1. FDA review of cultivated meat removes regulatory roadblocks
FDA’s historic “green light” of UPSIDE Foods’ cultivated chicken has paved the way for consumers to access cultivated meat products in U.S. restaurants and retail – we anticipate that the first U.S. launch of cultivated meat will happen this year. With the first step of the regulatory approval process cleared, UPSIDE Foods has now moved on to securing a USDA grant of inspection.
Cultivated meat represents a new era in food production. It can help feed a growing world safely—in a way that does not drive antimicrobial resistance, pandemic risk, food insecurity, or deforestation. Regulatory clearance is a milestone that GFI has been dedicated to realizing since our founding in 2016.
What does this decision mean?
U.S. chefs may soon be able to add cultivated chicken to their menus.
Startups hoping to sell cultivated meat products in the U.S. now have reason to expect similar FDA consultation– exciting news for the 40+ cultivated meat companies in the U.S.
The industry may experience a significant de-risking. We anticipate that this will usher in a new wave of investment, talent, and B2B technological innovations.
By continuing to nurture this budding industry through public investment, the U.S. government can unlock massive benefits for Americans, including creating tens of thousands of new clean manufacturing jobs.
FDA clearance in the U.S. helps to lay the groundwork for cultivated meat to be cleared to enter markets around the world. Many countries defer to U.S. guidance on food regulation and labeling, so U.S. regulatory approval of cultivated meat is likely to usher in additional approvals in other markets.
GFI continues to advocate for fair public policy and public research funding for alternative proteins around the globe.
2. Mergers and acquisitions are on the upswing
GFI expects to see an increased amount of mergers and acquisitions in the coming year as companies with stronger financial footing—incumbents and startups alike—acquire firms with valuable technologies, manufacturing processes, and talent that are struggling to maintain a financial runway. At the Bank of America Alternative Proteins Conference that was hosted in collaboration with GFI, Managing Director of SOSV’s IndieBio Po Bronson shared that “if an [alternative protein] company is worth $1 billion dollars or more, they are almost certainly shopping acquisitions as we speak.” Private equity firms and select SPACs formed to take alternative proteins companies public will likely also join the fray.
Notable acquisitions from the second half of 2022
Plant-based dairy company Lavva was acquired by lead operating partner Next in Natural, a New York-based venture studio, together with Lavva Founder and Chief Growth Officer Liz Fisher.
Wicked Kitchen, a plant-based company developed by chefs Derek and Chad Sarno, acquired plant-based seafood company Good Catch, which was also founded by the Sarno brothers.
Brazilian plant-based company Mr. Veggy was acquired through an LBO by Grano Alimentos, the market leader in the production of frozen vegetables in Brazil, via its financial sponsor Arlon Group.
We have already begun to see such activity in 2023. Moolec Science, a plant molecular farming company, acquired LightJump Acquisition Corporation, a publicly traded special purpose acquisition company (or SPAC), through a reverse merger for $138 million. This resulted in the combined entity trading on the NASDAQ under the ticker symbol MLEC and MLECW beginning on January 3, 2023. As part of the transaction, the company received $10 million of development capital from undisclosed investors on the same date via a private placement. This liquidity event adds Moolec to the still small, but growing, list of alternative proteins companies that are publicly traded.
Companies seeking an acquirer are encouraged to list themselves on GFI’s Fundraising Database.
3. ESG investment and alternative proteins align
The alternative protein industry is increasingly being recognized as relevant to ESG investing.
Evidence for this is everywhere
Alternative proteins and food sustainability were notably part of the conversation at COP27, the 2022 United Nations Climate Change Conference.
Leading data provider, PitchBook, incorporated alternative proteins in their Climate Tech Market Map.
The Boston Consulting Group (BCG) and the Rockefeller Foundation labeled alternative proteins as a critical mitigation solution in their paper What gets measured gets financed, and estimated that alternative proteins have an annual unmet funding need of more than $40 billion.
In response to GFI’s 2022 annual investor survey, 80% of investors who invest on behalf of an ESG or impact fund reported that alternative proteins are part of their funds’ core mandates.
