Opportunities and challenges in foodtech - developing foods of the future – Insights – News, Deals & Insights

Would you buy an alternative protein steak for €5 or a conventional one for €50?

Foodtech is a rapidly growing field, driven by the need to address the challenges associated with traditional food production and consumption. With a growing global population and increasing environmental concerns, developing sustainable and innovative food solutions has become a priority for governments and companies. This mindset means that traditional protein products, including meat, fish, eggs and dairy; now face increased scrutiny due to the associated negative environmental factors attributed to their production, including CO² emissions, water consumption, land erosion and animal exploitation [i].

Due to these environmental concerns and the high retail cost of purchasing meat, consumers are increasingly turning to a flexible or plant-based diet, prompting retailers and producers to recognise the potential and opportunity in this fast-growing sector. Recent research predicts the global plant-based protein market to grow at a compound annual growth rate of 7.3% from 2022 to 2027.[ii]

Beyond Meat, the first plant-based vegan meat company to list in the US went public on Nasdaq in May 2019[iii]. The stock price skyrocketed by over 150% in a day, resulting in a market capitalization of $3.8 BN[iv] and representing the best-performing public offering by a major US company in almost two decades[v].

Amongst consumers, there is an expectation that alternative foods should be offered at a competitive price to traditional meat and dairy products. As such, one of the biggest challenges for producers and retailers is to bear the burden of the costs associated with sustainability, fair trade and regulation[vi], and still achieve cost parity. While alternative protein sources have made significant strides in terms of taste and texture, their production costs remain relatively high compared to traditional meat. It has been estimated that plant based alternative protein will reach cost parity with traditional meat protein by 2023; microorganism-based proteins to reach cost parity by 2025, and animal-cell-based proteins to achieve it by 2032[vii].

There was a notable shift in investor focus late last year, from the plant-based segment [viii] to the next ‘big thing’: cell-based protein product development[ix]. The current state of the plant-based protein market has received criticism[x], due to an overwhelming number of products and brands, a perception of “health-washing”, and high prices. So, whilst creating food products in a lab using animal cells was once considered the extreme end of food innovation, it may become the healthiest blend for cost conscious investors and health-conscious consumers.

In line with consumers cutting costs in their food shopping habits, the alternative meat industry recorded a 4% decline in sales volume in 2022[xi] as consumers trade down, and the share price of major player Tattooed Chef was down by about four-fifths as of late last year[xii]. Additionally, as of June 2023, Beyond Meat’s market capitalization is $770M[xiii], 20% of the value reached at the time of its IPO in 2019, reflecting the significant slowdown in the sector. Despite the challenges, we expect when the long-awaited cost-parity is achieved over the next decade, the industry will be a major driver of deal activity.

So, coming back to the initial question, whether to buy an alternative protein steak for €5 or a conventional one for €50, we expect most individuals would opt for the more affordable alternative. As the market evolves and costs decrease, alternative protein has the potential to reshape the food industry, offering consumers more environmentally friendly and ethically produced protein options. So much so, that the two steaks will sit on the same store shelf.

This article has been prepared solely for information purposes and is not intended to function as a “research report.” In particular, this means that it is not intended, nor does it contain sufficient information, to make a recommendation as to the advisability of investment in, or the value of, any security.

Additionally, this article does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation of any offer to buy, or any recommendation with respect to, any securities. You should not base any investment decision on this article; any investment involves risks, including the risk of loss, and you should not invest without speaking to a financial advisor.

For additional important information regarding this article, please see insights and publications disclaimer.

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[i] https://www.food.gov.uk/sites/default/files/media/document/Alternative%20Proteins%20for%20Human%20Consumption.pdf

[ii] https://www.globenewswire.com/en/news-release/2022/11/29/2564198/0/en/The-Global-Plant-based-Protein-Market-Revenue-to-Hit-17-4-billion-by-2027-at-a-CAGR-of-7-3-MarketsandMarkets.html

[iii] https://investors.beyondmeat.com/news-releases/news-release-details/beyond-meatr-announces-pricing-initial-public-offering/

[iv] https://www.nytimes.com/2019/05/02/technology/beyond-meat-ipo-stock-price.html

[v] https://www.cnbc.com/2019/09/14/beyond-meat-stock-how-the-alternative-meat-company-surged-500-percent.html

[vi] https://www3.weforum.org/docs/WEF_White_Paper_Roadmap_Protein.pdf

https://www.ox.ac.uk/news/2021-11-11-sustainable-eating-cheaper-and-healthier-oxford-study

[vii] https://www.bcg.com/publications/2021/the-benefits-of-plant-based-meats

[viii] https://research.rabobank.com/far/en/documents/459657_Rabobank_Talking-Points_Fereday_Dec2022.pdf

[ix] https://www.just-food.com/features/leading-the-charge-the-companies-at-the-cutting-edge-of-cell-based-protein-product-development/