Plant-Based Meat Manufacturing Capacity Shortage in Europe 2020 - 2030

Summary

• European plant-based meat industry needs about twice the manufacturing capacity projected to be available by 2030 under the business as usual scenario: 8.06 MMT instead of 4.25 MMT.
• Around 238 new factories with an average production capacity of 30,000 MT need to be built by 2030 to satisfy the demand of SPP in Europe.

About the analysis

"The shortage of alternative protein processing and production capacity is one of the most limiting factors holding back the growth of the alternative protein industry," says GFI on their website.

The aim of this analysis was to estimate the size of structured plant protein (SPP) manufacturing capacity shortage in Europe from 2020 to 2030. The approach used was to find estimated plant-based (PB) meat market size in million metric tons (MMT) and projected supply of SPP until 2030 and subtract the second from the first to estimate shortage in MMT. 

This study was conducted as a capstone project for the Alternative Proteins Fundamentals Programme run by Cambridge University Alt. Protein Society and The Good Food Institute (GFI).

European 2020 SPP manufacturing capacity for PB meat products

First step was to find PB meat market share of the global meat market. According to Statista (2021), in 2020 the global meat market value was 838 billion USD and the value of the PB meat market was 6.666 billion USD. Therefore, PB meat made up 0.80% of the global meat market.

Global meat market production in 2020 was 325.17 MMT, according to Statista (2021). Assuming price parity between meat and PB meat products, the global PB meat production in 2020 was 2.59 MMT (325.17 x 0.80%). Since the European share of the global PB meat market was 36% in 2020 then estimated market size in Europe was 0.93 MMT in 2020. This serves as a proxy for SPP manufacturing capacity in Europe for 2020.

European 2030 SPP manufacturing capacity demand for PB meat products

OECD-FAO Agricultural Outlook 2021-2030 projects global meat demand to reach 373 MMT by 2030. Based on recent historical sales data, GFI (2022) estimates that PB meat demand will account for 6% of all meat in 2030. Therefore, estimated 2030 global demand for PB meat is 22.38 MMT (373 x 6%). Assuming that Europe will keep its share of the global PB meat market at 36% then estimated market demand in Europe will be 8.06 MMT by 2030.

Required growth trajectory

To reach the required production of SPP for PB meat production in Europe to meet the demand by 2030, the manufacturing capacity should grow from 0.93 MMT in 2020 with a CAGR of 24.1% to 8.06 MMT in 2030.

Supply growth of SPP until 2030

Historical global PB market revenue (Statista, 2021) was used as a proxy for estimating manufacturing capacity growth of SPP. From 2016 to 2020 market revenue growth year-over-year stayed between 12.2% and 24.1% with an average of 16.4%. For the capacity growth projections until 2030, 16.4% was used as a business as usual yearly manufacturing capacity (supply) growth. As the graph below shows, it is projected that European PB SPP manufacturing capacity will reach only 4.25 MMT by 2030, 3.82 MMT short of the estimated demand of 8.06 MMT. All calculations can be viewed in this spreadsheet.

Shortage of factories

GFI (2022) projects that at least 810 new factories for SPP with an average production capacity of 30,000 MT each need to be built globally to meet the growing demand by 2030. To satisfy the projected European demand, 238 factories need to be built between 2020 and 2030 in Europe. However, according to the business as usual scenario, only 111 factories will be built to reach yearly production of 4.25 MMT of SPP. This means 127 factories are needed more to satisfy the demand of 8.06 MMT by 2030.

Demand for LME and HME

GFI (2022) estimates that by 2030 low-moisture extrusion (LME) will account for 80% and high-moisture extrusion (HME) for 20% of the global SPP volume. Industry experts in the GFI report suggest that currently LME accounts for about 85% of SPP manufacturing. Therefore, to satisfy demand, additional manufacturing capacity of 1.47 MMT of HME and 5.65 MMT of LME is required in Europe by 2030.

Assumptions

Several assumptions were made that influenced the final results in one or the other direction. The main ones are presented below:

• Technology. It was assumed that all PB meat production is made using either LME and HME. New technologies such as shear cell technology and 3D printing are emerging. However, GFI (2022) expects the majority of SPP will continue to be produced using LME because of several advantages it provides: high throughput, cost advantages, shelf-stable products, and broad availability.
• Price parity. When estimating current production of PB meat in MMT it was assumed that it accounts for the same share of meat production volume as it accounts of the revenues (0.80%). This assumes price parity, even though most PB meat products are more expensive than meat. Therefore, it is likely that real SPP manufacturing capacity in early 2020s is somewhat lower and even faster growth with more factories is needed to achieve projected demand for 2030.
• European share of PB meat market value. To find demand for PB meat products in Europe for 2030, the same share of 36% of global revenue from 2020 was used. However, as many regions with high population and fast growth of PB meat consumption in the world are emerging (China, Latin America, Southeast Asia) then it is likely that European PB meat market share of the global market decreases over time. In 2020 it was the second largest market after the US.
• PB industry operating at full capacity. Historic revenue of PB meat market was used as a proxy for manufacturing capacity. In reality, it might be possible that in some years demand was reached without using the full manufacturing capacity.
• Equal or no exports and imports. Throughout the report it was assumed that the amount of PB products sold in Europe was equal to the amount of products produced there.

Conclusion

There is a significant shortage of SPP manufacturing capacity anticipated in the coming years. The industry in Europe needs about twice the manufacturing capacity projected to be available by 2030 under the business as usual scenario: 8.06 MMT instead of 4.25 MMT. Around 238 new factories with an average production capacity of 30,000 MT need to be built by 2030 to satisfy the demand of SPP in Europe. Low supply together with high demand will likely contribute to higher prices. Instead of supporting local production, unsatisfied demand will create demand for imports, which might create political challenges. 

Even though there were identified several assumptions that influence the results of this study and make them less certain, the trend is clear that manufacturing capacity might become a significant bottleneck for the industry’s growth in Europe. It is one of the key enablers for future market progress. What makes the case more pressing is that building manufacturing infrastructure takes years and a large amount of capital. Therefore, investing into a factory today starts reducing capacity shortage in 2-3 years.

How to minimize this shortage? 

James Ozden and Neil Dullaghan listed creating an infrastructure fund focused on CAPEX-heavy projects in the alt protein space as one of potential megaprojects for animals in their recent forum post. What else could be done?

Happy to get feedback on any aspects how this analysis could be improved!

Acknowledgements

Great thanks to Peter Bolinder for coming up with this research topic and supervising the work. Thank you Priera Panescu and Zak Weston from GFI for reviewing draft report and giving feedback. Also, the role of Will Saunter and the rest of the Alternative Proteins Fundamentals Programme organizing team cannot be overestimated.