
New alternative protein innovations capturing investor attention
NOTE from LRIC: This post is one in a series of LRIC-prepared summaries of discussions and presentations that were part of the 2021 Future Food-Tech Alternative Protein Summit. LRIC attended this virtual summit to learn more about how the livestock sector is viewed and how it may be impacted by the growing popularity of protein alternatives. LRIC believes it is important for those in the livestock industry to know what is being said about our industry so we can refute where possible and change where necessary. Originally published in the August 2021 Livestock Innovation Newsletter.
The alternative protein market is burgeoning with new areas of innovation. The sector has long moved beyond its early days of meat-free alternatives, and today encompasses a wide range of plant-based products, cellular agriculture (where meat is cultured using animal cells), and precision fermentation.
Four industry experts discussed the state of the market at the recent Future Food-Tech Summit on Alternative Proteins and shared their insights into where things are headed and what is capturing the interest of investors.
The panelists included Costa Yiannoulis, Co-Founder and Managing Partner of Synthesis Capital; Sean O’Sullivan, General Managing Partner at SOSV; Ali Morrow, Principal at Astanor Ventures; and Susanne Wiegel, Investment Manager Alternative Proteins at Nutreco.
Plant-based foods, cellular agriculture and precision fermentation - where are we?
Costa Yiannoulis, Synthesis Capital:
We’ve reached the high-level point where the right stakeholders are now getting involved. The recent G7 summit was super focused on climate and alternative proteins are a solution to this. Investors across the spectrum are now investing in alternative proteins and we are also seeing the right type of corporates getting involved like Nutreco and Anheuser-Busch InBev. The stars are now aligning on the idea of Beyond Meat; there is a huge opportunity there and people are coming together.
Sean O’Sullivan, SOSV:
Seven years ago, Perfect Day produced milk without the cow and now you can buy their brands throughout the U.S. In the plant-based area, we are seeing companies scale so rapidly now and revenue rising across plant-based proteins. We are also seeing precision fermentation of whey proteins and casein proteins. The area still to come is the cellular ag market, but we will see Food and Drug Administration (FDA) approvals by end of the year that we hope will be leading companies into that market in the U.S.
Susanne Weigel, Nutreco:
The consumer side is getting more aware and this is ultra-important. Only if the consumer is open to this then corporates react and that’s the one reason we are in there. Animal nutrition is closely linked to sustainability, and sustainability is very important to us because it is important to consumers. And for consumers, alterative proteins are part of sustainability.
What challenges we are seeing in the sector?
Costa Yiannoulis, Synthesis Capital:
For me, it is scaling and infrastructure. People are past proof of concept; it’s now people vying for a resource which is fermentation capacity.
Ali Morrow, Astanor Ventures:
Generation one of plant-based has mainstream adoption now and has been scaled via fast food and convenience food. What hasn’t changed is the supply side - with commodified pea or soy are we just moving from one monoculture to another? That’s not what we require for a diverse, nuanced food system and if regenerative agriculture is the best way to manage arable land but its not scaling, how do we change that? Cellular plays a role in that but it is a longer game and there are regulatory effects there. There are greater pressure points where there is land scarcity, so you see movement in the Middle East and Asia, but you see it less in Europe. If we talk about moving away from animals, we are talking about re-imagining food. Food is a way to communicate and engage with the natural environment. It’s an opportunity to be more creative than just a new burger; Gen 2.0 will be better.
What are you excited about or wish people were working on?
Sean O’Sullivan, SOSV:
There are differences in how we grow cell-based meat. New types of bioreactors are making this process incredibly efficient and eliminating some of the blockage points. You’ll see some type of innovation or revolution here as you saw in computers moving from minicomputers to microchips as the cost of manufacturing goes down. We will continue to see an increase in costs that will make it hard for animal-based agriculture to compete as costs for alternative proteins come down.
Susanne Weigel, Nutreco:
Ingredients that are different from pea and soy but still fulfill nutritional and health promises and still come down in costs. We are looking for ingredients that are tasty, nutritious and bring down the price.
Sean O’Sullivan, SOSV:
There is a risk of being dependent on too many plants that can’t be grown in enough areas and cause environmental impacts. We have to create a more circular economy, be more effective and efficient, and create other types of plant protein.
How do you rate precision fermentation’s sustainability?
Costa Yiannoulis, Synthesis Capital:
All of these technologies are much more efficient than animal agriculture. When we’re looking at precision fermentation, we have been brewing vaccines this way for many years and new technologies like CRISPR-CAS9 let us do this now for animal proteins. Precision fermentation is quite efficient, but we shouldn’t see cellular agriculture, plant-based and precision fermentation as silos.
