The market for vegetarian foods.

Because product innovation, media attention, and buyer demand are creating strong growth for the vegetarian foods market, more companies are trying to profit from meat, dairy, and egg alternatives.

A growing market does not ensure success, however. Competition is intense. In supermarkets, over 25,000 new packaged-goods products were introduced in 1997 alone. Although these products run the gamut of grocery items, including non-vegetarian and non-food items, they all compete for supermarket shelf space and consumer interest. The failure rate for new products may be as high as 80% (Sales & Marketing Management, 1998). A similar percentage of new restaurants fails in the first three years (Toronto Star, 1999). Established organizations as well as creative start-ups looking to take advantage of the growth in this sector can benefit from a greater understanding of the market, the competition, and their own capabilities.

WHO IS THE CONSUMER?

Vegetarian foods appeal to consumers ranging from vegans--who avoid eggs, dairy, honey, and any animal derivatives in addition to meat, poultry, and fish--through health-oriented omnivores who choose vegetarian foods frequently or occasionally. The following table estimates the number of people along the continuum of vegetarian eaters, from the most dedicated to the more casual:

             Definition                           Est. % of Adults

Vegans       Do not eat meat, poultry,            0.9%
             fish, dairy, eggs, or honey

True         Do not eat meat, poultry,            2.5%
Vegetarians  or fish (includes vegans)

Vegetarians  True vegetarians plus those          5%-9%
             who self-report vegetarian
             but use some meat **, poultry,
             or fish OR view themselves as
             self-identified "almost vegetarian"

Vegetarian   Replace meat with meat               20%-25%
inclined     alternatives for at least some
(would       meals, "usually or sometimes
include      maintain a vegetarian diet," OR
all above)   eat 4 + meatless meals per week

Health       Strive for a balanced                35%-50%+
Conscious    eating plan OR eat 2 to 3
(would       meatless meals per week
include
all above)

             Est. #  of Adults *  Source                        Date

Vegans       1.7 million          The Vegetarian Resource       2000
                                  Group (VRG) Zogby poll

True         4.8 million          The VRG Zogby poll            2000
Vegetarians

Vegetarians  9.7-17.4 million     National Restaurant           1994-
                                  Association, Time/CNN,        1999
                                  Gallup, and other polls

Vegetarian   38.6-48.2 million    Mintel Consumer Intelligence  2001
inclined                          HealthFocus                   1999
(would                            Land O' Lakes                 1994
include
all above)

Health       67.6-96.5 million    Land O' Lakes                 1994
Conscious                         American Dietetic             1996
(would                            Association
include
all above)

* Estimated percentage of adults from study times 193 million adults
ages 18 and older outside hospitals, military barracks and nursing
homes per The VRG Zogby poll 2000. Land O' Lakes survey based on
households; however, percentage applied to population.

** Survey respondents answer yes when asked if they are vegetarian,
but additional questions on foods consumed reveal use of meat, poultry,
or fish.

Although vegans represent a fraction of the population, the marketing of foods made without any animal products can include rather than exclude this segment to increase the potential market. Vegans are heavy users of products that meet their needs. They can be loyal, enthusiastic customers who generate word-of-mouth recommendations not only to other vegans, but also to the full spectrum of vegetarian eaters.

The term "vegetarian foods" will be used here to include both vegan foods and foods that are vegetarian but not vegan. Although kosher products are not necessarily vegetarian, vegetarian food purveyors should also consider kosher certification to attract additional customers. This market includes not only those who follow the associated dietary practices, but also people from a variety of backgrounds who view the kosher symbol as signifying higher quality.