Amid a challenging and volatile investment environment, ESG remains a bright spot. According to Goldman Sachs’ Equity Research report ESG Tracker: Ongoing ESG resilience in the face of broader equity outflows, global ESG public equity fund flows meaningfully outpaced non-ESG fund flows in 2022 through November, with ESG funds seeing inflows of $97 billion, while non-ESG funds saw outflows of -$81 billion.
Alternative protein companies may be able to look to ESG-oriented investors for funding in the near term as the ESG considerations driving investment are only becoming more pressing over time. Meanwhile, evidence continues to build that investments in alternative proteins are critical to moving the needle on climate.
In fact, a report by BCG states that “investment in plant-based proteins has the highest CO2e savings per dollar of invested capital of any sector,” but “despite the favorable economics and attractive potential, including ready consumer interest, investment in sustainable foods is only a fraction of that committed to other sectors.”
As measuring the ESG characteristics and potential impact of portfolio companies is increasingly important to investors, the GFI & FAIRR Alternative Proteins ESG Reporting Frameworks may help unlock additional capital.
4. Large incumbents partner with alternative protein companies
Strategic partnerships are vital to advancing the alternative proteins sector. As a nascent industry, alternative proteins stand to benefit from affiliation with large established entities. These affiliations make for an easier path to market through resource pooling, risk mitigation, technology convergence, supply chain optimization, and brand recognition.
As the sector matures, there is marked interest from large incumbents in leveraging the knowledge and innovation of emerging companies.
Recent notable partnerships
Nestlé partnering with fermentation startup Perfect Day to develop products using Perfect Day’s animal-free dairy protein. The first product, an animal-free milk, will launch later this year.
Large CPG brand Bel Group, maker of Babybel Cheese, announcing two separate partnerships with Standing Ovation, a Paris-based precision fermentation company that produces animal-free casein, and Superbrewed, a fermented protein ingredient company
GOOD Meat entering into a strategic partnership with large ingredients supplier ADM, who will help optimize cell culture nutrients to accelerate GOOD Meat’s production process.
One of Asia’s largest food and biotech companies, CJ CheilJedang, entering the cultivated meat industry in partnership with KCell Biosciences, a startup focused on cell culture media. The companies will construct a cell culture media facility in Busan, South Korea, later this year.
Major Israeli food producer Tnuva announcing a collaboration with biotechnology company Pluristem to develop and commercialize cultivated meat products.
Top Consumer Packaged Goods (CPG) company Kraft Heinz partnering with AI-powered plant-based startup NotCo to create a joint venture called The Kraft Heinz Not Company that will develop co-branded plant-based products across a variety of categories.
Kroger announcing a strategic partnership with Impossible Foods to develop exclusive plant-based products for Kroger’s Simple Truth private label line.
GFI’s upcoming 2022 State of the Industry Reports will include summaries of last year’s partnership announcements across plant-based, fermentation, and cultivated platforms. New partnerships are also published each month in our Alternative Protein Opportunity newsletter.
We expect to see a continuation of strategic alliances in the coming year as large incumbents enter into or expand their interests in the sector while startups take advantage of collaborative opportunities.
5. Capacity takes center stage
Scaling and infrastructure constraints throughout the value chain have become a pressing challenge for companies across all pillars of the alternative protein ecosystem. In response, companies, governments, and investors are moving quickly to identify and address bottlenecks.
In an effort to support fermentation companies seeking capacity, Synonym Bio has launched its Capacitor database, a free resource listing global microbial fermentation capacity including facilities, equipment, and services. GFI is a knowledge partner for the initiative.
2022 saw a number of new facilities opened or announced across the globe.
California-based Eat Just broke ground on its new production facility in Singapore. The $120 million facility will be operational in two years.
Nestlé announced plans for a $73 million production plant in Serbia. The facility will be used solely to produce Nestlé’s plant-forward Garden Gourmet line.
GOOD Meat, the cultivated meat subsidiary of Eat Just, recently broke ground on Asia’s largest-ever cultivated meat facility, located in Singapore.
