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Plant Protein's Key Players

Thomas Hayes, Analyst
December 20, 2020

Plant proteins are, and will continue to be, a key near-term opportunity within the realm of alternative proteins for the food industry. The space is reaching new heights in market momentum, especially since Beyond Meat's IPO in May 2019. More recently, COVID-19 has given plant-based products a boost – a ripple effect of supply chain challenges experienced in the animal protein industry and most acutely felt in the U.S. Livekindly is a good example of a company looking to plug this gap by scaling big and scaling fast – since March 2020, it has raised $335 million, made four acquisitions (Livekindly Media, The Fry Family Food Co., LikeMeat, and Oumph!), formed two partnerships (PHW Group, RCL Foods), and led an investment (Puris). Clearly, competitive tension is growing.

The plant proteins landscape consists of three major categories: crop production, ingredients, and finished products. Participants span the globe (Americas, EMEA, and Asia-Pacific) and take on different forms (i.e., research institutions, small-to-medium enterprises [SMEs], and large corporations), with varying degrees of engagement along the value chain. To understand this in both a quantitative and a qualitative sense, we identified and analyzed a long list of relevant organizations, helping discern "how" and "where" to play in this evolving space.

Lux Research Plant Proteins

The U.S. has the largest footprint today, but other regions are gaining share.

Three plant-based unicorns hail from California alone: Impossible FoodsBeyond Meat, and Eat Just. What the numbers do not indicate is the ongoing market expansion of plant-based companies beyond their homegrown territory. The three U.S. unicorns exemplify this expansionist strategy, with each making moves into either Latin America, Europe, or Asia-Pacific as of late. Market penetration from outside the U.S. into the U.S. is also occurring, with NotCo recently launching through Whole Foods after gaining a foothold in its Latin American home market. As these more mature companies grow through market expansion, fast followers are greatly rising in number, seeking to differentiate by emphasizing local product-market fit. This can be clearly seen in Asia, with China in particular becoming a hotbed for plant-based innovation.

As the commercial maturity of plant proteins increases, the line between SMEs and large corporations is blurring.

While SMEs dominate the landscape, especially for finished products, the boundary between SMEs and large corporations is becoming harder to discern. This is due to either rapid organic growth of SMEs (i.e., the rise of plant-based unicorns) or joint ventures, acquisitions, and newly formed subsidiaries brought on by large corporations. Joint ventures appear to be the preferred model for ingredients, with Cargill/Puris and DSM/Avril Group as notable examples. Acquisitions and subsidiary formation are the more popular routes for finished products, with Maple Leaf Foods interestingly combining both, bringing its plant-based acquisitions under the subsidiary Greenleaf Foods.

While low in number, research institutes have a valuable role in the plant protein ecosystem.

Beyond MeatProlupin, and Rival Foods are just a sampling of companies with roots tracing back to research groups. In terms of where these institutes are most prevalent, the U.S. bubbles up to the top of the list with its network of land-grant universities. Groups in Europe are generating higher research output, most notably France's National Institute for Agricultural Research (INRAE) and the Netherlands' Wageningen University.

Plant Proteins Market Map

Crop production: 

The usual cast of large agricultural input providers has the strongest presence in this value chain position, possessing a plethora of patents for different cultivars of protein-containing crops. Given the roll-up of agriculture companies in recent years, this segment is quite consolidated and thus has the fewest number of companies among the three categories. SMEs are looking to make their mark, however, developing crop varieties with agronomic and/or consumer benefits. Three startups in particular are going head-to-head to develop high-protein varieties: EquinomBenson Hill Biosystems, and Amfora. Amfora is early-stage, but Equinom and Benson Hill are nearing commercialization. Both claim to have developed soy varieties with up to 50% more protein content through non-GMO approaches, in addition to work on other crops and traits. Innovations like this can allow growers to demand a premium while also defraying protein extraction costs downstream.

Ingredients: 

Legacy ingredient companies are providing much of the scale to meet demand for first- and (select) second-generation plant proteins. With respect to the latter, between Roquette, Cargill/Puris, Burcon, and DSM/Avril Group, the capacity to produce several hundred thousand metric tons of pea and canola protein per year is set to come online in the next year or two. In parallel, up-and-comers are looking to break through with ingredients from alternative plant sources. Examples are wide-ranging, such as chickpea from InnovoProChickP, and Nutriati, water lentil from Parabel, and moringa from Kuli Kuli. Ingredients from these sources will not be able to compete in terms of scale for the next three to five years, but these alternative plant protein sources will open up more choices for finished product makers and consumers alike.

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Finished products: 

The end of the value chain is the most crowded and fragmented by far, though, as alluded to previously, some market consolidation has occurred. Granted, the pace of M&A activity has slowed down since 2018, and inflating valuations of plant-based food startups are likely to blame. For example, Alpha Foods raised the largest Series A round for a plant-based meat company in February 2020 with $28 million. Meanwhile, Impossible Foods raised only $9 million in its 2011 Series A round. As a result, large CPGs have been inclined to develop and launch their own products, such as Tyson's "Raised & Rooted" brand. Nevertheless, given the density of companies, there will inevitably be "me too" products that will fail, from both large CPGs and startups.

The plant proteins landscape is changing quickly, with participants transcending geographical borders and organizational types.The U.S.- and SME-heavy landscape of today will not be the landscape of tomorrow. Players are quickly growing into new markets, and in parallel, new entities are being created, bought up, or spun out. As this happens, the size of the global plant proteins market will inevitably grow, but don't fall into the "me too" trap. It is imperative to create solutions with a unique value proposition for your organization, customers, and consumers.   

Ultimately, in order to win, plant proteins must make regional sense, from both supply and demand perspectives. On the supply side, that means utilizing plant proteins from crops prevalent in a given region. On the demand side, it means creating products that cater to the local palette, which can be delivered through careful processing and formulation. Those that are able to strike a balance between both aspects will have the highest chances of realizing long-term growth. This does not have to be done in isolation, and we encourage those interested to partner up and/or down the value chain. Between crop production and ingredients, Equinom and Roquette serve as a reference model, and between ingredients and finished products, Burcon and Nestlé do the same.

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