The Vegetarian Resource Group (VRG)'s 2000 Zogby poll found that American vegetarians are more likely to live on either coast, reside in large cities, and be women who work outside the home. Twice as many women as men are vegetarian. People ages 18-29 are more likely to follow a vegetarian diet (6% reported they never eat meat, poultry, or fish). The VRG's 2000 Roper poll further estimates that there are one million vegetarian children ages 6-17. It is not possible to determine whether the trend is an increase in these numbers, given the margin of error for the sample sizes. Vegetarian foods manufacturer Lightlife reports that the average consumers of meat alternatives are very well-educated couples without children and with dual incomes. The company's most successful geographic areas have been the West Coast, Northeast, Florida, and the Rockies. The average meat alternatives shopper is a woman between ages 24 and 54 (Produce Business, March, 2001). However, these typical profiles should not obscure the fact that consumers of vegetarian foods represent all age, income, education, and geographical demographics.

WHY DO PEOPLE CHOOSE PLANT-BASED FOODS?

Health is the leading driver for vegetarian food consumption, with all consumer segments perceiving some mix of disease prevention, weight management, and good feeling from these foods. Almost half of Vegetarian Times readers noted health as the leading reason they switched diets (1992), compared to nearly a quarter citing ethics, the environment, or animal welfare. True vegetarians and vegans are likely to be equally or more motivated by ethical considerations, however. The Vegetarian Resource Group's Vegetarian Journal 1998 reader survey indicated that 82% of readers were interested in vegetarianism because of health, versus 75% because of ethics, concern for the environment, or animal rights.

To appeal to the widest audience, vegetarian foods should be healthful, free of animal products, and environmentally-friendly. Promoting vegetarian foods as produced with care, part of a nutritionally sound diet, and beneficial in preventing disease will provide further growth in the vegetarian foods market (Mintel Consumer Intelligence, 2001). Marketers should consider tailoring communications efforts to their various audiences, focusing on health aspects in mainstream media, while emphasizing animal and environmental benefits when reaching out to true vegetarians and vegans (Psychology and Marketing, December, 2001). Vegans inspired by ethical issues may favor companies that include pro-animal themes.

When selecting vegetarian foods, consumers also weigh availability, taste, convenience, and price. In a study of 20,000 households by the Soyfoods Association of America, taste was the primary consideration when choosing a meat alternative, with cost ranking second and fat content third. Consumers evaluating unfamiliar products are more likely to buy when provided demonstrations, samples, preparation information, and prepared meals to address taste and convenience concerns. The Vegetarian Society of DC (VSDC) found that approximately 3/4 of survey respondents visiting a VSDC table or attending a VSDC presentation sought cooking classes, 2/3 were interested in group visits to restaurants, and a large proportion wanted nutrition information to help them become or remain vegetarian. Self-identified vegetarians were even more likely to want this assistance than were people who did not yet consider themselves vegetarian.

HOW BIG IS THE MARKET?

Mintel Consumer Intelligence estimates the 2002 market for vegetarian foods, those that directly replace meat or other animal products, to be $1.5 billion. Note that this excludes traditional vegetarian foods such as produce, pasta, and rice. Mintel forecasts the market to nearly double by 2006 to $2.8 billion, with the highest growth coming from soymilk, especially refrigerated brands.

The Food and Drug Administration's 1999 decision to allow manufacturers to include heart-healthy claims on foods that deliver at least 6.25 grams of soy protein per serving and are also low in saturated fat and cholesterol has spurred tremendous interest in soymilk and other soy foods. A representative of manufacturer Food Tech International (Veggie Patch brand) reported that from 1998 to 1999, the percentage of consumers willing to try soy products jumped from 32% to 67%. Beliefs about soy's effectiveness in reducing the symptoms of menopause also attracted new consumers. A 2000 survey conducted by the United Soybean Board showed that the number of people eating soy products once a week or more was up to 27%. Forty-five percent of respondents had tried tofu, 41% had sampled veggie burgers, and 25% had experience with soymilk (Soyfoods USA e-mail newsletter). Mintel estimates 2001 sales of frozen and refrigerated meat alternatives in food stores at nearly $300 million, with soymilk sales nearing $250 million.

HOW ARE MANUFACTURERS RESPONDING?

