What will the future of the alternative protein sector look like? We had a chat with three experts that will share with us their opinion. These women are all working in the alternative protein industry and they can give us a perfect insider perspective on the topic.
As we have seen before the alternative protein sector is on the rise. Several startups are receiving support either from investors or leaders in the food industry. Still, there are some serious hurdles to face: the current economic crisis is hitting hard startups; investors are focused on a few geographic areas avoiding the opportunities in developing countries.
Could this change? What will happen in the next few years? Let’s hear from these three women leaders in the alternative protein sector, Roberta Franchi at Oxford University’s Smith School of Enterprise and the Environment, Cecile Sother, an expert in agribusiness, that has spent the last fifteen years investing and mentoring regenerative agri-food companies and Shannon Theobald, an industry expert, a startup advisor, an alternative protein author, and Podcast Host (Big Food Big Future).
The views of three women in the alternative protein sector
Investment opportunities
According to Roberta Franchi, who is currently leading a research project on alternative proteins at the University of Oxford “The alternative protein start-up ecosystem has exploded in the past 3 years, with big brands like Beyond Meat and Impossible burger leading the way and innumerable start-ups popping up in the space.”
Roberta believes it is also interesting to see how the focus shifted from mainly plant-based meat to other options: “We are seeing more and more start-ups trying to mimic other types of products such as chicken, lamb, seafood, eggs, and dairy, to the point that the market for consumer products in the space has become extremely crowded.”
From an investor’s perspective, Roberta thinks there are two interesting points to consider: “Supply-side companies in the field represent a more attractive investment opportunity. For instance, companies which are developing advanced formulations and ingredients for the production of alternative proteins will be crucial in supplying consumer brands with the materials they need to go to market.”
Also, “Companies that can build large-scale industrial platforms for capital-intensive technologies such as the extrusion process involved in the production of plant-based meats could also represent a good opportunity for investment.”
But there is a problem: “Alternative protein production is a very capital-intensive business, and as such many start-ups are finding it hard to raise capital to scale up as Venture Capital investors are reluctant to provide them with the funding needed to build this.”
The solution is to find alternative ways to fund their scaling: “Several companies are now partnering with big food corporations to take advantage of their supply chains and distribution chains across the food system.”
Part of Roberta’s work at Oxford is analyzing these transactions and she is looking to publish a database outlining all of these in a publicly available format. This document will highlight the opportunities for start-ups to partner with big food players in their journey toward growing and scaling in the industry.
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A valid alternative in developing countries
With Cecile Sother, an expert in agribusiness particularly focused on leading, investing, and mentoring regenerative agri-food companies, we had a chat about the trends in alternative protein in developing countries.
Cecile thinks the market trend in the alternative protein sector is very similar in developing countries compared to the rest of the world: “In Africa, the challenges to the food systems support a shift to alternative proteins in order for governments to be in a position to feed the population in the next 20 years, but the current population’s acceptance of plant-based protein should not be forgotten.”
With 60% or even 80% of the population made of Gen Z or Millennials – depending on the country – in Africa consumers are more likely to purchase plant-based options but unfortunately “Whilst the demand is growing at a rapid pace, the offer is not there at all or is at an inaccessible price point.”
Cecile believes this actually opens opportunities for innovative and purpose-driven founders with brands or solutions adapted to local tastes and consuming habits. “Because they know better than anyone their ecosystem, they can reach Product-Market Fit at a stellar pace, benefiting from significant need state gaps.”
Furthermore: “The cheaper supply and cost structure allows them to reach an often-lower price point and those arising from big metropoles can more easily reach the critical mass that allows them to expand to significant markets of neighboring countries.” (e.g. the USA from Mexico).
Cecile also shares two examples of companies in the alternative protein that are growing very fast in developing countries: “In Peru, with the availability of superfood ingredients representing healthy and often cheaper options the + NUTRI Co has seen unexpected success using in-house developed algorithms to formulate new plant-based products at 6x the pace of its competition.”
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While in South Africa: “Mzansi Meat Co, a cultivated meat company is being true to the country’s long history of tech and innovation entrepreneurship, reaching the tasting stage much quicker and at a competitive price compared to its peers.”
Unfortunately, there is a problem: “Emerging markets attract fewer investments than the rest of the world due to historical risk perceptions, investment readiness, and ticket sizes that don’t align with private equity and venture capital funds.”
But Cecile actually sees this as an opportunity: “As an investor who understands these markets and their founders, this represents an opportunity to support creative and agile start-ups with a great impact potential.”
Slow and steady growth for long-term returns
Shannon Theobald has several years of experience in the alternative protein industry helping startups raise capital and advising them. She thinks there are some immediate and long-term challenges for the alternative protein industry: “There is plenty of articles abound that “the industry is in trouble” after trouble for Beyond, layoffs for Impossible, and a shutdown for JBS’s plant-based unit.”
Another issue is the fact that “Climate impact isn’t compelling enough for the average consumer to maintain adoption long-term. If consumers are going to make the switch from traditional meat, it has to be better for them and taste better, too”
Luckily Shannon thinks “Soaring valuations are coming back to earth – and that’s a good thing. Food is never going to see the profit margins of software. It’s a resource-intensive physical product.”
She thinks the outlook is still optimistic: “Alt protein companies that get investment and retail acceptance now will see slow, steady growth that’s much less likely to spike and plummet. My bet is on slow and steady growth for long-term returns and long-term behavior change.
Long-term growth and behavior change could benefit humans and of course the planet. This is probably the best way to wrap up our talk with these three women, alternative protein industry experts.
Editor’s Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com –In the Featured Photo: Plant-based burger by Kyjy Foods. Photo credit: Kyjy Foods.
