The Alternative Protein Section Is A Financial ‘Must Have’

Alternative proteins, which include plant-based foods, tend to be a target for vegans and vegetarians. However, as technology improves in the area, experts say there will be tasty options for everyone, including die-hard meat-lovers, which opens up a massive opportunity for alternative proteins investors.

“The field is just about seven or ten years old when it first started however we have witnessed growth leaps and bounds in the last couple of months,” explained Amy Huang the university innovation manager for the think tank that is a nonprofit Good Food Institute, which helps in the creation of safe and sustainable alternatives proteins.

“And this time, it’s focused on the 97 percent of people who eat meat,” she explained. “As a result there is plenty of opportunity for further innovations.”

Consumers concerned about current meat-producing processes, as well as the increasing trend towards eating more healthily, are in search of alternative protein sources. This is despite a negative perception of their taste and texture experts believe. The market for alternatives to meat, eggs, dairy and seafood is estimated to reach at least $290 billion by 2035, according to research by Boston Consulting Group and Blue Horizon Corp.

It may appear that alternative proteins are now becoming popular, Decker Walker, Boston Consulting Group’s head of agribusiness but isn’t quite ready to label it a bubble yet.

“It is in certain fields because the technologies are decades off,” Walker said. “Investment-wise the situation is hard to say because it was a very slow-moving industry up to 5 years ago. However, the trend is very clear that our future will be filled with more alternatives to protein.”

Huang describes alternate proteins as immediate substitutes for meat, eggs and dairy, which are derived by one of three methods: plant-based, cell-cultured or by fermentation.

She believes that the future success of these proteins will depend on synergies across all the three platforms. She expects the innovation will be in waves, with the first being proteins made from plants as well as those made by microbial fermentation — the newest platform. The third category will be those made by cell culture, a more advanced technology she claimed.

“There is also a ton of research whitespace” she added. “If you take a look at the vast area, there’s a lot of foundational questions to still find out: What are appropriate raw substances? Soy, wheat , and peas dominate in plant proteins but wheat and soy are byproducts and aren’t made for human consumption. Can we diversify our plant proteins in order to expand beyond these three?”

Traditional fermentation employs intact live microorganisms to process plants, whereas biomass and precision fermenting, the areas Huang predicted are likely to power the next wave of innovation in alternative protein employ microorganisms in a different way. Cultured meat is derived from cells obtained from animals in a method that , according to some advocates, isn’t harmful to the animals. Cells are heated and fed with nutrients that help to build muscle and fat.

The effects of microbial fermentation can be seen already in the form of leghemoglobin found in Impossible Foods’ flagship burger. The technologies enable the meat industry based on plants to create products specifically designed to closely replicate animal flesh in terms of texture, smell and taste, Huang said. There is also startup research in the academic world and companies that are working on cutting-edge cuts of chicken and meat alternatives and fish substitutes.

To make the sector more efficient it is necessary to advance some technology. is still in need of improvement such as in the manufacturing techniques for extruding and texturing proteins, but there are many other promising ways to go about it. Redefine Meat, for example makes use of 3D printing technologies, while Rival Foods is experimenting with shear-cell technology to create whole meat cuts from plants-based proteins, she said.

Despite growth in the competition for the production of cultured meat along with the entire food chain, large-scale industrial facilities and lower costs for these technologies is likely in the next 10 to 15 years out, Huang said.

“Progress has been made, and there’s early evidence that these areas are acclimateable,” she added.

An investment that is strong

Many investors are eager have a taste of alternatives to protein startups. Since 2016, venture capitalists have put around $4.2 billion into 363 known global investment opportunities in this area as per Crunchbase information.

In 2020, less than $2 billion was spent on companies that were backed by venture capitalists in the space, dominated by Impossible Foods’ total raise of $700 million through Series F as well as Series G rounds last year. That’s an increase of 101 percent in investment from 2019 to as per the database.

This year has already been quite active , with $602 million of venture capital doled out in 39 deals, which include two separate rounds of $200 million of capital to LIVEKINDLY and Eat Just in March.

Big players did receive large chunks of capital, Sean O’Sullivan, managing general partner of the early stage investment firm SOSV, said 2020 was an excellent year for firms seeking funding in those nascent stages, including for startups that haven’t hit the market with their first products. There’s also a handful of $100 million deals in the works for 2020 as well, he said.

Cellular meat is at the “birthing period,” he said, but alternatives to protein are now commercially feasible.

