From vegan products to cellular meat startups, the alternative meat market is booming, creating huge opportunities for investment.

(World Finance) – In November, McDonald’s began rolling out its McPlant burger in the US, following its launch a month earlier in the UK. The same month, Cadbury introduced its plant bars, while in May, milk alternative Oatly surpassed all expectations with a $1.4bn debut IPO. All of these point to one thing: vegan living is now firmly the province of the mainstream, and it’s opening up a whole raft of opportunities for investors – while simultaneously rocking the food industry at its core.

A recent report by Barclays estimated the alternative meat market could be worth £100bn by 2029 – up from £10bn in 2019 – replacing 10 percent of the global meat industry. Credit Suisse went even further, suggesting its value could hit $1.4trn by 2050. More than 40 percent of consumers in the US now opt for non-dairy milk, according to research by the Plant-Based Foods Association and the Good Food Institute, while one in six households choose plant-based meat. That’s led sales growth in vegan meat, dairy and eggs to outpace that of animal products for the third year running in the country.

Joining the bandwagon

It’s not only McDonald’s, Cadbury and Oatly getting in on the trend, of course; research by Mintel found that more than one in 10 meat, fish and poultry launches in the UK are now positioned as meat alternatives. Plant-based California brand Beyond Meat – which collaborated with McDonald’s on its latest vegan addition and is backed by celebrities including Bill Gates and Leonardo DiCaprio – raised $36.8m in net proceeds at its IPO in 2019, with stock prices surging 163 percent on the first day. Kellogg’s vegetarian brand MorningStar Farms is estimated to generate around $450m each year in revenue, while Danone is targeting $6bn in plant-based sales by 2025 and recently bought Earth Island – producer of vegan mayo Vegenaise – following its $12.5bn acquisition of plant-based manufacturer WhiteWave Foods in 2016. IKEA has meanwhile pledged to make half of its restaurant meals plant-based by 2025, while Nestlé has just re-introduced its Garden Gourmet range in the UK in response to growing demand. Aldi, Lidl, Tesco, Sainsbury’s, Unilever and Marks & Spencer are just a few of the other big-name brands to have added vegan sidekicks, counting among the world’s top 10 companies to be investing in the sector, according to Mintel GNPD.

Eco-conscious consumers

The trend is being driven by a number of things – not least environmental issues, according to Sophie Moule of PI Data Metrics, which found a 77 percent increase in online searches for ‘vegan’ from 2018 to 2019. “If we analyse where the spikes are in consumer searches for vegan products, they undoubtedly align with key documentaries being released on Netflix and other streaming platforms,” she told World Finance. “Shows like Cowspiracy: The Sustainability Secret and David Attenborough’s A Life on Our Planet definitely influence people to research what they can do to reduce their impact on growing issues surrounding climate change.”

We need to change what we eat, how much we eat, and how we produce our food

Research by Mintel found that 36 percent of consumers who switched from dairy to plant-based products were indeed driven by environmental concerns, while health and animal welfare were the biggest motivations for those participating in Veganuary. The environmental impact animal rearing can have is no secret; traditional animal farming accounts for around 18 percent of greenhouse emissions and uses 70 percent of the world’s water, according to the Food and Agriculture Organisation of the United Nations (FAO), taking up 47,000sq miles of land each year. A much-quoted study by the University of Oxford declared that veganism was the “single biggest way” to reduce environmental impact and could cut an individual’s carbon footprint from food by up to 73 percent.

Meat demand
Despite this, global meat consumption has grown at an alarming rate in recent decades; according to World In Data, across the globe we now produce more than three times the quantity of meat and more than double the amount of milk compared to 50 years ago. In China, production has surged by more than 10 times, from 7.7m tonnes in 1968 to 88.1m tonnes in 2018, making the country now the world’s biggest meat producer. In the US, production has more than doubled from 20.3m to 46.8m tonnes, while in Brazil it has surged from 2.8m to 29.3m tonnes.

Many believe these levels are simply impossible to sustain. According to Credit Suisse, current trends combined with an exploding population – expected to hit more than 10 billion by 2050 – could see food-related emissions grow by another 46 percent by 2050, while demand for agricultural land could rise by 49 percent. “This is incompatible with the need to achieve a net-zero emission environment globally by 2050,” wrote the authors. “If we are to meet this goal, we need to change what we eat, how much we eat, and how we produce our food.”

