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By SAM GAO, Co-founder and Senior Analyst, Topguide Advisory Shanghai
NONE of the long-term macro trends have changed surrounding alternative protein, and the industry is experiencing a temporary re-adjustment along with many other industries, but is sure to embrace a healthy growing trend in a year or two’s time, said a leading investor in alternative protein recently.
Nick Cooney, Founder and Managing Partner of Lever VC, one of the world’s dedicated investment funds in the alternative industry, made the remarks in a recent board of directors meeting of the fund.
“We're now seeing, I think, the peak of the downside of that hype cycle. I think we'll go back to more normal historical growth rate of the category, but that long term trajectory, I think remains unchanged,” he said.
Lever VC has invested in 31 alternative protein startups in China, Israel, Germany, Britain, France, Sweden, the US, Spain, Mexico, Brazil, Canada, Russia and Singapore since 2019, completing its presence throughout the value chain in alternative protein. In the upper stream, it has invested in startups working on new strains of microorganism, in the middle stream, in startups working on contract development and manufacturing (CDMO) offering lab and pilot scale manufacturing, and downstream, in startups producing consumer products such as yogurt and meat. It played lead investor roles in around 15 startups.
Noteworthy is Turtle Tree Labs of Singapore, which has raised USD 400 million, with its latest series A commanding a post-money valuation of USD 430 million, one of the highest valued companies of the kind in the world, and a few plant-based meat companies in Europe which have been enjoying double-digit growth in the past.
The global investment scene: Heavy downturn across the board
According to the Good Food Institute (GFI), the global venture capital industry, except for artificial intelligence, has experienced recessions in the past two years, by 42 per cent year-on-year, reaching the lowest point since 2017 and funding into the world’s foodtech industry, which includes alternative protein, dropped by 61%.
GFI studies also indicate that in 2023, the world saw USD 225.9 million invested into the cell-cultured protein, vs USD 922.3 million for 2022. To date a total of USD 3.1 billion has been invested into cell-cultured protein startups, however, the figure only represents a fraction of funding injected into the new energy sector.
In 2023 the precision fermentation sector attracted an investment of USD 515 million, as compared with USD 758 million in 2022. Europe actually attracted 22% more investment into the precision fermentation sector in 2023 year-to-year.
Worldwide, plant-based protein companies raised $907.7 million in 2023, which exceeds the combined total of the cell-cultured protein and precision fermentation sectors by nearly 23%. The GFI report said that the $907.7 million represented 11 percent of all-time investment in the sector, bringing total private investments in the sector to $8.5 billion, but didn’t say how much the year-on-year decrease was.
In the US retail market, plant-based protein products generated sales of USD 8.1 billion in 2023, slightly lower than the 2022 sales of USD 8.2 billion, the decline mainly led by a drop in sales of plant-based meat and seafood.
1st market driver: Consumers remain interested in healthy food
However, the fundamental drivers for alternative protein remain intact, said Cooney: “None of the long-term macro trends have changed in terms of consumer interest in healthier food, consumer interest in more sustainable food, consumer interest in animal welfare.”
The 2nd market driver: Entrepreneurs continue piling into the alt protein industry
The second market driver is that more companies are entering the alternative protein industry, “either to sell alternative proteins as end products, or in working alternative proteins into their products and product set in more robust ways continues to grow,” said Cooney.
He noted that some of the largest retailers in western Europe, in the Netherlands, in Germany and the UK, have set these policy goals of dramatically increasing the amount of plant-based proteins, including plant-based meat and dairy they sell.
In Spain, Heura, a plant-based meat manufacturer, last year collaborated with more than 450 schools to incorporate plant-based protein in the menu, while Eroski, a chain supermarket chain, launched a series of private label plant-based protein products.
An increasing number of MNCs are getting involved in the alternative industry, and are deepening the level of involvement in the industry, said Cooney. Years ago, some MNCs were early investors in alternative protein startups, offering a symbolic amount of fund to observe and learn about the startup scene. Now they are setting up their own research and development centres or invest in building factories.
Ajinomoto of Japan and ADM of the US became shareholders of a few precision fermentation startups last year. ADM also collaborated with Israel-based Believer Meats in establishing a cell-cultured meat factory, while Danone and Coca-Cola, for the first time for a major MNC, to invest in alternative dairy startups. The world’s leading meat company JBS, headquartered in Brazil, started building its own cell-cultured meat R&D centre in September 2023
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Angel Yeast, a public company on the Shanghai Stock Exchange, has also released its yeast-based protein in cans, ushering in a new source of protein for the 1.4-billion people strong China.
