A report from the non-profit Good Food Institute found that, despite the current market climate, investors are confident about the future of alternative proteins.
Is it still a good time to put money into non-animal products? While there has been a downturn in the alternative protein industry, investors remain bullish on the sector’s long-term prospects.
The alternative protein industry has attracted $14.2 billion in investment over the past decade, according to a new research collected by the non-profit Good Food Institute (GFI). Although there is a lot of variation in the business, GFI finds that investments have increased every year.
Alternative proteins received $2.9 billion in investment in 2018, with funding split between plant-based ($1.2 billion), fermented ($842 million), and cultured ($896 million), according to the study.
In spite of the fact that the amount invested in 2022 was less than the $5.1 billion that was raised in 2021, the amount invested in alternative proteins in 2022 was still significantly higher than the $1.1 billion that was invested in 2019, which was a year before the pandemic and is therefore considered a breakthrough year for alternative proteins.
“As companies continue to develop new technologies, as well as scale and optimize production to improve the taste and affordability of products, sales will accelerate and spur additional investment—particularly when macroeconomic and market conditions normalize,” said Sharyn Murray, GFI Investor Engagement Manager.
A bet on food’s bright future
Investors’ actions in several sectors, including the alternative protein industry, will be influenced by the continued volatility of the market as the globe deals with pandemic-related challenges.
And how will this impact proteins that aren’t the norm? To gauge the sentiment of the investment community about the industry, GFI polled 125 professionals. Ninety-eight percent of investors are expecting to put money into the alternative protein category in 2023 because they believe in its long-term potential and are positive about its growth prospects. Four-fifths of those polled also reported that they had no plans to reduce spending or investment in the industry in 2022.
Eighty percent of investors who put money into this sector consider alternative proteins to be key to their environmental, social, and corporate governance (ESG) goals.
Given the nonprofit’s reach, GFI acknowledges that its findings may be based on investors with a stronger propensity to respond to opportunities in the alternative protein field.
With this in mind, GFI says that their findings are representative of a subset of the more active alternative protein investors.
Largest 2022 investments in non-traditional protein sources
Which businesses successfully swam in the most capital in 2022? UPSIDE Foods’ Series C round of financing of $400 million was the largest of any company involved in the produced meat industry. This year was particularly significant since the business acquired a GRAS (generally regarded as safe) letter from the FDA for its produced chicken, marking the first step in the long process of gaining regulatory clearance.
Meati Foods, situated in Colorado, received $150 million in 2022, making theirs the biggest funding round in the fermentation industry. With these funds, Meati will launch its commercial-scale operations, beginning with the “Mega Ranch,” which, if fully operational, will produce 45 million pounds of mushroom meat per year.
The plant-based market was led by Redefine Foods, an Israeli company that raised $140 million. This cutting-edge firm is making waves in the vegan meat industry by shipping steaks, lamb kebabs, pulled meats, and other whole-cut products to restaurants across Europe.
“Continued expansion of the plant-based category will be facilitated by innovation that results in delicious and appealing solutions,” said Alice Raksin, Vice President at private equity company L Catterton.
“Winners will be formed in the sector and provide substantial returns for investors as consumers increasingly seek out alternative proteins for personal health and environmental concerns.”
The alternative protein industry in Israel is thriving.
Israel is home to a number of alternative protein firms, including one that specializes in “whole-cut” plant-based meat (Redefine Meat), two that specialize in “precise fermentation” (Remilk and Imagindairy), and one that specializes in “cultivated meat” (with leaders such as SuperMeat, Aleph Farms, and Believer Meats).
To Re-Conceptualize Meat
The alternative protein business in this country has investors excited about the future. Israel-based firms raised $454 million in 2022, making up almost 15% of total global investments. This was second only to the investments made in the US alternative protein industry. More than a billion dollars in VC funding has been raised by Israeli businesses in the past two years, with a corresponding rise in investments in seed- and early-stage enterprises as well as increased support from Israeli government agencies.
Just like the rest of the globe, the Israeli technology industry suffered a drop in investment of 42% between 2020 and 2022. The food tech industry, meanwhile, was only down 18 percent over that time.
“Growth rounds got more hard as these firms scaled and reached worldwide markets owing to the global market slowdown,” Aviv Oren, director of business engagement and innovation at the Good Food Institute Israel, said in a statement.
To achieve climate targets and entice the future of the food tech industry to their region, “there is a chance for new non-equity finance methods and governments to come in to help infrastructure and scale up,” Oren added.
Plant-based alternatives are outselling their animal equivalents in Israel, according to a GFI analysis. Plant-based food sales increased by 8% in the region in 2022, while sales of animal products increased by just 1%.