Executive summary: The new food revolution is upon us. Alternative protein sources will become increasingly inevitable and necessary for economic, sustainability, environmental and health reasons. Expect plant-based alternatives, insects and cultured meat to complement existing protein (and vegetarian/vegan) options. The meat aisle will become a thing of the past. In the future, shoppers will likely embrace the protein aisle. One-in-ten global protein portions could be plant-based by 2035, implying a $290bn market. Insects and cultured meat will likely be smaller segments, albeit with the potential to grow significantly. Given the opportunity, over $3bn has flowed into start-ups across the broad space in the past year. Most businesses remain private but expect both future listings and industry consolidation. In the listed area, we favour companies which can add clear value.
The world faces no bigger problem than how to feed its population. 9.7bn people will need feeding by 2050 (and 11.2bn by 2100), implying a greater than 50% increase in global food demand relative to current levels. Even today, almost 700m people suffer from hunger. At the same time that the world faces this challenge, the earth’s resources are increasingly stressed. Consider that just 3% of the planet’s surface is arable land available for farming while only 1% of the world’s water is potable (all data per the United Nations Food & Agriculture Office, or FAO). With such scarce resources available, it should be of no surprise that environmental pressures such as water supply, deforestation and soil decline have become more pronounced, exacerbating the problems.
9.7bn people will need feeding by 2050
The facts are stark: a single quarter pound hamburger requires 6kg of feed, 1700 litres of water and six square metres of land (per the World Economic Forum, or WEF). Meanwhile, the meat and dairy industries account for 14.5% of global greenhouse gas emissions (FAO). In a typical lifetime, the average western diet comprises the consumption of over 1000 animals. Shockingly, the total number of animals slaughtered every two years exceeds the number of people that have ever lived (WEF).
Food production has always defined our societies, with the shift over time from hunter-gatherers to agricultural farming and most recently to industrial-scale production. Now, the new food revolution is upon us. Alternative protein sources will become increasingly inevitable and necessary for economic, sustainability, environmental and health reasons.
Currently, 75% of our food comes from just 5 animals and 12 plants (FAO). This will have to change. Think of four broad categories of ‘new meat’ or ‘alt proteins’, all of which will likely grow in significance, displacing conventional animal proteins. Most established are classic vegan and vegetarian replacements, such as tofu or seitan in the former category and Quorn – which contains egg – in the latter. Emerging at present are novel meat alternatives, made entirely from plants and meant to resemble meat closely. Insect-based options are well-established throughout much of the world but have yet to gain much of a presence in the western world. Finally, developments in cultured meat (which is typically produced through exponential cell growth in bioreactors) are accelerating, making this another potential growth avenue. These different segments will all likely complement each other (and meat too). The meat aisle in supermarkets will likely become a thing of the past, replaced instead by the protein aisle.
Plant-based alternatives represent the initial stage of the revolution. For the first time, these products (in contrast to classic vegan and vegetarian options) have a plausible chance of converting omnivores to make the switch. It seems clear that consumers want protein but that they’re also concerned about their health and the environment. At the same time that these trends have become more pronounced, the range and quality of products available has markedly improved. A growing number of products look and taste very similar to conventional products, particularly in the burger and sausage category. Sophisticated production processes are increasingly able to mimic the sensory experience of eating meat.
Data abounds to support these contentions. 93% of plant-based meals are currently eaten by non-vegans in the UK, while 39% of British consumers say that they plan to reduce their meat consumption over the next 12 months. These statistics should perhaps be of no surprise given the knowledge that if everyone in the UK were to eat one more plant-based meal a week, then this would be equivalent to taking 16m cars off the road, thereby reducing the UK’s carbon footprint by 8.4% (all data from Meatless Farm, a leading player in the field). The products are tasty too, as your author can attest.
This is just the tip of the iceberg and there is a lot more still to be done. Today, the plant-based meat alternative market has a ~1% share of the global protein market, albeit that that this figure grew by 45% in 2020 (per Credit Suisse). More product availability, a wider range of options and improved quality should all contribute to driving category growth. Plant-based innovation should see next-generation products with lower fat and salt levels as well as cleaner labels with fewer ingredients. Innovators also continue to push the boundaries, going beyond burgers to replicate products such as tuna. Mimic Seafood, a Madrid-based start-up is using dehydrated tomato seasoned with olive oil, algae extract, spices and soy to this effect. Look ahead and by 2035, over 1 in 10 protein portions could be plant-based, resulting in a global market worth at least $290bn (per Boston Consulting Group). Some are even more optimistic, forecasting a 25% share by 2040 (per Kearney).