David Yeung, Hong Kong-based co-founder and CEO of Green Monday, agrees. “There’s absolutely no doubt that plant-based is the future, because from the macro point of view, there’s just no way our current way of eating and our current way of consumption can be sustained,” he told World Finance. “So it’s only a matter of time before we shift towards that direction, whether from mainstream consumers, corporates or governments, who I believe will start to make very clear guidance.”

That guidance is starting to trickle out; the BBC recently reported on a leaked UK government research paper that had recommended people “shift dietary habits” towards a plant-based future. The Behavioural Insights Unit, who wrote the paper – which was quickly deleted after publication and highlighted as academic research rather than official policy – reportedly recommended taxing producers or retailers of high-carbon foods to encourage consumers to buy plant-based and local food in a similar way to the sugar tax introduced in 2018.

Cultural barriers
But there are several challenges to overcome before a plant-based future really does become a global phenomenon – not least in China, according to Yeung. “In Hong Kong, the readiness for a more plant-based diet is there,” he said. “But in mainland China, from both a climate change and animal welfare standpoint, the level of awareness is not the same. For many years, people did not have as much access to meat, so it’s kind of a symbol of affluence now, and it’s not immediately easy for the country to change course,” he said.

China currently consumes 28 percent of the world’s meat and half of all its pork, data from the OECD shows, with a meat market worth $86bn. Annual per capita consumption is still significantly below Europe and the US – in the US it was 102kg in 2020, compared with only 26.9kg in China the previous year – meaning there’s potential for consumption in the country to rise even more in the coming years.

China’s government has taken steps to prevent this; in 2016, the state released dietary guidelines to help halve the country’s meat intake with the aim of meeting its goal to become carbon neutral by 2060. Other green shoots are starting to appear – the country’s plant-based market is forecast to grow at 20 to 25 percent annually, according to research by the Good Food Institute, up from an estimated 6.1bn yuan (£675m) in 2018.
But shifting to a plant-based lifestyle requires more than just accessibility to vegan products – it’s about a change in deep-set mindset and culture. Research by Mintel found that in China, “consumers still perceive animal protein as a critical part of their daily diet, providing essential nutrition,” for example. That’s not a sentiment unique to China. While many tout the health benefits of a plant-based lifestyle, others point to potential deficiencies in a meat-free diet (in 2016, the German Society for Nutrition even recommended against vegan diets for children, pregnant women and adolescents).

Perhaps partly for these reasons, only 46 percent of over 65-year-olds asked in a study, Older Consumers’ Readiness to Accept Alternative, More Sustainable Protein Sources in the European Union, considered plant-based protein an acceptable alternative to meat protein (and only 12 percent considered it ‘very acceptable’). “The high acceptance to eat meat, dairy and seafood among our sample of older adults underscores the important status of animal-based protein in the habitual Western diet,” wrote the authors. A separate survey in the UK by OnePoll found that the cost and effort associated with plant-based alternatives were among the key barriers to meat-eaters going vegan – alongside simply liking meat too much, which accounted for more than half of responses.

A lab-grown future?
These obstacles suggest that worldwide veganism might still be some way off yet – but there are other sustainable alternatives coming into the limelight. Among the most talked-about of the moment is cultured meat, produced from animal cells in labs, without the need to raise and kill livestock.

Consulting firm AT Kearney estimated that by 2040, 35 percent of the $1.8trn global meat market would be grown in labs (compared to 25 percent being replaced by vegan alternatives). A report by Facts and Factors meanwhile predicted the sector could be worth $248m by 2026, up from $103m in 2020, while the Good Food Institute found the industry experienced its best investment year ever in 2020, with more than $366m in funding received. Consumers are open to the idea, according to research; in a survey published in May by the Foods journal (US and UK Consumer Adoption of Cultivated Meat: A Segmentation Study), 80 percent of respondents in the UK and US said they were either moderately or highly likely to try cultured meat.

