5.1
One of the key areas of focus for this inquiry was the economic impact of plant-based proteins and opportunities for growth within the sector. The Australian Government has set a target for the value of the agricultural sector to grow to $100 billion by 2030, a target that is shared by the broader agricultural industry. Representatives from across the protein-producing sectors have shown that global demand for protein is increasing which, in turn, offers opportunities for Australian producers of both meat and
plant-based proteins to expand. Plant-based producers have argued that meeting global demand for protein will provide Australian companies with opportunities in agriculture and manufacturing of plant-based protein products.
5.2
While acknowledging the opportunities that are afforded with increasing demand, the meat industry has expressed concern over the potential economic impact of plant-based operators using meat terminology. The meat industry has invested millions of dollars over the years into product branding, research, and marketing to ensure Australian meat is trusted throughout the world. Segments of the meat industry are concerned that the use of meat terminology by plant-based producers could potentially undermine that trust and that plant-based producers are reaping the rewards of the work paid for by
levy-payers.
5.3
This chapter will examine the potential impacts of plant-based protein sources on the meat industries’ investments, the opportunities available to all protein sectors to meet global protein demand, and domestic growth opportunities for the plant-based sector.
Growth of red meat and concerns over ‘piggybacking’
5.4
Australia’s red meat industry comprises over 77 000 businesses including producers, manufacturers, retailers, exporters, and lot feeders. The bulk of support for the industry comes from rural and regional areas with over
90 per cent of the 434 000 strong workforce located in these regions. Although the industry recorded combined annual sales of over $28.5 billion it is still growing. Industry turnover grew by seven per cent during 2019–20. The red meat industry provides safe and nutritious red meat to all Australians domestically and to over 100 countries internationally while serving as the economic backbone of regional Australia.
5.5
Since 1997, approximately $5 billion in revenue has been collected from red meat producers in the form of levies. Businesses across the meat supply chain —including those transacting livestock, exporting livestock, or processing livestock—are required to pay compulsory levies. Levies are used to fund research, development, and marketing activities to promote Australian red meat as a safe and nutritious form of protein for consumption both domestically and internationally.
5.6
Australian crop producers, including plant-based protein producers, are also required to contribute to research and development via compulsory levies of approximately 1.02 per cent of the total sale value of their crop. These levies contribute to Plant Health Australia, research, development, and pest control. However, unlike the livestock sector, plant-based levies do not contribute to marketing.
5.7
While the Commonwealth matches levy investment into research and development, the same is not the case for funds devoted to marketing. According to the National Farmers’ Federation (NFF), the scale of investment into marketing—totalling over $2 billion in the last decade—has given the red meat protein sector ‘an intrinsic sense of ownership of the language associated with the marketing and labelling of meat products.’ This sense of ownership over language and messaging is reportedly shared by poultry, dairy, pork and seafood producers.
Concerns over ‘piggybacking’
5.8
Members of the red meat industry have expressed concerns that plant-based producers are leveraging the positive language and labelling established by levy-paid marketing to promote their own products. Under the Australian Meat and Livestock Act 1997, definitions are given for terms broadly described as ‘meat’. Those producers fitting the descriptions are required to pay levies.
5.9
The committee received evidence from producers and organisations accusing plant-based operators of free-riding or ‘piggybacking’ on the back of the red meat industries investments by using terms like ‘meat’, ‘beef’, and ‘goat’ without contributing levies towards marketing of those terms. According to the submission from the Red Meat Advisory Council (RMAC), the use of these terms without contributing to them is akin to tax avoidance and poses a risk to the reputation of the red meat industry:
The continued exploitation of Australian red meat category brands by companies who do not pay compulsory levies poses a risk to the long-term viability of the compulsory levy system. The value proposition for compulsory levies to invest in red meat category brands is quickly diminished if MPBP [manufactured plant-based protein] companies are able to use predatory piggyback marketing practices to sell non-animal protein products labelled as ‘beef’ or ‘lamb’. The fact that non-levy paying supply chains are able to get a free ride off the Australian red meat and livestock industry’s significant compulsory levy investment for commercial gain is a market failure that needs to be addressed.
