Alternative Foods: What Investors Should Know

Gone are the days when plant-based food was only for a small segment of consumers. The global food and beverage industry has experienced relatively stable conditions for some time, with minimal changes around key product categories sold through the various retail and food service channels. Recent industry developments illustrate the growth in plant-based alternatives that have brought disruption, boosted by consumer behavior and a mix of ethical, health and environmental concerns. A December 2021 survey by Kerry, a leading global ingredient and flavour tech company, found that over 60% of global consumers say they plan to substitute meat and dairy products for healthier plant-based alternatives.

In a March 2021 study by plant-based dating app Veggly, 90% of vegan respondents cited animal welfare as their main reason to cut meat from their diet. The same study also reported that 64% of vegans said they chose veganism for environmental and sustainability reasons. Lastly, 53% cited health concerns (e.g., nutrition and immune systems) as main promoters for a vegan lifestyle.

This bodes well for the alternative foods industry, a sector experts say is poised for strong growth in the years to come. The projected significant growth of the alternative food market has already attracted the biggest food brands, a clear signal that the space is a very promising investment destination. If you're considering putting your money in this market, here are some things you should know.

Alternative Foods: A Booming Market

According to Statista, the plant-based food worldwide sector represented $35.6B in 2021, and is expected to grow to $44.2B by the end of 2022 and reach $77.8M by 2025.

Experts predict significant spikes in consumer demand for alternative foods in the future. A.T. Kearney, a global consultancy firm, projected that lab-grown and plant-based meat will dominate the market by 2040.

These deals are all positive indicators for those willing to make substantial investments in the alternative food space. But given its rapid expansion and highROI potential, the space is bound to get saturated.

Thus, investors who will bet early to secure even just a small piece of the market are in great position to realize significant dividends in the coming years. At Finalis, we can help you find deals and optimize them for better impact on your business.

Pioneering Companies

Alternative food startups are reporting significant success. Canada-based The Very Good Food Company showed a stunning 680% revenue increase 1Q20 to 1Q21. Also, US-based Beyond Meat Inc. reflected this successful trend when they opened January 2022 with an impressive 13% stock increase. Partnerships with fast food chains like Pizza Hut and KFC contributed to its recent success.

Also worth noting is Impossible Foods, another plant-based meat substitute company, who recently enjoyed an 85% spike in their quarterly revenue YoY by December 2021. This came after the company closed a $500M funding round last November 2021, increasing their total funding to over $2B.‍

Tech Innovations to Accelerate Adoption

Various plant-based food industry players are integrating emerging technologies to meet the surging market demand. Experts believe that utilizing tech to make alternative foods look and taste like actual meat or dairy will help encourage more people to embrace plant-based diets.

According to the International Food Information Council Foundation, 88% of consumers say that taste is the biggest factor when purchasing a food product.

Among some of the initiatives leading the space is “cell-culture meat,” where actual animal meat is produced inside production labs using animal cells. A number of alternative food startups have announced plans to produce cell-cultured meat products by 2022, including MeaTech3D, Mosa Meat, and UPSIDE Foods. Another notable innovation that's expected to further push alternative food market growth is extrudable fat technology. This particular tech gives plant-based meats authentic fat textures like marbling, a taste trait sought out by meat consumers. Yet another tech advance, prolamin technology, enables alternative food producers to use natural corn proteins to make plant-based cheese products taste like dairy-based cheese. This particular innovation will allow plant-based cheese to stretch, melt, and bubble like actual cheese. 

Retail Giants & Restaurants Want A Slice

Giant food retailers and restaurant chains are taking notice of the growing popularity of alternative foods among their target consumers. Among the evidence supporting this, we have Unilever, one of the world's biggest food and beverage manufacturers, poised to make $1.2B revenue from their plant-based meat and dairy sales within the next five to seven years – that's their 2020 sales revenue multiplied five-fold.

In addition, Tesco, the largest grocery store chain in the UK, expects a 300% sales growth of their plant-based products. Moreover, familiar fast food brands like KFC, McDonald's, and Burger King have been rolling out plant-based products like vegan burgers and vegan chicken nuggets to position themselves solidly as the alternative food market continues to expand. 

Alternative Foods: Whetting Investors’ Appetites

Serious investment activities took place in the alternative foods space in 2021. According to the Good Food Institute (GFI) State of the Industry report, capital investment in alternative food enterprises totalled $116M within just the first six months of 2021. This figure exceeded overall total funding in 2020, a clear undeniable investment appeal the industry exudes.

Since then, the industry has seen major action. Among the notable investment transactions in the alternative food market in the second half of 2021 are:

• In December 2021, Finless Foods, a cellular-agro tech company designed to create plant-based and cell-cultured seafood alternatives, raised $41.3M in a Series B round led by Sand Hill Angels.
• In October 2021, Impossible Foods secured $500M funding in a round led by Mirae Asset Global Investments.
• In October 2021, food technology startup Better Brand closed a $2.5M funding round led by Seven Seven Six, a venture capital firm founded by Reddit co-founder Alexis Ohanian.
• In September 2021, Plantible Foods received $21.5M in a round led by Astanor Ventures and Piva Capital Inc. to fund the construction of its first commercial factory. 
• In September 2021, Lever, an alternative protein venture capitalist, raised $80M to fund early-stage plant-based and cultivated meat and dairy companies. Its portfolio includes Turtle Tree Labs, Good Planet Foods, and The Better Meat.

Sources: Deloitte, Statista, Bloomberg, Business Insider, Forbes, Pitchbook, Food Navigator, The Guardian, Visual Capitalist, Food Business News