US plant-based protein investment in 2020 will surpass 2019 as Q1 brings in $741m

US companies creating plant-based alternatives to conventional animal-derived protein raised $741 million in the first quarter of 2020, according to new data from nonprofit alt-protein advocacy group The Good Food Institute and data provider Pitchbook.

In newly published research by GFI, the nonprofits highlight the record-breaking levels of alternative protein investment in 2019 and Q1 2020.

GFI reports that US plant-based meat, egg, and dairy companies received around $747 million in investments in 2019, an increase year-on-year by 11%, or $74 million. (This figure includes $457 million in venture capital and $290 million raised by Beyond Meat in its IPO.) But 2020 is set to massively surpass that after raising almost as much as that 2019 full-year total between January and March, reaching $741 million.

The growth in investment is palpable when the GFI sets the numbers from a 10-year perspective. US plant-based meat, egg, and dairy companies have raised $2.7 billion in venture capital in the past decade (Q2 2010–Q1 2020), 45% or $1.2 billion of which was raised in 2019 and Q1 2020.

Covid-19 impact on alternative protein investment

Alternative protein investment is less likely to surge in Q2 or Q3 2020, given an expected widespread pullback in investor appetite amid the Covid-19 pandemic. Then again, retail sales of alternative proteins have fared strongly during the crisis. During the F&A Next live webinar yesterday, Unilever executive Robbert de Vreede said that sales of its alt protein brand The Vegetarian Butcher were “through the roof;” other brands have told us the same. Research firm Nielsen backs this up, indicating that consumer purchases are somewhat compensating for restaurant shutdowns. Longer-term projections could also keep investor momentum going; UBS analysts say the plant-based meat market could grow 28% a year to $85 billion by 2030.

But there are no guarantees retail success will continue exponentially in a march toward veganism and flexitarianism. In Asia, for example, a study on alternative protein interest in China by the advocacy group Food Industry Asia (FIA) and market analysts AI Palette (disclosure: AgFunder portfolio company) detailed how interest can ebb and flow. Consumer interest in plant-based meat alternatives spiked at the height of China’s domestic Covid-19 crisis, when its strictest lockdown measures were in force and meat supplies faced significant disruption but the clamor for meat alternatives quickly subsided as the supply of traditional proteins and other food categories stabilized – indicating that companies offering such products need to do more brand-building in the Chinese market.

Unilever’s de Vreede conceded that if it turned out consumers “were only buying alternatives because they can’t get meat, [the sales growth trend] could pass,” but hopefully suggested that if consumers had a good experience trialing alternatives during this time, they could start to build those products “into their repertoire.”

(AgFunder’s White Paper on alternative proteins maps out the foundations of some of the increased investor interest over the past few years, giving an overview of the ecosystem.)

Cellular ag investments rise sharply in Q1 2020

Global cultivated meat companies — which are designing new ways to grow meat, eggs, or milk from clusters of cells — raised more than $77 million in capital in 2019, GFI finds, which is 63% more than in 2018 and more than double the capital raised in 2016 and 2017 combined.

In the first quarter of 2020, cultivated meat companies raised $189 million, more than the amount invested in the cultivated meat industry’s prior history, with Memphis Meats’ landmark $186 million Series B funding round.

For cultivated seafood companies, 2019 was also a year where investors finally took the bait. Three cultivated seafood companies raised Series A rounds—a first for the category. By the end of 2019, 55 cultivated meat companies had formed across the globe, 20 of which launched in 2019. This was a 57% increase from 35 companies in 2018.

“There’s been a surge in investor confidence fueled by durable and increasing consumer interest in alternative proteins,” said GFI associate director of corporate engagement Caroline Bushnell, in a press release sent to AFN. “Investors have seen the market opportunity and are moving to capitalize on a global shift in the way meat is produced.”

An instinctive guess might be that the world’s largest protein powerhouses would be opposed to plant-based or cellular ag companies getting too much market share. However, nine of the top 10 US meat companies have capitalized on the plant-based shift, having launched, bought, or collaborated on a plant-based meat brand by the end of 2019. “With historic pressures on conventional meat production, we expect to see the large meat conglomerates double down on their alternative protein investments,” said GFI Executive Director Bruce Friedrich.

Cargill recently launched a new plant-based meat brand in China. Find out more here.

The biggest sizzles of 2019

The two largest financing events of 2019 were Impossible Foods’ $300 million Series E funding round and Beyond Meat’s record-setting IPO—the first from a plant-based meat company—which raised more than $250 million in capital for the company. During the first quarter of 2020, Impossible Foods announced they had raised another $500 million in their Series F funding round.

Any thoughts on what investment into alternative proteins will look like in Q2 and Q3 2020, and how Covid-19 will impact it? We would be keen to hear from you! Send a note to [email protected]

Additional reporting by Louisa Burwood-Taylor

Want to join the alternative protein investment trend? Find out more about AgFunder’s New Carnivore Fund here.