- Tao Zhang
How Dao Foods is Expanding the Market for Plant-Based Food in China
Updated: Jul 8, 2022
In my more than 10 years of experience in the field of sustainable investing, one essential truth has become abundantly clear: that while impact investing takes time and commitment, it can also turn profits, and can absolutely change the world.
When compared directly to other kinds of investment, impact investing requires a long-term commitment of time and effort in order to see returns. Entrepreneurs who aren’t ready to acknowledge this essential truth about impact investing will most likely end up severely discouraged. However, for those who care about sustainability, environmentalism, and public welfare, impact investing is an essential tool for changing the world.
After finishing graduate study in the U.S., I returned to China to conduct an investment project in my hometown of Hebei, one of the most seriously polluted regions in the country. My experience seeing the place that I grew up so polluted made me ask myself: What can I do to change this situation?
Years later, Dao Ventures and Dao Foods are my twin answers to that question.
My companies have found ways to be both profitable and economically sustainable. Dao Ventures invested in and incubated entrepreneurs who had demonstrated a similar commitment to environmental protection, while Dao Foods, co-founded by Dao Ventures, nowadays attempts to directly address one root of the larger environmental problem.
Plant-based diets can have a huge environmental impact. Roughly 15-20% of greenhouse gas emissions are directly related to food consumption. Through promoting more sustainable food practices, Dao Foods hopes to cut down on the negative environmental impact of the way China eats.
Differences Between the U.S. and Chinese Plant-Based Market
In every society in the world, culture takes a primary role in determining peoples’ food choices. People in the U.S. and large parts of Europe are much more aware of environmental ethics than a majority of the people in China, resulting in a difference in the way that these populations buy food.
Around a third of the U.S. population is aware of plant-based diets and life habits, even though some consumers are not necessarily vegetarians or vegans. Even though many of these people don’t choose to explicitly restrict their diets by not buying meat or other animal derived products, this awareness of plant-based diets leads to a steady increase in the rate at which Americans are buying vegetables and other plant-based foods. For plant-based startups in the U.S. and Europe, it’s a great time to be doing business.
But what about China?
Mainstream consumers in China care far less about plant-based diets as a method for mitigating damage to the environment. Based on years of experience, we’ve realized that we can't stringently impose environmental ethics on consumers. Instead, we’ve focused our efforts on discovering what consumers care about most and purchase most frequently in the market. For Dao Foods, this has meant promoting plant-based alternatives to culturally significant foods that Chinese consumers have shown interest in. The goal is to either make these foods less expensive, or better tasting than the traditional food product. Although it’s difficult at first to achieve these goals in an underdeveloped plant-based market in China, this is our main goal: to develop and invest in business that will make it cheaper and easier to mass produce healthier and safer foods.
Impact investing businesses need to be working for a larger goal than just their bottom line. This is why we’ve set our sights on introducing environmentally healthy products to a larger consumer base in China. By thoroughly exploring this niche, we’ve found that we can both make progress on this mission while also turning a profit.
Creating Environmentally Safe Foods that the Chinese Middle Class Can Afford
Over the past few decades, many foreign impact investors have shifted away from investing in the Chinese market. This is primarily because these companies are most interested in rapid poverty alleviation in regions of the world that they deem extremely poor. In many foreign investors’ eyes, China no longer fits into that category, even though there are still many millions of Chinese citizens who live near or below the poverty line.
It’s important to recognize that China’s geopolitical and corporate/financial power has little bearing on the lives of the low and middle class. People still struggle for food daily, and don’t have enough money to consider buying a slightly more expensive food product that might be less damaging to the environment. Even if there was a popular environmental ethics movement in China, a huge portion of the consumer market wouldn’t be able to afford slightly more expensive products.
That’s why an integral part of Dao Food’s impact investing approach is to give people a financial incentive to buy our environmentally safe foods. If we can continue to develop supply and production chains that make it cheaper to bring environmentally safe foods to consumers all over China, we will be able to accomplish our goal of making an impact on the environment, and healing some of the damage that we’ve done to our planet and climate.