For many cultures, a festive occasion would not be complete without a meaty centerpiece. Meat has historically been viewed as a symbol of wealth and status, only available on a regular basis to a select few. However, even though meat has become widely available due to global production and cheaper prices, a recent research finding suggests a symbolic link between meat and status, especially for those who perceive themselves to be of lower socioeconomic status[1]. This, combined with the rising middle class in emerging economies, offers an explanation as to why meat consumption in Asia is rising at such a rapid rate.

 

Demand for animal protein in Asia is not going to fade

Food companies are profiting from breakneck growth in global protein consumption — up 40% since 2000, with more than half of this increase driven by Asia. According to Asia Research Engagement the total meat and fish consumption in Asia is expected to grow by 78% by 2050, with Pakistan, Philippines and Vietnam showing rapid growth in demand. China and India alone are set to consume 360 million tonnes of protein by 2025, more than doubling since 2000. 

Meeting the world’s growing protein needs is a pressing challenge. Food-producing farm animals – and the meat, milk and eggs they provide – are not the only solution, but they undoubtedly are one of the major contributors and will continue to be for decades to come.

 

But Asian farms are struggling with biosecurity

While meat and dairy provide a complete profile of amino acids, vitamins and minerals, current Asian farming practices have led to the spread of two pandemics in the last 5 years raising concerns over biosecurity.

The Coller FAIRR Protein Producer Index assesses 60 of the world’s leading animal protein producers across nine sustainability categories. Among the 60 companies are 28 Asian meat, fish and dairy producers with a combined market capitalization of $190 billion. On average, Asian companies scored 17%, demonstrating some of the lowest average scores on greenhouse gas emissions disclosure, deforestation, water scarcity and antibiotics management.

The threat of antibiotic resistance has been described by the World Health Organization as one of the most urgent global threats to public health, and Asian companies, especially in India and China, feed antibiotics routinely to healthy animals to help them gain weight and survive confined and unhygienic conditions. 73% of all antibiotics are used in factory farming, in many instances to help animals grow faster, accelerating the development of superbugs. The outbreak of the H7N9 bird flu pandemic in 2013, for example, cost the Chinese economy an estimated $6.5 billion, while ASF knocked 10% off the value of giant pork producer WH Group last year. Bird flu was estimated to wipe out 30% of the chickens in China and some estimates of ASF say 50% of pigs die or be killed to avoid the spread of the disease.

There are also concerns over the industry’s sustainability. Meat is a relatively inefficient way to produce calories. Livestock use up about 40% of global arable land to deliver 20% of human calorific intake: the ratio is 12 calories of chicken for every 100 calories of grain; beef is 3 to 100.

However, while livestock consume around one third of all cereal production, 86% of their plant diet comes from grass, leaves, and other foods humans cannot eat. In this way, it’s argued, livestock positively contribute to food security by making the inedible, edible.

So, increased meat production is the root of many problems. But the big issue at stake is access to quality proteins in Asia, more so than the reduction of animal protein consumption. while it is undeniable that reducing the quantity is part of the solutions at the individual level, it seems somewhat ineffective to patronize emerging middle classes, telling them how much protein they should eat, especially when protein is a newly found luxury for them.

 

Don’t bet the farm! The critical role of livestock farming in Asia Pacific

Another key part of the protein story in Asia revolves around smallholder farmers. 75% of all livestock-derived foods in Asia in 2010 were produced by small farms. Globally approximately 750 million rural poor livestock keepers living on less than $2 income per day in developing countries. They are sharply distinguished from the “industrial” livestock production systems of high-income economies that typically confine large number of animals in “concentrated animal feeding operations”. Smallholder mixed crop‑livestock systems may be less efficient and thus have a larger GHG footprint per unit of product than industrial systems.

Without critical size and financial resources, these smallholder farmers will fall through the cracks of technology improvement. Only consolidation can lead to better biosecurity conditions and lower environmental footprint, as shown by developed markets over the last decades. But how to avoid the shift to outright factory farms, the way the industry has evolved in the US.

Experiments of high-rise intensive pig farms in China[2], dubbed the ‘hog hotel’ may offer a glimpse into the future of livestock farming. While it was primarily built to meet the ever-growing demand for pork (prior to outburst of ASF? To be checked), it is also capable of modernizing farming and creating wealth in rural areas. It also has higher land productivity, thereby saving energy and resources.

But the future adoption of hog hotels across Asia remains unclear. Some in Europe have been abandoned due to management difficulties and public resistance to intensive farms at such a scale. What is clear though is that to meet Asia’s exploding demand a reorientation to a Western system of production will be required, one that is concentrated, prioritizes fast-growing animal breeds who process feed efficiently and have lower GHG impact per unit.

 

Plant based is worthy alternative but is not the silver bullet

While the demand for meat, milk and eggs is leveling off in most high-income countries, Bennet’s Law is just kicking in for Asia Pacific and meat consumption is expected to continue rising for the near future.

With the recent rise of plant-based protein, a popular suggestion would be to encourage migration from animal-based to plant-based protein. Asian consumers may be predisposed to accept new non-animal alternatives, as traditionally processed protein-rich plant-based foods, such as tofu and tempeh, have long been a feature of Asian cultures. Also, while environmental and welfare issues currently have less traction in Asia than in Europe and North America, there are signs of this changing amongst the increasing numbers of young, well-traveled (check if this is correct) consumers.

However, even with the alternative meat market on the rise, it is expected to take 10% share from animal meat by 2025 and 28% by 2030 – leaving a rather large portion of the plate to be serviced by animal products. It is pretty difficult to beat the efficiency of livestock farming, resulting from decades of optimization. If we are rightly critical of the toll they have taken on the environment, we should not forget how optimized the cow or poultry chain is, where everything is valorized and recycled[3]. Therefore, at least throughout the foreseeable future, the alternative meat market will support only a fraction not only of the demand but also the millions of jobs and livelihoods that conventional livestock-derived foods support today.

 

So Should Investors Vote against Cows?

So, what does this mean for VC investors seeking agrifoodtech opportunities in Asia, especially in light of the global momentum around plant-based alternatives? Investors must first recognize the breath of opportunities in this space and be aware of the risks that require mitigation. Disruptive technologies rest on consumer adoption and evolved regulations to succeed in the long term. In consideration of this, it may be wise to hedge their bets by investing in both technologies increasing the efficiency of traditional protein as well as the alternative technologies.

From a global perspective, transforming food systems to meet demand in inclusive, sustainable, healthy, nutritious and efficient ways is recognized as one of the world’s biggest challenges. And as entrepreneurs and policy-makers debate the future of protein delivery systems, no option should go unexplored, and no one must be left behind.

 

 

Sources:

[1] https://www.ncbi.nlm.nih.gov/pubmed/30172366

[2] http://www.reuters.tv/v/t4V/2018/05/11/high-rise-hog-hotel-with-1000-pigs-per-floor

[3] https://www.xinova.com/is-it-possible-to-disrupt-a-cow/