The 3rd market driver: National governments lending more substantive support
The third market driver, aside from consumer interest and corporates, is that an increasing number of countries’ governments, such as those in Singapore, Denmark, the UK, South Korea, the US and Israel, are drafting favourable policies and even dishing out cash to support the alternative industry. It is reaching a consensus among many nations that a stronger alternative protein industry can help bring down the greenhouse gas emissions.
To date five countries have given pre-market approval for cell-cultured meat products. They are Singapore, which gave approval in November 2020 to Good Meat, a subsidiary of Eat Just, the United States of America, Israel and United Kingdom of Britain. The US gave such approvals in the second-half of 2023 to Good Meat and Upside Foods. Israel granted a sales approval to Aleph Farms in December 2023, becoming the third country in the world with experiences of approving a cell-cultured meat startup. In early April, the Singapore Food Agency granted VOW, an Australian company by origin, a pre-market approval for its quail meat. UK became the latest, the fifth country in the world that has given approval to a cell-cultured protein company, when it approved chicken cultivated from animal cells for use in pet food in early July. That company is Meatly, founded in 2022.
These and some other countries have been generously contributing funds to support the development of the alternative protein industry, according to GFI’s summary reports for 2023.
In the United States of America, the White House last year issued a report stating expressly that it supports the development of the precision fermentation industry while the US Department of Agriculture (USDA) offered guarantees for a loan of USD 25 million for Liberation Labs, to support the construction of its commercial factory. The US Ministry of Defense has so far provided USD 40 million for precision fermentation startups in a bid to accelerate the development of new sources of food for the military. The ministry announced in early June that it will further invest USD 17.5 million for the entire alternative protein industry.
In 2023, the government of Canada invested USD 110 million into the country’s plant-based protein industry meanwhile. The governments of Denmark and South Korea announced action plans for supporting the plant-based industry in October and November 2023, respectively.
“Denmark's a small country, but Denmark's government has convened a whole alternative protein task force for the country, comprised of farmers and food companies and NGO's and similar, all about how to build out that national strategy to advance sales,” Cooney said.
In late June, Denmark announced that it will impose cattle farmers with a tax on livestock carbon dioxide emissions starting in 2030, with an aim to reduce Danish greenhouse gas emissions by 70% from 1990 levels by 2030. Danish livestock farmers will be taxed 300 kroner ($43) per ton of carbon dioxide equivalent in 2030.
In Korea, the government, led by the Korea Institute of Planning and Evaluation for Technology in Food, Agriculture and Forestry (IPET), Korea Agriculture Technology Promotion Agency (KOAT), and Korea Institute of Marine Science and Technology Promotion (KIMST), granted ($8.1M) to Simple Planet, a cell-cultured startup, in May 2024. The company aims for gaining pre-market approval from the the Ministry of Food and Drug Safety in the first half of 2025.
According to GFI reports, in 2023, the South Korea government also invested six million US dollars for a research and development center in the country, featuring the world’s largest piece of cultivated meat, while the UK government invested USD 15 million on a national research and development centre and an additional USD 4.3 million directly to seven cell-cultured startups.
The government of South Africa offered a grant of USD 700,000 to a precision fermentation startup, De Novo Food Labs, the first of an African country that has ever directly invested in an alternative protein startup.
China’s interest in promoting alternative protein was also evident in the fact that the China Ministry of Agriculture and Rural Affairs’ Five-Year Plan, which calls for “research and development in cultivated meat, plant-based egg, milk, and oil, recombinant protein technology” and other high-technology areas as important for food security and long-term economic development. China’s ambition in alternative protein is also highlighted by President Xi Jinping personally calling on entrepreneurs and scientists to pay more attention to biotechnology in the country’s bid to ensure food security for the 1.4 billion-strong population in March 2022, making him one of only a handful of global leaders to have publicly embraced alternative protein as an important strategic priority for development.
Aside from these external macro drivers, Cooney said, the alternative industry will also experience rapid developments in research and development down the road and thus see itself upgraded in ways of higher quality and lower production cost.
Plant-based meat to benefit from other alt protein sectors maturing
So far, commercialisation in the precision fermentation industry is rather miniscule in scale overall, and it is the plant-based protein industry that has done the majority of sales in the alternative industry.
New ingredients and technologies are expected to arise out of their sisterly segments of precision fermentation and cell-cultured protein, and utilised in the manufacturing of plant-based protein products, the plant-based protein industry will enjoy a boost in flavour, taste and texture at a lower manufacturing cost, Cooney said. “We think those things will help drive that next phase of growth, but we do think the long-term prospects are still just extremely positive.”
