Candidate name Michael Vassilchenko

Candidate number

Teacher Mr. Walker

Title of article Popularity of meat replacements soars in NL, meat sales

decrease

Source of article https://www.iamexpat.nl/expat-info/dutch-expat-news/popularity-

meat-replacements-soars-nl-meat-sales-decrease

Date the article was published 08/15/2019

Date the commentary was written 08/17/2019

Word count
(750 words maximum)

Section of the syllabus the article Section 1 : Microeconomics

relates to (please tick the one Section 2 : Macroeconomics
which is most relevant) Section 3 : International economics
Section 4 : Development economics
Popularity of meat replacements soars in NL, meat sales decrease
The popularity of meat replacements has soared during the last two years, with market research bureau
IRI Nederland reporting a 51 percent increase in supermarket sales. Meat, on the other hand, is
experiencing a decrease in sales.

Veggie alternatives rising up

Whilst veggie alternatives to meat saw a huge increase in sales, the sale of meat products actually saw a
decline. In fact, since 2017, there has been a decrease of around 9 percent in the sale of game, pork and
beef products. Chicken sales, however, saw an increase of 2 percent in this period. A downwards trend
is, nonetheless, occurring for this type of meat, with purchases dropping by 0,4 percent in the first half of
2019.

The popularity of veggie alternatives is clear if you visit some of the bigger supermarket chains in the
Netherlands, where the range has practically exploded. At Albert Heijn and Jumbo, the assortment of
veggie options has grown to 100 and 200 different products respectively. For Albert Heijn, this is a growth
of 33 percent since 2016.

In the last 52 weeks, 123 million euros was spent on meat substitutes, this is 4,5 percent of the total
spend of 2,6 billion on meat products. One of the reasons consumers are choosing meat substitutes is
climate change, along with animal welfare. Meat replacements are significantly less polluting than their
traditional meat counterparts. One kilo of beef, for example, causes over 57,9kg of CO2 emissions, whilst
the same amount of tofu only accounts for 5,8kg of CO2. A kilo of the average veggie burger is good for
even less CO2 emissions, at 4,1kg.

The meat industry is changing

The meat industry is changing and even some butchers are, albeit reluctantly, adopting the meat
substitute trend. And the market has become so interesting that even large meat producers are jumping
on the bandwagon to get a piece of the pie. This year, Bolscher, a meat processing business in
Enschede, is bringing out a vegetarian line, and hope it will equate to a quarter of their turnover by 2029.

Zwanenberg is another meat business with big vegetarian goals. In the future, their goal is to have 50
percent of turnover come from meat substitute products. “The acquisition of the Unox-factory was a big
step towards this goal. For Unox, we make vegetarian smoked sausage and soups and sauces without
fish or meat”, said a Zwanenberg spokesperson. If you include the vegetarian products made by
subsidiary Kips, 30 percent of the turnover for Zwanenberg is already created by the vegetarian division.

It’s not just in the Netherlands, that the meat industry landscape is changing either; the emergence of
meat substitutes internationally is undeniable. Beyond Meat, a popular American producer of meat
substitutes, experienced a 300 percent growth in the second quarter of this year: from 17 million dollars in
Q2 2018 to 67 million dollars for the same period in 2019.
The article ‘Popularity of meat replacements soars in NL, meat sales decrease’, discusses how
consumer tastes and preferences have been shifting due to the popularization of meat
replacements and growth of veggie options. This has had a big on demand, the quantity of a
product that consumers are willing and able to purchase at a given price, for meat and meat
replacements from various suppliers on the market.

Graph demand of meat replacements going up :

Since 2017, there has been a decrease of around 9 percent in the sales of game, pork and beef
products. Meanwhile the market research bureau of Nederland is reporting a 51% increase in
meat replacement sales in supermarkets. As a result, the demand curve for meat (mainly red
meat) shifted to the left from D1 to D2. This caused the quantity demanded to decrease at the
sample price level from Q1 to Q2 (kgs of meat) as shown in the graph below :

Graph demand for meat going down :

The decreasing demand for meat creates a market situation where meat products are in
oversupply as there is an excess of supply over demand of product (meat) being offered to the
market. To counteract this oversupply producers must initiate a movement down the supply
curve to combat their excess which could be done in accordance to the laws of supply and
demand. The law of supply states that the quantity of a good supplied rises as market price
rises. Conversely, law of demand says the quantity of a good demanded falls as price rises.
Meat producers may want to lower the price of their product to remove their excess and let the
market stabilize at a new equilibrium. Meanwhile the demand curve for meat substitutes would
experience a shift to the right as consumers are now willing to pay more to obtain veggie
alternatives. Meat replacement suppliers will respond to this by expanding their supply and
shifting the supply curve of their product.

This situation is demonstrated in the diagram below :

Overall both the both the supply and demand curves in the market for meat substitutes will will
move to the right expanding the market. At the newly established equilibrium a higher quantity
of product will be supplied at the same price.

As the demand for meat products is gradually decreasing, these consumers must therefore find
in substitute which fulfills the same needs of consumers and can be used to replace, in this
instance game, pork and beef. The article informs us that the increase in meat substitute sales
is directly correlated to the decrease of meat product sales, therefore it can be said that the
veggie alternatives are a substitute good for meat. In this case red meats and meat
supplements are substitute goods for one another; in other words they are goods with a positive
Cross Elasticity of Demand (CED) which is a measure of the responsiveness of the demand for
a good towards the change in the price of a related good.

