Industry News

Reinventing meat and cultivated proteins: Gauging the investor’s interest through sustainable investment products

by Sandeep Kumar

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Overview and Evolution

The popularity of alternative meat products from Beyond Meat (NASDAQ: BYND) and others, as well as early regulatory permission for some cultured meat products, has sparked a flurry of investment in this nascent business.

Despite this enthusiasm, the business is still in its early stages and is mostly pre-revenue, with a number of growth obstacles ahead, including the need for clear legal frameworks, more economically viable products, and scalable technologies. As the traditional cattle industry tries to defend its market share from produced protein sources, providers will almost certainly encounter greater lobbying attempts.

Even while widespread adoption may be several years away, improving consumer sentiment, together with increased demand for more sustainable food choices, will undoubtedly boost investment in grown protein products.

The key industry drivers for alternative meat products industry

· Antibiotics and hormones-free: Industrial farming conditions can be unsanitary, resulting in sick animals who are frequently treated with antibiotics. Hormone injections can also help to promote muscular growth or, in the case of dairy, milk production. These therapies may have an impact on human health, such as the transmission of animal hormones to people or the development of antibiotic-resistant bacterium strains. Cultivated proteins are made in sterile conditions without the use of antibiotics or hormone therapies.

· Free of zoonotic diseases: Zoonotic diseases, such as COVID-19, can be transferred to humans through animal meat intake. Because it is produced in a controlled, sterile setting, cultivated beef is deemed safe from this risk.

· Ability to design and change nutrient profiles: Cultured meat manufacturers can change inputs to generate products with better nutritional value, such as proteins, amino acid composition, vitamins, and minerals.

· Food security: Cultivated proteins offer a potentially large new food source that isn’t constrained by livestock’s significant land, water, and food requirements. This is especially essential in light of expected worldwide population growth and corresponding food demand.

· Environmental advantages: Some people believe that produced protein is a better option for the environment than conventional animal production. According to a 2011 study conducted by the University of Oxford and the University of Amsterdam, cultured meat may be produced with only 4% of the greenhouse gas emissions (GHGs) and 2% of the area required for conventional meat production, while requiring 45 percent less energy. 16 Critics have noted, however, that the energy required to create grown meat may originate from fossil fuels, resulting in worse environmental repercussions than animal agriculture in some ways.

 Ethical ramifications: Some consumers, such as vegans, avoid eating meat because of animal welfare concerns. Because no animals are injured in the manufacturing of cultivated meat, it is considered an ethical advance.

The environmental and ethical advantages of cultivated meat are based on a one-to-one substitution for traditional meat. On the other hand, a single cow can provide hundreds of distinct products. For example, if cultured beef totally replaced conventional ground beef, demand for steak, leather, gelatin, and steric acid would remain unchanged, meaning that cattle demand would remain steady, albeit ground beef demand might shift to new markets.

Competitive Landscape and Market Mapping

Source: PitchBook

Investors’ Trust Growing with Market

Compared to the initial years when alternative meat was first introduced to recent years, the market has witnessed steady growth in VC funding from a single $25 Mn deal in 2012 to a total of $303 Mn invested across over 30 deals in 2020. While the annual deal count has nearly tripled in 2018, the average deal size decreased. However, it is expected that the fundings will increase in tandem with the growth in the industry. The first five months of 2021 have seen a surge in investment with over $772 Mn recorded. With this pace, it is expected that the funding activity will triple this year, as compared to 2020.

Source: Pitchbook

Investment trends suggest that the cultivated protein providers have received the largest share of VC funding. Those among the top recipients include UPSIDE Foods, Eat Just, and Modern Meadow. Each of them have received more than $100 Mn funding, individually. Besides receiving funds from VCs, cultivated meat producers have also started to gain trust of investors like impact investors such as AiiM Partners, impact angel investors including Richard Branson, and even large corporations such as Cargill, Tyson, etc. These large companies have started to realise the importance of the alternative meat and are engaging through strategic investments.

How are Incumbents Reacting to the New Alternative Meat Market?

