The increasing demand for sustainable food and the growing need for ethically-sourced proteins have converged to produce rapid developments in food technology. Indeed, Barclays Investment Bank estimates that the alternative protein sector could reach a 20% share of the market by 2040 with a value of $450 billion. Neil Shah, director of Edison Group, tells us more.
The growing appetite for protein
Exponential population growth over the past century has led to a rapidly increasing demand for protein. With global food consumption projected to rise from 2.5 billion metric tons in 2021 to over 3,000 billion metric tons in 2026, revenues for the meat industry are set to double by 2040.
Yet this outlook for traditional sources of protein paints only a partial picture. Alongside these quantitative developments, the food industry is facing a significant qualitative evolution. Changing ethical attitudes and a heightened awareness of food security have driven an upsurge in the alternative protein industry. As of 2021, 50% of British people were including meat substitutes in their diet while the global number of vegans rose from 0.5% to 3% between 2020 and 2021.
Meat substitutes offer an alternative to traditional protein sources with a significantly reduced environmental impact. The cultured meat industry, for example, could use 95% less land than traditional meat production. Meanwhile, the production of plant-based products creates less greenhouse gases, with 1kg of wheat resulting in 2.5kg of emissions, compared to 70kg for the same amount of beef. With such environmental benefits, the alternative protein sector is primed to soar in revenue over the coming years and ultimately constitute a large share of the global food industry.
This combined demand for protein and sustainability couples to create fertile soil for the alternative protein industry. Over recent decades, the mass production of alternative protein has moved from pipedream to production line, with brands like Quorn and Beyond Meat leading an industry advancement projected to expand at a compound annual growth rate of 18% from 2022 to 2032. Indeed, this sector’s potential is reflected in investor trends. In the first half of 2022, Venture Capital groups invested a total of $1.05 billion into alternative protein producers, representing a 174% increase from the previous year and reflecting a growing confidence and interest in the sector.
A craving for innovation
While the practice of vegetarianism has ancient roots, alternative proteins have seen a rapid evolution over recent years. From plant-based beginnings, the industry has progressed through meat imitation to alternative meat production, with scientists now laying the seeds for cultured meat, eggs and dairy grown from animal cells.
Accompanying these technological advancements are the developmental challenges inherent in an innovation-based industry of this kind. One such challenge exists in the scaling-up of the industry. As demand for alternative proteins grows, the sector must undergo a similar expansion to meet consumer needs; yet as a child of the laboratory, alternative protein breaking into the mass market enters a landscape much larger than its own.
Cellular agriculture, for example, is currently limited in its production to 20,000-litre bioreactors due to cell morphology, while the typical industrial bio-reactors have a capacity of c200,000 litres. Beyond the difficulties involved in upscaling, the industry also faces the challenge of replicating the sensory experience of conventional meat and dairy products for those customers unwilling to part from the tastes, texture and smell of traditional animal products.
Food for thoughtful investors
The combined factors of growth and innovation pumping through the alternative protein industry make the sector a fertile pasture for investment. Valued at $220 billion in 2019, the global food tech market is estimated to grow to $340 billion by 2027 and offers an exciting opportunity for investors.
Alternative protein manufacturers founded over the last decade have witnessed rapid success. As an example, the 100% plant-based baby food manufacturer, Else Nutrition, has an estimated revenue of C$ 11m in 2022, following the launch of its debut product in late 2020. This figure constitutes a significant rise from 2021, when annual revenue lay at C$ 4.7m, and the company projects revenues to continue following this growth pattern, with estimated revenue for 2023 predicted to be C$ 27.5m.
Another company operating in the alternative protein space is Steakholder Foods which, despite its mantra that meat “is an ancient and universal tradition,” demonstrates no backward thinking in its approach to protein production. Using cellular biology and 3D bioprinting technology, Steakholder Foods has developed a method of creating real meat from ethically harvested animal cells. Founded in 2019, the company now possesses assets valued at $16.9m and aims to hold a 15% share of the cultured meat market by 2025.
With the cultured meat industry projected to reach an output of 40,000 tons in end products by 2025, and annual sales of $450 billion estimated in the alternative protein sector by 2040, companies like Else Nutrition and Steakholder present investors with an interesting opportunity as we move into a future of sustainability and innovation.
© FoodBev Media Ltd 2022
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