There are four main factors that have shaped the alternative ingredient and protein sector in 2023, and these can also help understand future influences too, according to Floor Buitelaar, managing partner of Bright Green Partners.
Firstly, several influences have affected raw materials: global inflation, war and conflict, disease and outbreak, global warming, and weather irregularities.
“Global prices have been increasing, and although consumer spending has been largely resilient, we have seen a notable downturn in venture capital (VC) investment activity in the space, as well as major plant-based companies struggling to finance their operations with increased interest rates,” she says.
“We expect consolidation in the alt protein sector for underfunded companies. Many of those that raised funding in 2020/21 are now running out of dry powder; only those that planned accordingly and spent conservatively will make it through this inflationary period.”
Referring to global conflicts, Buitelaar says: "Grain price increases due to the Ukraine conflict, especially in Europe–have resulted in higher per kilogram meat prices. This allows alt proteins to catch up, pushing them relatively closer to price parity across the board. Some countries, such as The Netherlands, have achieved price parity or better for various plant-based products,” says Buitelaar.
Finally, an outbreak of avian flu has caused egg and chicken prices to rise, wiping out 58 million birds in the United States alone and causing egg prices to skyrocket to an all-time high. RaboResearch predicts prices will remain at an all-time high for the rest of 2023.
Global warming and weather irregularities are also impacting raw material supplies.
Sugar prices have increased by over 200% in the last two years (relevant to fermentation) due to changes in global climate patterns. These have occurred in Brazil and India, the world’s two largest sugar exporters. India faces uneven rainfall and a shorter supply. In 2023, India announced it had imposed an export limitation on sugar for the first time in six years.
Increased investment
The second factor is an increase in investment, particularly from consumer packaged goods (CPG) companies.
Despite headwinds, consumer packaged goods (CPGs) are putting money into alt protein projects. “CPGs are now serious about alt proteins as an important component of their future business strategy rather than a hedge or a gamble,” Buitelaar says.
“Global demand for proteins is steadily increasing, and it is undeniable that current strategies and resources are not enough to feed ten billion people with an increased appetite for traditional meat.
“The future business case is becoming increasingly clear for alt proteins, especially as the ‘true cost’ of traditional meat and dairy products becomes clearer to the consumer. Alternative sources must be found if we are to not irreversibly destroy our planet.”
Collaborative approaches and regulatory developments
The third factor relates to collaborations: in the food industry, teaming up across channels is becoming more common due to sector consolidation and difficulties in obtaining further investment. Aleph Farms is collaborating with Migros, Switzerland’s largest food enterprise, for example, to be the first company to begin the approval process for cultivated meat in Europe.
Finally, the fourth impact is of a regulatory nature, according to Buitelaar.
The Food and Drug Administration (FDA) has deemed Upside Foods’ cultivated chicken safe for human consumption with a “no questions” letter in the US.
The Dutch government approved cultivated meat tastings in controlled environments, becoming the first European country to allow cultivated meat consumption while Aleph Farms has become the first company to submit a pre-market authorisation dossier to the Food Standards Agency (FSA) to launch cultivated beef steaks in the UK.
However, there are also regulatory blockades. Italy has banned the sale and production of cultivated meat and other ‘synthetic foods’ to preserve its food heritage and protect Italian farmers, showing that not all countries are on board and that others may also push back.
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Recommendations to grow the market
Going forward, Buitelaar has two recommendations to grow the market for alternative ingredients: brands should focus on their production process and market understanding.
“Keep the consumer in mind when developing new products, specifically taste, price and convenience factors.”
“Look to solve key industry challenges that the industry is experiencing broadly, for example, methylcellulose alternatives, new bioreactor design for precision fermentation or cultivated meat, new strain development for precision fermentation, cell line development for cultivated meat, scaling 3D printing for plant-based,” she told Fi Global Insights.
“Focus on developing products with a strong sustainability story, emphasising eco-friendly sourcing and production methods.”
Examples include life cycle analyses, sustainability scoring and making the supply chain transparent to the consumer.
Producers can ensure that a product scores well in terms of its ‘true cost’, a trend gaining momentum, whereby retailers price in the environmental costs of products they sell. In addition, producers can focus on design processes that are scalable and cost-efficient to achieve price parity.
‘Stay tuned in to evolving consumer preferences’
Developing a solid market understanding is also vital. “Stay tuned in to evolving consumer preferences and trends in the alternative protein space.”
Follow top industry news sources and industry thought leaders and attend conferences to not only stay in the loop, but also become a part of the conversation.
“Continuously innovate by experimenting with various ingredients, staying ahead of the competition, and addressing unmet market needs,” says Buitelaar.
Producers can do this by looking to collaborate with outside sources of innovation, foster an open culture of innovation and information sharing with other industry professionals, and look to third-party providers such as Bright Green Partners to help solve any knowledge or information gaps to accelerate their development.
All eyes on 2024: Some countries are moving towards adoption
Eyes are now on how alternative ingredients, protein perceptions, and applications will evolve over the next 12 months as we head into 2024. “As we reflect on 2023, I hope that consumers will understand the link between the extreme climate events of the year and the farming practices that have contributed to them,” she says.
“It seems, for now, that some countries, such as Germany, are moving more towards alt protein adoption, particularly in the plant-based segment. Over the next 12 months, it will be important for companies to take advantage of the prevailing high prices in the market by looking for market segments that are more competitively priced.”
“Unfortunately, many consumers are not yet convinced of the alt protein options, particularly when it comes to taste and sensory experience, but there is a new market foothold that companies should try to build out as much as possible.”
Taste, convenience, and price are the main factors for widespread adoption.
