Currently, animal protein alternatives have captured a mere 1-2% of the $1.4tn meat market, but to reach levels of market penetration closer to the 40% of the milk category enjoyed by dairy alternatives, protein players – and investors – will need to diversify, Jeff Grogg, managing director of JPG Resources, Darren Streiler, managing director of ADM Ventures, and Sanjeev Krishnan, chief investment officer and managing director of S2G Ventures, said earlier this month at IFT’s virtual annual meeting & expo (IFT FIRST).
They noted that the majority of development in the alternative protein space category currently is plant-based with much attention paid to recreating the taste and texture of animal protein – and while this has served the industry well so far, the next wave of growth will come from other sources, such as fermentation, air and mycoprotein, and will need to offer better nutrition at a better price point for the consumer.
But for this to happen, limited resources and funding likely will need to be redistributed – meaning the some underperforming companies may have trouble raising funds – causing them to fold or be sold.
“Certainly, there are too many companies. At some point, not all of these companies are going to win. There’s going to be companies that get bought or washed over. There will be failures for sure,” Grogg said.
But, he added, “that doesn’t mean the market is saturated by any means. It just means there is too many that don’t have enough reason to win.”
Wanted: More selection
While the overall alternative protein category may not be saturated, some aspects of it are – or at least close to – crowded, according to Krishnan, Grogg and Streiler.
For example, Krishnan suggested the market is at “peak texturized vegetable protein – whether it is soy, yellow pea or other sources,” and in order to transition from the “iPod phase of the protein revolution to the iPhone phase, we are going to need more focus on taste – especially on the fat side of the equation to get the umami feel of tradition [animal] protein expression.”
While some companies are developing better-for-you and more functional plant-based fats that can be combined with TVP and other plants to create products that more closely mimic their animal counterparts, Krishnan said he sees “a lot more opportunity to innovate around cell-based technology and new sources of protein, such as fungi or others,” that either have the fat or umami component built in, rather than simply added.
Wanted: Better sustainability
Streiler agreed that the alternative protein market currently is dominated by plant-based options, but as land becomes increasingly scare he says the next wave of category growth will come from air protein, fermentation, and mycoproteins, all of which not only deliver flavor and mouthfeel, but are more sustainably produced.
“We are at the point where land use has become an issue in the global population. Some of these alternatives really require such as small footprint of land to produce protein” especially compared to animal protein which requires thousands of acres for animals to graze, and for plant-based options that also require thousands of acres to grow ingredients, he said.
“There also are second order principles around animal and seed volatility due to climate and labor shortages in the Western world, particularly in the packing facilities,” that are placing additional pressure on animal protein companies, and providing tailwinds to innovators of alternative proteins, said Krishnan.
While plant-based protein is often positioned as more sustainable than animal-based options, Streiler said he also is interested in how animal agriculture players are reducing their environmental impact with innovation around methane production and feed additives for cows and other advances.
Wanted: Better nutrition
While the novelty of trying plant-based products claiming to taste like their animal counter-parts helped fuel initial consumer interest in some of the plant-based 2.0 options on the market today, Grogg says that consumers increasingly want products that are nutritionally comparable to or better for them than animal protein – something the current industry is not fully delivering.
He explained that most consumers base purchase decisions on taste, nutrition and price. So, as the plant-based category as a whole improves the taste profile of their products, this will become less a point of distinction and consumers will shift to look at nutrition and price – both of which often fall short of animal protein, at least when it comes to offerings designed to closely mimic the eating experience of animal meat.
Krishnan added that his fund increasingly is looking for clinical research on the nutritional impact of potential investments – whether they are animal, plant or cell-based.
“We have got to start with the data … and then let that play out. There will be some things that come out of various form factors, whether it is grass- fed vs grain-fed meats, soy or yellow pea or other things,” he said. “We still lack a data set that lets us making sweeping statements” about the health benefits of these distinguishing claims for protein sources.
On the nutrition front, Streiler added that ADM Ventures is interested specifically in how different protein sources and foods impact the human gut microbiome.
“There are a lot of research dollars being put towards figuring out how various ingredients interact with individuals’ unique gut microbiome and the cause and effect relationships to ward off potential indication,” he said.
Grogg agreed that the health impact of foods will be a “disrupting factor” in the future and that as innovators continue to refine their offerings they should do so partly through the lens of personalized nutrition, which is emerging alongside and even fueling the growth of alternative proteins.
Wanted: Better prices
Finally, regardless of whether something tastes better is offers a better nutrition profile, if consumers can’t afford it they won’t buy it, which is why all three men emphasized the need for alternative proteins to reach – or exceed – cost parity to the animal products that they directly are competing against.