The Food Dive Outlook on 2022

As many consumers hope for a fresh start in 2022, the ongoing pandemic will play a major role in shaping food and beverage trends regardless of whether COVID-19 itself finally becomes a thing of the past.

The virus’ effect will be especially noticeable in health and wellness, with functional ingredients such as adaptogens, nootropics and CBD making their way into new product categories.

Plant-based meat, which has seen tremendous growth during the past two years, will continue to evolve, with more progress made on the form and texture of products. And Generation Z is maturing into adulthood and will shape trends with its interest in ethical sourcing, sustainability and local food.

The new year also is expected to provide a boost to private label as inflation, a draw-down in savings and better-quality products attract new consumers to the category or bring back those who chose to stock up on more familiar brand names throughout the pandemic. Meanwhile, CPGs that are not only facing higher expenses but also supply-chain disruptions will continue to see ongoing labor shortages disrupt their operations. 

After conversations with industry experts and analysts, here is a breakdown of the six biggest trends that Food Dive predicts will impact the food and beverage industry in 2022.

 

1. Gen Z gets ready to take over

A decade ago, the newest buzzword was "millennial," referring to people born between 1981 and 1996. At the time, millennials were entering adulthood, and were about to mold society with their attitudes on technology and social issues, their relatively high levels of education, and purchasing power.

Now, Gen Zers — people born between 1997 and 2012 — are starting to come into adulthood. Barb Stuckey, president and chief innovation officer at Mattson, said their entirely new perspective on society and the environment is likely to cause big changes in the food business.

"I think the Gen Z consumer really will be driving things from the bottom up," Stuckey said. 

She recalled how one person who works with young readers around the globe had described the generation: "They have a generational stress on them because of what's happening with the planet.”

A 2018 study found that Gen Zers have between $29 billion and $143 billion in buying power — though much of the money represented in this study came from allowances. And while Gen Z consumers said in a Piper Sandler report last spring that food is their top spending priority, they pay much closer attention to the sustainability, nutritional value and the ethics of the corporations who make what they eat. 

Plant-based meat maker Impossible Foods has been paying close attention to Gen Z’s opinions and behavior, and found that younger consumers are more likely to eat plant-based food and eat less meat in order to save the environment. A survey commissioned by the company discovered that kids were optimistic about their potential contributions to help stop global warming, with 73% saying they could make at least some difference through their personal choices. After those kids read a statement about the impact animal agriculture has on climate change, 78% said it was important to do something to reduce the use of cows for food.

Stuckey said that just about every new brand today launches with the story of its mission, sustainability aspects, philanthropy and commitment to making the world a better place on full display. These assets, she said, are likely to only be more important in the near future.

This attention to sustainable and social missions goes deeper than new brands, though. In the food business, the traditional supply chain is flattening as CPGs and their suppliers shift from traditional approaches — like trucking produce grown in warm and sunny California all over the United States — to searching for ways to make food more local. EIT Food, a Europe-based agrifood innovation agency, found in a study last year that 74% of Gen Zers said that growing food locally helped with sustainability. Half said that importing food is not sustainable.

In response, some companies are bringing a new spin on old ideas, like AppHarvest, with its massive greenhouse for indoor farming in Kentucky — a location that is less than a day’s drive from more than two-thirds of the U.S. population. Some are using technology to re-engineer precious commodities that have traditionally been shipped from afar into chemically identical items, like Atomo’s bean-free molecular coffee and Voyage Foods’ no-cacao chocolate.

While companies like these are all still scaling up, Stuckey said more traditional manufacturers and retailers will likely be willing to work with them in 2022. The pandemic taught everyone lessons about what happens when long and inflexible supply chains break, she said. It also reinforced consumers' desire to know where their food comes from, and underlined the environmental footprint that a long supply chain leaves behind.

Though some of these foods made through new technologies might seem odd to older, more traditional consumers, Stuckey said Gen Z will help them succeed on the market in both the short and long term.

“You're going to have people who are really excited, like the Gen Z consumer who is really, really, really focused on the environment because they're growing up having to clean up this mess we've made,” Stuckey said.

 

2. Functional ingredients find new applications

As people pay more attention to their health and wellness because of the pandemic, CPGs are finding new ways to incorporate classic functional ingredients into more of their products in 2022.

Neil Saunders, managing director with Global Data, said while ingredients such as adaptogens, probiotics and nootropics aren’t necessarily new, the way they’re being incorporated into food and beverages is changing. 

Adaptogens, for example, are moving from a powder form incorporated into teas and coffees to mainstream products such as sparkling water, energy bars and chocolate. Other ingredients like prebiotics, often found in yogurt, are transitioning into drinks and foods that can be consumed during different occasions like an Olipop soda or nutrition bar. And CBD is making its way into sparkling water, beer, coffee, cocktails and even jelly beans to help people relax.

Shoppers used to look to food and beverage offerings for hydration or sustenance, but increasingly they are turning to them as a way to improve their mood, gain a boost in energy, provide nutritional benefits or improve their gut health. The shift is especially prevalent in younger Gen Z and millennial consumers.

A 2019 study from Kerry found 65% of consumers looked for function in what they eat and drink. The pandemic has only accelerated demand, with Research and Markets estimating that the global functional beverage market alone will be worth $158.3 billion in 2023.

“It is an area that is growing and is really capturing a lot of consumer interests,” Saunders said. “These ingredients are sort of problem-solving in a way, so I think that's why consumers are very interested in them and they're willing to spend on them.”

Large CPGs are increasingly taking notice, too. 

Nestlé, Hormel Foods and Danone are incorporating nutritional therapy or medical uses into some of their products. PepsiCo launched a functional water called Driftwell aimed at combating stress and inducing relaxation, and Soulboost, which reportedly boosts mental stamina. And Molson Coors' hard seltzer brand Vizzy is made with a superfruit that contains 30 times more vitamin C per cup than an orange.

 

3. Plant-based meat takes on new forms

Despite some discouraging recent earnings reports from publicly traded companies that make plant-based meat, many analysts say that the segment will continue to grow in 2022. 

