Study release: "Plant-based meat manufacturing capacity and pathways for expansion"
Read more
CSRD: Opportunities for alternative protein leaders in the food & beverage industry
Read more
Bright Green Partners Logo
Contact
Bright Green Partners Logo
Contact
Published November 29th, 2023

Investing in alternative proteins: what you need to know

Although the World Economic Outlook has predicted a global economic slowdown from 3.4% growth in the previous year to 2.8% this year, the alternative protein sector is experiencing a surge in innovation.

Investing in plant-based, fermentation, and cultivated companies during this downturn could be advantageous because there will be less competition for talent and resources. This can allow for the establishment of strong foundations and position the companies for long-term growth as the economy inevitably improves. However, investing in alternative proteins can be challenging without proper knowledge of the market and industry trends.

In this article, we will provide an overview of the plant-based, fermentation, and cultivated food markets, discuss the current trends and challenges, and offer tips for investors considering investing in alternative proteins.

A positive perspective on the plant-based food market

Despite recent negative perceptions and a temporary dip in demand for plant-based meat, the alternative protein industry remains resilient and promising. Companies in this sector, like in any other industry, may face difficulties in launching products that resonate with consumers. The success of plant-based food products relies on multiple factors, encompassing product quality, pricing strategies, go-to-market strategies, and evolving consumer preferences, among others. It extends beyond mere demand.

While food industry leaders such as Beyond Meat and Heck have encountered significant challenges, it is crucial to recognize the intricate dynamics of the market and consider the broader industry landscape, along with the prevailing financial climate. By acknowledging these complexities, investors and businesses can make more informed decisions and navigate the plant-based food industry with greater insight and adaptability.

It’s important to note that there are many plant-based food companies undergoing expansion and attracting substantial investment. For example, THIS™, a prominent plant-based meat brand, demonstrated remarkable growth within the chilled meat-free sector, contributing nearly £1 million to the expansion of the category in the first 13 weeks of this year. Moreover, THIS™ has emerged as the fastest-growing food and drink brand in the UK, boasting an impressive two-year annual growth rate of 246%. This surpasses major fast-moving consumer goods (FMCG) brands like Little Moons, Huel, and Gousto, further cementing the brand's position as a frontrunner in the plant-based food industry.

Taking a broader perspective beyond individual brands, it is evident that the market for plant-based foods exhibits robust demand and continues to undergo growth and evolution. Major retailers, such as Sainsbury's, forecast a significant rise in the number of individuals adopting meat-free diets. This growing trend is driving increased demand for vegan food products and contributes to the projected compound annual growth rate (CAGR) of 9.1% for the global vegan food market between 2023 and 2031.

The demand for plant-based foods remains strong and continues to grow and evolve

What’s more, while hype often creates short-term inflated expectations, the value of transformative technologies is proven over time; innovations like precision fermentation and cellular agriculture show promise for further sustainable and nutritious alternatives.

Undeniably, there is still ample room for improvement within the alternative protein industry, making it an exciting and dynamic space to watch - make sure you read our article for the bigger picture of the alternative protein industry.

The existing state of alternative protein investments

A recent GFI analysis revealed that, over the past decade, the alternative proteins sector has witnessed substantial private capital investments, with annual funding nearly doubling on average. Investments surged in recent years, peaking at a record $5.1 billion in 2021. However, 2022 saw a decline of 42% in funding, returning to pre-2021 levels.

The decline in funding aligns with broader market trends and economic conditions, including a reduction in global private funding and the impact of factors such as interest rate hikes, climate events, the pandemic, and geopolitical tensions.

Despite the slowdown, the alternative proteins sector remains dynamic and investor appetite for plant-based foods remains strong, with optimism about the industry's long-term potential and plans for continued investment in 2023, particularly in novel categories like fermentation and cultivated dairy. What’s more, while overall investment decreased, specific regions, particularly the Asia-Pacific and Europe, experienced notable growth.

Adding further momentum to this excitement, 2022 witnessed a notable de-risking event when UPSIDE Foods received FDA approval for its cultivated chicken. Several precision fermentation-derived products were also introduced in the US market. These developments indicate a maturing regulatory landscape and enhanced commercial viability for alternative proteins. Additionally, they pave the way for the creation of hybrid products that blend technologies from cultivated, fermentation, and plant-based sectors. These advancements are particularly appealing to investors looking for opportunities in diversified portfolios and long-term growth prospects.