5.10
The RMAC believes that the motivation to appropriate meat terminology comes from the Australian meat industries’ reputation for safe and nutritious products. They believe that the misuse of the red meat industries’ terms is a clear marketing ploy to convince or trick meat eaters into purchasing
plant-based protein products through deceptive and misleading tactics.
Ms Bonnie Skinner, General Manager, Policy and Advocacy, Sheep Producers Australia, cited the contribution that levies make towards industry research, safety and marketing that provide a public good to both sheep producers and consumers. Ms Skinner stated that the investments made by the industry should be protected against plant-based manufacturers aiming to ‘free ride’ on the work done by levy payers.
5.11
Concerns over misleading terminology and ‘piggybacking’ on the work of levy paying producers were echoed by the Northern Territory government. Mr Luke Bowen, Deputy Chief Executive Officer of Agriculture, Fisheries and Defence in the Northern Territory Department of Industry, Tourism and Trade, described the importance of the beef industry to the Northern Territory and how misuse of terminology undermines the sector. Mr Bowen told the committee that the Northern Territory’s current agricultural production is valued at $1.3 billion, of which 65 per cent is attributed to the beef industry. The Northern Territory Government aims to increase total agricultural output to $2 billion by 2030.
5.12
Mr Bowen contended that the use of meat descriptors was a clear example of the plant-based protein industry intentionally misleading consumers and that manufacturers were piggybacking on the positive associations with red meat:
The descriptors 'meat', 'beef', 'lamb' and 'goat', for example, or any other descriptor representing protein derived for the slaughter of live animals should not be used for synthetic protein and definitely not for plant based protein. The use of these descriptors is misleading and intentionally undermines the Australian red meat industry sector, and, potentially, the white meat—fish—milk and other animal production sectors.
Plant based and synthetic protein manufacturers do not contribute to the Australian meat and livestock industry levies and should not benefit from, or piggyback on, the funds used in marketing and insurance activities. The goal of replicating the taste, texture and aroma of meat derived from animals shows that the manufacturers of fake meat are intentionally trying to produce a product that imitates the natural, genuine product, including appropriation of the name 'meat'.
5.13
Mr Bowen told the committee that, in the Northern Territory, beef production involves extensive natural grass-based, grain-fed production systems. The Northern Territory government and beef industry view the uniqueness of this production system as a point of difference in the protein market. In their view, the misuse of terminology potentially impairs that opportunity.
Growth of the red meat industry
5.14
Meat and Livestock Australia (MLA) has reported that total global consumption of meat has grown annually over each of the last 20 years by a factor of 1-4 per cent per annum. In Australia, plant-based protein consumption accounts for 0.3 per cent of fresh meat volume sales, while meat accounts for over one third of total sales. Furthermore, demand for meat is growing at a faster rate than current meat production can sustain. The MLA believes that while meat will continue to dominate the protein market well into the future, the shortfall will be made up for by plant-based proteins. Chicken consumption is also rising, with Dr Vivien Kite, Executive Director, Australian Chicken Meat Federation, acknowledged at a public hearing that chicken consumption has increased during the COVID pandemic. Dr Kite also noted that it is difficult to get reliable data on whether market share has, in fact, been lost due to the increase in plant-based protein products. In asking consumers if they are moving away from meat, Dr Kite reported that while many people are lowering meat consumption, chicken meat is the least affected in that regard.
5.15
In its submission, v2food—an Australian-owned and operated
plant-protein producer—used the growth of the red meat sector as evidence that plant-based proteins offer no threat of impairment because these positive developments occurred for the red meat industry at the same time as plant-based protein products were growing in popularity. Further, the expected growth in global protein demand is new demand and provides room for both categories to grow from current levels. Rather than being a threat to animal protein production, plant-based production should be seen as a means to diversify choices for consumers. Ms Katie McRobert, General Manager, Australian Farm Institute (AFI), also indicated that the AFI sees no evidence of a threat to the Australian livestock industry. The AFI’s projections indicate that supply and demand are likely to increase for both animal and plant-based proteins.
