The cell-cultured meat industry is likely to see the same consolidation process playing out in the plant-based protein sector as the funding market tightens.
That is the view of Oghma Partners, a London-based advisory company for the food and drinks industry, which estimates £2.6bn ($3.1bn) has been invested in cell-grown meat since 2016, led by the US.
Regulators in the US and Singapore stand alone so far in approving commercial sales of proteins developed in a lab from animal cells, a facet Oghma Partners said is linked to “uncertainty and scepticism”. Price is also a barrier to growth in the sector until sufficient scale is reached to bring down costs comparable to regular meat products, according to a report from the advisory group.
“A key driver of the rationale behind cell-based protein production is to generate cheap, low-carbon protein without the need for antibiotics and in a safe and controlled environment,” Mark Lynch, a partner at Oghma Partners, wrote.
“Cell-based agriculture has therefore substantial potential as an alternative to traditional agriculture. We believe that this potential has driven interest and speculative investment into the industry.”
Lynch, however, added: “Money for new investment is now harder to come by, as the slowdown in funding so far in 2023 demonstrates. The industry will be challenged to deliver sales to consumers and to stretch funding runways to the point of delivering profitability.
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“We see a shake-out similar to that we are seeing in the plant-based meat sector, with consolidation amongst the players most likely.”
Canada-based The Very Good Food Company cited the difficulty in raising financing upon the demise of the meat-alternative business this year, as did US peer Tattooed Chef when it filed for bankruptcy in July.
Over in the UK, The Meatless Farm Company also went to the wall during the summer for the same reason, although the brand itself was later acquired by fellow meat-free business VFC Foods.
The US is “paving the way for the cell-based meats industry globally with the largest number of investors and producers”, Oghma Partners said.
One such company is California-based Upside Foods, which is the leader in terms of securing funding amounting to £555m, according to the corporate finance advisory, which said that represented 21.5% of the capital raised.
Upside Foods features in Oghma Partners’ top five for financing in all the cell-cultured meat sectors, which along with Israel-based Believer Meats (previously trading as Future Meat), Wildtype Foods in California, Aleph Farms and Mosa Meat, accounted for 46.9% of the cash raised from 2016 to 2023.
Oghma Partners said 68% of the deal activity to date is centred on the cell-cultured meat category, with the rest spread 17% in seafood, 11% in ingredients and 4% for pet food.
Wildtype Foods falls into the seafood category, while Israel and the Netherlands-based Aleph Farms and Mosa Meat, respectively, are focused on the meat segment.
“Israel and the UK are the second and third most-active countries, after the US, in terms of the level of funding for cell-based meat start-ups, which reflects a combination of the level of innovation going on in their respective food industries/universities, as well as the capital market pool available, combined with a flexible regulatory environment,” Lynch wrote.
However, he said the cell-cultured protein industry is still in its “infancy”, while the supply chain for mass production has “yet to be established”.
Lynch explained the potential: “There is a growing global consensus on the requirement for countries and organisations to become more environmentally friendly and reduce CO2 emissions. This demand could act as a key driver in the development of the cell-based meats industry.
“Current agricultural practices have negative environmental impacts and release harmful GHG emissions into the atmosphere. Cell-based meats have the potential to significantly reduce the environmental impact of meat production, whilst meeting the ever-growing demand for meat.”
Nevertheless, he said consumer demand for the time being is likely to be around hybrid products featuring a combination of cell-raised meat and real animal proteins, with price remaining an obstacle.
“Research indicates that niche consumer groups may be willing to pay higher prices for cell-based meats, deeming them more environmentally friendly,” Lynch said.
“However, to compete effectively within the mass market, achieving price parity with traditional meats will be critical for successful adoption
“Until the market begins to mature and production costs fall, cell-based meats will come with price premiums. This will likely slow growth and delay consumer uptake. As the industry scales, prices should decline, making the products more accessible to the general market.”