Investors flock to 'fake meat' companies as coronavirus highlights supply chain troubles

In mid-April, US sales of these products were double that of the same period last year.

epa07545424 A Beyond Meat product on a store shelf in New York, New York, USA, 03 May 2019. The company, which sells plant-based meat substitutes, had their IPO this week and shares quickly rose 163 percent.  EPA/JUSTIN LANE
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With meat processing workers falling victim to the coronavirus, shuttering plants and slowing supply, Americans are starting to see poorly-stocked aisles where meat products were once plentiful.

At the same time, the link between industrial meat production and deadly human viruses has become more widely understood.

The global crisis, in other words, is turning into a big opportunity for the plant-based protein sector.

The shares of Beyond Meat, one of the bigger names in food technology, jumped 49 per cent last month.

Meanwhile, venture capitalists have been pouring money into smaller companies, some focused on lab-grown meat analogues as well as plant-based substitutes.

In mid-April, US sales of these products were double that of the same period last year.

“The thesis of alternative proteins is strengthened by Covid-19,” said private equity veteran Jeremy Coller, a longtime vegan. “We see this as a massively growing and important sector.”

Mr Coller, founder of Coller Capital, formed asset management collaborative FAIRR to push companies towards greater food sustainability because of the risks – so clearly illustrated by the current recession – to the global financial system. Its members currently manage $20.4 trillion (Dh74.9tn).

The annual retail food market grew only 2.2 per cent in 2019, according to industry trade groups.

By comparison, plant-based foods were up 11.4 per cent, as estimated by the Plant Based Foods Association.

Plant-based meats had a retail growth of 18 per cent, with refrigerated versions like Impossible Foods burgers, Beyond Meat sausages and Tofurkey deli slices making up the majority of the increase.

The big meat processors – Tyson, Smithfield, Hormel Foods – were already investing in plant-based alternatives when the pandemic arrived.

Even as the administration of US President Donald Trump tries to keep traditional meat plants open, the pandemic is providing a tremendous boost to consumer interest in alternative products.

In Europe, Barcelona-based Novameat is moving quickly to capitalise on the moment. It uses tissue engineering and bio-printing technologies to produce meat alternatives.

Novameat "wanted to demonstrate that our technology is highly adaptable to work with a variety of ingredients, to mimic different types of plant-based meats", founder and chief executive Giuseppe Scionti said.

But nowhere is the potential for meat alternatives more significant than in China, the starting point of the pandemic, whose food supply has been hit by all manner of viruses. China feeds 20 per cent of the world's population on just 7 per cent of the world's farmland.

“Food security is an issue that is top of mind for the Chinese government,” said Bruce Friedrich, executive director of the Good Food Institute, a non-profit that promotes meat, dairy and egg alternatives.

In China, plant-based dairy has long been a staple, along with the basic protein alternatives like tofu, but it has been slower to innovate in the faux or cell-based meat space.

However, in a post-coronavirus world, China could move more swiftly on this front, and US companies may be the ones helping to propel it.

In February, PepsiCo acquired Baicaowei, a Chinese snack company that launched a plant-based sausage made from soy and konjac, for $705 million.

"Our investment activities haven't slowed down" because of the pandemic, said Matilda Ho, founder and managing director of Bits x Bites, a food technology venture capital company in Shanghai.

“We believe this recent uncertainty might just be a pivotal moment for the still nascent food-tech sector in China.”

Vectr Ventures, a Hong Kong-based early venture fund, co-led an investment in Plantible Foods' $4.6m seed round, which closed in late March.

Vectr partner Alan Chan said his $1.6m investment in the San Diego start-up was a way to "focus on Asia's population growth, urban migration and food", all weighty issues made more urgent by the pandemic.

“There has to be an efficient utilisation of things we can grow to feed everyone,” Mr Chan said.

Plantible is part of a new generation of US companies jumping into this space.

It began raising funds in December to grow lemna, or duckweed – a small, aqueous plant that’s almost 45 per cent protein and regenerates its biomass every 48 hours.

The final product is a flavourless protein that could eventually star in your next burger, as a dairy alternative or egg white substitute. When scaled, said co-founder Tony Martens, it could allow for a continuous production process that makes its supply chain “climate-change proof”.

Chris Kerr of New Crop Capital, a fund which focuses on replacing animals in the food system, recently invested in Starfield, a Chinese developer of plant-based proteins.

He calls plant-based foods “a mega-trend that will not go away”.

But still, he remains cautious about which food tech companies should be funded.

“The biggest risk is funding a bridge to nowhere,” he said.

There are other investors who are holding back. Leah Volger, principal at early-stage venture capital fund Manta Ray, said she doesn’t “necessarily see a shift in our strategy”.

Nonetheless, Manta Ray has invested in Berkeley, California-based Climax Foods, founded by Oliver Zahn, an astrophysicist who worked for both Impossible Foods and Google.

Mr Zahn plans to use computer science to comb through the plant kingdom looking for better, cheaper food combinations.

Several other food technology companies have been successful in raising money during the first quarter.

They include Rebellyous Foods in Seattle, which in March raised $6m in a funding round led by Fifty Years, a San Francisco seed fund.

Rebellyous currently makes plant-based chicken nuggets as proof-of-concept for what it touts as a cheaper, more efficient manufacturing process.

In the long run, Fifty Years founding partner Seth Bannon said, the pandemic “will cause way more capital to flow into the space, as the world wakes up to the very real threat of zoonotic diseases".

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