Investing In Alternative Proteins

Alternative proteins, which are plant-based foods, used to attract only vegetarians and vegans. But as technology develops in the area, experts say there will be a variety of delicious choices for everyone, even die-hard meat eaters. This can open up a massive market for investment.

“The field is only seven to 10 years old when it first started, but we have seen growth leaps and bounds over the last several months,” stated Amy Huang the university innovation manager for the think tank that is a nonprofit Good Food Institute, which supports the creation of safe and sustainable alternatives to protein sources.

“And, now it is specifically targeted at the 97 per cent of people who eat meat,” she added. “As the result, there is ample opportunity for further innovations.”

People who are concerned about the current meat-producing processes, as well as the increasing trend towards eating healthier are already looking for alternatives to meat. This is despite a lingering negativity about their taste and texture experts suggest. The market for alternatives to meat eggs, dairy, and seafood products is anticipated to be at least $290 billion by 2035, based on research conducted by Boston Consulting Group and Blue Horizon Corp.

Although it might seem that alternative proteins are now all the rage, Decker Walker, Boston Consulting Group’s head for agribusiness not ready to label it a bubble for the moment.

“It is happening in certain areas because some of the technologies are decades off,” Walker said. “Investment-wise the situation is difficult to assess because it was a very quiet industry until 5 years ago. But, it is evident that our future will be filled with more options for alternative proteins investors.”

Huang defines alternatives proteins in terms of direct substitutes for eggs, meat and dairy, which are derived from three different ways: plant-based, cell-cultured or fermentation.

She says the future viability of these proteins will depend on synergies among all three of the platforms. She anticipates that the innovations will come in waves with the first being proteins made from plants and later those created through microbiological fermentation, the latest platform. The third category will be those generated by cell culture, a more advanced technology she explained.

“There is also a ton of research whitespace,” she added. “If you consider the vast world, there’s lots of fundamental questions to decide: What are the best raw material? Soy, wheat and peas are the main proteins in plants but wheat and soy are byproducts and not intended for human consumption. Can we diversify our plant proteins to go beyond these three?”

Traditional fermentation employs intact living microorganisms to digest the plant material, whereas biomass and precision fermentation, which are the areas Huang predicted are likely to power the next wave of innovation in alternative protein use microorganisms in different ways. Cultured meat grows from animal cells taken from animals through a process that is said to be safe for animals. The cells are then warmed and fed with nutrients that help to build muscles and fat.

The results of microbial fermentation are evident by the leghemoglobin that is found in Impossible Foods’ flagship burger. These technologies allow the meat industry based on plants to make products made to closely resemble the meat of animals in terms of the texture, smell and flavor, Huang said. There is also startup research in the academic world and companies working on sophisticated cuts of chicken and meat alternatives as well as substitutes for fish.

For the sector to advance, some of the technology needs to be further developed, including in the manufacturing methods for extruding and texturizing proteins. But there are other exciting techniques. Redefine Meat, for example makes use of 3D printing, while Rival Foods is experimenting with shear-cell technology to create whole cuts of meat using plants-based proteins, she said.

Despite the expansion of the marketplace for cultured beef in the food supply chain industrial-scale facilities and lower prices for these technologies is likely still 10-15 years away, Huang said.

“Progress has been made, and there is early evidence that these are tractable areas,” she added.

Investments that are strong

A lot of investors are eager to have a taste of new protein-based companies. Since 2016, venture capitalists put around $4.2 billion in 363 known global investment opportunities in this area, according to Crunchbase information.

In 2020, just under $2 billion was invested in international venture-backed startups in this industry, which was dominated by Impossible Foods’ total raise of $700 million from the Series F and Series G rounds last year. That’s an increase of 101 percent the amount of money raised from 2019 to 2020 as per the database.

This year is already very active with $602 million in venture capital distributed in 39 deals, including two separate rounds of $200 million to LIVEKINDLY and Eat Just in March.

Big players did receive large amounts of capital, Sean O’Sullivan, managing general partner of the early stage investment firm SOSV told me that the year the year of 2020 was one to watch for firms seeking funding at these early stages which includes startups that aren’t even on the market with their first products. There’s also a handful of 100 million-dollar deals in the pipeline for the year ahead as well, he said.

Cellular meat is at the “birthing phase,” he said, however, other alternatives to protein are now commercially viable.

“Plant-based products are already available is in your fridge and in your pantry are food products crafted around a specific protein like dairy proteins,” Mr. Smith said. “With meat products made from cells, Memphis Meats is going for the whole burger . It would be selling in stores and restaurants, unless there is a need for regulatory issues.”

