The Future of Food: Alternative Meats

Published in

Impact Edge

7 min readMay 27, 2022

This is the first of a series of impact deep dives on the future of food. Keep an eye out for future blogs on vertical farming and food sharing platforms.

Executive Summary

Why are we interested?

Global consumption of meat has tripled over the past fifty years and continues to grow, driven by population growth, income growth, and urbanisation. In 2020, consumers ate 574m metric tons of meat, seafood, dairy, and eggs. Meat production places a significant burden on the planet with the FAO estimating that emissions from livestock represent 14.5% of all anthropogenic GHG emissions — see impact assessment below.

Alternative meats are one potential solution to this problem, seeking to replicate the taste and texture of animal meat while producing fewer CO2 emissions. They can be plant-based (e.g., soy, pea), microorganism-based (e.g., fungi, yeast), or grown directly from animal cells (not yet commercially available).

There has been a huge amount of investor interest in the sector, with $3bn raised by plant-based startups in 2021, an increase of +74% since 2020. However, plant-based companies such as Oatly and Beyond Meat have seen their share prices fall significantly since last year (7.5x and 3.8x respectively since June 2021).

What do we like about the sector?

Growing consumer awareness and adoption, with a 46% rise in demand for plant-based meats in 2020, albeit followed by a 0.5% decline in 2021
Compelling from an environmental point of view if consumers are switching out animal meat for plant-based meat, which is less carbon-intensive
Clear impact ‘lockstep’, with customer willingness-to-pay closely linked to impact and, as a result, companies unlikely to deviate from mission
Pursuit of impact is driving accelerated customer acquisition and growth

What remaining questions do we have about the sector?

Limited evidence available on the relative nutritional benefits of plant-based meats (which by their nature are highly processed) vs. animal meats
Some potential impact risks associated with scaling business models — for example if plant-based meats replace more environmentally friendly protein sources such as tofu
Cell-based meats are still at an early stage of development, and have not yet proven they can replicate animal meat’s taste and texture at a viable price point.
Despite a compelling impact proposition for plant-based proteins, companies have experienced challenges retaining and acquiring new customers and an overall decline in the category in 2021

Key Terms

Alternative proteins: alternatives to animal-based proteins (e.g., meat, seafood, dairy, eggs), which can be made from plants, insects, mycoprotein, or grown from cells.

Alternative meats: a sub-set of alternative proteins which provides alternatives to animal meat specifically.

Plant-based meats: Made from soy, pea, and other plant-based proteins (e.g., Impossible Burger) or from microorganisms like fungi, yeast, or algae (e.g., Quorn). We group these two types together as ‘plant-based’ because they are both currently commercially available.

Cell-based meats: Grown directly from animal cells (e.g., Mosa Meat) and not yet commercially available.

Commercial analysis

Globally, ~13m metric tons of alternative proteins (primarily plant-based) were consumed in 2020 (~2% of the animal protein market). This is expected to grow to ~97m metric tons in 2035 (~11% of the animal protein market). In the UK, the alternative meat sector is currently estimated at EUR500m.

Despite this overall trend, there was a decline in demand for plant-based meats in 2021 which experts believe is due to the price, taste, and texture of products, as well as the impact of the covid-19 pandemic.

Drivers of demand for plant-based meats

Impact analysis

We use the Impact Management Project framework to assess impact. Alternative meats can have a positive environmental impact (contributing towards SDG 12: Responsible Consumption) and nutritional impact (contributing towards SDG 3: Good Health and Wellbeing).

Interaction between impact and commercial growth

We believe impact acts as a source of value for companies (see our recent blog). It can help in acquiring and retaining customers, attracting talent, improve access to capital, and reduce risk. More specifically, these four areas have the potential to drive commercial growth by (i) increasing the total addressable market (i.e., the number of units sold) and (ii) improving the unit economics (i.e., the value of the units sold). We unpack these below.

Total Addressable Market

Alternative meats are a response to changing consumer preferences for increased sustainability and impact. A survey of UK consumers found that 36% choose alternative meats because of environmental or sustainability reasons. Another main driver for consumers to try alternative meats is for health reasons — in particular links between overconsumption of red meat and risk of cardiovascular disease.

Consumers are becoming increasingly aware of and concerned about these issues, which is expected to increase the size of the addressable market for alternative meats — 30% of UK consumers reduced their consumption of meat over the past 12 months.

Unit Economics

Unit economics is dependent on the cost of acquiring a customer, volume purchased per customer, profit from each purchase, and customer retention.

Customer Acquisition Costs

Because alternative meats are aligned with changing consumer values and preferences, this gives companies in the sector an edge in terms of customer acquisition. As a result of values alignment with the product, consumers appear more likely to organically refer the product and convert based on those referrals. 34% of allplants’ (a plant-based food company) customers refer, with 27% taking action on that referral. This is higher than the average conversion rate in DTC food brands of ~6%. It is also higher than brands such as Kencko (plant-based smoothie company), which has 22% of referrals converting.

Impact themes often have movements behind them — for example, 18% of allplants’ referral customers come through Veganuary

Transaction Volume

This alignment also gives companies in the sector an edge in terms of the speed of per customer volume growth. Shifting customer preferences with a lack of existing options means there is pent up demand. Therefore, impact products in this category are likely to experience accelerated early customer acquisition. The plant-based meat sector grew by +46% in 2020 and UK spend on plant-based milk grew by +32% in 2020.

Transaction Margin

While some consumers are willing and able to pay a premium for impact (e.g., McKinsey estimates that US consumers will pay +51% for cage-free eggs), it is expected that companies will need to lower price points to achieve widespread adoption. One survey showed that while 65% of people said they wanted to buy purpose-driven brands that advocate sustainability, only about 26% actually do so (the ‘intention gap’). A Deloitte survey found that one of the most common reasons for UK consumers not adopting a sustainable lifestyle (16% of those who said they had not) was that it was too expensive

In the longer-term, it is expected that making plant-based meat might be less expensive than animal meat (i.e., here, impact is aligned with improving unit economics) and BCG expects the sector to reach price parity by 2035.

Retention

While impact will drive top of the funnel (through organic channels) and conversion (through values alignment), retention of customers appears to be based on traditional purchasing criteria (e.g., price, taste, cooking properties, etc.). There are inherent tensions between impact and traditional characteristics here as described above (e.g., different inputs alter taste, etc.).

In particular, prices for alternative meats are currently 30–40% higher than for animal meat. This is primarily because alternative meats are a new product category, which means companies need to spend money on R&D and may not yet have realised efficiencies from large-scale production — i.e., innovation is driving impact but also increased prices.

If the connection between the product and environmental or health impact is weakened (either objectively or in the customers mind) then the positive dynamics may fall away. For example, in the case of plant-based milks, almond milk sales have been hit by questions around the true environmental sustainability of the product. Almond milk is water intensive and also leads to high shipping emissions as 80% of almonds are grown in California. In the UK, oat milk (which is more environmentally friendly) sales doubled to £146m in 2020 and it overtook almond milk as the top plant-based milk in the UK.

Similarly, some consumers have questions about the health implications of eating processed alternative meats.

Final Thoughts

Overall the category has high potential for environmental impact although more proof points are required on the nutritional side. Impact alignment with customer values has driven customer acquisition at tremendous speed although these companies now face challenges retaining those customers and continuing to accelerate growth. Relatively strong lockstep should ensure that impact grows as these companies grow and we are looking forward to watching how the space develops over the next few years.

We would love to hear your views about alternative meats. How do you expect the sector to develop? What are your thoughts on the lockstep between commercial and impact growth?

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