone item such as ribeye steak, or it can be a burger patty inside a burger or the filling inside a breaded fish-stick. In a fish-stick, the breading is a very defining part of the experience. In a hamburger, the vegetables, dressing, and bun all play an important role in the overall flavor experience.

The taste requirements will be lower for the products that are part of a grander experience and higher for those the consumer will taste on its own.

Taste Elasticity

One of the most important questions for predicting the demand for a particular product with lots of substitutes is how much taste preferences influence demand.

In a fascinating study done on various beer brands, researchers found out that a 1% increase in taste preference leads to a 4–6% increase in demand [15]. Certainly, we can’t transfer beer directly into meat alternatives but can use this as a base-rate of consumer preferences impact on demand.

Introducing a model to predict general product appeal

I’ve been tinkering with a very simple model that can help predict the appeal of a new product, given what you think are its most frequent substitute goods.

So, after you’ve scored your product on various consumer preferences, it calculates the general appeal of your product.

I start with a 100% appeal and then subtract appeal each time you miss something that is important to consumers. For example, if we assume that soy-free is important to 15% of consumers and your product does contain soy, you’ll lose 15% of the market and have 85% appeal left.

On metrics that aren’t binary but more variable degrees, such as, meat-like taste’, you also have to predict the elasticity of those numbers. Let’s assume a taste-demand elasticity of 5, so that a 1% decrease in taste has a 5% decrease in demand. Your product scores 90% on this metric. Hence it will lose 50% appeal with the 37% of consumers who say this matters to them. So the appeal left will be 81.5%.

Assumptions made

I assume that some of the consumer preferences are non-correlated, ie that people who watch for protein content aren’t more likely than general consumers to also look for, say a soy-free label. On the other hand, I’ve assumed that consumers who care about GMO, organic and no artificial ingredients can all be grouped into one group, making sure we do not discount your appeal too much. Ie if your product does contain GMs, it’s also not organic and thus we’ll subtract appeal only once.

The model here serves more as a general guidepost on what to check for, as it still has important caveats.

  1. It simplifies a lot of things. For example, I couldn’t come to a proper conclusion on how price impacts demand here and have left it out of the analysis for now. Lower price means higher demand generally, but higher price is also associated with higher quality. For health and taste focused consumers, a higher price could signal higher quality.
  2. Your assumptions matter more than the model. If you make incorrect assumptions, the model will deliver very faulty predictions. Garbage in, garbage out, as people who build models know.

Here is the model with some sample calculation on the Impossible Burger, the Beyond Burger, and the Boca Burger. Feel free to copy and use it for your own needs.

https://docs.google.com/spreadsheets/d/1Vx1fjviuGHBoVE3cm61CS-wxDfesgaBW19kNQWTkAh8/edit#gid=1320344679

Which Venn Diagram intersection can you own?

Once I brought together the various burger patties available, it was clear to me that it is very hard to differentiate on one metric alone. Sure, taste will reign relatively supreme and the better your product tastes, the better. While taste is also somewhat subjective, other attributes like Protein Content and the ingredients aren’t. If someone is really looking for a soy-free option, then there are fewer players in town. The more accurate you can estimate the number of consumers within each intersection, the better you’ll be at predicting the appeal of your product.

How many customers in each segment?
Beyond Meat highlights specific attributes to attract certain consumers

What does this mean for cell-based vs plant-based products?

Given the number of funded startups in the space, cell-based meats, will definitely make an entry to the market. After seeing how strong the meat-like flavor & texture ranks in consumer priorities, I’m quite bullish on the case overall. Most people seem to agree that the main hurdles are getting the price down to an acceptable level. However there are a couple of points to watch out for.

Red meat is getting a bad rap and people are reacting

As we’ve seen above, between 40–85% of consumers are reducing meat intake for health reasons. They are worried about cholesterol and saturated fats as well as links to cancer. Those will be less likely to replace their animal red meat intake by cell-based red meat intake which has the same nutritional profile. Mark Post says here that we can coerce animal cells to produce more omega-3 and potentially less of the heme iron, rendering the cultured meat less likely to cause cardiovascular disease and colorectal cancer, respectively. But will we give up taste by making it healthier? We are still figuring out how red meat can create harm and thus it remains to be seen how exactly this will play out.

What do consumers think is less processed?

Another interesting trend is that up to 43% of consumers want their meat alternatives to be free of artificial ingredients, or organic or non-GMO. While ‘unnatural’ food likely isn’t really bad for you, they still guide very real purchase decisions.

Food is always regional

A study done in 2019 by several GFI researchers together with Baath University and the Center for Long Term Studies in Hong Kong show a strong openness to try cell-based meat amongst Asian, mostly well educated urban consumers but much less for US consumers (60% vs 30% for very and extremely likely to purchase cell-based meat.) [16]. Other data points to a lot of skepticism, like the YouGov study on Chinese consumers done in 2018 [17] which showed that there are still lots of concerns about cultured meat, with only 26% saying they would ‘probably eat’ cultured meat. Now in China that represents 360M people, so if even half of the people will actually follow through their statements, it’s a huge market regardless.

The right strategy will be to deeply understand each individual market and build a product tailored to the culture, needs and desires of its consumers.

Transparency a must

The cellular agriculture companies have to be wary not to get the bad rap that the GMO companies have gotten. While GMOs are generally as safe for consumers as other plants we have bred over 10,000s of years, the genetic engineering crowd failed to convince European mainstream consumers of their benefits and their harmlessness, which is why there is virtually no GM food being sold in the EU. We need to make sure to educate consumers very well about the benefits and risks of cultured meat before we can really transition the world towards a cruelty-free food supply chain.

Conclusion

Flexitarians are a heterogeneous and growing group of consumers. They have diverse needs and it’s a good idea to clarify which sections of the various ‘need Venn diagrams’ you can serve really well. Somewhat unsurprisingly, we have seen that ‘perceived healthiness’ and ‘meat-like flavor’ are key attributes to master. But in order to master these components, a deep understanding of what consumers in your target market perceive as healthy is important, and that is where the model template I’ve built can hopefully be of help.

Next Steps

If you’re working on an idea in this space or have feedback on my model, I’d love to hear from you! Please reach out to flavio.rump@gmail.com or find me on Twitter.

If you want to hear about my next post, subscribe here

Thanks to Robert Yaman and Martin Y. Welzl for reading drafts of this.

Sources

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[14] Food and Agriculture Organization of the United Nations, Ed., Dietary protein quality evaluation in human nutrition: report of an FAO expert consultation, 31 March-2 April, 2011, Auckland, New Zealand. Rome: Food and Agriculture Organization of the United Nations, 2013.

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