What Happened in Plant-Based Protein in 2017?

The plant-based protein startups using technology to create and mass produce their products have traditionally received support from a small, but dedicated group of investors, which is increasingly being joined by major food and agriculture players as this trend solidifies.

“We’ve been flooded with deals and opportunities because so many different companies are looking for the type of capital we offer,” said Lisa Feria, the CEO of one such investment firm, Stray Dog Capital to AgFunderNews in September.

But the trend toward plant sources of protein isn’t investor created. According to a Nielsen study released in August, 23% of North American consumers want to see more plant-based protein options in stores. The study indicates that consumers are interested in more plant-based protein options outside of a vegetarian or vegan label since those two categories remain at 6% and 3% of North American consumers respectively. 

So is this growing consumer preference being met with funding of new startups with the potential to add variety to grocery shelves? Here are the most prominent events in the plant-based proteins from 2017.

(It’s important to note that cultured meat or other cultured animal products are not included here. Though often included in discussions about alternative proteins and supported by a similar cast of investors, the technology behind cultured animal products is in much earlier stages and will likely take years to reach commercial scale. Read all about what it will take to bring cultured meat to market here.)

Funding Announcements Change the Leader Board

Impossible Foods posted the biggest funding raise in plant-based agrifood tech in 2017, raising $75 million in Series E funding in August, with Singapore state fund Temasek leading the round. This marked the fourth agtech investment for the Singaporean state fund and the second investment in a company looking to replace animal products with no-slaughter alternatives.

Impossible Foods makes a plant-based burger with synthesized heme, the non-protein part of hemoglobin in blood that carries oxygen. This compound ingredient helps Impossible’s burgers cook, taste, and bleed like beef. It obtains heme by genetically modifying yeast and using fermentation to produce a heme protein naturally found in plants, called soy leghemoglobin.

The company has now raised $273.5 million in debt and equity in total, making it the best-funded alternative protein startup to date. The company received a US patent also in August for the use of its leghemoglobin in plant-based meat and says it has it has more than 100 additional patents pending.

The other big name in plant-based meat replacements, Beyond Meat, snuck in a $55 million Series G round in December, from Tyson Foods, an existing investor. Tyson’s stake is now unknown, though it was reported to be 5% before this recent funding bump. Chicago-based food and beverage VC Cleveland Avenue also participated.

Also raising new funding in 2017 were animal product replacement startups and ingredient companies.

Plant-based ingredients startup Nutriati raised $8 million in Series A funding in April led by Tate & Lyle Ventures, a London-based firm focusing on food science startups.

PowerPlant Ventures, the relatively new, vegetarian food fund, also participated in the round, alongside Blueberry Ventures, a San Francisco-based food and beverage venture firm, and NRV, a Virginia-based multi-sector investor. Tate & Lyle Ventures manages a £25 million ($32.12 million) fund independently from its sugar company parent.

Miyoko’s Kitchen, a food company manufacturing non-dairy, vegan cheese and butter alternatives, raised a $6 million Series B round in February, led by JMK Consumer Growth Partners and including Obvious Ventures, CircleUp, and Stray Dog Capital. The company said it would use the proceeds to complete a new manufacturing facility in Petaluma, CA, which would increase production capacity 30 times.

Israeli plant-based yogurt maker Yofix raised a $2 million Series A round in September led by Strauss Health, an Israeli food and beverage manufacturer. Individual investors from the US, UK, and Israel also participated in the round.

Yofix makes a seed and lentil-based yogurt product joining the other nondairy yogurts on offer in stores today such as soy, flax, almond, and coconut. The company claims to use traditional fermenting techniques on new ingredients, making it the first grain, seed, and lentil-based yogurt on the market.

Mergers & Acquisitions Show Real Value

In three plant-based protein M&A deals this year, the potential for this growing category is evident in the selling prices and the expertise of the buyers, one of which is a meat processor.

In July, Japan’s global holistic healthcare company Otsuka Pharmaceutical Co acquired Canadian dairy-free, food company Daiya for a reported $325.5 million. Daiya produces plant-based greek yogurt alternatives, pizzas, desserts, spreads, and dairy-free cheese. The products are sold in more than 25,000 grocery stores in the US, including Whole Foods, Kroger, Safeway and Publix, and other natural foods grocers. Daiya’s products are also available in Australia, Sweden, Mexico, and Hong Kong, among others. Otsuka hopes the acquisition will add to its nutraceuticals business, creating a plant-based platform, according to a statement.

In other consumer packaged goods deals, Brynwood Partners, a US private equity firm, sold Lightlife Foods to Maple Leaf Foods, and a group of Dutch venture capital firms sold Ojah to Korys, the investment arm of the owners of a Belgian supermarket chain.

Maple Leaf Foods, the Canadian consumer packaged meats company, which raises and processes pigs as its main business, paid $140 million for Lightlife Foods. Lightlife owns 38 percent of the US market share for refrigerated plant proteins and sells a range of products from tempeh to Teriyaki Smart Jerky. Brynwood Partners purchased the company from ConAgra Foods in September 2013.

Korys, the investment arm of the Colruyt family, which owns one of Belgium’s biggest discount supermarket chains, acquired Ojah for an undisclosed amount. Based in Holland, Ojah produces textured meat alternatives from plants. It markets its products under the brand names Beeter and Plenti in the domestic and international markets respectively.

Product Expansion Quickly Follows Funding

Beyond Meat’s Series D Raise in late 2017 came after a year of product expansion announcements. The company inked a contract with Safeway back in May – its first mainstream grocery partnership. Beyond Meat burgers launched in about 20% of the Safeway’s more than 1300 stores.

Beyond Meat now claims to have product for sale in more than 19,000 stores including, Albertsons, Kroger, Safeway, Target, and Whole Foods. Beyond Meat burgers also became available at TGIFridays restaurants this year. The company also struck a deal with Sysco this year, though details have not emerged.

The company also launched a sausage product at the end of 2017.

Impossible Foods, which has chosen to expand through chef-partnerships and food service more so than through grocery stores, announced in December that its burger would be headed to Asia in 2018 after reaching 300 restaurants in the US in 2017.

Not All Smooth Sailing

One of the more senior startups in this class, Hampton Creek, has had a tumultuous year — though it did end with the launch of the company’s mung bean-based scrambled egg product.

Once the plant-based startup media darling now problem child, Hampton Creek created a consumer vegan egg-less mayo spread and egg replacement for food service several years ago. Vegan cookies followed and the company raised a $100 million Series D round in 2016 bringing its funding total to $220 million. 

However, investigations by the SEC and FDA, a July walk-out from the entire board less founder Josh Tetrick, along with operating at major losses, have led some to predict the company will run out of money in early 2018, plagued 2017 for the silicon valley startup. Major retailer Target dropped the product line in August and in a departure from his core business of making food products with a pea-based egg replacement, Tetrick has claimed that he will have a cultured meat product on the market next year.

Hampton Creek had a new board by September and the launch of the scrambled egg product is a long-awaited positive headline for the company, but it likely won’t reverse a reputation for tumult built largely in 2017.