Germany-based bioengineering company The Cultivated B. announced the opening of a 130,000-square-foot cellular agriculture facility in Ontario, Canada, in partnership with Ontario Genomics, a government-funded nonprofit.
Mycoprotein producer ENOUGH has opened its flagship production facility in the Netherlands. The facility is 15,000 square meters and has an initial capacity of 10,000 tons per year, with plans to scale to 60,000 tons by 2027.
ScaleUp Bio, a joint venture between large ingredients company ADM and investment firm Temasek, will open two precision fermentation facilities in Singapore in early 2023.
And, in early January 2023, the Israel Innovation Authority announced a new RFP for the establishment of infrastructures to “maintain and expand the strength of its developmental ecosystem in the field of alternative proteins.”
6. Consumer insights become increasingly valuable
With a wave of alternative protein companies already bringing products to foodservice and retail, and with dozens more planning product launches this year, consumer adoption is key to long-term success. On the heels of plant-based milk securing a 16% market share of the conventional milk market in U.S. retail, industry leaders are looking to other categories to carve out similar market capture. Yet there is still much work to be done to understand and deliver on the drivers of consumer acceptance and adoption. There are considerable differences in consumer preferences, priorities, and buying habits across geographies, formats, and technologies.
New consumer research commissioned by GFI APAC examines motivations for consuming alternative seafood across Singapore, Thailand, Japan, and South Korea. A guaranteed lack of mercury or other heavy metal contamination is a top driver of interest in alternative seafood across all countries. Concerns about taste, however, are a top barrier to future purchase and consumption of plant-based and cultivated seafood. Health benefits and a lack of “fishy smell” were also key drivers.
A new study published in the journal Nature uses household scanner data for an in-depth analysis of plant-based meat purchasing behaviors. Researchers found that while about 3% of households only purchased plant-based meat products, about 86% of plant-based meat consumers also bought ground meat, indicating that formulating with meat-eaters in mind remains a top priority.
GFI Europe recently conducted a survey examining consumer attitudes in France, Spain, Germany, and Italy. The survey, which had 4,096 respondents, found that more than half of consumers report reducing their conventional meat consumption over the last 5 years, and that more than half of consumers say they are willing to buy cultivated meat.
A recent survey of UK consumers indicated that more than one third would likely buy or eat hybrid plant-based/cultivated meat if it were accessible.
Research conducted by academics from universities in the U.S. and the UK found that consumers largely believe animal-free dairy is a viable choice,” to complement a market of conventional dairy products and plant-based dairy products. Few respondents expressed strong opposition or strong enthusiasm, suggesting that education and clarity will be vital to prevent consumer hesitancy and lead to consumer adoption.
Regardless of how many technological and regulatory advances the alternative protein sector achieves, consumer demand is absolutely key. GFI and others interested in advancing alternative proteins will prioritize consumer insights in the coming year. If you are interested in conducting consumer research about alternative proteins, please contact us.
7. An increased mandate to de-risk will lay the groundwork for agile startups and optimized products
Volatile market conditions and less-than-favorable product performance by a few key players have resulted in greater scrutiny for emerging companies. In the long run, this will be beneficial for the sector as a whole, with startups across all platforms working to de-risk investment and go-to-market strategies.
What this means
Startups will spend more time conducting consumer research to optimize for taste and price, thereby improving performance in retail and foodservice.
Startups should see an alleviation of pressure to rapidly grow at all costs.
Startups can take advantage of increased opportunities to educate both generalist and specialist investors about their technologies and companies, helping to manage expectations.
Corrections in valuations should benefit long-term outcomes for both startups and investors.
Talent working with weaker startups will become available to stronger ones following liquidity events, mergers, and acquisitions.
Startups will conduct more Life Cycle Assessments and Techno-Economic Analyses as part of the fundraising process, which will help the sector as a whole.
Non-dilutive and creative funding resources will become more attractive to startups, some of which will have better outcomes vs. solely seeking venture capital.
GFI has many free resources available for startups. Access them here.
Let’s stay in touch
The alternative proteins industry promises to have many exciting innovations and developments in 2023. To receive the latest industry insights throughout the year, sign up for our newsletters.