Combining the benefits of plant-based proteins along with cultivated proteins have proven to have cost and scale efficiencies, without leaving a significant impact on nature. Apart from health benefits like low cholesterol and with a taste similar to real meat, the alternative meat sales reached over $1.4 Bn in 2020. This growth in demand justifies why the existing food companies are venturing into this domain.

Based on location, Singapore is emerging as a hub for cultivated meat and is attracting many companies primarily due to ease of access to funds and required talent, attractive regulatory environment and significant market opportunities in South-East Asia. Companies like Avant Meats, Shiok Meats, Aleph Farms, etc. are considering to set up production units in Singapore.

Challenges Faced by the Culture Protein Production

The alternative meat market is yet to realise its full potential. Despite its wide range of benefits, there are certain roadblocks that are restricting the fast growth of the market. The Cultured protein market has three stages of production — developmental scale, pilot sale, and commercial scale. Most companies are yet to access the commercial scale. Once it is able to attain commercialization scale, plant-based meat will be available at a cheaper price compared to traditional options. It is estimated that cultured protein would be 5x cheaper by the start of next decade.

Currently, these options are not widely available to the customers and still require further advances in R&D processes to ensure the growth of the sector. Food Tech startups are continuously evolving to generate cost-efficient alternative meat. It requires huge amounts of investments and specialised workforce to experiment with different techniques from the use of AI, to bioprocessing and 3D bioprinting. This can be taken care of through greater funding from investors. The median funding for early stage VC rounds in cultivated meat startups have gone up from $4 Mn to $9.5 Mn in the last three years. Companies are trying their best to make the alternative meat very close to the traditional meat in taste and texture so that they are able to fully replace the animal meat in the coming years.

A Nascent Industry with Great Potential

Environmental concerns with the regular meat industry, change in food preferences, health benefits, cost efficiencies are some reasons that are facilitating the growth of the alternative meat market. It is estimated that the market for cultivated food, including meat, seafood, dairy, eggs, etc., would reach close to $18 Bn by the year 2035, with a consumption of about 6 million metric tons. While this may be just 1% of the total protein consumption in the future, the market may witness high growth.

Currently, a huge part of the alternative protein production goes into research and development. However, as the market enters commercialisation scale, costs will come down. Studies suggest that by 2035, cell-based and plant-based meat alternatives will be 10x cheaper than the traditional animal products, and will allow families to save over $1200 in food costs. It is also expected that by next decade, companies’ revenue will also increase 100x for plant-based meat.

Although the overall consumption of plant-based meat is currently very less, the market shows no sign of slowing down. The sector is still in its nascent stage and companies can gain from grabbing the opportunities early, which would be possible only through sufficient funding support from investors.

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This article has been co-authored by Sargam Palod and Tamanna Kapur, who is in the Research and Insights team of Torre Capital.

The Fault in our Doge

by Sandeep Kumar

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– And why it won’t go to the stars; or the moon; or practically anywhere for its sake

Among the deluge of cryptocurrencies popping up every day, Dogecoin has had the most gala ride in the past few months. The cryptocurrency, which features the ‘Shiba Inus’ dog as its mascot, gained its market cap from $1 Bn in early January to $80 Bn in May. January and May, of the same year! That is insane!

So a basic primer first for all those who don’t know what Dogecoin is.

Dogecoin: Something that started as just a meme.

Dogecoin is basically like Bitcoin (it actually is a fork of Litecoin, which is heavily adopted from Bitcoin) and like most cryptocurrencies, it enables peer-to-peer transactions on a decentralized network. The difference between the two? Bitcoin was a revolutionary technology, the original proof of work concept, based on a blockchain. Many called it the ‘disruptor of the internet’, some considered it a challenge to the global financial system, yet others considered it to be a shift of power from evil global forces to the next-door Joe and6 Jane. Bitcoin was the money of the future.

Dogecoin is just dogecoin, a digital coin, with the picture of a dog on it!

The Dogecoin has been around for much much longer than most think. It was started in 2013 by two engineers, Billy Markus from IBM and Jackson Palmer from Adobe. In their meeting they decided to combine the two phenomena that had taken the world by storm: Bitcoin and Doge, and out came the Dogecoin. Because this is what the guys do when they meet, they build random, open-source, meme-based, cryptocurrency.