“Plant-based is already here and is in your fridge as are the foods formulated around a certain protein, such as dairy protein,” He said. “With the cell-based meat products, Memphis Meats is going for the whole burger and would be selling in shops and restaurants, except for issues with regulatory.”

SOSV invested 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 determine how best to label its food products to ensure they can be safely sold commercially.

Additionally, O’Sullivan expects more capital for infrastructure investment to support the scaling required to generate the immense amount of food production needed to feed the population of the world, but this will require time.

“Billions will be invested in the next five years to scale in all three capabilities. Additionally, a brand new type of infrastructure company are expected to create the products,” he added. “Food is a multitrillion-dollar business, so to actually redesign it will take decades.”

Food manufacturers

Eat Just’s latest funding round came just months after it declared in December it was using their cultured chickens, which it believes to be real chicken meat, as an ingredient in chicken bites was accepted to be sold in Singapore -the first nation in the world to commercialize products made from cells, co-founder and president Josh Tetrick said in an interview.

“It’s real chicken, not a plant-based product, and this is the first time this technology has been created and made available for commercialization,” he said. “There is no difference in taste as well as a nutritional point of view, and the people who try it in Singapore affirm that it’s as great or even better than traditional chicken they are familiar with, and the majority of people are happier after eating it.”

Its San Francisco-based names Egg alternative Just Egg, and the chicken brand Good Meat, are available in around 20,000 distribution centers across the U.S. and Canada.

The beginnings of Eat Just’s history began in 2011, when the firm was known as Hampton Creek and had launched its first vegan food products, such as Just Mayo, an egg-free mayonnaise alternative, and Just Cookie Dough, an dairy-free, egg-free edible cookie dough.

The company started with an egg and found a plant that scrambled like an egg. The company then attempted to create several products using the plant. However, the research focused on bringing it to the point at which consumers can use the egg-like product of the plant into a fry pan and consume it without cholesterol, and use less water and land, Tetrick said in an interview.

“We knew there were over 350,000 plants in the world and was unsure if one could produce an egg,” he added. “We discovered the mung beans which functions as an egg and then developed the technology and business model around it. The first issue was finding the mung bean, and the second was commercializing.”

However, Eat Just’s success wasn’t without some challenges along the way: It weathered mislabeling allegations in 2015, and then in the year 2017 there were product safety concerns prompted Target to take its products from its shelves. The FDA eventually removed the company from those allegations and Tetrick declined to discuss past problems.

Furthermore, Berkeley, California-based Climax Foods, which secured a $7.5 million seed round last September, has employed its proprietary data science to develop vegan foods. Its first product is plant-based alternatives of the seven most popular cheeses, which aim to imitate the taste, texture, flavor, and nutrition of their dairy-based counterparts.

Climax Foods CEO Oliver Zahn stated to Crunchbase News the company has conducted more than 100 tastings of its cheese products. the response was positive with some not able to distinguish between the Climax Foods products and dairy-based cheeses.

“If we can control the taste and texture of this cheese we’re able to make anything,” he added. “Once you’ve figured out the mechanism of fermentation that works in one particular brand of cheese You may need to make small optimizations to improve the other brands.”

Based on the positive results, Zahn said, the company aims to raise a small bridge round, before pursuing an A Series round that is targeted for its primary market.

Future food is in the hands of Food

Tetrick anticipates many more multinational corporations and startups creating technology for alternative proteins, as well as the capital needed to help them follow.

“My main goal is to ensure that when my niece graduates from High School — she is 2 years old now — we will have eggs each day, chicken in the evening, and beef, without having to slaughter animals,” Mr. Smith added. “The hurdle right now is scaling. We aren’t able to make enough to meet the needs of only the U.S., but for everywhere. We must reduce the cost so that everyone can afford it.”

Then there’s the problem of perception. While consumers are open to new flavors and tastes The food products that are produced require to be something one would like to eat according to the Boston Consulting Group’s Walker.

Plant-based alternatives are picking up more and more in food items in which they’re not the primary ingredient, such as lasagna, in which the little quantity of meat doesn’t alter the overall flavor of the dish. However, in the case of steak — where the dining experience involves texture and mouthfeel as much as the flavor, there remain a variety of technical obstacles that the food industry must over come, like the cost and the fact that a lot of products are processed, Walker stated.

“You do not have to address the limitations all at once to allow adoption however, for rapid adoption, you will need to maximize the yield of your protein crops,” he said. “Heme is what provides meat with the bloody taste is a costly process. That will need to come down in cost. Texturization can be accomplished on an individual basis, however the technology isn’t enough to allow it in a mass method.”