Why Investors Bet on the Future of Alternative Protein

Alternative protein sources have become a hot topic in recent years, and the Covid-19 pandemic appears to have only pushed it to the forefront. Data suggest that the 2020 sales of plant-based meats and milk grew by 45% and 20% compared to 2019, respectively. A new report released by Research and Markets this month predicts the plant-based market to grow to $20b in a decade. It’s valued at below $7B now.

We talked to several dozen investors on whether they believe the growth of the alternative protein market is long-term or just a temporary trend. Here’s what they had to say.

“We think plant-based proteins is here to stay,” said Scott Porter, Managing Director of Food & Agribusiness at Cascadia Capital, a Seattle-based middle-market investment bank. “We don’t think it’s a fad. We think it’s a long-term trend and shift in consumer preferences in food technologies.”

Though interest in plant-based diet dates back to long before Covid-19, the pandemic appears to have served as a catalyst for the trend with the growing concern that animal-based products might be at a higher risk for spreading the disease.

A major study published this week provided further support for the argument that vegan patients may be less at risk of dying from Covid-19. The medical research, conducted by several scientists, concluded that people who followed plant-based diets developed milder symptoms of the disease than those who consumed animal-based products.

Asked if he were to invest $1 million in a sector, what it would be, Fred Kaplan with New Jersey-based Stony Hill Advisors showed no hesitation in answering.  “I definitely would invest in plant-based proteins,” he said. “I think we’re going to find more and more mainstream restaurants offering plant-based [food]. Certainly, the food service for the elderly is offering more plant-based options. I think this is only going to grow further and further,” he added.

Don’t expect meat to disappear from the American diet anytime soon, but meatless options are becoming more popular. Nowadays, alternative proteins include everything from fuels to animal feedstuff. There are even meatless alternatives for burgers, steaks, and chicken nuggets.

But one of the key reasons that make many investors bullish on alternative proteins now is the growing dedication from the public and, in turn, politicians to protect the environment and reduce global warming emissions- a primary source of livestock pollution from cows that produce methane gas, as well as feed production.

“You have a unique customer base there that is sort of evangelical, and they really believe in your mission, and I think any company that is giving away a portion of their profits or helping the environment, planting a tree for every certain number of sales or any of those trends,” said Blake Shear, the director of The Forbes M+A Group, based in Denver, CO.

Despite the growth in demand for alternative protein, it’s still small compared to the $95-billion meat industry in the U.S.

“I think the trend is we continue to eat more and more meat…I do think people are supplementing their diet to some extent,” Shear said.

Globally, Brazil was the world’s largest beef exporter in 2020, followed by Australia, the United States, and India. Those four countries exported more than 1 million metric tons of beef throughout the year.

In 2020, more than 20% of global food launches were plant-based. More than 50% of this figure was in Europe. The U.S was responsible for only 11 percent.

“I would say that the people who actually did the best were people who were in the alternative protein sector, said Adam Bergman, managing director of EcoTech Capital, an M&A advisory firm. “People were just getting concerned about the interaction between humans and animals because of where Covid came from,” he added.

According to WHO, the Covid-19 virus likely originated in bats and passed from animals to people. The first case was reported in Wuhan, China. There is no evidence to suggest that eating meat-based products makes people more susceptible to Covid-19.

Meanwhile, plant-based meat alternatives, or meat analogs (MA) as they are sometimes called, have received increased media attention. MA products can be made from various ingredients, including soybeans, wheat gluten, and pea protein isolate.

“I think that the plant protein moment has seen as high watermark,” Ivan Saval, managing director at National Securities, a New York-based brokerage firm. “And it’s going to be commoditized and that it’s going to competing with the traditional protein categories,” he added.

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