Maple Leaf Foods Inc. announced plans on Monday to spend US$336-million on factories to produce plant-based protein products as part of a strategy to ensure shoppers buy the company’s burgers, whether they are made from beef or tofu.
Mississauga-based Maple Leaf is investing US$310-million into a newly constructed factory in Indiana that will turn soy beans, peas and other protein-rich vegetables into hot dogs, burgers, sausages and deli products. Maple Leaf also announced plans on Monday to spend US$26-million on upgrades to two existing U.S. facilities. The plants will serve a market segment expanding at a 40-per-cent clip, far outstripping the low-single-digit growth in sales of prepared meats.
“We want to serve a consumer we call the ‘flexitarian,’ who wants both meat and plant-based protein,” Maple Leaf chief executive Michael McCain said. "These consumers want more protein in their diet, and they want more choices in the proteins they purchase.”
Maple Leaf’s research shows just 6 per cent of U.S. households currently eat plant-based protein products, while 98 per cent of consumers buy animal-based meats. Maple Leaf is targeting the market for refrigerated meals made from plant-based proteins that will complement its existing lines of packaged chicken, pork and beef sold under the Schneiders, Swift and Maple Leaf brands.
The company expects the refrigerated segment will account for approximately 25 per cent of all plant-based protein sales and said sales in this category increased by 40 per cent in 2018. In comparison, U.S. sales of animal-based meat increased by just 2 per cent last year, according to a Nielsen Co. survey commissioned by the Plant Based Food Association (PBFA). “The plant-based foods industry has gone from being a relatively niche market to fully mainstream,” said Michele Simon, executive director of the PBFA. “Plant-based meat and dairy alternatives are not just for vegetarians or vegans anymore."
Maple Leaf, which can trace its roots to Kitchener, Ont., sausage makers in the 1880s, currently sells U.S. consumers plant-based products made at facilities in Massachusetts and Washington State, and sold under the brands Lightlife Foods and Field Roast Grain Meat Co. These two brands rank first and second for market share in the refrigerated sector, according to Maple Leaf. Mr. McCain said the two sites will be at full capacity by 2020 and “our supply chain is stressed.”
“We’re investing in production, in people, in brands and in innovation,” Mr. McCain said. Last November, Maple Leaf began construction on a $660-million poultry-processing facility in London, which will eventually replace three older Ontario facilities.
The largest U.S. food producers, including Archer Daniels Midland Co. and Cargill Inc., compete with Maple Leaf in the plant-based protein sector and analysts say the Canadian company is likely to continue acquiring brands to build its product portfolio. Analyst Irene Nattel at RBC Dominion Securities Inc. said in a recent report: “It is clear that Maple Leaf is determined to extend its positioning as the leading supplier of sustainable meats in North America through a combination of greenfield expansion and M&A.”
Maple Leaf decided to enter the plant-based protein market five years ago, Mr. McCain said. The company spent US$140-million in 2017 to buy Lightlife from a private equity fund, then committed US$120-million to acquiring Field Roast later the same year. The new factory in Indiana is expected to open late in 2020, hit full production in 2021 and employ 460 people. Maple Leaf obtained US$50-million on government grants and incentives to build the plant, and will fund its construction from cash flow and credit lines.
Maple Leaf forecasts its US$336-million investment in plant-based protein facilities will post 13-per-cent to 16-per-cent returns for shareholders over the long term. The company said the Indiana factory is designed to be expanded if demand warrants. Maple Leaf said it expects the plant-based division to make 14-per-cent to 16-per-cent margins on earnings before interest, taxes, depreciation and amortization (EBITDA), in line with what Maple Leaf generates from traditional meat products.