Total Addressable Market for Alternative Proteins
[I ran this back-of-the-envelope calculation to derive US TAM for alternative proteins on a recent project. Thought I would share it here.]
TAM can be calculated in a number of ways, but all future projections are based on a number of assumptions. We can either leverage available industry reports (A.T. Kearney, McKinsey and Barclays have some applicable resources targeted at global and USA-specific TAM), but depending on the context, we could use publicly-available data and some back-of-the-envelope analysis to derive our own estimations.
Before jumping into this, it is important to note that it wouldn’t make sense to replicate the process I’ve used below to calculate global TAM. Given demographic and cultural differences across regions, TAM within each region would have to be calculated using distinct sets of data and logic.
Broadly, the total market for alternative proteins will be a subset of the total market for food, and likely a subset of the total market for animal meat and dairy.
Alternative proteins are expected to play in the US meat and dairy industries.
- The US dairy industry is worth $42B in 2020
- The US meat industry is worth $103B in 2020
- Ergo we can assume the total US food marketing industry is worth ~$ 145B in 2020
As a relatively new product on the market, alternative proteins will either substitute individuals’ consumption of traditional meat and dairy products, or have an additive effect on the diets of people consuming alternative proteins in addition to the meat and dairy they regularly consume.
Research indicates that US customers for food products can be segmented by dietary preference:
TAM for the US alt protein industry would be =
(Alt proteins consumed by Vegetarians and Omnivores in addition to their existing diets) + (Alt proteins consumed by flexitarians as a substitute to animal derived products)
1. SUBSTITUTIVE SEGMENT
Majority of alternative protein consumption will lie within the Flexitarian market. Research indicates that that adoption varies significantly by age demographic, with Millennials and Gen X driving sales by volume. We also know that Gen Z, which is still coming into purchasing power, is most open to the idea of alternative proteins.
Brookings, Now, more than half of Americans are millennials or younger
Data here could likely be amended with direct survey results
Derived from Mintel - The Protein Report
Assumed 20% higher than Millennials and Gen X, given that Gen Z has the highest incidence of vegetarian-preferring individuals of any generation
Assumed half the rate of the demographic with highest rates of alt meat adoption
2. ADDITIVE SEGMENT
Within the “Additive” market, market research and customer surveys can inform how much more alternative protein the population will consume in addition to their existing consumption.
Data here could likely be improved with direct survey results
McKinsey, How the global supply landscape for meat protein will evolve: “Per capita meat consumption growth is forecast to grow at only about 1 percent a year until 2025”
“Total Addressable Market for Alternative Proteins in the US in 2020:
= Additive Consumption of Alt Proteins + Substitutive Consumption of Alt Proteins
= $(1.45 + 9.78)B
= $11.23B”
This is the low end of our TAM range for addressable market in the present immediate future. In reality, millennials and Gen X are taking over the market, and show more willingness to adopt alternative protein products than older generations do. i.e. The number of flexitarians and number of alternative protein consumers is increasing beyond the estimates above. Demand for proteins as a category of food is also on the rise.
As customer awareness evolves, demand for proteins continues to increase and alternative protein technology improves, the US market for alternative meats will continue to grow.
“The alternative meats adoption grew by 22% in 2018 . Conservatively assuming that growth will continue at half that rate over the next decade (11%), we expect the Total Addressable Market for alternative proteins to be ~$32B by 2030.”
As mentioned earlier, all projections are based on assumptions. Market-sizing exercises for new or disruptive technologies are particularly tricky, since we’re assigning hard numbers to qualitative survey responses and speculations, such as:
- How many times a week would you eat XYZ were it to exist?
- How likely is so-and-so demographic to adopt a new product within the next three years?
It’s going to be very interesting to see how this assessment plays out in the next decade, but given the data so far, I’m feeling bullish.