There are several challenges to overcome before a plant-based future really does become a global phenomenon

And as with the plant-based trend, big-name companies are getting in on the game. Bloomberg recently reported that Nestlé was in talks with Israeli lab-meat startup Future Meat Technologies (FMT), which famous US meat producer Tyson Foods has already invested in – and which claims to emit 80 percent fewer greenhouse gas emissions than traditional meat production. Nestlé confirmed in a statement to Bloomberg it was indeed evaluating “innovative technologies to produce cultured meat or cultured-meat ingredients with several external partners and startups.”

FMT is far from being the only company scaling up; in February, Israeli firm Aleph Farms hit the headlines for having produced the world’s first ribeye steak through 3D bio-printing. A few months later, the company raised $100m in funding to help bring its beef to market as early as next year – marking one of the industry’s biggest financing rounds to date – with new supporters joining existing investors such as food giant Cargill.

In September, Chinese startup CellX meanwhile unveiled its lab-grown pork and said it was aiming to be producing and selling cultured meat by 2025, while in July, US firm Wildtype opened a pilot plant in San Francisco to produce cell-cultured salmon. The startup plans to open a cell-based sushi restaurant next to the plant and is currently seeking regulatory approval from the US Food and Drug Administration (FDA). Upside Foods – formerly Memphis Meats – also hopes to roll out its lab-grown produce in the US this year pending regulatory approval, and counts Bill Gates, Richard Branson and Cargill among its investors; the company raised $161m in 2020.

Ongoing obstacles
But there are still obstacles to overcome before cultured meat can come to market across the world – not least affordability, practicality and regulation, according to Green Monday’s Yeung. “Because most of these lab-grown products will require bioreactors, how fast can they scale?” he said. “How affordable would the products be? And when will these kinds of products get approved? Those are the key barriers, but I’ve no doubt that ultimately cultured meat could become one of the solutions.”

Some governments have already taken action – in December 2020, Singapore became the world’s first country to give the go-ahead on cultured meat, granting regulatory approval to cell-cultured chicken nuggets made by Californian startup Eat Just.

Private members’ club 1880 soon became the first restaurant on the planet to serve lab-grown meat. And Qatar might soon follow in Singapore’s footsteps; Eat Just is building a cultured meat factory in the country, marking the first of its kind in the Middle East, with $200m in backing by sovereign wealth fund Qatar Investment Authority (QIA). The company said in a statement it was expecting regulatory approval “very soon” and was identifying restaurants in the country where the products could be sold. There’s nothing to say other nations across the globe might not soon start to follow suit.

Impacting agriculture
For many, it’s therefore a case of when, rather than if, both lab-grown and plant-based alternatives start eating their way into the traditional meat market (see Fig 1). Impossible Foods CEO Pat Brown, for example, recently said he wanted the company’s vegan products to replace all animal farming by 2035.

But while that might well bring about huge environmental benefits, what would it mean for the conventional agriculture industry and the people within it? Transitioning to a new dietary model means uprooting one of the world’s biggest sectors from the bottom up – and that impact is not to be undermined.

Indeed the effects are already starting to be felt by farmers in the US, according to Jeri Devereaux of JD Consulting, who specialises in helping farms transition from animal to plant-based agriculture. “As more people embrace a plant-based diet, the effect is experienced in every area of farming and ranching, including the farm owners, their workers, animal truckers and meat and dairy processors,” she said.

“If farmers don’t embrace regenerative measures and diversify their agriculture production to include non-GMO food crops for humans, the reduction in consumption of meat, dairy, chicken and other animal products will absolutely affect their bottom line and their ability to meet new market demands,” she said.

“The USDA’s Economic Research Service found a 22 percent decrease in the consumption of dairy milk beverages from 2000 to 2016, and in the same time period, the consumption of plant-based milk increased by triple digits,” she added. “We are already seeing small family dairies collapsing into bankruptcy along with major producers like Dean Foods and Borden Dairy Company filing for Chapter 11.”

Transition period
The obvious solution for farmers would be to make the transition from animal to plant-based agriculture – but how easy this would be is up for debate. A research paper by the Breakthrough Institute looked at exactly that and found three groups whose livelihoods would be most at risk; those growing soy and corn for animal feed (which accounts for around 95m acres of farmland in the American Midwest, according to the USDA), contract farmers growing pork or poultry, and meatpacking plant workers.

