As the world’s population has grown and become wealthier, demand for animal-based protein has been rocketing – doubling approximately every 30 years since 1960 – and is set to keep rising rapidly.
Investors expect that a significant proportion of this demand will be supplied by alternative protein sources in the future, explained Nick Cooney, Founder and Managing Partner at Lever VC, at a Chamber webinar on 4 February.
Cooney explained the two different types of alternative meat products: those made completely from plants and shaped to resemble meat products, and those that are cultivated or cell based. These use real animal protein and are molecularly identical to meat, but created without using live animals. Lever VC, a fund that focuses on early-stage investment in the sector, invests in companies developing both types of protein products.
There are many benefits to meat alternatives: from the health point of view, they include far less saturated fat and cholesterol than animal products.
“They are also dramatically more sustainable than animal products, using far less land, water and other resources to produce,” Cooney said. “They are also safer, as the alternative protein supply chain is diverse, resilient, and immune to risk from diseases like bird flu and swine flu.”
Consumers of this new breed of alternative protein are buying them mainly for health reasons, he said. Most are in fact not vegetarian or vegan, but are regular meat and dairy eaters who want to improve their diet.
And the market is growing fast. The market share of plant-based milk in the United States has grown from 2% in 2005 to 13% in 2020, with similar growth being seen in Europe. Investment banks including UBS and JPMorgan have projected the market to grow massively in the next decade, including in China.
Investors in many of the plant protein brands that have emerged in recent years have been rewarded as the new products have taken off among consumers.
“There have been an increasing number of very successful exits in the past few years,” Cooney said. “Most of these have been by acquisition by major food companies, and there have also been a number of eye-catching IPOs.”
The growing trend can already be seen in shops and restaurants in Hong Kong, where plant-based meat and dairy products have become more widely available in just the past few years. Within the past 18 months, cafe chains including KFC and Starbucks as well as packaged goods companies like Ramen Talk and Bai Cao Wei have started selling protein alternatives.
China is already by far the largest market for plant based dairy in the world, due to the consumption of soy milk. And while alternative meat products are not new in China, they tend to be available in Buddhist restaurants and at temples, Cooney said. So there is plenty of scope for growth in this segment of the market.
“The new overseas brands are selling at quite a premium price point, and are targeting Western-style products like burgers,” he said. “So that opens the door for domestic brands to offer higher quality at a lower price.”
Cooney added that the Mainland Chinese government is actively encouraging foreign investment in the sector.
Nick Halla, Senior Vice President International at Impossible Foods, also noted the many advantages that alternative protein products have over meat, in particular the environmental benefits. However, he said: “Meat is delicious.”
Impossible Foods’ aim since it began has been to encourage meat eaters to make the switch to plant-based products. “The only way to do this is to create a better product,” he said.
So the company set out to devise a product that meat eaters would happily eat, and therefore create a choice without compromising on taste.
“We spent five years researching what makes meat and dairy products so delicious, and learned about the heme protein, which drives the flavour chemistry,” Halla said.
Impossible Foods’ products, particularly its signature burger, are now available around the world, and it is now focusing on refining its offerings for Asian consumers.
“The U.S. is a very burger-heavy market, but Asia is a very diverse market and pork is very important, particularly in China.”
One result of their recent research has been the Impossible sausage, which has been trialled in Hong Kong recently. Consumers responded well, so it will become more widely available in the future. The company has been in Hong Kong, Singapore and Macao for almost three years, and its products are available in international hotels like the Shangri-La as well as local chains including Fairwood. Serving a wider range of consumers here has helped the copmany understand the Asian market better.
“We have learned a ton about what we need to do and how to evolve to make our products more accessible,” Halla said.
One challenge for the newer brands in the Asian market has been their high price point. But Cooney and Halla agreed that the price would likely come down as the products become more widely available in Asia, as a result of economies of scale, more local production, and increasing competition in the market.