But the items that drive this year’s growth will be very different from the burgers, grounds and plant-based chicken nuggets that made plant-based a hot trend a handful of years ago, according to Emma Ignaszewski, corporate engagement project manager with the Good Food Institute.

“We're starting to see more product launches in the whole cuts area,” Ignaszewski said. “There are a couple really interesting companies out there that are making some large strides on texture, in particular, and I think that's something that we see is really exciting as a component of the consumer’s organoleptic experience. There's still room for innovation.” 

This is coming through the use of different ingredients, technologies and methods of producing the analogs, Ignaszewski said. While soy, wheat and pea proteins have been some of the biggest staples of plant-based meat, many ingredients are getting a new look. Consumers say they are interested in a variety of tastes, functions and different kinds of plant protein in their food, Ignaszewski said. And manufacturers are broadening their horizons. Last year’s launch of Beyond Chicken Tenders included fava bean protein as a main ingredient. Chickpeas and lupini beans are also getting consideration.

Several plant-based meat companies have been rolling out new technology and perfecting high-moisture extrusion to make more meat-like plant-based items in forms similar to tenders or whole cuts. Kellogg’s MorningStar Farms Incogmeato brand launched all new tenders last year using a proprietary technology that the company says can more realistically tear along fibers like chicken. JBS-owned Planterra announced that following significant R&D, it has a new whole cut and shredded product launch planned for this year under its new True Bite brand.

Meat analog products made through fermentation will also change the game in terms of forms and textures. Though they aren’t plant-based per se, planned launches from companies including Meati and Aqua Cultured Foods use mycelia and fungi to mimic the structure and texture of traditional meat products. 

Other new technologies are helping plant-based food makers produce more realistic products. Plant-based fats, used by companies like Juicy Marbles, are being incorporated into these newer products to create a more realistic taste and mouthfeel. Plant-based companies are also experimenting with cultured fats, like Silva Sausage’s partnership with Mission Barns to make a plant-based sausage with actual animal fat grown from cells.

 

4. Value returns

After losing ground during the pandemic, private label and value brands are set to make a comeback in 2022, according to Gary Stibel, founder and CEO of New England Consulting Group.

Private label found itself harder hit by supply chain and transportation disruptions as issues cropped up at the end of 2021, according to brand analytics tracking firms. Consumers, many of whom have been working from home due to the pandemic, have also been buying more premium products since they haven’t been spending money on commuting or meals out.

But as the economy is expected to shift, with more people returning to offices and eating in restaurants, value is back, Stibel said. And with inflation driving food prices up, consumers are looking to save a bit wherever possible.

Private label has transformed in the past decade, going from the cheap no-name alternative at grocery stores to branded and premium items that help influence consumer loyalty. New premium prime label offerings have hit stores in the past year, including Amazon’s Aplenty brand, and more than 250 offerings from Kroger’s Simple Truth and Private Selection lines.

“We have private label clients whose biggest challenge is acquiring new capacity because they’re out of capacity, and they can charge more because they're delivering high-quality monogrammed foods,” Stibel said.

On the other side of the coin, however, are major manufacturers changing their focus in the face of rising prices. Stibel sees inflation as a continuing trend in the economy for the next 18 to 24 months. 

While rising prices are bad for consumers on the lower end of the economy, they are good for business, he said — especially those industries with very tight margins like food. Stibel predicts a lot of companies will use the opportunity to enact price increases they haven’t been able to institute in past years — including during pre-pandemic times, when growth rates were flat or minuscule.

But, he said, these companies will be doing more to provide value to consumers in other ways, including the eventual upsizing of packaging.

In a world where scarcity “becomes a variable, you’re willing to pay more for a larger size,” Stibel said. “You want to have the cabinets filled. So both in terms of sizing, in terms of positioning, you're going to see more of a return to benefit-driven positioning."

5. Greens embrace the branded approach 

For decades, products such as Dole pineapples, Chiquita bananas and Driscoll’s berries have given a branded facing to fruits and vegetables, while the greens section has been filled with nameless, generic perishables.

But increasingly, once-nondescript lettuce, basil and other greens are being branded by companies such as Bowery, Gotham Greens and Square Roots as a way to tout their environmentally friendly production practices or to connect the customer with the exact farm where it was grown. 

Elly Truesdell, a partner at Almanac Insights, said upstart produce companies have recognized how effective large CPGs have been in storytelling to build their brands; they’re now using that tactic to their advantage.

“It's both a new concept of having branded produce to a degree but it's also just how much is being put into those brands to message and tell a story about the farming and the practices behind the product,” Truesdell said.

A study by Foodmix Marketing Communications found 68% of shoppers will pay more for produce that is branded over private label or unbranded options. Brand becomes more prevalent by generation, with two-thirds of millennials and Gen Zers considering it important that the fresh produce they buy is branded, compared to less than half of Gen X and baby boomers.

Viraj Puri, co-founder and CEO of indoor farming company Gotham Greens, said when his firm launched its line of packaged salads and herbs in 2011, it observed there were only a few recognizable produce brands on the shelf, largely relegated to legacy fruits such as bananas, oranges and pomegranates. 

“There was very little brand loyalty that would impact a consumers' decision to buy produce from one store to the next,” he said in an email.  

Today, Gotham sells its greens at approximately 3,000 retail locations across more than 45 states. It touts the freshness of its product, the use of sunlight and renewable electricity to power its farms and the recycling of all of its irrigation water among some of its defining factors.

The branding trend infiltrating greens also has leaped into the seafood case, where companies like Scout Canning and Luke’s Lobster stand behind transparency and sustainability. Truesdell noted seafood is being impacted by concerns including overfishing, microplastics and ocean health that have provided momentum for branding.

 

6. Labor continues to weigh on supply

After a year where striking workers at Frito-Lay, Mondelēz, Kellogg and other food CPGs were able to win contracts with more time off and improved wages, labor in general will emerge emboldened by these successes in 2022. This could lead to new rounds of contentious negotiations between companies and workers, as well as strikes, according to labor expert and Temple University professor Bryant Simon.

