The Alternative Meat Market
What’s going on with Impossible and Beyond? And what else it out there?
At the heart of the alternative-meat sector is an existential crisis that has become hard to ignore. Two variables — the world’s finite resources and the uncapped and exponential growth of the world’s population — make our current consumption of meat unsustainable. These facts give meaning to the alternative meat sector’s 20.7 billion global market size and its rapid ascendance.
Alternative meat provides a solution for interlaced global problems: the climate crisis and food insecurity. Meat and dairy production accounts for around 14.5% of global greenhouse gas emissions — more than all the traffic in the world — and scientists say that a diet shift will be necessary to manage rising temperatures. Meanwhile, according to a UN report, by 2050 the demand for meat is expected to rise more than 50 percent and the global population is forecasted to reach almost 10 billion. This not only provides a great threat to our ability to stifle the climate crisis but also presents a challenge to global food production, as already 80% of global farmland is used to raise animals. Enter the solution: alternative meat, which could potentially decrease greenhouse gas emissions by a factor of ten and uses between 45–99 percent less land.
Covid-19 has increased the urgency and appetite for a shift away from the traditional meat industry. The pandemic has revealed the fragile nature of traditional meat’s supply chains and has caused retail grocers and venture capitalists alike to rush to alternatives. Traditional meat’s supply chain is bogged down by middle men and a surplus of connecting links, which can disrupt distribution easily. For example, one meatpacking plant in South Dakota is responsible for 5 percent of US pork production and when it closed during the pandemic, prices hiked up precipitously. Alternative meats took advantage of the gap left in the market and were able to increase sales to grocers by 264%. Increased demand for alternative meat products were felt with equal strength outside of the US. The pandemic-induced market adoption of alternative meat has contributed to the expectation that the market will size at 23.3 billion by 2024. This is aided by the fact that alternative-meat companies are molding their supply chains to be impenetrable, with companies like Impossible Foods partnering with the OSI group to reduce shipping, increase quality, reduce labor supply, and move products closer to urban areas.
Regarding distribution channels, alternative meat incumbents like Impossible Foods and Beyond Meat have been moving into fast-food chains like Burger King, White Castle, and Subway. Incumbents ability to scale and manage their supply chain has allowed them to price their products for low-to-medium income buyers. One remarkable example of price parity is at Dunkin Donuts, where Beyond Meat costs as much as regular meat. Yet, few emerging startups are following Impossible and Beyond’s lead. This may be because the cost of alternative meat is a function of scale, supply chain, research and development, or go-to-market strategy, all of which remain underdeveloped at the early stage. While alternative meat companies have the potential to become accessible to the underserved consumer, their current price-point make affluent consumers their primary market.
Factors of regulatory constraints, cultural considerations, and cost present frictions to consumer adoption of alternative-meat. Government policy plays a substantial role in the price and distribution of alternative-meat products, especially in the U.S., where traditional meat is heavily subsidized. Ideas of a “meat tax” or subsidies for alternative meat have been recently debated and gaining traction in the US and EU. Additionally, regulatory hurdles may burden the emergence of cell-based meat. To date, only one country — Singapore — has approved the sale of lab-grown meat. In part, regulatory hurdles reflect the larger cultural views surrounding alternative meat, which can be dangerous, inorganic, foreign, or simply disgusting. Studies have shown a popular sentiment of revulsion towards particularly cell-based meat. Many people support innovation, but feel uneasy about consuming it. Understandably, alternative meat can present more formidable customer acquisition challenges than say, a mobile app. As such, consumers look to regulators for guidance. Cost also presents a huge barrier to consumer adoption, as cell-based meat is priced exorbitantly because of its expensive technology. In 2019, it cost Singapore-approved cell-based company Eat Just around $50 dollars to produce a singular chicken nugget, raising its price point tremendously. As mentioned earlier, while Beyond and Impossible have been able to maintain a competitive price point, smaller startups in the plant-based sector struggle to keep their costs low enough to enter larger markets. Overall, the major tasks ahead of plant-based and cell-based companies are extremely different, but customer acquisition is top of mind for both.
Despite these challenges, the alternative meat sector continues to grab the attention of investors as technology progresses. Cell-based meat is a segment of the sector that is gaining prominence because of its enormous potential and rapidly accelerating path to market. At scale, cell-based meat will be cheaper than plant-based and traditional meat, even with the crutch provided by government subsidies. Additionally, most components of cultivated meat can be created “in house” meaning that from start to finish, all the parts needed to create a burger exist in the same lab. The supply chain for cell-based meat benefits enormously from this vertical integration and labs can be closer to cities, which is advantageous for distribution. A lab will use less land, water, food, space, and employees than a farm and most startups estimate that they will only need one or two employees proctoring their technology. Perhaps the biggest advantage that cell-based meat contains is that it can be marketed to “flex-etarians” and meat-eaters themselves. Cell-based meat genuinely tastes like traditional meat, no if, ands, or buts! This is largely due to the fact that cell-based meat IS real meat, just humanely sourced and processed outside of the body of an animal. Therefore, cell-based meat is a product that can appeal to those who eat meat, but want to do so sustainably. Eventually, lab-based meat can be used to address issues of world hunger as it could technically be grown anywhere and be marketed at a lower price point. I am looking forward to the future of cell-based meat and here are some of the companies I have my eye on:
The momentum of the alternative meat sector is uncanny. Whether you consume red meat or legumes, this sector is driving a change that we cannot escape as a civilization. There are many risks to investing in cell-based meat, but it is undeniably a product that we cannot, in the most literal sense, live without. This, above all factors, convinces me to be bullish on alternative meat and even more so on its future in a lab.