The rapidly-growing vegetarian foods market has attracted a variety of entrants. Manufacturers such as Eden Foods, Imagine Foods, Melissa's/World Variety Produce, and Food Tech International report double- and even triple-digit growth rates (Mintel, 2001; Produce Business, March, 2001; Supermarket News, September 10, 2001). Major corporations are showing their confidence in the market by entering through acquisition. ConAgra purchased Lightlife Foods in 2000. In 1999, Kraft Foods bought Boca Burger, and Kellogg acquired Worthington Foods, maker of the Morningstar, Natural Touch, Worthington, and Loma Linda brands. These big companies are not only undertaking significant promotional spending, but also can offer discounted pricing to grocery stores (Supermarket News, 2001). Some people are skeptical of these organizations and may switch to products from independent companies; however, any attrition should be more than offset by growth from these companies' marketing might.

Regardless of size, manufacturers are pursuing products, promotion, and pricing to expand the size of the vegetarian foods market and to compete against each other. New offerings include vegetarian entrees that are gaining ground as consumers look to combine healthy eating with the convenience that Americans expect. These products can serve as quick dinners, options for lunch at work, or after-school snacks for children (Supermarket News, 2001). To help consumers understand new products and how to use them, companies offer take-home recipes and information to be used at the point of sale. These materials give consumers more confidence to try new meatless products, which usually cost more than their counterparts due to the cost of ingredients and production. As demand for vegetarian products increases, industry members predict that prices will decline (Produce Business, 2001).

WHAT IS THE IMPACT FOR GROCERY STORES?

Although health foods stores and the natural foods chains Whole Foods and Wild Oats lead the retail vegetarian foods movement, mainstream supermarkets are bringing these products to a wider audience. About half of the vegetarian foods volume is sold through supermarkets, and about half through natural foods stores, leaving less than 3% through outlets such as mass merchandisers, drug stores, and convenience stores (Mintel, 2001). The most progressive stores feature refrigerated products in a separate area of the produce section or as part of a natural foods "store-within-a-store" area. Other supermarkets have integrated the products throughout the store in order to reach new customers. Good promotion and signage can help prospective buyers to find vegetarian foods.

Regardless of placement, a wide variety of featured products is necessary for grocers to be successful with vegetarian foods. Promotion is also critical to educate consumers. Signage and advertising circulars attract attention to the products, while recipes, demonstrations, and sampling encourage use. Knowledgeable staff can discuss the products with shoppers and provide more effective demos. Temporary price specials help motivate trial for use by those who are new to vegetarian foods, although vegetarian foods also have a loyal following that is less price sensitive (Supermarket News, 2001).

WHAT ABOUT DINING OUT?

Restaurants provide an ideal venue for people to try new dishes. A 1999 VRG poll found that 57% of the population sometimes, often, or always orders a vegetarian item when eating out. The National Restaurant Association's 2000 Consumer Survey showed that 16% of adults were ordering more vegetarian entrees compared to two years ago. Restaurants are responding to this demand, with roughly eight of ten tableservice establishments offering vegetarian entrees, according to the Association's 2000 Tableservice Operator Study. More than 70% of restaurants with an average check size under $8 offered a vegetarian option, and 91% of those establishments with average check size $25 or more offered a vegetarian entree. Depending on whether a vegetarian meal includes specialty, heirloom, or organic produce, and based on the required preparation time, the cost of these dishes may or may not be less than meat-based offerings. Just as with other new menu items, the success of vegetarian entrees often depends on training the waitstaff to explain the dish to guests (Restaurants USA, January, 1999).

