The Chinese market for plant-based products has experienced fast growth for the past years. Sales for alternative meat products are booming, and so are the plant-based beverage ones.

In particular, soymilk and now oat milks have become a thriving segment of China’s alternative food industry and are gradually composing a significant part of the Chinese diet.

To learn more about the modern plant-based food market in China, I talked with Roberto Guidetti, Group CEO of Vitasoy. Founded in 1940 in Hong Kong, the company’s main products comprise plant milks (soy, oat, almond, rice), teas and various kinds of tofu. Vitasoy’s revenues doubled in the last decade to almost a billion US dollars. China including Hong Kong now contributes more than 80% of the total, with the rest of sales contributed by the company’s operations in Australia, Singapore, Philippines and additional exports to more than 40 countries. Guidetti attributed the reason behind the company’s fast growth in China to the high product quality of its original portfolio, a gradual segmented geographic expansion and the deliberate acceleration of plant-based milks innovation:

“From the original beginning in China’s southern area, we have been able to expand to Central and Eastern China, and then nationally via tailoring our portfolio and route-to-market model in the favorable context of progressive premiumization of the category.”

In the following conversation, he shares with me some of the ways in which the company has augmented its commitment to sustainability by also incorporating international ESG standards and applying for B Corp certification. He also reflects on his past experience of leadership before Vitasoy at Procter & Gamble and Coca-Cola, with observations on leadership of large multinationals in general. We conclude our dialogue with a future outlook for Vitasoy, and some of the suggestions he would give to individual enterprises wishing to enter China.

Marquis: Where are the soybeans produced?

Guidetti: Most our raw materials are sourced locally in Mainland China, complemented by additional soybeans and oats from Australia, as we expanded our portfolio to include oat milks. We also buy some soybeans from Canada, all with non-GMO certification given the shoppers’ preference in our markets. We need to pay particular attention to the nature and quality of these raw materials as their variety influences the final product experience. We use natural ingredients as much as possible. The combination of sourcing from different markets allows us to have some flexibility in the supply chain.

Marquis: how do you ensure they are sourced in a sustainable, ecological, fair labor practice way?

Guidetti: This is a key vector in our ESG activities and intended progress. We have implemented a suppliers’ classification, validation process and sustainable farming practices guidelines that engage suppliers on expected requirements. These go beyond raw materials’ quality to include their own sustainability, fair labor practices and governance. Beyond our own determination, these standards and processes are also very critical for some of our big customers, who audit these specifications for their own ESG guidelines.

Marquis: Tell me more about Vitasoy’s ESG work. How do you meet your ESG goals?

Guidetti: The original founding purpose of the Vitasoy company in 1940 was to provide tasty, sustainable plant-based nutrition. Therefore, as the ESG momentum started to gradually build internationally, we determined that ESG for Vitasoy was core corporate purpose work, as opposed to just adequate compliance to Hong Kong Stock Exchange guidelines. After updating our materiality assessment, we started our own ESG framework with two core pillars: one is “Making the right products”; the other one is “Making products the right way’.

“Making the right products’ means that 1) we are making most of our portfolio plant-based (now 90 percent of our SKU are plant-based, comprising soy, oat, almond, rice milks and teas), and 2) we are adding more nutrition whilst cutting fat and sugar into our formulae.

“Making products the right way” has focused on energy reduction — how many liters of water, how many kilowatts of electricity, how much fuel we are consuming per liter of manufactured product. We set an initial goal to reduce them by 20 percent for the next five years. This pillar has now been extended beyond such parameters to also include other social factors.

Specifically, we realized there are three important areas to work on. First is instituting our best practices into specific published policies, with mechanisms to track their implementation. Second is climate readiness, which means going beyond contributing to sustainability via our plant-based portfolio, to run climate risk assessment and specific quantification of emissions that in turn will enable us to set carbon neutrality goals in line with international requirements. We have already quantified our full scope 1, 2 and 3 emissions. We are aligning our practices with the guidelines set by the Task Force on Climate-related Financials Disclosures (TCFD) as much as possible. We look at not only the Hong Kong Stock Exchange’s requirements but also at more advanced countries like those in Europe to stay ahead of the curve in this area.

Last, but not least is packaging. Most our products are sold in carton packaging. This is helpful in terms of upstream supply chain as it is Forest Stewardship Council (FSC) certified; however, there are some gaps to be addressed on the downstream as not every market has the full infrastructure for carton recycling and circularity. Therefore, in Hong Kong we are piloting initiatives in this area involving collection and recycling. In Hong Kong we are also piloting the conversion of plastic packaging (a smaller part of our portfolio) into recycled PET.

Marquis: How do you make choices between for instance carton packaging and plastic?

Guidetti: Our main lines of business are plant milks and teas. We choose packaging materials and configurations according to the usage occasion (at home, on the go, on premise), shopper preference, our sustainability criteria and government regulations. We have successfully established a carton packaged tea business. This has been remarkable given that the majority of consumption has tended to be in plastic packaging. We have made some plastic packaging available, but we prioritize a long-term view when making such choices. Starting with the comprehensive ESG view to make sure the long-term choices are correct and align with not only current but also future market demand and government regulations.

Marquis: You have applied for B Corp certification. Can you tell us more about it?

Sponsored

B Corp certification is naturally consistent with our corporate purpose: deliver shareholders’ value whilst leveraging our sustainable profitable growth as a force for good to benefit stakeholders inside and outside the company. Whilst in Asia presently there are less B Corp certified enterprises than in the Americas and Europe, the B Corp movement here is growing steadily as its value is becoming well known. We have recently submitted our application for our Vitasoy Singapore unit and look forward to work towards earning certification.