“I just don’t see the pressure to create better conditions abating anytime soon,” Simon said.

One tactic that labor advocates used to their advantage in 2021 and will continue to apply in the year ahead is influencing public opinion through social media. Simon cited Kellogg's decision to return to the negotiating table after receiving widespread criticism of its plan to replace striking workers as one example of how effective this pressure could be.

Another factor that will encourage workers is the political support from national leaders. President Joe Biden has shown he is willing speak out, having publicly sided with union employees in the Kellogg strike and calling for legislation to prevent replacement hiring. But a divided Congress that many expect to shift toward more business-friendly Republican control next year could provide a counter weight here.

That said, the labor market is expected to tighten; economist Michael Feroli of JP Morgan told Yahoo News that he predicts the national unemployment rate to fall to a historic low of nearly 3% by the end of 2022. And the surge of the omicron variant of COVID-19 is spelling out uncertainty, Goldman Sachs told the publication.

Meanwhile, almost 200 large union contracts are set to expire before December 2022, covering nearly 200,000 workers in the food and beverage space, according to Bloomberg Law. This includes several Frito-Lay factories.

Several Wall Street economists predict that the working conditions that led to the strikes this past year — including 12-hour shifts at food plants to meet rising demand — will gradually improve. Going forward, unions will continue to try to change hiring, wage and benefit practices that they see as unjust, according to labor historian and University of Rhode Island professor Erik Loomis. This could include frameworks like Kellogg's two-tier payment plan that provide newer employees with fewer benefits than veteran workers, or restoring pensions that manufacturers like Mondelēz have swapped out with 401(k) retirement programs. 

“Workers are not in the mood to compromise right now,” Loomis said.

As Hain Celestial prepared to consolidate two U.S. snack plants into one this past spring, CEO Mark Schiller faced a big problem that threatened to halt production of one of its biggest food brands: a labor shortage, which made it impossible to hire the 200 workers needed to staff the new facility.

The former Pinnacle Foods and PepsiCo executive quickly responded by hiring a manufacturer overseas before the product was air freighted to the United States "at a huge cost just to be able to keep it in stock so the retailers didn't replace me with something else," Schiller said.

Today, that partner has not only become a permanent supplier but also the first in a broader push by Hain to diversify the number of companies who make its products and packaging, supply its ingredients and distribute its teas, yogurts and chips — to minimize the impact of a future disruption. It's counterintuitive to the past, Schiller said, where companies prioritized low-cost, highly efficient supply chains. 

"It's almost become the new normal that you have to have a very scrappy and nimble business model to be able to survive in this kind of environment," he said in an interview. "It's unprecedented."

'Never seen anything like this before'

Food and beverage manufacturers such as Hain are being inundated with a barrage of challenges that are testing even the most seasoned CEO. Supply chain disruptions, labor shortages, elevated consumer demand and soaring inflation are simultaneously battering CPGs, with little clarity on if and how things will finally improve in 2022. The disruptions have placed many executives in a bind as they try to remain competitive and respond to shifting trends.

General Mills, the maker of Cheerios and Nature Valley bars, said its challenges are especially prevalent across its supply chain, where it's facing record levels of disruptions, covering everything from ingredient suppliers and its own manufacturing plants to the warehouses of its customers. The Minnesota company has struggled in some cases to fully meet its customers' orders.

"If you look at our pricing ... we would offset the inflation. It's really the short-term supply chain costs, obviously that's really the bogey for us," Jon Nudi, who oversees General Mills’ North America retail business, said during the company's second-quarter earnings call in December. The company recently hiked the prices of some of its offerings by about 20% at the start of the new year, CNN reported.

Neil Saunders, a managing director with GlobalData, said executives at several CPGs tell him they are struggling to gauge how long many of the challenges they are facing will last and the best way to position their businesses to address them. 

"Even seasoned companies and seasoned industry executives who have been through the many ebbs and flows and cycles are all saying, 'Well, we've never seen anything like this before,' " Saunders said. "Wherever you look, there are unusual dynamics and it just makes planning very, very challenging and difficult."

Among the issues weighing on CPGs include unprecedented upheaval in the supply chain that have made it difficult for businesses to procure packaging, raw materials and trucks to keep up with heightened demand. The highly contagious omicron variant is further pressuring the supply chain by sickening workers at several CPG companies. 

"It’s entirely reasonable for all of us to project that the next month or so could remain strained within the supply chain as omicron runs its course," Sean Connolly, Conagra Brands' president and CEO, said last week.

Together, these disruptions have lead to frequent product shortages and temporary out-of-stocks for everything from V8 to Pringles to Nutella.

"The fact is, it’s like whack-a-mole," Vivek Sankaran, CEO of grocery giant Albertsons, said during the company's second-quarter earnings call in October. He noted the unpredictability of carrying a particular item on the retailer's shelves. "On any given day, something is out of stock in the store."

The supply chain disruptions have prompted many companies to curtail promotional offerings. There is little need to boost consumption for a product when demand is already elevated and there is uncertainty over whether the manufacturer will be able to make enough of it in the first place, analysts and CPG companies said.

"You don't want to frustrate a consumer right at the store looking for a particular product, then they can't find it," said Erin Lash, a director of consumer equity research at Morningstar who has personally struggled at times to find Lunchables and small bottles of Gatorade for her family. 

The highest rate of inflation in at least a decade also is battering nearly every major food and beverage company, prompting them to pass along higher prices to the consumer across a broad range of categories.

Conagra, Campbell Soup, Coca-Cola, Nestlé and Hain are just a few of the CPGs to announce price increases. Analysts expect more hikes to continue through at least the first half of this year. Many CPGs have announced plans for or already implemented another round of price increases to further offset further escalating costs.

Any further increase would come on top of those already levied by manufacturers in 2021. Food at home has risen 6.4% during the past year — the largest 12-month increase since the period ending December 2008, according to the Labor Department's November consumer price index report. The six major grocery food groups measured by the government have all increased in the past year, ranging from 1.6% in dairy and related products to 12.8% in meats, poultry, fish and eggs.

