Alternative Proteins: Rethinking our Appetite
Contents
Introduction
An alternative to commercial fishing
Market forces
Facts and Figures
Impact
Carbon footprint and food security
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Final Thoughts
Regulatory hurdles and considerations
Proteins Under the Microscope
How innovations are paving the way for new palates
Cows can be forgiven for breathing a sigh of relief.
Consumers are opting to get more of their protein off-hoof, as well as off-claw for the poultry eaters, replacing it with plant-based sources.
Fast-food has taken notice. First it was the classic White Castle sliders, then Del Taco burritos, and a year later, Burger King Whoppers making room on their menus for items that taste and “bleed” like meat. McDonald’s, Dunkin’, Pizza Hut, Panda Express, and KFC have since followed suit, breaking the beef ceiling with new plant-based meat roll-outs.
More than thirty percent of consumers in a Boston Consulting Group survey said they would switch their diets completely to alternative proteins should they have a major positive climate impact. American’s openness to plant-based protein alternatives is at an all-time high, and for three major reasons: climate concerns, increasing interest in flexitarian diets, and aversion to factory farm practices.
Lab-based chicken, seafood, bacon along with other textures, are coming next, experts say. While 2021 sales slowed in part due to supply chain issues, widespread adoption still hits barriers including taste, appearance and price. Still, the passion and investment capital from environmental and social beneficiaries should keep the excitement brewing.
Market Trends: Facts, Figures, Forces
Forces
Alternative protein sales slowed in 2021 due to supply chain issues, inflationary pressures, labor costs rising, and added competition, according to Bloomberg Intelligence analyst Jennifer Bartashus.
After several years of big gains, including 40% growth in 2020, meat alternatives from the five biggest North American producers dropped 4% last year: They include Impossible Foods, Conagra’s Gardein, Beyond Meat, Quorn Foods and Maple Leaf Foods Inc.
Animal meat conglomerates own 77.6% of the alternative meat market – MorningStar Farms, Conagra, Kellogg’s, etc., says the IPES Food Report.
Plant-based retail dollar sales grew by 27% in 2021, totalling about $7 billion, according to consultant Kearney
In June 2019, Beyond Meat reached its highest market capitalization, exceeding $13 billion before the stock price collapsed this year and the company’s value plummeted to $1.65 billion.
Facts and Figures
The market for alternative proteins today is around $30 billion according to Bartashus, while BCG anticipates a rise to $290 billion by 2035.
Investments in the so-called Innovative Food category more than doubled last year to $4.8 billion, fueled by contributions from more than 430 total companies, according to AFN.
Alternative protein prices are “highly elastic,” Kearney said, adding that a change as small as 1% could lead to 3% growth in market share.
Fifty-seven percent of all households purchased plant-based proteins, according to data from the Plant Based Foods Association (PBFA) and the Good Food Institute (GFI).
The same study found the plant-based food market to grow 27% in 2020 (pre-COVID-19), while the retail food market grew 15%.
A Healthy Market
The alternative protein market is expected to reach $290 billion by 2035
Investment Opportunities
Investors are finding a range of opportunities to engage in the alternative proteins field, including funding early-stage cell-cultured meat companies, supporting more established plant-based protein corporations and more. Providing growth-stage capital to privately held companies is a way to finance technological innovation and help emerging businesses scale up.
Market Segments
New Plant-Based Meat Alternatives
The plant-based meat alternatives sector typically uses sources like soy and pea protein. Other ingredients like algae (seaweed), and most recently wheat proteins, chickpeas, and fava beans have also entered the picture and are being used in the emerging plant-based seafood sector. Responding to complaints that the meat is too processed, companies are racing to reduce the number of ingredients in their offerings.
Yet aside from new research and developments in the field, the one aspect that remains a top priority is flavor. So far, taste has been the largest obstacle to wider consumer adoption, and a 2019 study found that 73% of those surveyed wanted alternative meat products to taste like meat. In the IFIC’s report, they also found a higher proportion of 18-34 year olds enjoyed the taste of soy or plant-based meat compared to 34-52 year olds.
Upwards of 1,050 distinct companies co-exist in the alternative protein space now. In addition, existing meat manufacturers and other food corporations are coming out with alternative meat product lines. Beyond Meat and Impossible Foods are the fastest growing front-runners. However, they face fierce competition from more established plant-based product lines like Morningstar Farms and Gardein. The latter two have a longer history of grocery store presence, so are likely more recognizable to consumers.
Lab-Based Proteins
Cell-cultured meats—proteins made in labs from animal stem cells—present an interesting alternative to farmed animal proteins since they provide an opportunity to eat “real” meat without negatives such as animal slaughter. Still, cost, scale, and regulatory hurdles are high, and it’s not anticipated that cell-cultured meats will reach store shelves until at least 2021. That said, costs are beginning to come down. According to food technology firm Mosa Meat, the cost has dropped from $280,000 per patty, when the first cell-cultured burger was made in 2013, to about $112 in 2019. The price is expected to fall even further, reaching $10 per patty by 2021.
Uncertainty around classification and safety regulations is an ongoing issue. Significant progress was made in 2019 when the US Food and Drug Administration along with the US Department of Agriculture signed a memorandum of understanding outlining how both agencies would oversee, regulate, and approve the production of cell-cultured meats. Challenges notwithstanding, investment in the industry has not slowed.
Employing proteins derived from microorganisms, such as algae, allows us to utilize some of the most prevalent and sustainable “beings” on earth as edible protein products. While not yet deploying a meat alternative, microorganisms have already successfully launched dairy, collagen, and egg alternatives.