The Initial Claim to Fame

The idea was to make an alternative to Bitcoin due to the massive profiteers that had gotten into mining it. Bitcoin, launched in 2008, had failed to achieve what it set out to venture. Dogecoin was expected to change that.

How?

Well, Bitcoin was limited in number, only around 21 million of those can be mined ever. Dogecoin, on the other hand, 10,000 of them can be mined every minute.

The Dogecoin was a hit amongst the crypto geeks. It was mostly used to tip online content creators due to the high speed of transactions, nominal denominations, and low cost of transaction compared to other cryptos like Bitcoin. It was dubbed as a ‘tipcoin’. It is claimed that the trading volume even surpassed the heavyweight Bitcoin for a brief period. In 2017, it crossed the $2 Bn market cap figure, after raising 50,000, USD for a Jamaican bobsled team, raising 30,000, USD for clean water in Kenya, and sponsoring a Nascar. All of this before crashing.

The Dogecoin went unnoticed for years, the original subreddit that had catapulted it to fame silenced, the founders of the coin left, and the code wasn’t even updated.

It was in March 2020 when the Doge had its moment. Serial entrepreneur and influencer Elon Musk threw his support behind Dogecoin and the community, claiming it was ‘inevitable’ and could be ‘the currency at Mars’. He was joined by several others such as Carole Baskin, a big cat rights activist, singer Gene Simmons, bodybuilder Kai Greene, former adult star Mia Khalifa, American rap star Snoop Dogg, etc.

Even with all the love and support that Dogecoin has been getting, let us walk you through the potential faults that hinder its acceptance as a currency of any form.

Founder’s Exit

The Dogecoin is a meme coin, not meant to be taken seriously. Even its founders didn’t. So much so that they abandoned the project long ago. Today merely three part-time developers manage the codebase. This has led to absolutely no tech development taking place in the Dogecoin code base since 2015.

While some view this in the ‘do not take it seriously’ vein, a poorly maintained codebase makes the Dogecoin susceptible to be dislodged by more up-to-date and modern coins. The Dogecoin may be left behind and simply replaced by some other memecoin that catches people’s fancy.

Cyber Attacks, Security Breaches, and Frauds

Due to very little codebase maintenance, Dogecoin has been hacked previously. The Doge Vault was infiltrated and close to 280 million Dogecoin, worth $55k then ($196 Mn today) were stolen along with the credit card information of hundreds of users. While the community almost immediately pooled resources to recover the stolen Doge under the banner, the official statement read this:

“It is believed the attacker gained access to the node on which Doge Vault’s virtual machines were stored, providing them with full access to our systems. It is likely our database was also exposed containing user account information; passwords were stored using a strong one-way hashing algorithm. All private keys for addresses are presumed compromised; please do not transfer any funds to Doge Vault addresses.

If you like to use Dogecoin, you should change your online account passwords and make sure to check your credit card statements frequently for fraudulent or unauthorized purchases. But let’s be serious here; we kind of hope you aren’t investing serious capital into this pseudo-currency. (emphasis added)

That is the official statement.

In 2014 a crypto exchange called Moolah was set up in the UK to handle Dogecoin by Alex Green. Many new doge holders jumped the wagon, while Green continued using the ‘tipcoin’ to make hefty tips. He even sold shares of the exchange as Dogecoins. It wasn’t long before Moolah was shut down, and Green disappeared with the money, who was later found to be Ryan Kennedy, a serial scammer, and rapist.

And not just dogecoin, but even with other cryptocurrencies, several unregulated exchanges spring up one day and take off the next, leaving investors high and dry.

Pump and Dump

Cryptocurrencies aren’t really of any use except mindless trading. The volumes are meager and regulators are absent. This makes them a ripe target for pump and dumps by pumping rings which have existed since the very inception of cryptos.