Krishnakumar Davey, president of client engagement at IRI, forecast food prices to jump an average of 5% through the end of June. 

So far, there is evidence that consumers have shown a willingness to digest the price increases showing up for some of their favorite products. 

Total food and beverage volumes, which have benefited from the holidays and the rapid spread of omicron that may have shifted more consumption at home, have been stable at about a 2% to 2.5% per year increase during the eight weeks ending Dec. 26, according to IRI data. But the question looming over CPG giants is whether the price hikes will further weigh on the U.S. shopper. 

General Mills' Nudi noted elasticity is lower now than in the past, but he expects it to creep up going forward. Elasticity is defined as the change in consumer demand following a movement in the price, with lower elasticity indicating a greater number of shoppers are not changing their buying habits despite an increase in cost. 

Chris Foley, president of Campbell Soup's meals and beverages division, told Food Dive the maker of Swanson and V8 has moved cautiously in increasing prices to make sure they are commensurate with a rise in inflation. 

Campbell hasn't seen "dramatic changes [in consumption] based around specifically price," Foley said last month. "We're not seeing elasticity come in more dramatic than we forecast." 

PepsiCo CEO Ramon Laguarta observed a similar sentiment in October, when he noted that the snack and beverage giant has witnessed "much lower elasticity on the pricing that we've seen historically." 

A change in buying habits?

As the new year unfolds, people will become less willing to tolerate price increases and will change their buying habits as a result, said Davey at IRI.

Consumers will increasingly look to promotions and other value-shopping strategies. Premiumization, which has infiltrated many categories, will no longer be as attractive to low- and middle-income households. And private label, a category that struggled during the pandemic due in part to availability, will gain momentum, Davey said. Shoppers also will change what they buy, forgoing fine cuts of meat in favor of ground beef, or loading up on frozen chicken instead of fresh.

"When pricing goes up this much, then people shift down. They look for value," Davey said. "Some of the CPGs are talking about what happened in the past, which is long gone, that consumers are not price-sensitive."

Rob Vitale, president and CEO of Post Holdings, told analysts in late November that he observed "some uptick" in private label during the previous eight weeks but noted it was too soon to determine if it was the start of a more prolonged shift. Post's portfolio includes private-label offerings as well as brand names such as Pebbles cereal and Bob Evans frozen foods. "If these trends continue, it is an inflection point," he predicted.

The reason for the uncertainty comes amid a potential shift in consumer spending. Shoppers, many of whom cut back on traveling, eating out and commuting during 2020 and much of 2021, were left with more money in their pockets. At the same time, government stimulus provided extra cash that offset economic hardships caused by the ongoing pandemic.

But as savings shrink and government support declines, there is growing skepticism among many market watchers that consumers will remain as amenable to paying more for their meals and snacks in the new year. The risk for CPGs: Pass along such a severe price hike that consumers never return once economic conditions stabilize.

Despite the ongoing pandemic, people are traveling more and returning to routines they delayed like going to the dentist or meeting friends and family for dinner. Their willingness to splurge on holiday presents also will give way to a more conservative spending pattern as the new year unfolds, Davey with IRI predicted. And as more CPGs pass on higher costs to their customers, a groundswell of price hikes affecting even more products could weigh on shoppers.

One way to offset this is for food makers to cut back or carefully limit the use of promotions, change packaging and reduce the amount of product content while keeping the cost the same, tactics that are less noticeable to sticker-watching consumers. Hain's Schiller said the food maker is implementing these practices, but it may be several months before they appear on store shelves. 

Lash at Morningstar observed CPGs that have prioritized spending money on marketing and innovating across multiple tiers of products are positioned to be the biggest winners as buying habits shift. "The ability to keep a consumer within your brand family is much more cost effective and accretive than having to try to win or coax that consumer back," Lash said. 

Some executives have touted their ability to offer a range of products throughout their portfolio in case some shoppers decide to trade down.

"We're making sure that we are differentiated at each rung of the price ladder, whether it's entry to mainstream to premium so that consumers can stay within our franchise even if their circumstances might change," Kraft Heinz CEO Miguel Patricio said this past fall. 

Improvements in product offerings through new flavors, items that cater to trends like healthier eating or splashy new packaging also could make the shopper more willing to accept a price hike. Schiller said Hain has seen "very little volume fall off" from its price increases that have averaged between 6% and 10% because the company appeals to more affluent consumers and individuals who prioritize health and wellness.  

CPGs for the most part remain decidedly upbeat for the the new year despite the ongoing uncertainty.

Kellogg CEO Steve Cahillane told Wall Street in November that the cereal giant "has growth happening in most of our business that is very resilient, robust and sustainable."

In a November report, analysts with investment banking firm Stifel predicted food manufacturers will post organic revenue growth of 3.6% in 2022, even as pricing pushes volumes flat to down and food away from home continues to outperform.

"While it’s easy to get caught up in the quarter-to-quarter impact of inflation and pricing, it’s important to keep focused on the big picture," Conagra's Connolly said last week. "When you take a step back to evaluate the broader environment and how our portfolio delivers against the needs of the modern consumer, we believe that Conagra is uniquely positioned for the future."

Nature’s Fynd, which creates what it describes as a nutritious and versatile food protein through fermentation from a fungus found in a volcanic spring at Yellowstone National Park, has an unconventional brand story for a food company.

Chief Marketing Officer Karuna Rawal said the company has been doing research for years to gauge what consumers think of its origins, products and messaging. Before the pandemic, more than half of consumers said they were interested in food from the company, Rawal said. But as the pandemic has continued, the percentage of interested consumers has increased by double digits.

“I think people have been exposed a lot more to what's happening in our environment,” Rawal said. “I think people are thinking about the connection between their food and climate change a lot more than we have in the past. I think all of those forces are combining to make this a prime opportunity.” 

