Fake Meat May Save The World
A plant-based diet is one of the most practical and sustainable solutions to feeding a growing and warming planet. Let’s have a look at the market forces driving the trend, and some of the companies involved.
Written by Victoria Kent, Senior Investment Specialist
Photo by Markus Spiske on Unsplash
This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.
Participating in Veganuary? Keen to learn more about plant-based meat? Whether you are a veggie-loving herbivore or a T-Rex level carnivore, you would have heard of alternative protein by now, if not tried it for yourself.
'Alt-protein' as it is known, is defined as meat, egg, or dairy products that are plant-based, cultivated, or fermentation-derived. It is essentially 'meat' but not produced in a conventional animal agricultural format. Also known as fake meat, fishless fish, or meatless burgers.
There are hundreds of examples on supermarket shelves.
And while still niche, you may be surprised to learn just how fast the industry is growing. UBS calls plant-based meats "the biggest revolution in food in more than 20 years", forecasting it to reach $51 billion in size by 2025.
Some even believe plant-based meat may eventually succeed in taking over meat as the primary protein source. This is a pretty controversial claim, given meat is an incredibly popular product consumed by billions of consumers often several times a day.
Certainly, the trillion-dollar meat industry – often the recipient of government subsidies – will not be encouraging this revolution.
So where is this growth coming from?
Let’s have a look at the market forces driving the trend, and some of the companies involved.
Demand side – there is clearly a desire for food that is not just delicious but also sustainable.
Part of the popularity of alt-protein is the so-called 'eco indulgence'; the perceived sustainability or ecological benefit.
Two of the major environmental challenges we face today – greenhouse gas emissions from livestock and loss of arable land – stem from animal farming. While these industrial agriculture practices are driving the problem, creating a more sustainable food system is part of the solution.
This is the driving force behind American innovator Impossible Foods. Their core mission is to make the food system sustainable by 2035:
"By eating meat made from plants (instead of meat made from animals), we can drastically cut our carbon footprint, save water supplies and help ensure that our planet is here not just tomorrow - but for future generations."
Source: One Green Planet
In addition to environmental concerns, healthy eating trends and animal welfare concerns are motivating consumers to try alt-protein. Interestingly, these motivations vary quite significantly by region.
In one US study, 95% of respondents claimed health reasons to be a reason for eating alternative protein, with 75% calling it their primary reason (McKinsey). This is different in the UK and Europe, where environmental factors are more of a consideration for choosing alt-protein.
For the health buffs out there, research to date suggests many of the health benefits of cell-based meat are largely speculative. Currently, fake meat is highly processed, including ingredients like soy leghemoglobin, so those looking to eat them for health benefits should be looking at the ingredients list.
Supply side – from the lab to your plate
Plant-based eating has become big business only recently. Companies such as Beyond Meat (NASDAQ:BYND) command multibillion-dollar valuations, despite not being currently profitable.
Enabling the increasing demand is economies of scale and technological innovations. Because let’s not forget just how highly technical and laboratory-driven alt-meats are.
Beyond Meat has historically spent around 10% of its revenue on its key strategic advantage: R&D capability. The company also excels at continually developing new products and making quality improvements.
Impossible Foods also invests heavily in R&D. CEO Pat Brown is a former biomedical researcher who realised early on that to change behaviour and encourage consumption of alt-protein, moral-based arguments alone wouldn’t cut it.
He knew alt-meat would also need to taste better than 'real meat' and set out to achieve it. Brown and Impossible Foods spent 2.5 years researching the biomechanical mechanisms of meat – its unique flavour, behaviour, aromas, textures, juiciness etc. – before they even commenced creating their first product: raw ground beef made entirely from plants.
This type of 'meat' was chosen strategically for the US market, as the burger is the largest single category of meat and "was the ideal vehicle for communicating to consumers that delicious meat doesn't have to come from animals”. Since then, they have launched pork, sausage and chicken products.
Impossible Foods is not currently publicly traded, although rumours of an IPO have been around for a while.
Both Beyond Meat and Impossible Foods are examples of companies using plant-based protein; where protein is extracted and isolated from plants, then combined with other plant-based ingredients. The goal is to make the product as meaty as possible.
Another form of alt-meat is cell-based or 'cultivated meat', where an animal cell is extracted from an animal and grown in a lab culture to create a piece of meat.
Lab grown meat has been around since 2012 and the process is similar to brewing beer or making yogurt. It is thought to be faster, more environmentally-friendly, and (in the future) a cheaper way to produce food for a growing population (compared to traditional animal farming).
Example companies in this space include JUST Meat and Upside Foods (formerly known as Memphis Meats), the latter famously backed by entrepreneur Richard Branson. The vision of Upside Foods is to build a food system where everyone has access to delicious, humane and sustainable meat.
Given the global population is expected to reach 8.6 billion by 2030, a plant-based diet is one of the most practical and sustainable solutions to feeding a growing and warming planet.
Just what a plant-based diet will look like, and whether or not it will eliminate animal meat consumption altogether is anyone’s guess.
What is clear is the pace at which consumers adopt this trend, and its flow on effects to other industries (chemicals, machinery, food production and food retail), will have major ramifications for the planet as well as investment portfolios all over the world.