Not Your Garden-Variety Industry: The Rise of Plant-Based Foods

From the fast-food drive-thru window to the floor-to-ceiling windows at Manhattan’s Eleven Madison Park, plant-based foods are cropping up everywhere. Demand for plant-based products surged in North America over the course of the pandemic. In 2021, U.S. retail sales of plant-based foods reached US$7.4-billion and grew 6.2% following a record year of growth in 2020. In Canada, the industry was valued at C$981.9-million in 2021. Below are answers to some of the questions you may have about shifting consumer appetites:

1. So, what exactly is the plant-based foods industry? “Plant-based” is a term used to describe a rapidly growing sector of the food and beverage industry that captures products derived exclusively from plants, grains, seeds and other non-animal-sourced ingredients. It includes everything from oat milk to plant-based eggs, vegan tuna to veggie dogs. In recent years, plant-based items have become a staple in stores and on restaurant menus alike. In fact, Canadians can now easily identify these products on grocery shelves since the first products carrying the official “Certified Plant Based” seal hit stores last May.

The popularity of plant-based foods and the potential for disruption in the food industry has also attracted litigators. For example, popular vegan cheese brand Miyoko’s was recently successful in its lawsuit against the California Department of Food and Agriculture on the basis that regulations prohibiting the use of words like “butter” and “cruelty-free” on Miyoko’s packaging infringed its First Amendment speech rights. While litigation on this issue is less advanced here, commentators have suggested there could be hurdles in challenging food labelling laws under the Canadian Charter of Rights and Freedom. Nonetheless, Canadian plant-based food manufacturers and distributors must keep labelling considerations in mind as they market new products that compete with conventional offerings.

2. What do Canadian consumers think? Sustainability and health benefits are consistently cited as the main motivators for the rise in popularity of plant-based products as consumers look to make decisions that reduce both their risk of disease and environmental footprint (e.g., by lowering water and land usage and carbon emissions). Recent data show that eight-in-ten Canadians eat plant-based foods on occasion, while two-thirds enjoy them frequently. Lower prices and enhanced product quality are viewed as key factors in the rate of adoption of plant-based foods. Canadian manufacturers looking to extol the virtues of their plant-based products will need to be cautious in making certain claims to ensure that claims are accurate, not misleading and comply with both food regulatory and environmental claims guidance.

3. Is the plant-based foods industry attracting investment?  The market for plant-based products is growing, with Bloomberg estimating that it could make up 7.7% of the global protein market by 2030 with a value of over US$162-billion (up from US$29.4-billion in 2020). In recent years, the market has seen a number of high-profile plant-based IPOs, including Beyond Meat and Oatly. Notably, Canada’s own The Very Good Food Company and Eat Well Investment Group have also gone public. Nonetheless, the sector has not been immune to growing pains and the simulated meat category in particular has faced challenges in converting curious consumers to repeat buyers.

Canada is home to approximately 100 pure play plant-based food and beverage companies. Increasing consumer demand and high capital expenses in research and scale up capacity make Canadian plant-based food startups prime targets for venture capital and government funding. In 2018, the federal government launched the Innovation Superclusters Initiative to promote growth and innovation in areas of intense business activity. One of the five superclusters is Protein Industries Canada, an industry-led not-for-profit organization designed to position Canada as a global supplier of high-quality plant proteins and plant-based products. The federal government has committed up to C$173-million to this supercluster, with the intention of matching private sector investment dollar for dollar. In 2020-2021, Protein Industries Canada solicited C$227-million in industry investment on a total of 22 projects in Canada’s plant-based food, feed and ingredients ecosystem.

4. What is the regulatory landscape in Canada? Plant-based food and beverage products are regulated under the Food and Drugs Act and Food and Drug Regulations. Under this regime, simulated meat and poultry products have strict naming, composition and fortification requirements, such as minimum protein and fat content and vitamin and mineral fortification. Regulators have reacted to the growth in popularity of these foods and, in November 2020, the Canadian Food Inspection Agency launched a consultation on proposed updates to industry guidelines on simulated meat, simulated poultry products and certain other plant-based protein foods. This was a step towards the CFIA recognizing the expansion of the plant-based food and beverage industry and the broader category of plant-based products that are not meant to simulate meat and poultry products (e.g., soy burgers that have discrete nonmeat ingredients and which are not labelled or advertised to represent the product as a substitute for meat or poultry). The guidelines as drafted today require, among other things, that the complete common name of the product (e.g., “simulated chicken”) appears on labels and advertisements to ensure consumers are not misled as to the true nature of these products. Nutrition labelling and protein content requirements are also stipulated.

5. What about IP? A search of the Government of Canada’s Patent Database conducted in March 2022 for the terms “plant-based” and “food” returned over 2,000 results. Not surprisingly, protection of intellectual property, whether patents, copyright, or trademarks, is also a key legal concern for plant-based businesses operating in Canada, and market entrants will want to ensure they are appropriately protected under Canada’s intellectual property regime – not only in registering their innovations but in enforcing their exclusive rights once registered in order to protect their brand and reduce confusion with competitors.

Blakes has one of the most active food, beverage and agribusiness practices in Canada and has seen increasing activity in the plant-based foods sector. We are experienced in acting for producers, processors, distributors, retailers and manufacturers and have worked on several significant M&A transactions in the space.
 
For more information, please contact:
 
Robin Burns      416-863-5281
Jake Gilbert       416-863-5831
Pei Li                  416-863-4265
 
or any other member of our Food, Beverage & Agribusiness group.