5.16
The committee also heard that global demand for livestock also benefits the cropping sector, with Graingrowers reporting that it has witnessed ‘tremendous growth in [Australia’s] livestock feed sector’. According to research from the Australian Export Grain Innovation Centre, it is forecast that domestic demand for feed grain in Australia will increase by ‘almost 2 ½ million tonnes of grain per year by 2030’. This growth in grain production will provide ‘opportunity for the Australian agriculture sector to value-add on our own shores and turn grain into animal based proteins both for Australian consumers and to export as well’.
Global protein demand and opportunities for growth
5.17
According to the Commonwealth Scientific and Industrial Research Organisation (CSIRO), total global population is expected to reach 9.7 billion by 2050. To feed the rising population and meet global protein demand a diverse and sustainable protein supply is vital. Meeting demand provides ample opportunity for both the meat and plant-based protein industries to benefit economically from increased production.
5.18
The NFF reported that in 2018–19 the value of the red meat industry stood at approximately $17.6 billion with estimations that this figure will double by 2030. In comparison, the value of the
plant-based protein sector was estimated at around $140 million during the same period.
5.19
For growth to continue, some submitters said that cooperation is required and that the meat and plant-based industries should refrain from competing with each other. In The Changing Landscape of Protein production: opportunities and challenges for Australian agriculture, Agrifutures Australia (Agrifutures) reported that growth in demand can provide opportunity for all producers provided that:
Australian agriculture presents a united front in the aim of producing sufficient protein for the growing population [and that] the industry monitors the marketing language used by some alternative protein companies to ensure accurate representations of both plant- and animal-sourced proteins are presented to consumers.
5.20
Agrifutures also reported that ‘while alternative protein substitution of animal protein will continue to increase in the next 10 years, the levels and rate of substitution will not present a material threat to the viability of animal agriculture by 2030.’ Further, Agrifutures believes that while plant-based producers will benefit from increased market share, this benefit will be small compared to new demand for animal protein from a rising population. To capitalise on these opportunities, it is important for all of Australia’s protein producers to present a united front, avoid competition that could harm both meat and plant producers, and embrace supportive policy measures. The NFF agreed, stating:
Policies that support the growth of both animal and plant industries also provide immediate and long-term social and economic benefits to businesses, livestock producers and individuals across regional, rural and remote Australia.
5.21
Ms Kirsten Grinter, Chair, Alternative Proteins Council, told the committee that many Australian farmers already know this. According to Ms Grinter, many farmers are already diversifying and branching into mixed farming practices to embrace the opportunity afforded to each sector. Among these are farmers who have recognised the potential growth of plant-based proteins and are growing crops specifically for plant-based protein supply chains. Ms Grinter suggested that manufacturers and producers want to be able to promote and grow both their plant and their meat-based protein products equally.
Opportunities for the plant-based protein industry
5.22
Studies have shown an increasing trend of values-based consumerism. Consumers are becoming more intent on purchasing products with high environmental and social values and will consider factors like animal welfare, sustainability, and climate change when shopping. With resources to produce meat becoming scarce, like land and water, there are opportunities for
plant-based producers to expand as people look to consume plant-based proteins. Ms Grinter told the committee that an estimated 6 000 full time jobs will be created over the next decade because of plant-protein growth. In particular, Australia’s advanced agricultural sector puts the nation in a good position to lead the development, production, and supply of plant-based protein products in the Asia-Pacific region.
5.23
The submission from the CSIRO details the agency’s collaboration with industry and the government to form the Future Protein Mission. The Future Protein Mission aims to capitalise on the increased demand for protein that a growing population will require, and will work to capture high value and high margin export opportunities while also building domestic manufacturing capabilities. v2food indicates that investment is already picking up with over $122 million combined investment in the Australian plant-based protein sector during the 2020-21 year to support business development and regional processing facilities.
