Beyond Meat, Impossible Foods Hungry for a Cut of China's Meat Market -- 2nd Update

By Stephanie Yang 

Beyond Meat Inc. and Impossible Foods Inc. are considering China as their next big market for plant-based meat products, but local startups aim to leverage their own knowledge of Chinese tastes to gain an edge over the U.S. companies.

China is emerging as an attractive market for alternative-meat makers because purchasing power and meat consumption have grown at a rapid clip in the world's most populous country. In addition, Chinese officials have encouraged meat alternatives amid a deadly swine epidemic that has wiped out as much as half of China's pig population and pushed up pork, beef and poultry prices.

Impossible Foods, based in Redwood City, Calif., unveiled its plant-based meat burger in China last month at a Shanghai trade fair attended by President Xi Jinping, while rival Beyond Meat, based in Los Angeles, has made plans to enter China next year.

Chinese entrepreneurs aren't sitting still. China has a tradition of vegetarian meals, and Buddhists in China have been offering their own meat alternatives for centuries. A number of companies are now rushing their own meat substitutes to market, betting they can better cater to Chinese appetites.

During the traditional Mid-Autumn Festival holiday in September, Beijing-based startup Zhenmeat, founded this past May, received attention by using e-commerce platforms to sell thousands of traditional mooncakes made with a plant-based pork substitute.

The company is now refining its product, in hopes of getting it onto the menu of a Beijing vegan-friendly restaurant by early next year -- a first step toward broader commercialization.

"We are short on money, we are short on [a research-and-development] team, and we are short on time, because we just entered this market this year. Our advantage is we know the consumer," said Vince Lu, Zhenmeat's founder.

The new wave of food suppliers will depend heavily on the patronage of a younger generation of Chinese consumers who are increasingly health-conscious and less likely to equate a lack of meat with economic hardships, as has been the case historically in China.

Domestic Chinese entrants can benefit from lower production costs and might be able to bypass some regulatory hurdles. "The biggest winners will be the domestic companies," said Nick Cooney, an early backer of Beyond Meat and the founder of Lever VC, a New York-based early-stage venture fund that has invested in two Chinese alternative-protein startups this year. "We certainly expect that there will be a Beyond Meat or Impossible Foods of China -- probably several of them."

Chinese officials have touted the virtues of protein alternatives -- warning about an uptick in health issues such as obesity and diabetes -- while raising concerns about nutrition and food security.

The development of the plant-based food industry is a good way of "nurturing our people's nutrition and health," said Sun Junmao, deputy director of the Institute of Food and Nutrition Development at the Ministry of Agriculture and Rural Affairs, at a November food conference in Beijing.

"That guidance and general direction from the government will be very helpful, because it can help set the tone for the overall society," said David Yeung, founder of Hong Kong-based Green Monday, the maker of OmniPork, a plant-based imitation of China's most popular protein.

Green Monday, which was founded in 2012 and launched OmniPork last year, recently introduced several alt-meat dishes at Wagas, a chain of 75 cafes with locations in 10 cities across mainland China. Green Monday is also working on the mainland with Taco Bell, a subsidiary of Yum China Holdings Inc., on a fish-flavored eggplant taco with imitation ground pork.

Partnerships such as the one between Taco Bell and Green Monday are an attempt to tailor products specifically for the China market. Impossible Foods, in addition to the meatless burger it unveiled at the trade fair in Shanghai in November, also showcased plant-based stewed meatballs and traditional dumplings to signal its commitment to winning over mainland Chinese consumers.

Impossible Foods is hoping to enter China once it receives regulatory approval of soy leghemoglobin, the substance that makes its burgers have a red hue and appear to bleed, a spokeswoman said. The company doesn't know when approval might occur, she said.

Beyond Meat aims to have production running in China by the end of 2020, though a spokeswoman couldn't confirm exact timing. "China is a key, long-term strategic region for growth," she said.

Jose Cil, chief executive of Burger King's parent-company, Restaurant Brands International Inc., also sees tremendous opportunity in China. The company is still determining what supplier it would look to use in China, he said, adding that it wants one that could provide plant-based patties that would withstand flame grilling.

In an attempt to better understand the Chinese market, New Crop Capital -- which invests in alternative-food startups, including Beyond Meat -- forged a partnership with Dao Foods International, the food-focused arm of Dao Ventures Group, a social venture fund.

"The one thing we are smart enough to know is that we have no idea how to get into China," said Chris Kerr, New Crop Capital's chief investment officer.

In August, Dao Foods launched a roaming boot camp to support plant-based enterprises, starting in Shanghai. The event drew about 50 entrepreneurs and 30 investors, according to Dao Ventures founder Tao Zhang. Mr. Zhang said his initial plan was to help transplant Western products into China. But after a yearlong feasibility study, he decided to focus more on homegrown startups.

"Chinese entrepreneurs tend to learn things very quickly, especially with the help of investment dollars. And this sector is getting a lot of attention from investors," Mr. Zhang said.

--Heather Haddon contributed to this article.

Write to Stephanie Yang at [e-mail]

(END) Dow Jones Newswires

December 04, 2019 16:17 ET (21:17 GMT)

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