Susanne Weigel, Nutreco:
It is about a very efficient feed to food conversion rate. Plant-based can be very sustainable if farmed in the right way. Soy can be very sustainable but you have to look at the whole system, where crops are grown etc. With fermentation there are also differences: where does the sugar come from? Where does the power come from? Every start-up in the space needs to analyze their process and what can be done to make it even more sustainable. Both technologies have a lot of potential.
What is the role of government and policies?
Ali Morrow, Astanor Ventures:
Supportive policy creates incentive. You need something that enables entrepreneurs and not be a handcuff.
What about the role of accelerators?
Sean O’Sullivan, SOSV:
We back about 150 new start-ups every year; in the food area alone, we back over 20. There is such a massive opportunity here, multiple trillions of dollars of market as old food are converted to new food markets. Animal-based agriculture will be a luxury item in our lifetime; maybe 10 % will use animal agriculture and plant-based, cellular ag, and precision fermentation will make up the difference. That’s a massive disruption and in order to make a disruption happen, you need to go to first-time entrepreneurs. All of the companies we’ve backed come from scientists who are passionate in this area. This is an unstoppable force and there will continue to be a large number of start-ups. It’s a great time to be in this space - we can make this change, there is a revolution going on.
What is the role of corporations in this space? Venture capital?
Susanne Weigel, Nutreco:
Strategic investors are very important to funding as they bring money but also capabilities. They have a view to how to actually commercialize so any corporate can really add a lot, but it depends a bit on the risk appetite of corporates as to what the right time is. For start ups, it’s valuable to work with a corporate early on.
Costa Yiannoulis, Synthesis Capital:
From our experience, in the very early stages where you build your immediate team and do proof of concept, that’s bread and butter to incubators. Once you get past proof of concept and go to proof of scale, you need a corporate on board. The Nestles and Unilevers still own the grocery shelf and customer distribution, so you need to bring in the right strategic corporate partners.
What about the role of insect protein?
Sean O’Sullivan, SOSV:
We’ve backed meal worms. It’s actually a tasty protein - just throw it in a microwave - that is used in most of the world as a primary food source. They’re most useful for feeding animals like fish etc and there are large opportunities in that space.
Susanne Weigel, Nutreco:
Insects play a huge role as novel ingredient in animal feed as the animal industry looks at ways to make feed more sustainable.
Ali Morrow, Astanor Ventures:
We are invested in French Ynsect, who raise mealworms. It’s a priority to change the footprint of the aquaculture food chain instead of depleting fish stocks. They’re also a better quality protein source. We first saw cricket flour and granola bars and we’re now in the second generation where insects can be formulated and formatted differently for human consumption and regulatory follows. The lead in all of this is consumer demand and different awareness of how diet influences human health and climate change. Chefs are the translators of innovation to culture, they’re a special piece of magic that is required.
Sean O’Sullivan, SOSV:
I think insects will grow and grow but will be surpassed with advances in precision fermentation and cellular agriculture. It’s not going to be a staple for the human diet as much as the other things; it will be leapfrogged, although it will be bigger than it is today.
What do you think is important for success?
Sean O’Sullivan, SOSV:
Giving start-ups access to the gatekeepers in the industry so they can get higher levels of yield and scale and having great advisors and mentors that they can be working with. Those mentors can serve a wide range of companies. At later stages, it’s having that talent on staff, but early on, it is finding the secrets so you can be productive quickly.
Costa Yiannoulis, Synthesis Capital:
At early stages, when it’s an idea on a page, it’s connecting that team with the right people in the industry and helping single founders get the right people around them to help them build that out. That’s where venture capital can help.
Susanne Weigel, Nutreco:
Have people there who can help you think things through and provide comments on the bigger picture. That’s something corporates can bring to the table: a big company has a lot of resources and knowledge a start-up can tap into.
Ali Morrow, Astanor Ventures:
Don’t forget why you are doing it. Think of food as culture, so remember consumers and mentors can help you not lose sight of that.
Your best advice for early-stage entrepreneurs and where do you see the industry in five years? In 50 years?
Sean O’Sullivan, SOSV:
Best advice: Iterate quickly and work on the taste.
Future: We could have 10% of the market converted in meats in five years. One of our companies with a plant-based burger has taken 5% of the ground beef market in five months in Chile. In 50 years, regular animal products will be a luxury only 10% people will be involved with.
Ali Morrow, Astanor Ventures:
Best advice: Follow your gut. The microbiome is the engine of the body and nutrition matters.
Future: We’ll have more diverse understanding in the future. Diverse equals sustainable provided we don’t put too much pressure on one crop.
Costa Yiannoulis, Synthesis Capital:
Best advice: Bring the right people around you that share your vision.
Susanne Weigel, Nutreco:
Best advice: Think always about how we get out of the lab and onto the shelves and what do we need to make that happen.