The substitutability of one good for another is a matter of degree. If the two goods are highly
substitutable than the change in demand will be greater than if they are less perfect substitutes.
One good is a perfect substitute if it can be used in exactly the same way. In markets of NL,
consumers are switching due to climate change and animal welfare as meat replacements are
significantly less polluting than their traditional meat counterparts. Therefore the two products
appear to be near perfect substitutes, as the changes in consumption are occurring due to
changing consumer preferences.
The brief 2% increase seen in chicken sales may have occurred as chicken is an intermediate
good between red meat and meat substitutes

Over the past year, 123 million was spent on meat substitutes, which 4.5% of the total 2.6
million euros spent on meat products. The substitution of one good for another is slowly
occurring as consumer preferences and some butchers are reluctantly adopting the new trend.

The industry is slowly changing, and the meat market has become so interesting that even large
producers are jumping on the bandwagon. Many meat producers are buying stock in the meat
substitute industry, sensing the potential profits to be had as well as combatting any potential
income loss from the decreasing demand for meat products. Companies such as Bolscher are
coming out with vegetarian lines, and companies like Zwanenberg are setting future goals to
have 50% of their turnover come from meat substitutes. And it's not just the Netherlands, the
emergence of meat substitutes worldwide is undeniable. American producer ‘Beyond Meat’
experienced a 300% growth from 17 to $67 million in the second quarter of 2019. Meat
producers are to be strongly affected by the changing market, seeing decreased sales and
increased competition from substitutes. Meat products may experience lowered prices as their
producers attempt to again increase demand while getting rid of their excess stock, preventing
possible product expiry. Of course the change from meat to meat substitutes will not go over as
smoothly as may be expected. The extent to which consumption moves on to plant alternatives
may differ as plant based meat replacements may be limited on such as amino acid profiles and
require to be fortified. Traditionalists that prefer meat may not want to switch due to synthesis
affecting flavor. Preference within the category substitutes may also occur. Were one to turn out
inferior to the other it would become more noticeable in a close market which would create a
negative contrast effect, and lead to the within-category substitutes being less satisfying and
slow the increasing demand for meat substitutes for a time until their production is perfected.

Overall the market for meat substitutes will continue to grow and bring higher revenue as
consumer preferences change and there is less demand for meat products. Many meat
producers are doing well by buying stock in the veggie alternative market.

NOTES :
Commentary plan :
Intro : Article is about the decrease in meat sales and the rapid increase of meat replacement
consumption
- Discusses how consumer preferences have changed due to the popularization of meat
replacements
- 51% upward sales trend of meat replacements has had a big effect on the demand,
define, for meat from various suppliers to the markets of IRI Nederland.
- Graph of demand for meat products

P1 :
- Demand for meat decreasing creating a market situation where meat products are in
oversupply.
 - To counteract this oversupply producers initiate a movement down the supply curve to
combat their excess as the market reaches a new equilibrium.
- Meanwhile the demand curve for meat substitutes experiences a right shift as
consumers are now willing to pay more to obtain veggie alternatives.
- Meat replacement suppliers will respond according with by expanding their supply and
shifting the supply curve.
- Overall both the supply and demand curve in the market for meat substitutes will shift
right expanding the market as shown in the diagram below :
- Diagram
- At the newly established market equilibrium a higher quantity of product will be supplied
at the same price.

P2 :
- Since the increase in meat substitute sales is directly correlated to the decrease of meat
product sales it can be said that the veggie alternatives are an almost perfect substitute
good for meat.
- Substitute goods are :
- For example both meat and meat substitutes.
- They are goods with a positive Cross Elasticity of Demand (CED)
- This means that a good’s demand is increased when the price of another good is
increased.
- Indifference curves for perfect substitutes would show :

- Aside from price determinants of supply, changes in a variety of other factors, in this
case __ will cause a shift in the supply curve.

P3 : The increase in chicken product sales may have occurred as they were intermediate goods
between meat and meat substitutes.
- Impact on producers and the industry
- Meat producers may also decrease prices in an attempt to increase demand and get rid
of their excess meat stock as soon as possible due to expiry dangers
- An odd occurrence is that the demand for chicken actually rose at first with the initial
decrease in demand for red meat before slowly dropping. Chicken products may be
intermediate goods in this case between meat and meat substitutes
- A similar thing may have occurred with fish
- Cost of producing veggie alternatives is still great but many companies such as ( ) are
buying stock in the new meat replacement industry
- The extent to which consumption moves on to plant alternatives may differ as plant
based meat replacements may be limited on things such as amino acid profiles and may
need to be fortified.
- The difference in synthesis could also affect the flavor. Traditionalists that prefer meat
may not want to switch, change in industry would be gradual.
- Other problems encountered may be : Since such meat replacement is also derived in a
laboratory were a food-borne pathogen turn up it could collapse the entire market.
- Preference within category substitutes may also occur, if one turns out to be inferior to
the other it would become more noticeable in a close market. This would create a
negative contrast effect, leading to within-category substitutes being less satisfying.