A case for insect protein as a billion dollar market
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Today’s Rad.Daily is a Note initiating our coverage of the Insect-Based Protein Snacks startup sector, which includes companies that sell their own brand of insect-based snacks online. Companies in this report range from funding-leader Exo Protein to smaller up-and-coming competitors like Salt Lake City’s Chapul and Reykjavik’s BSF Productions (Crowbar Protein).
Problem
The world population continues to soar. The number of people on earth is expected to balloon to 9 billion by 2050, and as a result, global demand for protein is expected to grow 80%. Feeding this number of people sustainably presents serious challenges, given that most proteins (specifically, meat-based proteins) are “environmentally expensive.”
Global demand for protein is expected to grow 80%
From a resource intensity and environmental cost perspective, the following figures frame where the strain will come from. Producing one pound of beef requires:
· 2,500 gallons of water
· 12 pounds of grain
· 35 pounds of topsoil
· 1 gallon of gasoline (or the energy equivalent)
Americans eat on average roughly half a pound of meat per day. Even assuming most of the growth in the world will come from geographies where protein consumption is lower, meeting the protein needs of an additional 1.5bn people will still strain the planet.
Solution
There are a lot of insects out there. According to Quartz, there are more than 1,900 edible insect species across the globe, indicating that insects are a potential solution to rising demand in protein.
They’re full of protein. According to the Food and Agriculture Organization (FAO), adult locusts and grasshoppers have similar levels of protein to raw beef, demonstrating that they may be an effective protein substitute.
They’re environmentally friendly. Insects contribute less to global warming and use less energy and land than more traditional sources of protein do. Crickets in particular produce 80x less methane than cows. They also require 12x less food than cattle and half as much as pigs for the same amount of protein.
Aside: The intersection of problem and solution is an area of intense experimentation by startups, as well as interest by investors and potential competitors / acquirers. In this analysis, we take a look at some of the startups seeking to address this problem through Insect-Based Protein Snacks. In the coming weeks, we’ll initiate our coverage on startups focused on Meat and Fish Replication.
Of course, in this case, success will be a question of consumer adoption, because insects are, well, gross. And consumer adoption will ultimately determine the market opportunity each company is targeting.
TAM and SAM or PAM?
We can talk about total addressable market (TAM) and serviceable addressable market (SAM), but how can we frame the Potential Addressable Market for insect protein?
In our sector report we estimated the current SAM in the US for insect protein snacks to be $96m. That’s not large. We based this on a Radicle Customer Research survey, in which only 3% of respondents surveyed indicated that they had tried insect protein in the past year and that insect proteins snacks would be only a fraction of total snack consumption. We believe this to be a reasonable estimation of the market opportunity that can be served today and in the near-term.
On the other hand, ~3x as many customers surveyed indicated a willingness to try insect protein. If we assumed that those ‘most willing’ represented a servable market, our market opportunity for these startups — who primarily sell online — would obviously triple.
But let’s think bigger and longer term.
While the size of the edible insects market was reported to be only $33m in 2015, something like 2 billion people globally consume insects on a regular basis. That’s 26% of the world’s population. And so theoretically, applying that figure to our TAM, one could see an insect protein snack bar market online of ~$1b and a total market in the US of ~$5bn.
How reasonable are these stabs at a future market size?
Well, sushi is a potential analog. The sushi bar was introduced to the US in the 1950s, and sushi restaurants (the preponderance of the US sushi market) have grown to become a $2bn market according to IBIS. People are much more willing to try new things today than they were 70 (or even 30) years ago. At the same time, as noted, the need for alternate sources of protein are clearly growing, and creative entrepreneurs will likely meet this need with products that reach mainstream acceptance.