Lab-based Salmon
Courtesy of Getty Images
Impact
Data concerning the environmental impact of plant-based and cell-cultured meats is relatively scarce, and often commissioned by manufacturers themselves. Current research indicates that plant-based meat alternatives generate fewer negative environmental impacts than traditional meat cultivation. On the other hand, early data implies that cell-cultured meat products have an overall worse environmental impact than both plant-based and traditional meat products.
A 2018 report by the University of Michigan found that making a four-ounce, plant-based Beyond Burger, when compared to a beef patty, generated 90% less greenhouse gas emissions and required 46% less energy.
Impossible Meats claims to use 87% less water, use 96% less land, and emit 89% fewer GHGs
GFI identifies land use, climate change, water pollution, and antibiotic resistance as plant-based meats reduce or eliminate harm, all with high certainties.
However, cultured meat products are estimated to have a carbon footprint five times that of traditional chicken production, and ten times higher than plant-based meats. This is due to the longer-lasting nature of carbon dioxide as opposed to methane emissions.
Market Movers: Current and Future Heavy Hitters
Market Leaders
Beyond Meat (US) Perhaps the oldest market leader, founded in 2009, Beyond Meat products are available in over 90 countries at 135,000 retail locations.
Impossible Foods (US) Impossible Foods targets meat eaters with products made from plants, offering burgers, ground meat, sausages, chicken nuggets, pork, and meatballs.
Morningstar Farms (US) A part of the Kellogg Company specializing in meatless, vegan and vegetarian food – announced in 2021 a switch to all vegan products by eliminating eggs.
Gardein (US) The Conagra-brands product recently introduced plant-based chick’n wings and breakfast saus’ges.
Emerging Companies
UPSIDE Foods (US) Upside Foods produces meat products made in labs from animal stem cells, and says it cultivated the first beef meatball, duck, and chicken in 2016 and 2017. Investors includeTyson Foods, Cargill, Givaudan, and investors Bill Gates, John Doerr, Kimbal and Christiana Musk.
Aleph Farms (Israel) Aleph Farms is a food-tech startup that grows meat cuts from beef cells using a 3D tissue engineering platform, and made the first cultivated ribeye steak in 2021. Leonardo DiCaprio serves as a board member, and the company raised $105M in Series B funding in 2021.
Mosa Meat (Netherlands) Mosa Meat created the first cultured meat hamburger in 2013, which cost $325,000 to produce. They have since achieved an 88x reduction in cost, due to decreasing their main medium. The company, like many others, is scaling up their technology and hopes to commercially produce their product soon.
Future Meat Technologies (Israel) Future Meat Technologies has raised $347 million in new financing that will help launch its first large-scale production facility in the US in 2022. The company makes cultivated chicken, lamb, beef, pork, etc. and says its chicken is produced at $7.70/pound, down from $18/pound six months ago.
Noblegen (Canada) Has been growing an algae, Euglena gracilis, into a protein replacement. The company’s egg-like product has successfully replaced eggs in vegan pancakes, stratas, breakfast sandwiches, quiches, and even a chocolate cake.
Air Protein (US) Air Protein says its flour is a complete protein, containing all nine of the essential amino acids necessary for the human diet and consisting of 80% protein. The microbe technology has the potential to be paired with direct-air-capture facilities to convert harmful CO2 into protein.
Perfect Day (US) The company that has developed processes of creating dairy proteins, including casein and whey, through fermentation of microflora rather than the typical extraction of protein from bovine milk. In 2019 it began selling ice cream made from non-animal whey protein.
Every (US) The former Clara Foods is a cellular agriculture company making egg whites from yeast cell cultures. It raised $175M in Series C, raising a total of $233M. It’s product is used in Pressed juices.
Geltor (US) Geltor uses synthetic biology techniques to engineer microorganisms to produce collagen via a fermentation process.
Investors with an Appetite
Plant-based alternatives have seen the most capital invested, but not by a wide margin.
Venture Capital/PE and Other Fund Investors
Venture Capital Funds
S2G is a VC firm focused on sustainable investment opportunities across the entire food supply chain.
Invested in Beyond Meat, Yali Bio, Future Meat
Unovis is a global leader in the alternative protein sector, having created The Alternative Protein Fund focused on investing in sustainable protein companies.
Invested in Aleph, Beyond Meat, Mosa Meat
AgFunder was established to invest in startup level companies focused on the non-animal protein industry.
The fund consists of $20 million of investable capital for a 10-year life with 50% saved for follow-on investments.
Temasek is a global holding company headquartered in Asia with a $231 billion portfolio.
In April 2022, Temasek invested in Upside Foods, bringing their valuation up to $1Bl.
SOSV is a global VC firm with 1000 companies, holding $1.2 billion AUM
Previously looked to invest in 150 new startups per year.
Hemisphere Ventures focuses on early stage technology companies and aims to help them achieve scale.
Hemisphere’s portfolio consists of Finless Foods (cultivated Bluefin Tuna), The Every Company, New Age Meats (cell based pork sausage)
Final Thoughts
The alternative protein arena is a relatively new field, and there are key opportunities and challenges facing both companies and investors alike. The proliferation of new research, like Danish scientists testing how to turn grass into an edible protein, and new investments such as funding for algae-based products point to continued growth of the industry.
Various challenges will test the industry further.
In order to convert consumer interest into real sales, producers must businesses will need to make alternative proteins taste more like meat.
Costs must be brought down. Alternative protein products cost about twice as much as beef.
As the industry grows regulatory battles are following suit. Labeling restrictions and requirements to place “imitation” labels on packaging potentially create further hurdles to bringing more alternative protein products to market.