Lux Research recently attended the Future Food-Tech Alternative Proteins Conference held both in person and virtually from Brooklyn, New York. Over two days, the event highlighted current trends and issues in the alternative proteins landscape. The panels included thought-provoking conversations from industry, venture capital (VC), and regulators from the U.S. FDA and U.S. Department of Agriculture (USDA). The conference included 123 speakers, 280 food brands, and 78 startups. Here are some key takeaways from the event:
1. Nontraditional partnerships may be the key to pushing alternative proteins like cell-based meat forward
Speakers from diverse organizations like the Singapore Economic Development Board, GFI, Merck KGAA, Guggenheim Partners, and BlueNalu emphasized the need for partnership across the alternative proteins landscape to enact a fundamental change in production. Large corporations like ADM, JBS, Cargill, and Tyson have been pouring money into startups. Players in the space hope that this surge in investment will encourage national governments to follow suit. Cell-based meat is the perfect case study for how these, until now, unconventional partnerships could work. The landscape currently lacks an ecosystem to supply necessary inputs like media, bioreactors, or cell lines. Companies like Nutreco are working on scaling up business as an input supplier, but without many companies ready for large-scale production, the market for its products is small and growing slowly. Cell-based meat needs a lower-cost and secure food-grade source of its expensive growth media; relying on pharma supply isn’t sustainable or economical. Partnerships between small to midsized enterprises like Merck and traditional meat suppliers like JBS have been pivotal in the scale-up process and will continue to be necessary to get cell-based meat to market at the scale needed to make any impact.
2. VC funding will not be as abundant for the rest of 2022 and likely for all of 2023
Panelists from Guggenheim Partners, Footprint Coalition, Synthesis Capital, Temasek, and Norwest Venture Partners repeatedly stated that VC dollars would be less available for the remainder of 2022 and 2023. Startups looking to raise seed funding will have a difficult path ahead. Those headed for later rounds like Series C or D will also not see the oversubscribed fundraises of 2021. Investors warned against using VC funding to build physical factories and suggested the formation of joint-development agreements (JDAs) or soliciting funds from government entities or grants may be easier paths while broader financial markets remain volatile. The lack of funding will slow alternative proteins startups on their quest to reach profitability, and it’s highly unlikely that we will see more IPOs until 2024 or later. Despite this grim outlook, multiple panelists still see alternative proteins continuing to grow and claim more market share. Rosie Wardle of Synthesis Capital estimated that while alternative proteins would have only 5%–8% of market share by 2030, it would rise to 40% by 2050. Manuel Maenke of Footprint Coalition opined that by 2050, we may not even refer to the category as “alternative” any longer.
3. Regulatory requirements must be top of mind from day one to achieve a viable commercialization path
Representatives from FDA and USDA as well as in-house counsel from Upside Foods and Perfect Day presented a regulatory deep dive on the global approval of novel foods. Lux also attended a roundtable discussion on opportunities and challenges in novel proteins authorization. Regulators drove home the point that if companies working on new technologies don’t engage with regulators and work with regulatory documentation requirements in mind, they are looking at a considerable delay in commercialization timelines. Products designed around the regulatory framework have the best chance of approval. Additionally, regulatory timelines must be considered; according to one regulatory expert who spoke at Future Food-Tech, approval takes a minimum of 1.5 years in the EU, six months in the U.S., and one year in Singapore. For novel foods and processes, requirements aren’t always clear and often require companies to revise filings several times before approval is granted.
Lux Take
Given the state of the world economy, it is not surprising that VC funding won’t reach 2021 levels. Companies in the alternative proteins sector won’t be able to rely on the huge, oversubscribed fundraises of 2020 and 2021 and will need to turn to creative solutions for growth. Lux expects to see an uptick in partnership with the formation of new JDAs. We will also see fewer companies seeking to build production facilities and more engaging outside R&D firms to save on salary expenditure. Companies may be looking to governments to provide grants and funding for projects that meet sustainability goals. The reality is that the alternative proteins industry is likely to see more startups fail or consolidate. Those that can survive financially will still face an uphill battle to gain regulatory approval, given the lack of streamlined frameworks worldwide. Despite these challenges and near-term financial crunch, the alternative proteins landscape is here to stay and will require the interplay of multiple value chain players, opening up opportunities to engage.