The alternative protein sector is at the top of the class when it comes to growth and investment, spurred on by its environmental and nutritional promises and potential. Kim Berry looks at the current state of play.
In its annual consumer trends report this year, Innova Market Insights recorded a first. When asked what global issues concerned them the most, consumers’ top response was the health of the planet.
In the 14 years Innova has carried out the survey, personal health has topped the list every single time. Until now.
It stands to reason that as consumer behaviour and attitudes change rapidly and dramatically, our food and beverage production system will be having its own revolution.
Partner at CSIRO’s venture capital fund Main Sequence Ventures Phil Morle says it’s an exciting time to be a venture capitalist because there are big problems to solve and making enough food for 10 billion people while we’re running out of land is one of them.
“That problem synchronises with the maturity of food production, science and the wealth of opportunity that exists to develop new ways of making food and build incredibly valuable companies,” Morle says.
Money Money Money
At the Future Food-Tech (FFT) conference in the US last month, research firm Crunchbase said US$12.8 billion was invested in food tech through almost 1000deals in 2021, double the amount invested in 2020.
Morle recounts that Impossible Foods, the largest plant-based protein company in the world, had raised half a billion dollars before the first consumer had taken their first bite.
Research carried out in the US by the Plant Based Foods Association, The Good Food Institute, and SPINS put the US plant-based market value at $7.4 billion. While some of the stratospheric growth rates have slowed, the research found 62 per cent (79 million US households) are now buying plant-based products and 79per cent of those are purchasing multiple times within the category.
The report said millennials and Gen Z make up 47 per cent of the US population and continue to grow their spending power in store and online. Ecommerce sales of plant-based foods grew 47 per cent in the last year to US$351 million.
At FFT, Matt Spence from Guggenheim Partners said the feel-good aspects of food tech – helping the planet, feeding the world – was inspiring more traditional funders to diversify into food.
And there has certainly been investment in Australia in recent years. V2food has raised $185 million since it launched in 2019 and is now valued at more than $500 million. It was valued at $2 million when it launched.
Fënn Foods – its retail brand is Veef – raised $3 million in February; and agribusiness Harvest Road, part of Andrew Forrest’s Tattarang, invested in commercial scale plant-based pioneer ProForm Foods – retail brand is Meet – for an undisclosed sum in January.
Australian Plant Proteins secured a $45 million investment from global agrifood company Bunge and just announced its $378 million joint venture with Thomas Foods International and pulse and ingredient supplier AGT Foods Australia to build three new plant protein manufacturing plants in South Australia.
Regenerative food company Wide Open Agriculture raised $20 million through institutional investors last December to develop Western Australia’s first oat milk manufacturing plant, and Harvest B raised $4.5million to fund its intelligent ingredient system.
Late last year the University of Adelaide announced a $2.5 million project with the UK University of Nottingham’s International Flavour Research Centre to improve the taste of plant-based foods and ingredients.
And All G Foods entered the market in September having completed a $15.5 million seed raise to further its precision fermentation cow-free dairy technology as well launch its alternative protein retail product, Love Buds.
The latest forecast from IBISWorld is that revenue from alternative meat manufacturing in Australia will grow 29.9 per cent a year over the next five years to reach $424.4 million.
IBISWorld analyst Matt Reeves says plant-based meat companies are the only manufacturers in the alt-meat sector currently generating revenue in Australia, with its revenue expected to reach $114.6 million in 2021-22, representing an estimated average annual growth of 50.4 per cent over the past five years.
At the time of launch founder and CEO Jan Pacas said, “Getting a premium product footing in the Asian market is a big priority for us. We’ll be looking to have another big funding raise, invest more in capex and scale up to fuel our overseas ambitions with a product ready for market in the next 12 months.”
New CEO of Fënn Foods Tony Rowlinson says while the Australian market is still in its infancy, based on global trends it will be a billion-dollar market in the very near future.
And companies building that potential billion-dollar industry need money. The human capital required, combined with the type of equipment needed for producing plant-based proteins, or precision fermentation processes, or growing cultured meats, makes for an extremely expensive enterprise.
S2G Ventures managing director Chuck Templeton told the FFT audience that another trillion dollars’ worth of infrastructure was needed to meet existing demand. It’s worth remembering here that other tech industries are also operating with these kinds of numbers, and we can’t eat them.
