Where’s the Meat? Growing Trends in the Plant-Based Food Industry

Jordan: Hi, I’m Jordan Virtue, and welcome to the Blakes Sound Business podcast.
In this episode, we will be focusing on the plant-based foods industry in Canada, which has been gaining momentum.

Today, we are joined by Blakes lawyers Robin Burns and Vivian Kung from our Food, Beverage & Agribusiness group, who will be talking to us about current trends in the industry, as well as business opportunities and potential legal issues that could arise.

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Jordan: Robin, I understand the plant-based industry is booming and offers a real opportunity for investors and dealmakers. Can you tell us more about this, starting with what plant-based foods are?

Robin: Sure. Thank you, Jordan. “Plant-based” is a term that is used to describe a rapidly growing sector of the food and beverage industry, and it captures products derived exclusively from non-animal sources. So, no meat, fish, eggs, dairy or even honey are found in any of these products.

The market, as you’ve probably seen in the news, has been growing rapidly for particularly the past decade, and in Canada, the industry was valued at almost C$100-million in 2021, with that number being significantly higher in the U.S., as you might expect. Not surprisingly, we’ve seen quite a large uptake in M&A activity and venture capital funding in the space. Conventional protein brands and established food and bev companies are entering the market through strategic acquisitions and startups are seeking funding to accelerate their potential.

Vivian and I have also come across an increasing number of private equity firms that are focusing specifically on plant-based and other sustainable targets.

Jordan: Vivian, you and Robin recently attended the Planted Expo. What can you tell us about the conference?

Vivian: So, my first impression was just how much consumer interest there was in the space, and we spent the day visiting booths, product sampling and meeting with a lot of founders. In terms of what products were available at the expo, there was a broad range from what we would have expected, like plant-based food and beverages, nuts, seeds, oat milk, condiments, supplements, proteins, to plant-based skin care and beauty products to, somewhat surprisingly, a lot of non-alcoholic beverages. I think that the future is definitely very exciting in terms of what’s in the pipeline for those who are interested in incorporating more plant-based aspects into their lifestyle.

Jordan: Were there any important takeaways?

Vivian: I can say, unequivocally, that this isn’t a passing trend. The technology is only going to continue to develop to create more impressive products, and it won’t surprise many that just because something is labelled as being plant-based, doesn’t mean that it’s healthy.

So, a few of the keynote speakers mentioned some fascinating emerging technologies, like precision fermentation, which creates animal proteins from non-animal sources, like yeast or algae, through a fermentation process similar to how beer or kombucha is made. Another technology involves fungi. There are so many undiscovered species that I think could create boundless opportunities for very realistic mock meat and very supple pleather.

Jordan: Robin, continuing on the topic of the expo, did the founders that you met talk about any particular legal concerns?

Robin: They did, actually. So, entrepreneurs are really concerned about protecting their IP [intellectual property]. Plant-based companies, in particular, those in the growth phase, the startup phase, they need to understand (a) what IP they have, (b) what steps they should take to protect it, and (c), and this is a big one that I think companies forget about, they need to ensure they aren’t infringing on the IP rights of other players in the space. Lately in the news, there have been some high-profile cases of big established plant-based companies going after new brands, whether big or small, for trademark infringement. So, companies really need to be careful here.

In terms of patents, in particular, I think because there is so much innovation in this space and the use of food technology, we’re really seeing a proliferation of filings in Canada and the U.S.

We should watch out for lab-grown or cultured meat. It’s an interesting area, and even though its not technically within the defined term of “plant-based” because it’s derived from animal stem cells, it still falls under the umbrella of alternative proteins, and I think it’s going to be an area to watch specifically with respect to IP and patent filings.

Jordan: Vivian, what other legal issues could plant-based food companies face?

Vivian: So, one of the key considerations that we’ve noted is labelling. We’ve seen plant-based products face challenges in terms of how they can market new products that compete with conventional animal-based options. Can you use words like “meat,” “butter,” “milk,” “chicken,” “bacon” in the context of something that’s plant-based?

There’s also composition and fortification requirements, such as minimum protein content, minimum fat content, vitamins, minerals. Along those lines, when it’s a major bragging right to say that your product packs a protein punch, there are guidelines on how protein content is measured. Canada and the U.S. look at the protein quality of a food through the lens of a protein efficiency ratio or a protein digestibility corrected amino-acid score, which takes into account that plant-based sources of protein generally have lower levels of amino acids and digestibility compared to animal-based sources which affects their measured protein quality. That being said, I think that protein content claims will be an evolving regulatory issue.

Jordan: Thanks, Vivian. Robin, you get the final question. We know that litigation is a possibility in any industry, can you tell us what you’re seeing in this area?

Robin: For sure. So, as mentioned earlier, we’ve seen several instances of trademark infringement cases. And just to give a recent and local example, a leading plant-based meat company, an American company, has recently filed a lawsuit against a much smaller Toronto-based business, alleging that that business is using confusingly similar trademarks to its own. Among other remedies, the plaintiff is seeking an injunction to prevent the defendant from using this mark going forward. I think this is a key case to follow especially since it’s a quite a bit of a “David vs. Goliath” situation.

And then apart from IP, I would say most lawsuits in the sector have revolved around product labelling and those rules and regulations that Vivian was just mentioning. For instance, at least one of the major players in the U.S. has been sued for allegedly misleading consumers about its protein and other nutritional requirements. So, companies do need to be careful here that they can back up the claims that they’re making.

That being said, we’re also seeing cases where plant-based companies themselves are challenging naming and labelling laws. For example, a popular vegan cheese brand was recently successful in its lawsuit against the state of California on the basis that regulations prohibiting it from using the words “butter” and “cruelty-free” on its packaging infringed its free-speech rights. I find that case particularity interesting, and I wonder if we’ll see similar Charter challenges in Canada. To my knowledge, we haven’t yet, but I think it’s an interesting area to look out for.

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Jordan: Vivian and Robin, thank you so much for joining us today to give us more insight into the business and legal aspects of the plant-based industry. We look forward to hosting you again on our podcast.

Listeners, for more information on our Food, Beverage & Agribusiness group, and our podcast, please visit blakes.com.

Until next time, stay well and stay safe.