But while the report highlighted several threats, it also found potential new opportunities; animal feed farmers could possibly switch to farming plant-based ingredients such as peas (used in meat substitutes by the likes of Beyond Meat), oats and other products, or continue producing feedstock for cultured meat, for example. Animal farmers could meanwhile still raise small numbers of livestock for cellular agriculture.

There could be several advantages to these changes, according to the report: “First, some of these crops could be more profitable. Second, production could represent a chance for farmers to diversify their income sources, in turn offering greater resilience. Third, because many leguminous crops can be incorporated into rotations with double-cropping, they could represent an additional rather than an alternative source of income.”

Several players in the industry are attempting to help farms make the transition; Cargill has invested around $100m in US pea protein producer Puris, which works with farmers in the US to get its ingredients. In Sweden, Oatly began purchasing oats from a livestock farmer in 2017 that had previously been growing them for animal feed. The company has since worked with several other animal farmers to do the same.

Farming constraints 
Yet there are still likely to be significant challenges in making the change, according to Devereaux. “Because of contracts and loans on animals usually tied to production contracts, farmers cannot and should not simply leap from their current business model to new, plant-based models,” she said. Governments could play their part in helping to make the transition – for example by introducing a subsidy system that supports the switch from animal to plant-based farming. The Breakthrough Institute report points to other potential areas of focus, including “regulatory clarity” on alternative-meat products, incentives such as tax credits for rewilding unused land and programmes to support the transition such as “debt forgiveness, compensating for losses incurred, and funding re-training initiatives.”

Even then, however, there are further constraints; geographical factors limit what can actually be grown where, for example. In the US, almonds (often used for plant-based milk) can only grow in warmer regions such as Florida and Southern California, excluding farmers in other parts of the country from getting involved. Contract chicken and pig farmers meanwhile don’t necessarily have enough land to grow the relevant crops. Then there are cultural and psychological barriers. “This will require farmers and ranchers to leave an often generational way of life and an understanding of the business of agriculture,” said Devereaux. “Farmers will need to educate themselves while moving into new product areas and embracing new ideas around farming.”

A sustainable balance
Of course, it’s unlikely conventional farming is going to suddenly disappear overnight – it’s likely to be a gradual transition, and many believe that even as alternatives come to bear, there will always be a place for it. Where pressure is likely to mount, however, is on the way that agriculture is done. Research shows that regenerative agriculture – essentially crops that capture carbon in the soil – can help to limit carbon emissions, and the US is already taking action to encourage these practices. Carbon credits have been introduced under Biden, providing payment to farmers who grow carbon-capturing crops, and other initiatives are currently under discussion.

Meanwhile in the UK, the National Farmers Union has set a goal to achieve net zero carbon emissions from food production by 2040. Deputy President Stuart Roberts is quick to point out that greenhouse gas emissions from beef production in the UK are half that of the global average. “When people buy British meat and dairy they are buying sustainable, local food, often produced in areas where it is difficult to grow other foods,” he told World Finance. “The same cannot always be said for plant-based proteins. People should know that if they want to reduce their carbon footprint at the same time as continuing to enjoy meat and dairy products, they can.”

Demonising agriculture is therefore only one side of the argument; and even plant-based eating can take its environmental toll if it’s not handled carefully and sourced locally. As with everything, there’s no silver bullet to a please-everyone, perfectly sustainable future – but the answer likely lies in striking a balance between moderate, sustainable meat rearing, lab-grown alternatives and plant-based living.

Shifting to a plant-based lifestyle requires more than just accessibility to vegan products – it’s about a change in deep-set mindset and culture

That’s exactly what the EAT Lancet commission set about to do in its science-backed ‘planetary health diet,’ released in 2019 with the goal of feeding a future population of 10 billion, while simultaneously addressing climate change issues. The diet includes cutting global consumption of red meat and sugar by half, while doubling vegetables, fruit, pulses and nuts in a 2,500-calorie-a-day flexitarian model.

While that kind of model might sound like a distant dream, it might be closer than we think. With more and more consumers adopting a flexitarian lifestyle, more and more companies offering vegan options and an ever-greater awareness around both health and environmental issues, it’s not a totally unachievable target – and one we might have no option but to accept in the coming decades as the true impact of an exploding population, a rising global middle class and a current food system that’s impossible to sustain all come to bear.