5.24
In evidence given at a public hearing, Mr Brendan McKeegan, Co-founder and Director, Australian Plant Proteins Pty Ltd (APP), explained how APP identified a gap in the Australian market that they could fill. APP recognised that there was a lack of facilities available to turn raw materials into a powder form that could be used in food and beverage products. In 2020, APP built a full-scale large facility in Horsham, Victoria. The facility is the only one of its kind in the Southern hemisphere. APP chose this location for two reasons:
to embrace the opportunity to add regional jobs in the area; and
the area is a strong pulse growing area in the state.
5.25
The APP example shows how there is scope to expand operations in Australia and bridge the gaps along the supply chain between growers and consumers. Further illustrating ways in which the Australian plant-based sector can grow, Mr Nick Hazell, Chief Executive Officer, v2food, showed that although Australian farmers grow a range of plant proteins, producers must still rely on imported proteins because Australia does not have the infrastructure to process raw plant commodities into products at scale:
None of the products—the protein extracts, the concentrates, the isolates, which are the building blocks of alternative protein—are made in Australia. We do grow great legumes, we grow great pulses and we have an amazing agricultural sector, but no-one has felt the need to invest in manufacturing in Australia up to now. This is deeply concerning, and we want to do something about it… We are forming consortia and partnerships so that we can grow the soy in Australia and process it in Australia, and that involves hundreds of millions of dollars of investment. But, without that, Australia is going to be dependent on the US or Europe or, heaven forbid, Brazil for the sources of protein.
5.26
Despite this, Australian producers still produce more than is required for domestic consumption, thereby opening a potentially lucrative export market worth $3-6 billion should further domestic capabilities be enhanced.
Ms Jessica O’Connell, Counsel, Beyond Meat, reiterated the need to increase capability within Australia. Ms O’Connell stated that Beyond Meat has a goal to produce and manufacture locally, but that facilities in Australia are not yet capable:
Right now, there's a supply chain that sources mostly from the US, which is where our product is manufactured as well. That's the most efficient place to get it from where we're manufacturing. As I said, as the company grows, the idea would be to manufacture regionally and locally and source from those areas as well but there are limited facilities that produce the product right now. It's not big enough to have different supply chains, unfortunately.
5.27
Ms O’Connell also confirmed that the company hoped to open a factory in Australia when they are large enough to do so. The need for expansion was also voiced by Mr David McKeon, Chief Executive Officer, GrainGrowers Ltd. Mr McKeon told the committee that grain producers have grown in recent years but still have further room to expand into other areas:
We recently released a report looking at changes in growth in the Australian agriculture sector, and, over the last five years, we've seen the volume of pulses in Australia—we're talking largely about chickpeas, lentils and lupins, Australian pulses—increase by 20 per cent, but we've seen the value of pulses increase by 70 per cent. That really shows that Australian farmers on the ground are doing as much as they can with a limited amount of land and a limited amount of rainfall to add value and deliver really high-value products, so we are seeing growth in the value of those pulse based products in Australia. In Australia, we don't grow many soybeans, which are the basis of a lot of our plant based protein industries, but we are seeing continued growth in the pulse sector.
5.28
Soy production is a relatively small industry in Australia, meaning most soy products must be primarily sourced from global markets. However, the CSIRO in partnership with industry and the NSW Government, is seeking to increase soy production within Australia. The CSIRO advised the committee that soy is a highly competitive market globally, with Australia’s market share being eroded since the 1980s. However, it’s representative Dr Michael Robertson spoke of the CSIRO hosting the National Soybean Breeding Program and the potential for soybean production to grow in northern NSW and southern Queensland:
In short, with the market cues we're receiving from companies like v2food and others, we believe there could be an opportunity to quadruple the area of soybean in northern New South Wales and Southern Queensland. That's the main area where the crop would be grown, under irrigation, probably complementary to crops like cotton and others—grown in rotation with those. Of course, there are benefits there because it's a legume. It brings some nitrogen into the system and has some other sustainability benefits. So, in summary, there are huge opportunities for growing that little industry into something much more significant and bringing benefits to regional Australia as a consequence.