UPSIDE Foods obtained FDA approval for its cultivated chicken, paving the way for the development of hybrid products blending various technologies

Trends and challenges in the alternative protein market

From shifting consumer preferences to regulatory complexities and market competition, these factors play a significant role in determining the success of plant-based, fermentation, and cultivated food companies and influencing investor decisions:

1. Diversification and optimization

Consumer preferences have shifted towards more diverse and innovative product offerings, including plant-based seafood, mycoprotein-based products, and plant-based ready meals. There is a growing emphasis on clean labels, natural ingredients, and minimally-processed products. Moreover, consumers are increasingly looking for alternative protein foods that not only mimic the taste and texture of animal-based products but also provide additional health benefits, such as being lower in saturated fat and cholesterol.

By investing in companies that utilize a range of alternative protein technologies, investors can tap into various segments of the growing market and capture opportunities arising from changing consumer preferences. Furthermore, hybrid products that combine different technologies demonstrate considerable potential, allowing investors to access the synergies and benefits of multiple approaches in a single offering.

For more information about consumer expectations, make sure you check out our analysis of the plant-based trends to watch out for in 2023.

2. Differentiation through unique value propositions

One notable trend is the intensifying competition among various players, including plant-based start-ups, established conventional meat companies, and supermarket own brands. As the popularity of alternative proteins grows, more companies are entering the market to capitalize on the opportunities.

To stand out in the face of increased competition and capture significant market share, companies in the alternative protein industry, particularly in the plant-based sector, may need to differentiate themselves by offering unique value propositions. This could involve emphasizing attributes like superior taste, health benefits, or sustainability credentials.

To thrive amidst growing competition, plant-based food companies must differentiate themselves through unique value propositions

3. Navigation of regulatory hurdles

Regulatory issues pose another challenge for alternative protein companies and may act to deter those interested in investing in alternative proteins.

Investors are more likely to be drawn to companies that have positioned themselves in markets with supportive regulatory frameworks as it reduces uncertainties and potential obstacles. This strategic decision showcases a proactive approach to navigating novel food regulations, which instills confidence in the company's ability to execute its business plans effectively.

Furthermore, a favorable regulatory environment can facilitate faster market adoption and expansion, resulting in stronger financial performance and increased potential returns for investors.

4. Establishment of a reliable supply chain

Sourcing sustainable and high-quality plant-based ingredients at scale can be difficult, necessitating collaborations and strategic investments. Companies with resilient and efficient supply chains will be better positioned to meet market demands and maintain product consistency, which can positively influence investor confidence.

How to invest in plant-based foods and other alternative proteins

Investing in plant-based meat and other alternative proteins can be an attractive opportunity for institutional investors looking to capitalize on the growing demand for sustainable and alternative protein sources. However, finding the right startups or established companies with substantial growth potential requires astute scouting and evaluations. Bright Green Partners excels in this regard, offering expertise not only in technical assessments but also in evaluating the commercial viability of potential investments.

When it comes to plant-based stocks, it's worth noting that some prominent names, such as Beyond Meat and Oatly, have faced recent challenges in the market. Nevertheless, these setbacks don't overshadow the overall positive trajectory of the plant-based food industry; this sector continues to exhibit strong growth potential. Investors seeking to select plant-based stocks should consider factors like company performance, market share, sustainability efforts, and competitive advantage. Thorough research or advice from experts is essential for informed investment decisions.

Still unsure?

For assistance in evaluating the latest trends and projections in the alternative protein industry, feel free to contact us at Bright Green Partners. We can help you make informed investment decisions by objectively assessing cultivated, fermentation, and plant-based companies and providing valuable insights into the investment landscape.

Disclaimer: Please note that the content of this blog post is intended solely for informational and educational purposes and should not be construed as investment advice or recommendation to buy or sell any securities or engage in any investment strategy.

Ready to discover what alt protein strategies could mean for your business? Discuss it in a 30 minute call with our Managing Partner, Floor.
Start now
Get our newsletter: tailored for alt protein decision-makers
Newsletter CTA
By subscribing, you are agreeing to occasionally receive information about our relevant products and services.
Recent posts
Take Action

How can we help your business?

Schedule a 30 minute strategy call with our Managing Partner, Floor.
Contact
Subscribe for impact: Stay informed with our latest expert insights in sustainable food alternatives
Newsletter CTA
By subscribing, you are agreeing to occasionally receive information about our relevant services.
Bright Green Partners Logo
Bright Green Partners B.V. 
Chamber of commerce number: 80727077 
Tax number: NL861776367B01
Bright Green Partners. All rights reserved © 2024
Join us on Linkedin