Nature's Fynd's products — which currently include two varieties each of sausage patties and cream cheese — debuted in a few markets last year, but the company has reached the scale and capacity needed for a national launch this year. Several other companies that use fermentation to make meat analogs are also preparing for widespread 2022 product launches, including Meati Foods, Aqua Cultured Foods and Atlast Food. 

And Quorn, whose products predate the founding of plant-based meat giants Beyond Meat and Impossible Foods, has plans for a new push this year that USA President Judd Zusel hopes will make it the leader in chicken alternatives. Its process of using fermentation to create a unique protein can make analogs with a more meat-like profile.

"You get the flavor, the texture, the same taste profile as real chicken, and that for us is a huge differentiator, and that's why we feel like it really does create the best-tasting chicken alternative products," he said.

Even Big Food is looking at fermented analogs for future meat-free products. Last year, Hormel's venture arm, 199 Ventures, entered into an exclusive partnership with fermented meat analog maker The Better Meat Co. to develop meat alternative products and bring them to market.

Fermentation is old technology that humans have relied upon for millennia for food and beverages including beer, kimchi and yogurt. But the latest spin on it will bring new types of alternative products to consumers. Products made through fermentation also have an extremely low carbon footprint, can be produced quickly, and are relatively inexpensive. 

“Now we're seeing an influx of alternative protein products that allow that sector to provide more choice to consumers,” said Emma Ignaszewski, corporate engagement project manager at The Good Food Institute. “And I think that's quite a beautiful thing, that consumers are starting to have more and more choices in the alternative protein space.”

Why create analogs through fermentation?

While plant-based food is almost synonymous with meat, dairy and egg alternatives, it isn't the only player in that game. GFI has called fermentation the "next pillar" of alternative protein. Through the process, companies can make protein material for meat and dairy analogs — known as biomass fermentation — as well as proteins identical to those created by animals that are used to create ingredients such as dairy and egg — known as precision fermentation.

GFI tracks startups in the fermentation space, and issued a report on the state of the industry in 2020. Ignaszewski said biomass fermentation companies represented eight of the 14 companies founded in 2019. In 2020, precision fermentation companies made up nine of 13 new players in the space. And now, the products from those startups are preparing to hit the market — and targeting a much wider audience than vegetarians and vegans.

“The proliferation of fermentation as a technology is paralleling the alternative protein industry’s new strategy of appealing to omnivore consumers,” Ignaszewski said.

Meati, which was founded in 2016, uses fermented mushroom mycelium — the fungi's root structure under the ground — to make meat analogs. The company says its products can mimic the appearance, texture and taste of actual meat, but without the environmental, health and financial costs of a meal that came from an animal.

Co-founder and CEO Tyler Huggins said that Meati wants to create products that meat eaters will enjoy, with the same taste and experience as meat. But he said the company’s mission, realized through its products, goes farther than that.

“It had to be whole food nutrition, meaning minimally processed,” Huggins said. “This isn't a man-made product using a bunch of ingredients that are off the shelf that make food together. This is really nature harnessed, and that's really a key differentiator from us.”

Last year was a key period of ramping up for the Colorado-based startup. In July, Meati raised $50 million to expand and prepare to launch its whole-cut beef and chicken later this year.

Huggins, who grew up around his family's bison farm in Nebraska, calls Meati's fermentation facilities "ranches." The company has operated its "pilot ranch," which can produce the equivalent of a cow overnight, for some time. Some of the funds raised last summer are to build out Meati's nearly 80,000-square-foot “mega ranch.” This facility, which Huggins said will start production in the second half of 2022, will have a final output capacity of 15 million pounds of product a year when it is completed.

“That's where the scale gets to the point where we can get national distribution and really set the stage to be the market leader,” Huggins said.

Meati's products are primed to hit grocery shelves and foodservice menus later this year, Huggins said. He couldn’t go into detail, but said Meati is working with groups and people known in the industry — including thought leaders in the food and nutrition space and “like-minded brands.” Some partnerships — starting with foodservice — will be announced in the coming months, Huggins said.

Nature’s Fynd, which was founded as Sustainable Bioproducts a decade ago, also spent last year getting ready to have a huge 2022. In July, it raised $350 million — the second largest single funding haul of any food tech company last year — to help lay the groundwork for this year. Its sausage and cream cheese analog products went up for sale, first as an extremely limited offering online, and then later in the year at regional grocery store chains Berkeley Bowl, Mariano’s and Fairway Market. 

Rawal with Nature's Fynd said the company has plans to accelerate that expansion, growing its presence at these chains and expanding into other geographic locations. Nature's Fynd hopes to have "a pretty significant presence" by the end of 2022, she said.

Nature’s Fynd uses biomass fermentation of the fungus Fusarium strain flavolapis to create a protein it calls Fy, which is used as an ingredient. CEO and Co-Founder Thomas Jonas has said it has diverse application potential in food and beverage.

While Nature’s Fynd’s products are new on the market, Rawal said they are off to a good start. In the company’s first month at Berkeley Bowl, an independent grocery store in California, it had the top-selling SKU in both dairy-free cream cheese and meat alternatives, Rawal said. She attributed part of that to on-the-ground marketing. Rawal estimated Nature's Fynd has handed out well over 10,000 samples.

Rawal said many consumers have told her they were pleasantly surprised by how much Nature’s Fynd’s sausages and cream cheese taste like their animal-derived counterparts.

“Quite a few say to us, ‘I actually like this even better,’ " Rawal said. "And once they hear the health and sustainability and other benefits, they're pretty sold."

Quorn, whose fermented analogs made from mycoprotein have been on the U.S. market since 2002, is doubling down here given the stratospheric rise of plant-based meat products — especially chicken alternatives. 

Quorn’s parent company, noodle giant Monde Nissin, has invested heavily into raising the profile and improving the offerings for the fermented analog brand in the United States. After Monde Nissin went public on the Philippine Stock Exchange last year, the company committed nearly 16 billion pesos ($335 million) to expand its presence here.