“You don’t have to be an Einstein to know that the solution to needing to double our food supply is not to produce twice the amount of lamb, beef, pork and chicken, just like it’s not the solution to have twice the number of cars for transport,” Pacas says.
V2food founder and CEO Nick Hazell says for domestic start-ups or companies, it is important to look at this as a global problem.
“It is an Australian problem, and there are 25 million of us, so that is a good market opportunity. But it is the wrong way of looking at it. The market opportunity is the world. It’s a trillion-dollar opportunity of which less than one per cent will be consumed in Australia.
“Ultimately, we’re not a big country in that sense. But when your perspective is the global opportunity, then these really quite huge investments that are needed become a little bit more palatable because you can see that they make sense. But clearly you would never be making those investments if you only looked at the Australian market,” Hazell says.
CEO of precision fermentation company Eden Brew Jim Fader sees a lot of credible, talented businesses coming into the sector and says that will only increase.
“There’s a lot of money going into cool companies with great molecules like Eden Brew, but you need a solution to manufacture at scale if you’re going to compete with traditional goods on the shelf,” Fader says.
Co-founder of cultured meat company VOW, Tim Noakesmith says the mathematical scenario to map commercial viability is one where the numbers “get crazy, really quickly”.
“Every year about 300 million tonnes of meat is produced around the globe, which is just an unfathomable number when you think about it. We have these large tanks filled with liquid making meat that could replace that, so how many of these would we need?
“The answer ends up being around the equivalent of what we use to produce the world’s global supply of wine. And we all love wine, but we also love our meat.
“So, while it seems absurd to be able to grow tens of thousands of these large, 20,000 litre tanks to produce meat, it’s not dissimilar to what we have now for the global wine production.
“It is massive, and we need to think massive to have an impact. But it is absolutely doable,” Noakesmith says.
Fader reiterates the critical need for solutions to scale fermentation capacity.
“If you build a 10 plus million litre fermentation plant, it could be anywhere from $200 to $400 million, depending on the technology, the setup, the design, and the purification at the backend. That’s a lot of money, so you’re not going to get start-ups tripping over $400 million on the pavement and going, ‘I’ll build my own plant’,” he says.
Fader says it is about a continuation of the thinking differently, innovation mindset that frames the whole industry.
Eden Brew is in advanced discussions with existing businesses that understand fermentation – farming, breweries, wineries – and are interested in diversifying into food.
“It is a brave step for them because it’s not what they’re used to doing, who’s going to underwrite the capital expense and myriad factors. But if Eden Brew presents as an anchor tenant to a prospective industrial fermenter, business suddenly becomes a lot more viable,” Fader says.
For plant-based meat producers, the challenge when demand grows is ensuring the supply chain can keep up. It becomes a question of how you strengthen ingredient and manufacturing capacity to ensure the supply chain keeps up with demand.
Hazell says v2food has been looking into growing and extracting its own protein to avoid having to import ingredients for its range.
“It is a major capital investment. We have been working for two years with our partners on protein extraction technology. At any given time, we’re running around 30projects with researchers.
“This journey doesn’t stop until our products are cheaper, tastier, and more nutritious than traditional counterparts, and even then, it won’t stop,” Hazell said.
ProForm Foods CEO Matt Dunn echoes Hazell’s sentiment, saying Harvest Road’s investment will accelerate ProForm’s next growth phase, assist its existing production facilities, and strengthen its focus on using locally sourced ingredients.
Dunn says that while a lack of local demand for Australian-made inputs made investment in the sector harder to justify, regional demand for 100 per cent Australian ingredients and products is providing the business case. For ProForm, R&D on protein inputs and ingredient functionality is pushing the business to the next level of innovation.
“At the moment we’re ahead of the game in terms of commercialised, in the market technology, but we want to stay at the forefront,” Dunn says.
Back at FFT, Guggenheim Partners’ Spence said success relied on three things: R&D and food tech excellence to make quality products; good branding and selling strategy to sell the products; and production capabilities and supply chain systems to get them to market.
It turns out even the most sophisticated, newest foods rely on the age-old rules.
This article first appeared in the April 2022 edition of Food & Drink Business.