Vegetarian dining is even hotter on college campuses. The National Restaurant Association, in conjunction with the National Association of College and University Foodservice, discovered that as many as 20% of college students consider themselves vegetarian, and that number is rising (Restaurants USA, January, 1999). Just as in surveys that ask people to self-identify, these results may include many students who are not true vegetarians, but who may consume meat or fish. Nonetheless, almost all colleges and universities provide vegetarian options daily and many have vegetarian, and in some cases vegan, dining halls. Partnering with Vegetarian Times magazine and a variety of vegetarian foods manufacturers, Chartwells Educational Dining Services established its Terra Ve program for universities, which includes a recipe database of more than 1,000 vegetarian and vegan menu options from appetizers to desserts, as well as information about healthy living and natural products. The program earned the "Best On Site Menu" award from Nation's Restaurant News. Over 200 schools have implemented the Terra Ve program, and Chartwells's parent company has launched a similar effort for workplace cafeterias.

CONCLUSION

From cafeteria lines to restaurant menus to grocery aisles, the range of vegetarian options continues to grow. Greater availability will attract more people to sample these foods. Retaining customers who purchase vegetarian foods occasionally, frequently, or as part of a committed lifestyle requires that offerings meet consumers' primary decision factor for eating: flavor. Great tasting meals that are convenient and reasonably priced will help drive additional expansion of the vegetarian foods market. Because established companies and many new entrants are wing to serve this market, businesses must have the knowledge, resources, and commitment to achieve meaningful advantage over competition in order to prosper from this opportunity.

RESOURCES

THE VEGETARIAN RESOURCE GROUP (VRG): [phone]. <www.vrg.org>. The VRG educates the public about vegetarian and vegan diets. It assists businesses, schools, food services, professional groups, and consumers. The group has conducted polls, written vegetarian pamphlets for supermarkets, and offered speaker and dietitian referral The VRG publishes Vegetarian Journal, FoodService Update, a guide to vegetarian restaurants in the US and Canada, Simply Vegan, and other books and brochures.

MINTEL CONSUMER INTELLIGENCE: The Vegetarian Food Market--US Report. [phone]. [e-mail], <consumer.mintel.com>, search on "vegetarian." This report provides in-depth analysis of who is most likely to be a vegetarian and why, why more people are incorporating soy in their diets, what health issues are driving the market, and how "occasional vegetarians" influence food purchases.

NEW HOPE NATURAL MEDIA / NATURAL PRODUCTS EXPO: [phone]. <www.naturalproductsexpo.com>. Provides marketing solutions for natural products ventures, including publications, web resources, and trade shows.

NATIONAL RESTAURANT ASSOCIATION: [phone]. <www.restaurant.org>. Represents, educates, and promotes restaurant and food service outlets and serves associated distributors, suppliers, and service providers.

FOOD MARKETING INSTITUTE: [phone]. <www.fmi.org>. Association for food retailers and wholesalers, including large multi-store chains, regional firms, and independent supermarkets.

NATIONAL NUTRITIONAL FOODS ASSOCIATION: [phone]. <www.nnfa.org>. Represents retailers and manufacturers, suppliers and distributors of health foods, dietary supplements, and other natural products.

GROCERY MANUFACTURERS OF AMERICA: [phone]. <www.gmabrands.com>. Association for food, beverage, and consumer product companies.

SMALL BUSINESS ADMINISTRATION: [phone]. <www.sba.gov>; AND

SERVICE CORPS OF RETIRED EXECUTIVES (SCORE): [phone]. <www.score.org>. These are organizations that provide information, advice, and other assistance to small businesses.

Caryn Ginsberg is a strategic idealist for Priority Ventures Group (<www.priorityventures.com>), a consulting firm that helps businesses and nonprofits get better results by identifying critical issues, key information, and new ideas. Also a strategy and marketing instructor for Johns Hopkins University, she applies these disciplines in promoting plant-based eating. She can be reached at [phone] or [e-mail].

Alissa Ostrowski is a public relations manager with Mintel Consumer Intelligence (<www.mintel.com>), a research firm that helps companies achieve advantage by providing market reports with high quality content, thoughtful analysis, and extensive coverage of consumer markets. Mintel has published The US Vegetarian Food Market, an industry and consumer study.