In a world grappling with a pressing need to preserve resources and mitigate global warming, the alternative protein market has emerged as a transformative force with the potential to substantially reduce emissions and create a more sustainable food ecosystem.
According to estimates, transitioning to alternative proteins could contribute between 14% and 20% of the necessary emissions reductions to meet the 1.5°C target set by the Paris Agreement until 2050. Moreover, by freeing vast expanses of land from environmentally destructive animal agriculture, this shift could save an astounding 39 billion cubic metres of water worldwide by 2035.
Despite the market downturn, the sector is resilient and investor appetite remains healthy as demonstrated by start-ups securing $3.5 billion in funding in 2022. Supported by the growing demand for alternative proteins – projected to surpass $290 billion by 2035 and good exit prospects, Nadim El Khazen, Partner at PeakBridge VC, commented, “Large food players use M&A as a key to innovation within the space, averaging lower R&D spend than other industries”.
Dissecting the alternative protein market
The alternative protein market can be segmented into four sectors – each representing different approaches and avenues within the broader alternative protein landscape and offering unique opportunities and challenges.
Beyond Meat and Impossible Foods are the two most prominent players in the plant-based protein segment. Beyond Meat, in particular, has been a pioneer in the field and played an instrumental role in raising public awareness about plant-based meat and the impact of the $1 trillion meat industry.
While these leading players and others have made significant technological advancements and demand continues to rise in the US and other Western markets, resistance to plant-based proteins persist in countries where plant-rich diets are prevalent and meat consumption is considered a status symbol.
There are also sustainability and affordability concerns around certain plant-based proteins. One example is the water-intensive nature of almond farming for milk alternatives. Plant-based alternatives presently carry a higher price tag than traditional animal products. For example, plant-based meat is priced at twice the cost of beef, more than three times pork, and over four times the cost of chicken per pound.
Companies innovating on multiple fronts within the sector include Innovopro, a start-up based out of Israel has been using a natural process to extract chickpea protein, which can be used as a base to make a range of products from ice cream to protein bars. The company products enable producers to create clean label products with significantly less ingredients.
Minor Figures, a UK-based carbon-neutral manufacturer of 100% plant-based drinks, focuses on producing plant-based products that are also carbon neutral. Another company, Umiami, is looking to produce whole cut vegan chicken using a process called Umisation. The start-up reports energy savings of 25% and 50% less water and land requirements, while creating half of the standard emissions.
Insect based proteins
Insect-based proteins are a sustainable, nutritious protein source that can be used in various food products such as protein bars, snacks, and even burgers. They are packed with essential amino acids, healthy fats, and vitamins and currently supplement the diets of approximately 2 billion people across Asia, Africa, and Latin America.
In the EU and other Western markets, the situation is somewhat different. Cultural barriers and regulatory and safety concerns have slowed the adoption of insect-based foods. Nevertheless, insect farming in Europe is experiencing significant growth as an industry, with the production of insect-based products expected to reach 260,000 tonnes by 2030, a substantial increase from the current level of just a few thousand tonnes.
Furthermore, there is a projected surge in demand for such products in the upcoming years. By 2030, the consumption of insects and their derived products by Europeans will reach 390 million, a remarkable rise from an estimated 9 million in 2019. Most of the market share will go to bars, other snacks, specialty food ingredients, and pasta. The market share represented by whole insects will sit at around 25%.
While start-ups creating insects for food have been around for some time, we are seeing a new wave of start-ups focused on using insects to create animal feed following the $250m raise by InnovaFeed and $175m raise by Ynsect.
ENORM, a Danish start-up, produces insect protein from black soldier fly larvae, for animal and aquafeed. The company raised funding in 2022 to build an expanded factor that can produce an expanded factory producing around 11,000 tonnes annually. Another start-up, Agroloop transforms organic waste into a sustainable protein source by upcycling organic materials while Better Origins uses AI to empower its insect farms aiming to eliminate food waste.
Mycoprotein is derived from fungi and produced via three primary fermentation processes – traditional, biomass, and precision. It is commonly used in various food products as a meat substitute and is known for its high protein content and meat-like texture.
Due to the rising demand for plant-based foods, the market for Mycoprotein is experiencing rapid growth. Mycoprotein production has also become more efficient and cost-effective in recent years, enabling companies to scale up production to meet rising demand. The market for precision fermentation alone is forecast to grow from $1.6 billion in 2022 to $36 billion in 2030.
TurtleTree has developed a precision fermentation technology that produces milk-based products, the world’s first precision fermentation-produced lactoferrin —LF+—a high-value bioactive milk protein and one of the most powerful parts of cow’s milk. Another company, Imagindairy, uses precision fermentation to produces non-GMO and animal-free dairy products from microorganisms through its proprietary precision-fermentation technology and has recently received an investment form Danone.
While other companies are using the process to create more exotic flavours, Mushlabs, a German biotech company, uses fermentation to create sustainable foods from the roots of mushrooms. Mazen Rizk, CEO of Mushlabs, commented, “food is always a personal experience such as using mushrooms and fermentation which both have been staples of our kitchens for decades. We are able to create exotic flavours that goes beyond what is in the market and are now able to produce our products at scale”.
Other companies are creating proteins out of air using a combination of processes, such as Solar Food; based out of Finland, it produces natural protein using air, electricity and fermentation.
Lab grown meat
The market for lab-grown meat is experiencing rapid growth and holds the potential to revolutionise the global food system while making a significant environmental impact. Traditional animal agriculture, a leading cause of greenhouse gas emissions and land degradation, stands to be transformed by this emerging industry.
Prominent companies in the US, Israel, and the Netherlands are currently focused on establishing large-scale farms equipped with multiple bioreactors to enhance production scale. They are working to overcome technical hurdles in scaling production, reducing costs, and addressing regulatory frameworks and public acceptance, but there is a significant way to go. Investors will need to pony up substantial capital in the range of hundreds of billions to facilitate a successful industry scale-up.
The industry is still in its early stages and most companies are still developing their products. Dutch company Meatable is a developer of cell-cultured meat and has raised over $60 million in funding and recently achieved a world-first breakthrough by producing high-quality cultivated meat in 8 days. Vow, out of Australia, has begun the regulatory approval process to launch a line of cultivated quail called morsel in restaurants by 2024. The company has gained a lot of attention for cultivating mammoth based meatballs.
Alternative proteins can forge the path to sustainability
The global food system is a major contributor to climate change, accounting for 34% of global greenhouse gas emissions. This presents a pressing issue that demands mitigation efforts, especially considering the projected increase in meat demand by 50% – 100% between now and 2050. Such an escalation would lead to 5-10 gigatons of CO2-equivalent per year of emissions from livestock and related activities alone.
By reducing the reliance on traditional livestock farming, these alternatives can significantly decrease greenhouse gas emissions, minimise land and water usage, and mitigate the detrimental impacts of the current global food system on climate change and the environment. Moreover, they offer a viable solution to meet the growing demand for protein as the world’s population continues to increase.
Despite these promising advancements, we are still in the early stages of exploring and implementing these alternatives. Transitioning to an alternative protein system will require substantially more funding and financing to support research, development, and large-scale implementation and deeper collaboration and coordination among governments, industries, and scientific communities worldwide.
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