Is the proof of this investment in the eating?

Is the proof of this investment in the eating?

A tech revolution has been quietly gaining momentum around the world. This is not the kind of tech that one associates with Silicon Valley. It is focused on the production of food, dietary protein in particular. This protein is a combination of plant-based protein and protein that simulates protein produced by animals. Why the interest in this kind of tech? Numerous studies carried out by prestigious institutions such as The Food and Agriculture Organization of the United Nations, Oxford University, the American Journal of Clinical Nutrition, the Joint Research Centre of the European Commission and the World Wildlife Fund, to name a few, have concluded that the current trend in animal husbandry is having a highly detrimental impact on the planet. It is the leading producer of green-house gas emissions (even exceeding that of the transportation sector); it takes about 75 times more energy to produce meat than corn; about 80% of the world’s arable land is used to rear livestock; the production of beef requires 36 times more farm land than the production of plant-based protein; and a vegan diet uses five times less water than a meat-based diet.

Projected growth of vegan market
Why are plant-based diets becoming so popular? Global warming is at the forefront of many people’s minds and this is not limited to wealthier, developed countries. People are starting to realise that what is on their plates has a direct impact on the environment. Various studies have estimated that by 2026 the vegan market will have grown to more than US$ 24 billion in the USA alone and by a CAGR of between 9% and 13.5%. Even so, vegans make up considerably less than 1% of the world’s population, despite them making up between 2% and 8% of the populations in wealthier countries. Furthermore, this trend is not limited to vegans, and includes vegetarians and ‘flexitarians’, those people whose diets only occasionally include meat and fish.

Youth leading the way.
The impact of what we eat has struck a chord with the younger generation, who stand to inherit a planet with an ecosystem in distress. In the USA approximately 78% of persons with a primarily plant-based diet made the change between the ages of 16 and 34, with 52% being between the ages of 16 and 24. Internationally, the average (mean) age for this dietary change is 24.1 years, and is the most prevalent between the ages of 19 and 21 years.

Heme – the magic ingredient
This desire to change is driving the tech behind food production. “You’re not going to make anything that appeals to a hard-core meat lover by mushing together a bunch of vegetables,” said Pat Brown, the CEO of the plant-based food company Impossible Foods, which he founded in 2011. “We use science to understand what makes meat, dairy and fish taste, smell and feel the way they do, and sensory tests to understand what people love most. This means looking at proteins, textures, and flavours at a molecular level and finding plant ingredients that behave the same way. One of our first key discoveries was that heme — a molecule found in all plants and animals — is the magic ingredient that makes meat taste ‘like meat.’”

The emerging brands and players
Investors’ attention were drawn to this sector by the highly successful initial public offering on the New York Stock Exchange of Beyond Meat Inc. in May 2019. The company, which was founded in 2009, produces the highly acclaimed Beyond Burger. The company priced its initial public offering at US$ 25 a share, raising around US$ 250 million at a valuation of a little less than US$ 1.5 billion.

South African businesses have not missed out on this market. Fry’s Family Food Co. is a business that started in the kitchen of Debbie and Wally Fry in KZN in 1991. Its vegetable-based alternative meat and fish products have been available in most South African supermarkets for a number of years. Since 2018 it has been producing in excess of 35 tons of plant-based food per day in its South African facility and a further five tons at its UK contract manufacturer in Cornwall. The product range has expanded to more than 35 products, each of which uses a different technology to create unique textures and flavours, and includes schnitzels, pies, roasts, strips, coconut ice-cream and cereal mixes. These are sold in approximately 12,000 stores in more than 30 countries, including supermarket giants Tesco, Sainsbury’s and Morrisons in the UK and Coles and Woolworths in Australia. Its products were launched in the USA in the latter half of 2018.

In order to improve its ability to compete with larger multi-national companies, Fry’s joined the new global plant-based food collective, called The Livekindly Co., launched in New York in March 2020. Having raised US$ 200 million from the founders’ funding round, The Livekindly Co. aims to “transform the global food industry” and accelerate the shift towards plant-based eating, beginning with chicken substitutes. The funds raised will go towards funding further acquisitions with the goal of establishing a collective of both established and start-up brands.

Brands within The Livekindly Co. portfolio offer non-GMO plant-based meat alternatives to consumers. Fry’s is joined by German plant-based protein start-up LikeMeat, and plant-based digital media platform, Livekindly Media. In addition to plant-based meat and media, the Livekindly Co. also has an equity stake in Puris Holding, a purveyor of plant-based ingredients.

One will have to see how successful the launch of this new collective will be given the COVID-19 pandemic. This is somewhat ironic as plant-based foods are not capable of producing SARS-type viruses. Needless to say, the proof of this investment will be in the eating.

Contact Mettle Corporate & Specialised Finance to find out more about alternative investment sectors which will become the norm.

William Marais
wmarais@mettle.net

Michael Hodgson
mhodgson@mettle.net