Those funds have gone into both product and marketing. Last summer, Quorn opened up a culinary center in Dallas dedicated to R&D and product development catering to the U.S. palate. Late last year, Quorn launched its new Meatless ChiQin offerings, both as sandwich-sized patties and boneless wings. Actress and talk show host Drew Barrymore entered a multi-year partnership to be Quorn’s "chief mom officer" — a spokesperson and adviser with whom the company’s target demographic of middle-aged moms can identify. And a new marketing campaign, complete with a packaging redesign, is planned for this year.

Zusel said that the new attention to the U.S. market is all about making a product that is specifically targeted to the preferences of consumers here and building brand recognition.

"We know if we can get people to try Quorn, they will love the food and they will come back, and they will buy it again," Zusel said.

Unique benefits

While plant-based meats have a bright health halo, research has shown they aren't necessarily much better for consumers than products that come from animals.

Fermented analogs, on the other hand, may have much deeper health benefits than animal- or plant-based options. Quorn, which has actively funded and participated in health and nutrition research on mycoprotein for more than three decades, has found it is good for muscle growth and contributes to lowering cholesterol. Mycoprotein is high in dietary fiber, low in fat and a source of nutrients including riboflavin, folate, phosphorus, zinc, choline and manganese, Quorn's research has found.  

Nature's Fynd has determined through its own nutritional research that Fy is a complete protein source, with all 20 amino acids — including the nine most essential ones. It's low in fat, high in fiber and easily digestible, the company says.

And Meati's mycelium forms the bulk of its products, meaning they have relatively short ingredients' lists, which is in sharp contrast to those for many plant-based meat analogs.

“We want to make sure that people understand that we're not just a regular plant-based product with a new label,” Huggins said. “That we're something completely different. Entirely new. A whole new type of whole food.” 

Through fermentation, Huggins said that Meati can make meat analogs that surprise consumers. He said consumers often ask the company how it was able to make something that is so meat-like. They have also told the company that the plant-based alternatives they have tried didn’t satisfy them in the same experiential way that products from Meati do, Huggins said.

Rawal with Nature's Fynd said that not being plant-based has actually helped the company in some conversations with retailers. Since there are so many plant-based products crowding into the market, there is an appetite for different kinds of alternatives. 

The production method for fermented meat analogs also can provide it with an advantage over plant- and animal-based options. Nature’s Fynd’s 35,000-square-foot facility, which opened in February 2020, is 10 minutes from downtown Chicago, Rawal said. Construction is underway on a second 200,000-square-foot facility nearby, which the company has said will be able to produce three to five times as much protein. 

“We are able to create protein in a city, near where people live, and that gives us some advantages in terms of not having to transport food all over the place, which adds to greenhouse gas emissions,” Rawal said. “So we're able to create food literally anywhere because you don't really need large tracts of land and water and all of the other resources.”

The smaller physical production footprint of fermented meat analogs also contributes to a smaller environmental footprint. Quorn plays up its sustainability, and was one of the first to include third-party accredited carbon footprint data on its packaging in its home country of the U.K. Zusel said Quorn works to communicate to consumers how much better its products are for the environment.

“For one meal, they [consumers] save the water of 20 showers, they lower their carbon footprint,” Zusel said.

Not exactly plant-based

Currently, fermented analogs tend to be lumped in with plant-based products. They are usually shelved together, and most data firms capturing product sales information include fermented products in the plant-based category. And with only one major player in the fermented space — Quorn — there haven't been any big efforts to differentiate the segment, though communicating food tech to consumers is an issue companies are working through.

Zusel said that the company's biggest challenge right now is building brand awareness. It wants consumers to know that Quorn is not only a meat-free alternative, but also made in a way that results in a product very much like chicken. He explained that there’s a hierarchy of messages to pass along.

“Over time we will talk more about fungi,” he said. “We will talk more about what our product is made from as a differentiator, because as they dig deeper and understand it a little bit more, they'll want to know why it’s so much like chicken.”

Rawal said Nature's Fynd has had many discussions about whether to “ride the plant-based wave” or try to be its own type of product. It chose the latter. The first thing that a visitor to the company’s website sees is an introductory video that opens with film showing the highly acidic spring where Fusarium strain flavolapis was found, as a narrator says, “It all started with a volcano.”

“We explain that this is not plant, not animal, but a third kingdom called fungi, and most people know a little bit about fungi,” Rawal said. “So I think once we start educating, it becomes very clear that people are much more open and willing, frankly, than we would have assumed, even five years ago.” 

While plant-based food generally has an admirable health halo and it’s a category that consumers seeking alternatives look at, Huggins said he wants to be able to differentiate Meati’s products. After all, he said, plant-based meat has a reputation for long ingredient lists, questionable nutrition and high prices: three things Meati wants to avoid.

Expanding the alternatives

While Quorn has been fairly unique among meat alternatives in U.S. grocery stores for years, Zusel said he thinks it’s "fantastic" that more meat analogs made by fermentation will be joining the brand this year. It’s validation for the process and products Quorn has been honing since the 1980s, especially since other food giants have funded and partnered with the newer companies.

“I think it's only positive, and I think the category can only grow if there are more players and we're all successful,” he said.

Huggins is quick to share Meati's ambition: The company hopes to lead meat alternatives in short order. Last month, the company announced it hired General Mills veteran Scott Tassani as its president. Tassani, who is known for his deep personal relationships with retailers nationwide, can help Meati feed the world this year, Huggins said.

“We’re an early-stage hypergrowth startup, there's no doubt about it, but we have big intentions to be the category leader and to be nationally and globally accessible,” Huggins said. “So we need to function and establish ourselves, building the discipline and rigor in order to be a world-class food company. And we're taking every measure to do so, and Scott's gonna play a big role in that.” 

Aside from the products already on the market or almost there, Ignaszewski with GFI predicts food made through fermentation will be used for many applications in years to come. Fermented items could be mixed with existing plant-based products as well as cell-based meat and fats, creating ingredients and altogether new hybrid alternative protein products.

