The past several years have seen significant development in the space of alt protein innovation, including a wide array of new products, investor interest at unprecedented levels, and a slew of new research in the field. Information about this space has been fast and frequent, with our collective knowledge of what the future of food may look like being enriched with each passing day.
This week in plant-based we look to address the concern that interest in the plant-based sector is waning. Though investment activity through Q1 & Q2 of this year indicate that last year’s record USD $5 billion invested in the space will not be broken in 2022, this trend is not exclusive to the sector and is rather indicative of wider market trends.
The amount invested in private companies across all markets has been decreasing by close to 10% month-on-month through 2022. In the food tech sector, for example, deal values overall have declined 41% from 2021 levels while the number of rounds is down over 13%.
Contrary to the premature conclusion that the dip in deal frequency within plant-based represents a long-term trend of category slowdown, the latest report from Technovia covering the alt protein category, with an emphasis on plant-based meat, predicts the market size will ultimately increase by USD $7.21 billion by 2025 at a CAGR of 25.14%. Changing consumer demographics and new product launches are cited by this report to be prime drivers of growth in this market.
Echoing this sentiment, a recent report by Ecowatch has stated that adopting diets rich in plant-based food will be an essential behavioral shift for consumers in order to sustain our ever growing population, particularly in a changing climate. This report claimed that cell-cultured meat and several ingredients that are increasingly common in alt protein products (including algae, beans, and wild grains) will soon become staples in the consumer diet.
Similarly, with concerns over food security growing globally, particularly amid the COVID-19 pandemic and the ongoing war in the Ukraine, the demand to secure local ways to produce high-quality nutrition is growing rapidly. This has fueled demand for cell-cultured meat development and evolution from niche, small-scale tasting opportunities into the wider consumer markets. These products are produced through closed systems meaning they can be manufactured independent from the availability of arable land and regardless of climate conditions. With a growing number of nations providing regulatory approval to these products and an increasing demand for these, the days of seeing cell cultured meat available for purchase in grocery stores are rapidly approaching.
As such, though the investment market is currently seeing depressed activity this is not a trend reflective of or exclusive to interest in the plant-based space. Rather the broader economic environment of interest rate hikes, and inflation has served to deccelerate venture activity across nearly every sector. In the alternative protein space we continue to see vast interest and development across sectors; from new products being launched weekly, to an increasing number of governments providing funding and regulatory guidance for leaders in the category, development in this space is far exceeding what the cynic may claim.
In this economic environment, startups should focus on developing agility to the ongoing market changes and concentrating on a strong product-market fit. Current indicators suggest that raise rounds will likely be smaller for the foreseeable future and evaluating cash-flow for this period should be a priority for founders. In a high interest rate environment, the price sensitivity of consumers increases, meaning that the cost of products in the market must be set delicately. With the right preparation startups in this space can be well prepared to ride out the temporary dip currently being seen across markets.