SOSV is investing in Memphis Meats at its pre-seed stage. The firm is working closely with U.S. Food and Drug Administration as well as the U.S. Department of Agriculture to figure out how to identify its food products so that they are safe to sell commercially.

Additionally, O’Sullivan expects more capital to be invested in infrastructure to support the scaling required to generate the immense amount of food production required to feed the hungry people of the globe, however, it will require time.

“Billions will be spent in the coming five years to expand in all three capabilities. Additionally, a brand new layer of infrastructure firms will be created to produce the goods,” he added. “Food is a multitrillion-dollar business, so to actually modify it would take decades.”

Food makers

The latest round of funding from Eat Just came just months after it declared in December the use of its cultured chicken, which it claims to be real chicken meat as an ingredient in chicken bites was approved to sell in Singapore — the first country in the world to commercialize meat products that are derived from cells, cofounder and CEO Josh Tetrick said in an interview.

“It’s real chicken, not a plant-based product, and this is the first time that the technology has been created and commercialized,” he said. “There is no distinction from a taste or nutritional standpoint. In fact, studies of people who have tried it in Singapore say its tastes as great or even better than typical chicken they’re used to eating, and 80 percent of respondents claim to feel better having it.”

A San Francisco-based firm’s products Egg alternative Just Egg, and the chicken brand Good Meat, are available at more than 20,000 distribution points in the U.S. and Canada.

Eat Just’s origins began in 2011, when the firm was called Hampton Creek and had launched its early vegan food lines, which included Just Mayo, an egg-free mayonnaise substitute, and Just Cookie Dough, an egg-free, dairy-free cookie dough.

The company started with an egg and found an egg-like plant, which scrambled similar to an egg. It then tried to make several products with the plant, but its research focused on bringing it to the point where people could pour egg-like product from a plant into a frying pan, and get it without cholesterol, and use less land and water, Tetrick said in an interview.

“We had a good idea that there existed more than 350,000 plants in the world , but we was unsure if one could create an egg.” he said. “We found the mung bean which functions as an egg and created the business model and technology around it. The first issue was finding the mung bean first, and the second one was commercializing.”

But the success of Eat Just wasn’t without some challenges throughout the process: It weathered mislabeling allegations in 2015, and then in 2017, there were safety claims that prompted Target to pull its products from shelves. The FDA has since exonerated the company of these allegations and Tetrick was unable to discuss past problems.

Furthermore, Berkeley, California-based Climax Foods has received an $7.5 million seed round in September, is using proprietary data science to develop plant-based foods, starting with alternative plant-based versions of seven most popular cheeses, which aim to replicate the taste, texture, flavor, and nutrition of dairy-based alternatives.

Climax Foods CEO Oliver Zahn said to Crunchbase News that the company had performed about 100 tastings for its cheese products. the reaction was favorable and some were unable to distinguish between Climax Foods products and dairy-based cheeses.

“If we can control the flavor and texture of this cheese well it is possible to do anything,” he added. “Once you know the process of fermentation in one particular brand of cheese there is no need to do small parameter optimizations in order to improve the quality of the others.”

Based on the positive results, Zahn said, the company aims to raise a small bridge round, before pursuing an A round targeted towards its target market.

Future food is in the hands of Food

Tetrick expects to see more multinational and startup companies creating technology for alternative proteins and the capital required to follow.

“My main goal is to ensure that when my niece is finished with secondary school — she is 2 years old at the moment — we will have eggs in the morning, chicken at night , and even beef without killing an animal,” He added. “The hurdle right now is increasing. We aren’t able to make enough to meet the needs of just the U.S., but for all over the world. We must increase the cost so everyone can afford it.”

It’s also a matter of perception. As consumers are open to different flavors and new experiences Foods that are created need to be something that someone wants to eat, said the Boston Consulting Group’s Walker.

The use of plant-based products is growing particularly in foods where they aren’t the main act, such as lasagna where the small amount of meat does not alter the overall taste of the dish. However, in the case of steak, where the dining experience involves the texture and mouthfeel as well as taste are still plenty of technical hurdles food companies must overcome, including the cost and the fact that many products are processed, Walker stated.

“You don’t have to solve the problems all simultaneously to be able to adopt however, for rapid adoption, you’ll need to optimize protein production,” he said. “Heme, which gives meat its blood-like flavor is an expensive process. This process will have to come down in price. Texturization is possible in a single-handed manner, but the technology is not sufficient to be able to accomplish it in a speedy method.”