Launching an Edible Insect Business, Part I: Market
Along with energy and transport, I’ve always been interested in agriculture; growing up on a farm no doubt influenced that. In particular, entomophagy - eating insects - has always intrigued me. Aside from the (illogical) “yuck factor”, they’re nutritious, environmentally-friendly, and ethical. Cultures across the planet and throughout history have eaten insects. So why don’t we now?
Your client is considering launching an edible insect brand in the UK. What do you suggest?
Consultants love an “issue tree”, a tree diagram used to get to a root issue. This question doesn’t have a problem with a cause, but a structured approach is still the way to approach this question.
- First, look at the market overall - see if there is any potential.
- Next, the players - the sellers and buyers, to understand competition and customer preferences respectively.
- After we could look internally, at the product we’d look to launch.
- Finally, the nuts and bolts of how we’d do it, including financial and regulatory considerations.
I’ll keep this at a pretty high level as I’m not actually going to do this - it’s an exercise in market entry strategising.
In this first post I’ll look at the market.
The UK has almost 69,000,000 people and I’d suggest over 99% of them eat food. The average UK household apparently spends ~£5900 a year on food (groceries and restaurants/takeaways), and the average UK household is 2.4 (say 2.5 people). Quick maths - 69,000,000 / 2.4 * 5900 - says the UK spends £170bn on food annually.
If we were to estimate this in our heads: (70m/2.5)6k=420b/2.5=(420b4)/(2.5*4)=1680b/10=£168bn. That’s pretty close!
There are a few ways we could segment this to get to “our” market size. As it’s a new product, an “adventurous” one, we could segment into novel foods and normal foods. Alternatively, we could focus on the health aspects, and segment into health foods and normal foods. Existing knowledge tells me edible insects will, at first, be a premium product, so we could segment into premium foods and normal/budget foods (either by the food market or by population income statistics). Another thought could be segmentation into snacks vs meals.
If time and budget allowed, all of these segmentations would be done - used in conjunction with competitor analysis (to see market gaps) and customer analysis (to see buying preferences), it could give an idea of exactly what type of product to launch.
Statistica has some quick data: the snack food market is £2.4bn, and the organic food market is £2.6bn. Of course our market will be a subset of these, but overall, the food market is, unsurprisingly, pretty big!
Do you know any edible insect companies? You may have heard of one or two, but there are no obvious monopolies, market leaders, or household names. Even if the market already has a dozen players, given the potential size, and the relative obscurity of all the companies in the market so far, this doesn’t appear to be an obstacle. Later I’ll do a competitor analysis to get a more comprehensive view, but at this stage I think it’s safe to say we’re good.
Onto market trends. Food prices have been increasing due to inflation, which has boosted the market size, but is also meaning people are getting less for their money. Due to this, they are likely substituting for cheaper products, such as own brand over brand name. While this may not affect us (there are no supermarket-brand insects yet), another shift could be from organic to non-organic, or premium to standard, and this might do. Launching a premium brand during a time of economic hardship is something to be wary of, and would need promotion/placement in a way to overcome this.
In general, people become more conservative during economic downturns. Why take additional risks when things are already risky? Edible insects are still novel (albeit one of the first foods the human species ate), so risk-aversion may work against us. Then again, when life is stressful, perhaps some small, cheap-on-the-grand-scale risks could be positive?
People are more health-conscious now than before - more aware of the consequences of low-quality food, and more aware of their health in general due to the COVID pandemic. This means people are more interested in nutritional value of food. Launching a health food during now could be good, although effort would need to be made to show the health benefits of insects, and avoid the potential “insects = illness” mindset some people may have.
Additionally, environmentalism is finally something everyone is talking about, and a large aspect of that is agriculture. Eating the quantities of beef we eat now seems to not be the most environmentally-friendly activity, so people are looking for alternatives. Veganism, which involves destroying ecosystems and monocropping, is not the answer - especially as veggies are not particularly protein-dense. Beyond agriculture, lab-grown meat is exciting but a new technology and still in the development/testing phases. Insects could be positioned as an ethical, environmentally-friendly, high-protein food and/or supplement.
I’m going to throw this one in here as it relates to barriers to entry, although it could fit in elsewhere (for example in a PESTLE analysis).
There has been back-and-forth on this in the UK, with them being legalised, then banned (due to Brexit), but now they’re coming back onto the table as a novel food. It’s still a bit of a grey area, and an area in flux, but I’m optimistic about the outcome. If this were a real venture it is of course something to keep a very close eye on - it would definitely be worth joining the UKEIA (formerly Woven).
In summary, the potential market is huge, whichever way we segment it, and market trends are in our favour. The edible insect market itself is undeveloped, with little competition, meaning gaining a large market share is possible. There are a few obstacles, both from customers and regulators, which would need different responses, but are not insurmountable.