The world's alternative protein industry is experiencing a great shakeout as investor funding declines, production costs increase due to inflation, and consumers become more discerning about the nutritional value, taste, and processing of food. After the early success of Beyond Meat and Impossible Foods, a crowded field of imitators mushroomed. However, sales have not met expectation, and shoppers are turned off by high prices and unusual tastes and textures, leading a growing number of companies to shut down, lay off staff, and sell themselves. Even established players like Beyond Meat and Impossible Foods have suffered recent rounds of layoffs. Nevertheless, some investors remain positive about the sector, with Euromonitor International predicting volume sales of meat and seafood substitutes to grow by over 10% this year.
The adjustment phase taking place in the alternative protein industry is typical of every high-growth consumer segment, according to Andy Shovel, co-founder of UK-based THIS, whose sales have increased by around 45% this year. Shovel believes the result will be a simpler customer shopping experience, better quality products, and prices will come closer to being comparable to meat. Companies that survive are likely to have a more concentrated share of resources and control more shelf space.
Despite market turmoil, some investors remain optimistic, with Big Idea Ventures raising $75 million, and companies like MyForest Foods and Chunk Foods raising $15 million in funding. Agricultural company Archer-Daniels-Midland Co. continues to invest in the sector and hopes the alternative-protein market will grow by high single digits and reach $100 billion in sales by 2030. The market is evolving to cater to consumers' needs better, according to Leticia Gonçalves, ADM's president of global foods.
While the clear-out may be painful for some companies, it provides an opportunity for others. Wicked Kitchen, a maker of vegan convenience foods, acquired plant-based seafood company Good Catch for over $7 million in stock, and vegan fish brand Current Foods for between $7 million and $10 million. Similarly, vegan chicken company VFC Foods acquired the brand of The Meatless Farm from administrators.
Food is now widely recognised as central to efforts to combat the climate crisis, and alternative proteins are seen as delivering the most significant benefit, says Rosie Wardle, a partner and co-founder of Synthesis Capital. She believes that the correction in the alternative protein sector was overdue, and the best companies in the sector will continue to secure the capital they need, even in these challenging times, and that ultimately the sector is here to stay.