5.29
Enhancing production capability would result in greater employment opportunities in manufacturing, as well as also providing soy growers with greater certainty and premium prices for what is usually an opportunistic and seasonal crop. A similar benefit was identified for the oilseed sector, with the advancement of manufacturing technology that enables the extraction of plant protein from canola meal that is suitable for the human food chain. However, the Australian Oilseeds Federation noted that this technology is yet to be deployed in Australia.
5.30
v2foods warned that any prospective regulatory changes may work to restrict future investment and business development in the sector by indicating a lack of support from authorities.
Balanced support to all sectors
5.31
Whilst research and technology investment by the Australian Government plays a vital role in the development of Australia’s plant-based industry, the committee heard it should not come at the expense of the animal protein sector. The RMAC expressed concern about the connection between the CSIRO and Food Frontier, demonstrated by email ‘conversations between those two organisation and how that’s shaped both the dietary recommendations and the research that’s been conducted by CSIRO’.
5.32
The committee raised these concerns with the CSIRO, noting its health recommendations for children’s lunch and Main Sequence Ventures (MSV) investment into v2food. In response, the CSIRO clarified that dietary advice does not preference one form of protein above another, rather it provides dietary options for parents. Regarding the investment decisions of MSV, the CSIRO emphasised MSV’s independence, maintaining that the agency is not a shareholder of v2food. The CSIRO’s Chief Operating Officer, Ms Judi Zielke proceeded to explain the rationale for MSV’s investment into v2food, the broader benefits to the Australian economy and the agency’s management of conflict of interests:
V2food is one of around, I think, 37 firms we have an equity investment in at the moment. We've done that because we believe that they have commercial potential and that the research is exciting and of great benefit to the country, not just to that firm. What we're trying to do is get a good outcome that benefits the country as a whole by growing both a great product and jobs, and a better outcome across the economy in that regard. We have very strict arrangements in place in relation to conflicts of interest—the way in which we deal with projects—right through to competitor arrangements et cetera and how we manage those as well. I think we do a good job of managing that effectively.
Committee comment and recommendations
5.33
The committee acknowledges the economic contribution and importance of the red meat industry to rural and regional areas. The red meat industry has long been the backbone of the regional economy and continues to support the community. The committee shares the concerns of the red meat industry regarding plant-based protein producers ‘piggybacking’ on the investment made by levy payers. The red meat industry has worked hard to create a reputation for safe and nutritious products and this hard-won standing must not be taken advantage of. The establishment of a mandatory marketing and labelling framework for plant-based protein products will strengthen brand integrity for both sectors.
5.34
The committee recognises that a growing world population necessarily has greater protein needs. This provides an opportunity for all Australian protein-producers to fill the demand and grow. The committee believes there is room and opportunity for all industries to grow without impairing others, and encourages the cooperation of all agricultural sectors towards the common goal of a $100 billion agricultural sector by 2030.
5.35
In particular, the committee believes that more support and investment is required in the plant-based protein sector. Although currently small, plant-based protein production is an important emerging market for both agricultural producers and consumers at large. The committee believes that with support and investment the plant-based protein sector will be better served to source and manufacture their products locally, thereby further supporting rural and regional employment.
5.36
This support, however, should not come at the cost of one sector over another. It is vital that the Australian Government’s investment in new and emerging technologies is equitable across all sectors striving to invest in Australia’s future food production.
5.37
The committee recommends the Department of Agriculture, Water and the Environment, in partnership with the Commonwealth Scientific and Industrial Research Organisation, examines measures to:
strengthen the plant-based protein product sector’s capacity to source its products from Australian grown produce; and
support investment opportunities into the Australian plant-based alternative product sector’s manufacturing infrastructure to foster competitiveness and market opportunities on the international market.
5.38
The committee recommends the Department of Agriculture, Water and the Environment ensures that the plant-based protein product sector is supported to contribute to the Ag2030 goal of achieving a $100 billion agricultural sector by 2030.