Marquis: Speaking of government regulations, how do you see the government supporting sustainability within the food and beverage sector?

Guidetti: The bulk of our revenue is in Mainland China. We experience both the central government and the local authorities taking this very seriously. The country has already inserted in the last decade targets on energy and carbon intensity in its 5 Year plan, these being set as KPIs for various levels of government. Beyond its carbon neutrality goal by 2060, China has set the target of reducing its carbon intensity (emissions per unit of GDP growth) by more than 60% by 2030. Interestingly for food specifically, China has also recently inserted in its formal planning the goal of driving alternative plant-based and lab/cellular grown food. These are important not only for global sustainability, but also for China’s own national food security. Whilst there is a lot of work ahead, China has a solid tracking record on effectively delivering on its strategic goals. In the current context, our offices and factories in various provinces enable us and peer companies to engage at various levels. This in turn allows us not only when requested to provide feedback on upcoming guidelines, but also more critically to advance preparations. What we have observed in the past in China is that once the policy is done, the deployment is rapid, with adoption set in quarters, not years. Companies operating anticipatively to secure readiness and proper quality compliance and adoption will be more successful.

Marquis: How has your background prepared you for where you are now?

Guidetti: I first worked for The Procter and Gamble Company in Italy, Greece, UK, Mainland China and Taiwan on various local, regional and global roles. Then I joined the Coca Cola Company in Mainland China, where I held the responsibility for all JV operations in Mainland China. This is very helpful to me now as Vitasoy itself has two international JVs. Postings in Guangzhou, Taipei, Shanghai, Beijing over more than a decade, repeatedly visiting every single province in Mainland China as well as my experience in the FMCG and food industry provided a good foundation for my current Group CEO role at Vitasoy. This includes exposure and assimilation of cultural diversity and its placement into a broader international continuum. Both P&G and Coca-Cola in China are 5+ billion USD revenue businesses, with complementary strategic and executional competencies, deeply embedded locally yet also truly global and diverse internationally. I have been fortunate to start my China experience in the first decade of 2000. China is now a most sophisticated market, fast changing in a way that was not at the time when I arrived; then you would have had a bit of time to settle, learn and contribute. Now if you have neither lived in China nor speak Chinese it is not so straightforward to succeed.

Marquis: Given your experience, what’s your reflection on how the leadership of these large multinationals is changing to become more localized or not?

Guidetti: As a company, in Vitasoy we believe in local management. We have local leaders in every one of our markets. This also holds true for Mainland China specifically, because it is challenging for a person who has not lived there a long time to truly understand the nuances in culture and have the “pulse” of the pace of change. On top of that, given the sophistication of the market, you need a very competent and digital savvy local team. The good news is that Chinese talent has made extraordinary strides in the last two decades and is no less than world class now. One area that is often pointed out is that China is so huge that at times it takes your full focus, and as an international executive you might unintendedly diminish your attention to the rest of the world outside of it. For instance, in our sector, the more contemporary plant- based food trend and its vegan and sustainability characteristics are more pronounced in the western world. This is a key reference point to innovate and stay ahead of the curve in China itself. The local leader will always better understand the local market, but this leader must also be able to simultaneously understand and connect with global markets, which is not easy given the local competitiveness and demands. Last, there is one critical point that we always keep in mind as we hire in Vitasoy. Is the Vitasoy’s purpose of accelerating the transition to sustainable plant-based food a passion-point for you, or just another job? Identification with purpose amplifies competence and other factors to achieve significant impact in the market and in society.

Marquis: Hong Kong is now a lower percentage of the Vitasoy Group total revenues than previously, what’s your thinking on the future outlook for Hong Kong for both your portfolio and in general?

Guidetti: Our Mainland China revenues will naturally grow faster than Hong Kong’s, given its huge scale and the fact that our per capita consumption is lower than not only long-established Hong Kong, but also our other markets. As a Chinese company, Hong Kong has been our starting point and our lead market for decades of growth. Our goal is to continue to grow Hong Kong via innovation in portfolio, new channels, and stronger integration with Mainland China to leverage the appealing synergies of scale. We are optimistic about Hong Kong. It is a growth engine for us because beyond our own company strength, this amazing city has incredible levels of commercial sophistication, competence, innovation, education, and infrastructure, which are critical to future success.

Marquis: What advice would you have for individual entrepreneurs or companies on how to enter China to do business?

Guidetti: First thing to say is to do it, do put China in your strategic business plan. Whilst the current pandemic and international context do pose some limitations, these are temporary. China remains a most exciting market with an unbeatable number of sizable opportunities. At the same time, most diligent and competent preparation before launch is critical. A first must-do is to develop a thorough understanding of government policies and priorities, to verify that the purpose and outcomes of the enterprise are aligned and contributing to the strategic destination of the country and its priorities for societal development. In our case for instance, food health, its security and its supporting a sustainable common prosperity for different clusters of Chinese society are pivotal and relevant themes that link with and support formal national priorities.

Secondly, there is ever less possibility for just applying business models generated elsewhere. Design for China, because the market has now a remarkable level of sophistication and uniqueness, driven by ever more frequent and segmented innovation: it combines local and international companies, extreme digitization, and huge amounts of private equity and venture capital to drive new start-ups. Secure strong talent on site and be there yourself. Be astute in piloting the proposition in certain geographic clusters and on-line if possible before branching out. Be ready for not only a fair amount of investment as you scale up, but also for agility and flexibility in evolving the original business model.

Sponsored

Leave a Reply

Your email address will not be published.