WhiteWave Foods' deal to buy of Canadian firm Vega last week will mean the US group adds plant-based nutritional powders and snack-bars to its range, products industry watchers expect to show promising growth in the near future. But low awareness among mainstream consumers of plant-based proteins could prove a challenge. Hannah Abdulla reports.
The demand for plant-based foods is growing at a pace that cannot be ignored. According to Nielsen, the US plant-based food and beverages market grew at a CAGR of 14% in the two years to 2014.
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Last week the Alpro and Silk owner agreed a US$550m cash deal to buy Canadian plant-based nutrition powder and snack bar maker Vega from owners Charles Chang and investment firm VMG Partners.
With brands like Alpro and Silk, WhiteWave already has a significant presence in plant-based products and has been continuing to add to that in recent months. Last September, the company acquired plant-based beverages, creamers and frozen desserts maker So Delicious in a $195m deal.
But Vega is quite different from WhiteWave's other plant-based brands. Vega started out in 2004 producing a "complete, whole-food derived, nutritional shake that was made from 100% plant-based ingredients". Today the company has a turnover of around $100m and has developed a product portfolio that includes supplements, snack seeds, smoothies and snack bars. The total market for nutritional powders, bars and ready-to-drink beverages in the US is worth $8.6bn and there is growing demand for plant-based options.
These categories, asserts Chris Schmidt, senior analyst at Euromonitor International, are "very high-growth categories in North America and many other markets around the world". He says: "Plant-based options are increasingly gaining favour outside their traditional bastion of vegetarians and vegans, in part because of growing allergy and sustainability concerns among the general populace."
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By GlobalDataIt is difficult to gather data specific to plant-based snacks or shakes as the market is still quite small. However, according to Datamonitor, the category of cereal bars in the US that includes nutrition bars is expected to grow at a CAGR of 2.7% for the period 2014-2018. That is better than the 2.2% growth rate for savoury snacks.
According to WhiteWave, Vega holds "a strong market position in the plant-based nutrition category across Canada and the US and is seeing rapid sales growth. Over the last 12 months sales grew 30% on a constant currency basis, WhiteWave says.
What impact could the acquisition of Vega have on WhiteWave's existing range? It could add to the company's new product development pipeline. Innovation is an area of focus for WhiteWave, which believes its work on new products is broadening its reach. The company says it saw was a 30% jump in the household penetration of its dairy-free beverages in the US last year following the introduction of almond and coconut varieties.
When contacted by just-food, a spokesperson for WhiteWave was reluctant to comment on "specific growth opportunities" since the deal with Vega is still in its early stages. However, it seems clear the pathway to a new product portfolio has already been opened up.
Tom Vierhile, innovation insights director at Datamonitor Consumer, says WhiteWave's existing portfolio could benefit from a wider array of protein sources including what he labels the "trendy ingredients" of pea protein, rice protein and hemp protein – an area with which Vega is familiar.
"I’d expect to see some innovation there, especially in plant-based milk alternatives since this market has really broadened over the past few years."
Innovation could also work both ways. "Maybe we’ll even see [Vega] experiment with complete meal solutions like powdered drinks offered by Soylent which has attracted a cult following as a complete replacement for food for people that are too busy to cook or even prepare a simple meal," Vierhile says.
While much of WhiteWave's plant-based portfolio is present in mainstream channels across North America, this is another area where Vega differs. Vega has predominantly grown its presence through online and speciality channels – supplement stores and health food shops allowing WhiteWave access to these alternative retail channels. But where this particular deal could get interesting is transitioning Vega into a mainstream brand. WhiteWave can of course provide Vega with the potential of greater distribution, as consumer interest in alternative proteins rises and access on a much wider retail platform.
"It’s the kind of buzzworthy brand that could potentially get very big, very fast if it were pushed into mass channels like supermarkets [and] hypermarkets," says Schmidt.
However, there could be challenges. Unique product formulations behind Vega's products could make mass production problematic.
There is also the possibility – as is often in the case when small firms sell to larger companies – Vega will lose credibility among its existing fan base who view the move as it 'selling out'. That said, the make-up of WhiteWave's portfolio probably means it will not face the same accusations of being part of 'Big Food' as some of its more processed food peers.
A further issue is competition. Vega and WhiteWave will tout the ingredients in the Canadian firm's snack bars but, as the products gain distribution, will all consumers be able to make the distinction with more established products?
"The market is kind of a free-for-all because a lot of major brands also compete in the space, and distinctions between offerings may not be very well defined. Vega may define the niche as "plant-based protein" but it is not clear if consumers see that as a line of demarcation in the category," says Vierhile.
Combined, the US and EU plant-based foods and beverages category was worth $2.7bn in 2014 according to Nielsen. But where consumer awareness of plant-based proteins is concerned, Datamonitor Consumer's 2015 Ingredient Survey found 30% of global respondents said they were unfamiliar with pea-protein and 14% said the same for soy-protein. In the short term, WhiteWave and Vega will have a challenge educating more mainstream consumers, although Vierhile believes ingredients like pea protein could gain mainstream acceptance.
"This knowledge gap will take time to fill, but plant-based protein from sources like tree nuts as in the case of almonds currently enjoy a near halo effect, and this may eventually carry over into pea protein, hemp protein and more," says Vierhile.