Rawal with Nature's Fynd expects to see fermented products expand this year because she says the benefits — from a taste, nutritional and sustainability standpoint — are becoming apparent to everyone. As more products come to the market, she said consumer demand for them is likely to grow. And that will potentially drive other players to get into fermentation.

Huggins agrees. He doesn't see fermented meat analogs as a total replacement for meat, but growing mycelium through fermentation is a relatively easy and straightforward way to make a better meat analog suitable for everyday consumption.

“In the end, you're going to have a superior product, and my belief is that a superior product, as long as it's accessible, will always win,” Huggins said. "I come from the world of ranching. I do like regenerative, ethically grown, animal-based meat. I hold my protein standards very high, and Meati checks all the boxes for me. I think in the end, the consumer would agree with me."

Beef is not sustainable: That’s what critics charge and what many consumers want to see change.

The statistics around the meat’s environmental footprint are attention-grabbing. Globally, livestock contributes 14.5% of manmade greenhouse gas emissions, with beef responsible for the largest share, according to the Food and Agriculture Organization of United Nations. The livestock industry was responsible for the second-largest share of emissions of methane — a powerful greenhouse gas said to be 25 times more potent than carbon dioxide — in the U.S. in 2019, according to the EPA. Global methane emissions from cattle, meanwhile, have risen by more than 10% since 2000, according to Statista data. 

“We all worry about what this future looks like, and we all feel extreme pressure to mitigate these impacts in a very real way,” said Kim Stackhouse-Lawson, professor of animal science at Colorado State University and a researcher of sustainable cattle herding methods.

While demand for beef remains high, with sales last June rising 12% above the 20-year average, according to Gro Intelligence, consumer attitudes may be shifting against the protein over the longer term because of its large environmental footprint. Studies have shown growing interest among U.S. consumers in limiting meat intake based on the industry’s impact on climate. According to a 2020 Gallup poll, 49% of people who were reducing their consumption of meat cited environmental reasons as a major factor. Meanwhile, the rising popularity of plant-based alternatives, whose production is said to emit anywhere from 30% to 90% less greenhouse gases than animal-based meat, has also added pressure for the beef industry to address the sustainability of its protein.

In response, beef providers have recently begun to set goals to reduce emissions by tapping approaches like regenerative farming and methane-cutting feed. And in the year ahead, these efforts and a search for other solutions are only expected to ramp up as the industry seeks to win over skeptical consumers and governments grappling with climate change. At the same time, some critics argue that meat producers are ignoring some compelling — if costly — options for addressing the problem, demonstrating the complexity of making beef truly sustainable.

Industry efforts target emissions

As a first step, many of the largest beef processors have set goals to cut their emissions, with each relying on a mix of measures to hit its target. 

Last year, Brazilian beef giant JBS committed to achieving net-zero emissions by 2040 across its global supply chain. To do so, it is investing $1 billion on projects targeting greenhouse gases, including $100 million by 2030 to help its producers implement regenerative farming practices. It also has vowed to eliminate illegal deforestation from its supply chain by 2025. This is after The Guardian published a 2020 report that JBS was being supplied by a cattle farm linked to illegal deforestation in the Amazon. 

Cargill aims to cut beef emissions across its North American supply chain by 30% by 2030, through practices like regenerative farming. And in 2021, Tyson announced it was targeting net zero emissions across its global operations and supply chain by 2050, in part by eliminating deforestation and sourcing beef from producers verified by BeefCare, a program that audits farms and ranchers to ensure they are following sustainable practices.

As major beef processors set their individual targets, the industry is also trying to collaborate with other stakeholders on the the issue. The Global Roundtable for Sustainable Beef has a membership portfolio that includes not only big beef producers, processors and their suppliers but also retailers, environmental groups and academic institutions. 

Ruaraidh Petre, executive director of GRSB, said that the entity was formed around goals that industry leaders thought were critical to stop temperatures from rising, providing specific principles for different areas of the globe that produce beef based on their climate. He said that the organization finds common ground in wanting to prevent climate catastrophe, both personally and for the beef industry’s sake.

“We won’t be able to be in business if we don't stop climate change,” Petre said. “Nobody will be in business.”

Petre said one area the industry is focused on is feed additives, which have the potential to prevent methane production in the cow. In November, JBS SA announced it was partnering with ingredients giant Royal DSM to use its new feed additive, Bovaer, which is said to suppress the enzyme that produces methane in beef cows and reduce emissions by up to 90%.

Hugh Welsh, president of DSM North America, said the company is currently working with JBS to see how the additive can best be implemented in its supply chain, but did not indicate how long this process could take. However, he noted that the FDA has not approved Bovaer for use as a feed because it determined that the additive does not offer nutritional benefits to the animal. Instead, the agency has classified it as a drug, which means it will likely go through a potentially longer approval process.

“There’s no regulatory pathway for a feed ingredient with an environmental benefit,” Welsh said, adding that the company is currently trying to figure out if the feed provides a nutritional benefit to cattle. “It might improve the energy efficiency of the animal,” he said.

Petre with GRSB also pointed to genetic research being conducted to identify which cows have a lower residual feed intake, which could lower emissions. In July, Cargill announced it was participating in the Dairy Beef Accelerator, a three-year program that will examine the benefits of crossbreeding beef and dairy cows to create hybrids that have improved feed efficiency.

“There’s a lot of promise, but those things are really just coming to the stage of commercialization now,” Petre said.

Regenerative agriculture rises

As these longer-term efforts roll out, one common approach that many big beef processors and producers have embraced to address emissions is regenerative agriculture. Broadly speaking, these are farming practices that restore the soil and water used for food production by sequestering a critical mass of carbon dioxide from the atmosphere, according to nonprofit Regeneration International. They include the use of cover crops, for example, that prevent the release of carbon from land that is being used to raise beef cattle or grow ingredients for feed. 

In September, Cargill announced it would pay farmers to expand or implement regenerative agriculture practices. The beef giant said it will involve sustainable grazing practices to “harness the potential of cattle,” and restore soil to remove carbon from the atmosphere.

