Disclaimer: The views here are those of the author and not necessarily shared by the platform, particularly with respect to insect protein.
Ali Al Suhail, associate at investment bank DAI Magister, discusses the alternative protein market, saying the sector is resilient and investor appetite remains healthy as startups secure $3.5 billion in funding by 2022. The alternative protein market has emerged as a transformative force with the potential to substantially reduce emissions.
Alternative protein is projected to exceed $290 billion globally as the need for a more sustainable food ecosystem increases. According to estimates, conversion to alternative proteins could contribute between 14% and 20% of the emissions reductions needed to meet the 1.5°C target set by the Paris Agreement by 2050.
Global revenue from alternative proteins is estimated to exceed $290 billion
Written by Ali Al Suhail
In a world grappling with a pressing need to conserve resources and mitigate global warming, the alternative protein market has emerged as a transformative force that has the potential to substantially reduce emissions and create more sustainable food ecosystems.
According to estimates, conversion to alternative proteins could contribute between 14% and 20% of the emission reductions needed to meet the 1.5°C target set by the Paris Agreement by 2050. Moreover, by freeing vast tracts of land from ecologically destructive animal agriculture, this shift could save an astonishing 39 billion cubic meters of water globally by 2035.
Despite the market downturn, the sector remains resilient and investor appetite remains healthy as demonstrated by start-ups securing $3.5 billion in funding by 2022. Backed by growing demand for alternative proteins – estimated to exceed $290 billion by 2035 and good exit prospects, Nadeem El Khazen, partner at PickBridge VC, commented, “Major food players use M&A as a key to innovation within the space, with lower average R&D spend than other industries”.
Alternative Protein Market Segmentation
The alternative protein market can be divided into four sectors – each representing different approaches and pathways within the broader alternative protein landscape and offering unique opportunities and challenges.
Plant based protein
Beyond Meat and Impossible Foods are the two most prominent players in the plant-based protein segment. Beyond Meat, in particular, is a pioneer in this field and has played an important role in raising public awareness of plant-based meat and the impact of the $1 trillion meat industry.
While these leading players and others have made significant technological advances and demand continues to grow in the US and other Western markets, resistance to plant-based protein remains in countries where plant-rich diets are prevalent and meat consumption is considered a status symbol.
There are also sustainability and affordability concerns surrounding certain plant-based proteins. An example is the water-intensive nature of almond farming for milk substitutes. Plant-based alternatives currently carry a higher price tag than traditional animal products. For example, plant-based meat costs twice as much as beef, three times as much as pork, and four times as much as chicken per pound.
Companies innovating on multiple fronts within the sector include InovoPro, an Israeli startup, using a natural process to extract chickpea protein, which can be used as the basis for a variety of products from ice cream to protein bars. The company’s products enable producers to create clean-label products with significantly fewer ingredients.
Minor Figures, a UK-based carbon-neutral manufacturer of 100% plant-based beverages, focuses on producing plant-based products that are carbon-neutral. Another company, Umiami, is looking to make whole-cut vegan chicken using a process called umication. The startup saves between 25% and 50% less water and land requirements and produces half of standard emissions.
Insect based protein
Insect-based protein is a sustainable, nutritious protein source that can be used in a variety of 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 nearly 2 billion people across Asia, Africa and Latin America.
The situation is somewhat different in the EU and other western markets. 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 production of insect-based products expected to reach 260,000 tonnes by 2030, a substantial increase from current levels of only a few thousand tonnes.
Mycoprotein
Mycoprotein is derived from fungi and produced through three primary fermentation processes – traditional, biomass and precision. It is commonly used as a meat substitute in various food products and is known for its high protein content and meat-like texture.
Due to the growing demand for plant-based foods, the mycoprotein market is experiencing rapid growth. Mycoprotein production has become more efficient and cost-effective in recent years, enabling companies to increase production to meet growing demand. The market for precision fermentation alone is forecast to grow from $1.6 billion in 2022 to $36 billion in 2030.
While other companies are using the process to create more exotic flavors, Mushlabs, a German biotech company, uses fermentation to create sustainable foods from mushroom roots. Mazen Rizk, CEO of Mushlabs, commented, “Food has always been a personal experience, as is using mushrooms and fermentation, both of which have been staples in our kitchens for decades. We have been able to create exotic flavors that exceed what is on the market and now we are able to make our products at scale”.
Other companies are making protein from air using a combination of processes such as solar food; Based out of Finland, which produces natural proteins using wind, electricity and fermentation.
Lab grown meat
The lab-grown meat market is experiencing rapid growth and has the potential to revolutionize the global food system while creating a significant environmental impact. Traditional animal agriculture, a major cause of greenhouse gas emissions and land degradation, is about to be transformed by this emerging industry.
Prominent companies in the United States, Israel, and the Netherlands are currently focusing on setting up large-scale farms equipped with multiple bioreactors to scale up production. They are working to overcome technical barriers to scaling production, reducing costs and addressing regulatory frameworks and public acceptance, but there is a significant way to go. Investors need to raise substantial capital in the range of hundreds of billions to facilitate a successful industrial scale-up.
The industry is still in its infancy and most companies are still developing their products. Dutch company Meatable is a developer of cell-culture meat and has raised over $60 million in funding and recently achieved a world-first by producing high-quality cultured meat in 8 days. Vow, out of Australia, has begun the regulatory approval process to introduce a line of farmed quail called Morsel to restaurants by 2024. The company has received a lot of attention for farming mammoth-based meatballs.
Alternative proteins may pave the way to stability
The global food system is a major contributor to climate change, accounting for 34% of global greenhouse gas emissions. This presents an important problem that demands mitigation efforts, especially considering that meat demand is expected to increase by 50% – 100% between now and 2050. Alone related activities.
By reducing reliance on traditional animal husbandry, these alternatives can significantly reduce greenhouse gas emissions, reduce land and water use, and reduce the harmful effects of climate change and the current global food system on the environment. Moreover, as the world’s population continues to grow, they offer an effective solution to meet the increasing demand for protein.
Despite these promising advances, we are still in the early stages of exploring and implementing these options. The transition to an alternative protein system will require substantial funding and funding to support research, development, and large-scale implementation and deep collaboration and coordination among governments, industry, and the scientific community worldwide.
Ali Al Suhail has over eight years of experience in transaction advisory and investment management. He worked within the valuation and M&A advisory team at EY Dubai and recently earned his MBA from London Business School. He is actively working to support the fundraising efforts of SMEs and recently launched the first Iraqi Angel Investment Network.