If everyone in the UK were to eat one more plant-based meal a week, then this would by equivalent to taking 16m cars off the road
If plant-based technology is novel and continues to push boundaries, then insect-based protein has a long-established history. Pliny the Elder references the enjoyment of beetle larvae in his 1st Century writings. Even if bugs barely feature in western diets, some 2bn people globally consume them currently (per International Platform of Insects for Food and Feed). Given the compelling case for insect protein, it may only be a matter of time before their presence becomes ubiquitous globally. Insects are high in good things and have low carbon footprints. The humble cricket, for example, contains over three times as much protein and five times the amount of calcium as that derived from any animal. Further, for every kilo of insect protein produced, just 1g of greenhouse gas is emitted. The equivalent amount for chickens is over 300 times this figure. For cows, it is more than 2,800 times (all data per Eat Grub, an insect producer).
Around 1900 insects are edible, the most common options being crickets, beetles, mealworms, locusts, grasshoppers and ants, some of which your author has tried. The edible insect market is still small today but is growing at a greater than 40% compound annual rate and could be worth $1.5bn by 2026 (per Global Market Insights). Notably, the industry saw over $200m of venture capital funding committed to it in 2020 (per Dealroom). This figure looks set only to expand.
While plant-based alternatives are increasingly ubiquitous and insect options can be found without too much difficulty, cultured meat development is still largely confined to research laboratories at present. Its potential is significant though. Think of cultured meat as being produced by in vitro cell cultures from animals (as opposed to slaughter). Another term for the idea might be cellular agriculture, with the meat produced by using engineering techniques traditionally applied to regenerative medicines.
2013 saw the unveiling of the first cultured meat burger, by Mosa Meat. Comprising 20,000 thin strands of muscle tissue, the burger had taken two years to create at a cost of ~$300,000. Wind the clock forward and owing to exponential gains in bioreactor technologies combined with falling costs of productions and the cost of burgers has dropped to ‘only’ around $250/ pound. They continue to decline rapidly. Upside Foods (formerly Memphis Meats) says that it plans to have its first burgers available for the consumer market within the next six months. Go to Singapore and it’s already possible to purchase cultured chicken (made by Eat Just). Over 40 start-ups have entered the field and are working on cell-grown beef, pork, fish, gelatin, milk and egg alternatives. French business Gourmey is even making a lab-grown version of foie gras.
One-in-five UK and US consumers claim that they are eager to try cell-based meat products, although over two-thirds say that they would still prefer to eat real meat from slaughtered animals on a regular basis. The main reason cited for trying cultured alternatives is that they would reduce harm to animals, followed by lowering carbon emissions (per the WEF). Consumer acceptance will be crucial for growing all alternative protein categories, even if the path for plant-based options is the least controversial. Insects and cultured meat options continue to suffer from perception and ‘yuck’ factors, even if these probably need to be set in the context of the horrors of industrial-scale animal farming. Insects are, of course, already eaten widely in Asia, Latin America and Africa. Meanwhile the messaging from most cultured meat players is that their products are grown from natural, non-GMO cells which contain no antibiotics. Supermarkets can also play a clear role in improving product positioning and developing further the concept of the protein aisle.
Alternative protein businesses globally raised $2.9bn of new funding in 2020
The other key factor that will likely play a role in how the alternative protein market develops is cost. Consider that the price for 100g of conventional ground beef retails in a US store for around $0.80. This compares to ~$2.50 for an equivalently sized plant-based patty and ~$80 for a cultured meat option (per Kearney). The good news, however, is that as the alternative protein industry (and its various sub-sectors) gains in scale, then costs should fall, increasing access to the category. An increasing amount of venture capital flowing into the industry should also help it in this respect. Alternative protein businesses globally raised $2.9bn of new funding in 2020 (per Pitchbook).
Plant-based meat alternatives comprise by far and away the largest sub-segment of the new protein market. Some 600 players are present in the field (per Credit Suisse), with Beyond Meat (capitalised at ~$7bn) and Impossible Foods (still private) being the most significant. Nonetheless, given the addressable market opportunity, there is clear room for everyone to grow. Watch for many private companies potentially choosing to go public, providing these businesses with expansion capital. Further, the logic for consolidation – whether led by an industry player or private equity – is high. Established animal protein producers also may be forced to gain a presence in the alternatives market, given the direction of travel. Our preference would be to favour either proven winners, leaders in niches or value-added players. In this latter category, businesses such as Kerry Group (capitalised at ~€20bn) which provide functional ingredients – or building blocks – to established players in the food industry to facilitate new product development look well-placed. The revolution is only just beginning; the future will be increasingly meatless.
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