The adoption of regenerative agriculture by meat companies has happened very rapidly, according to Petre with GRSB. While there is research pointing to the positive benefits of sequestering carbon, he said they are not fully known because “regenerative” practices are defined differently by various companies.

“It’s kind of being used as a panacea in a way,” Petre said. “Regenerative [agriculture] has become really popular, almost before we have the evidence to say, ‘These are the things to concentrate on.’ ”

In its 2021 investigation into the meat industry's sustainability claims, environmental group DeSmog argued that regenerative practices are not guaranteed to neutralize beef’s climate impacts, and cited a New York University study that found limited evidence that the practice can effectively sequester more carbon than the industry produces.

However, some small beef producers see regenerative farming as a key part of the solution to raising the sustainability profile of the meat.

The owners of Stemple Creek Ranch, a grassfed beef company based in Northern California, are used to dealing with a difficult growing climate because of the trend of yearly droughts in their home state. Lisa Poncia, who runs Stemple Creek with her husband Loren Poncia, said the company has prioritized sustainability since its founding in the 1970s, embracing practices like rotational grazing, which confines cows in one section of a pasture to let the plants in other parts recover.

The company, which sells whole-cut steak, hot dogs, jerky and ground beef on its website, believes in the potential of regenerative agriculture, Poncia said. She noted that the improved soil that results from these practices supports more biodiversity and allows more moisture to be extracted by plants, which are eaten by cows, for greater growth.

“The more carbon we have in our soil, the more water it absorbs,” she said.

New Zealand-based Silver Fern Farms has embraced some regenerative agriculture practices for its own grassfed beef. It sees the approach as a comprehensive effort that involves the entire process of growing beef, including lowering its overall carbon content, maintaining water quality, as well as the social impact of beef production, according to Matt Luxton, director of U.S. sales.

In July, the company announced it would launch its Net Carbon Zero Certified Beef in the U.S. The company told Food Dive its retail launch is "imminent," but that there is not yet a release date. To earn certification, Silver Fern Farms had to track the lifecycle of its products from the cow’s birth to its processing phase to the consumer. It arranged carbon offsets to negate the emissions produced in the process.

“So all of those things had to be investigated, and that was a long, arduous journey, making sure that we had all those numbers right,” Luxton said. The product will be available in whole cuts to U.S. consumers through the company’s website, as well as various grocers, he said. 

He noted that ultimately, Silver Fern is working to sequester more carbon than it produces overall. It wants its practices to serve as a wider example for the beef industry.

“If we're coming to market with this carbon-zero beef and there's 20 others within two months, that's a good thing,” Luxton said.

Are certain measures just greenwashing?

Despite the goals set and approaches that beef producers have taken to address the sustainability of the meat, critics have called many of these efforts greenwashing. They fear that producers are simply announcing sustainability efforts but have no plans to follow through on them, or that they will not in fact lower emissions.

Poncia with Stemple Creek acknowledged that there is greenwashing in the industry from both big and small players. However, she said that her company is focused on prioritizing sustainability as it expands in the years ahead.

“This is not just puffery,” Poncia said. “This is truly who we are as individuals and as a business.”

Companies may not “intentionally” be greenwashing, but sustainability goals must provide a roadmap for farmers to actually implement their practices more widely, according to Stackhouse-Lawson, who also serves as the director of AgNext, Colorado State University’s agricultural research center. These roadmaps could differ, she added, based on locale and at different points in the supply chain.

Perhaps more fundamentally, Stackhouse-Lawson said the total level of emissions resulting from beef is not even currently known because it is very expensive to measure, and it is not yet technically feasible to measure emissions from a large number of animals.

“Unfortunately we actually don't even really have a baseline of greenhouse gas emissions from livestock in this country,” Stackhouse-Lawson said. “That is some of the research we would love to do and we have continued to pitch that.” Sustainability investor group FAIRR has found that globally, only 18% of meat and dairy companies track even partial methane emissions. 

This begs the question: if the majority of beef providers are not tracking their total emissions, how can they properly achieve their goals?

Petre with GRSB said that the commercial beef industry has been investing in reducing its emissions. He cited research showing that industry carbon emissions have been falling in countries like the U.S., Canada and New Zealand for decades. The industry's overall carbon footprint is rising, Petre said, due to lower-income countries increasing their herd sizes with poor nutrition, along with deforestation, referencing findings from the Intergovernmental Panel on Climate Change. 

Meanwhile, advancements like the Bovaer feed additive will take a long time for wider adoption, he said, because the regulatory process is arduous and the financial incentive is not high for farmers.

“Individual ranchers or farmers are the ones to administer such products, but if there is no financial incentive to do so and the products cost money, adoption will clearly be slow.”

One promising approach that AgNext has been studying is precision herding, which trains cows to graze on less land. It involves placing a collar on a cow and tracking its movement. The collar beeps when the animal has moved outside its desired range. 

“You could literally run cattle from your desk on your phone and move them appropriately to forage growth,” Stackhouse-Lawson said.

However, Stackhouse-Lawson said that research and execution of precision herding would be expensive, and there is limited funding in terms of private, grant and federal investments.

“We are very behind on solutions to really reduce the overall impact of animal agriculture on greenhouse gas emissions more broadly,” she said. “It just has not been prioritized at all in funding mechanisms.”

Petre said that there is virtual fencing for grasslands being developed by tech companies like Vence and supported by large investors like Rabobank. However, he said, many individual farmers enjoy the ability to check and handle their cattle physically.

“For many, beef production is not primarily an economic driver, so investments in technology are not always top of mind,” Petre said. However, he noted that commercial producers are generally quick to adopt tech that enhances returns and labor such as automatic gates, radio frequency identification tags, and weighing systems.

Stackhouse-Lawson acknowledged that it is a layered issue, as many farmers are struggling financially and may feel burdened by taking on a new method of doing their job. Finding new incentives to promote adoption of sustainable strategies, she said, is a key component of AgNext's work.

“Generally, our producers are not provided the true tools that they need to really develop an adaptive capacity to move as fast as they're being expected to move,” she said.