This small cap wants to capitalise on China’s protein shortage by getting into plant-based meat
Food & Agriculture
Food & Agriculture
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The surge of New-York listed Beyond Meat and predictions that the plant-based meat market will be worth US$13.3 billion by 2023 has prompted more companies to break into the space.
There were just two ASX small caps in this market — Roots Sustainable Agricultural Technologies (ASX:ROO) and Wide Open Agriculture (ASX:WOA).
Now a third has joined the mix: Jatenergy (ASX:JAT), which has been in multiple industries since its 2008 listing.
This morning it revealed it had partnered with Sydney-based food processor Oppenheimer to develop plant-based meats. Both companies want to focus specifically on the Chinese and Asian markets.
The deal involves the companies co-operating on development and testing. Once this is complete the pair will form a joint venture to produce and sell the products.
The board told shareholders this morning there was huge opportunity in Asia, especially in China. It noted there were protein shortages and plant-based meat could fill this.
One notable example is pork, which has substantially increased in price in China this year due to market conditions.
“JAT intends that it can participate in this growing market in China and other Asian countries by offering alternative Australian made products,” Jatenergy boss Wilton Yao said.
Another unique driver of demand for plant-based meat in China is the inability of traditional meat and poultry to keep up with consumer demand.
A recent Fitch report found meat consumption is 48 kilograms per capita in 2019 and will grow 16 per cent to 56 kilograms by 2023. US tariffs have also hurt the market as well.
“We believe that these developments will be increasing the focus on meat security in China and will act to drive demand momentum for fake meat,” Fitch said.
While Jatenergy may be the only ASX small cap to have an Asia specific-focus, other companies are targeting that market, including Beyond Meat.
In a June analyst call, CFO Mark Nelson said Asia had a “desperate need” for plant-based meat.
“So I’m going to be very aggressive in going into those markets, and our team will be as well,” he said.
At the time of publication, Beyond Meat was hours away from releasing its most recent quarterly update, which would likely include a geographical breakdown of its success.
But the biggest threat to new entrants is China’s own giant in this sector — Qishan Foods. And it is hardly a newcomer, it has been in this trade since the 1990s catering to Buddhists who want to abstain from eating meat.
Earlier this year, the heavyweight partnered with Walmart to launch its latest range of products.
In fact, in China there is even a trade group to represent the sector — the China Plant Based Foods Alliance (CPBFA). Last month it held the first industry standard and regulation symposium on meat alternatives.
It was hinted at the conference by secretary-general Ryan Xue that in the future there may be standards that companies have to meet.
“There will be active endeavours from CPBFA on supporting different stakeholders in this sector,” he said.
“Tasked by national policy regulation authorities, we will launch a consortium officially to focus on labeling, standard drafting and policy for plant-based and cell-based meat here in China.”