When the Reddit user /r/wallstreetbets successfully managed to pump the Gamestop stock, the crypto pump rings saw this as the moment that they had been waiting for for years. They saw a gullible audience, that didn’t really know what it was doing, to follow them thinking that they would make a blow against the big guys and have fun doing so.

Needless to say, most stories ended on a bitter note, with several of these gullible traders buying at the peaks when the pump rings sold.

This is what took place on January 28, when a Reddit user decided Dogecoin be the next asset to pump. He was joined by Elon Musk, an obsessive Twitter user. The price of the Dogecoin rocketed up and crashed the next day.

Not just the Dogecoin, but several other cryptocurrencies, all are susceptible to such hostile market manipulation.

Too Volatile to be a global currency

All cryptocurrencies have seen massive volatility. In the image below, bitcoin and ETH are found to be more volatile than the S&P 500 itself. Even as the S&P volatility dies down, the crypto volatility keeps rising.

These are not the characteristics of a stable, fiat currency. What is expected of the currency is to hold its purchasing power stable even over long periods of time, not jump up or down 10% by the time one goes from home to the grocery store.

Poor Hedge Against Inflation

As 0% interest rates or even negative interest rates seem a possibility, bitcoin, among others, is touted as a hedge against inflation. Limited supply cryptos like Bitcoin are positioned as a hedge against this inflationary scenario. Why? Because of its 21 million limits, Bitcoin’s demand vs supply is expected to cause an increase in price as supply decreases.

Even the short history of Bitcoin is not enough to cement its position as a hedge against inflation. Gold on the other hand has had millennia of history of tracking inflation and yet it was susceptible to shocks, manias, and crashes over the shorter term. Bitcoin is no different.

Even in the recent weeks as concerns of inflation pushed the 10 year US treasury yield from 1.34% to 1.62%, bitcoin suffered its worst drop in months. Unlike other inflation hedges, cryptocurrencies’ value is based entirely on other people’s willingness to hold on to it, not on some underlying asset like oil or real estate.

It is fully possible that increasing inflation may lead to an overall recession. The real test of cryptocurrencies will be when investors pull their money from riskier assets like bitcoin or pour more into it.

The infinite supply of Dogecoins

While a few cryptocurrencies do have at least the “limited number” argument in their favor, Dogecoin does not even have that. 10,000 dogecoins can be printed every minute. This rather infinite supply of the dogecoin makes it very hard for it to gain in value.

However, in spite of this structural anomaly in Dogecoin, the prices have soared considerably over the past months.

 

So much for being Decentralised

According to a Wall Street Journal report, the largest holder of Dogecoin owns 28% of the currency! The position is worth at least $2.5 Bn today! The top 10 largest addresses combined hold 43% of the total Dogecoin supply. The idea behind Dogecoin being decentralized simply bites the dust when just 10 wallet holders own 43% of the currency. One major sell-off and the prices crash.

Will the party continue for Dogecoin?

Bears believe that the bubble could burst anytime soon. A game that has a definitive end in the near future. On the other hand, some enthusiasts feel the recent crash is just a minor setback. They still think that it has the potential to grow further in the future.

Can Dogecoin place itself as a reliable money system not limited to any particular state and government? Or will the influencers of crypto just have fun with it for a while and then forget about it for another eternity? Or will Dogecoin ever reach the $1 mark? Probably, Probably Not!

So the final question – whether to invest in this joke or not? Well, be clear about your investment goals first. It’s always a good idea to have a diverse set of investments for your portfolio which are harmless to your risk appetite. So ask yourself this – why do you want to invest in Dogecoin? To make instant money or a fortune that you see forthcoming?

Or maybe launch a crypto coin of your own. That is the sure-shot way to make some quick bucks.

                                                                   – – – – –

This article has been co-authored by Khubaib Abdullah and Yogesh Lakhotia, who are in the Research and Insights team of Torre Capital. 

Will Grab make money for its investors even post the massive $40Bn SPAC valuation?

by Sandeep Kumar

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Grab Holdings, Southeast Asia’s largest ride-hailing firm, plans to merge with Altimeter Growth Capital, based in the United States, in a deal worth approximately $40 Bn and allowing it to trade on the Nasdaq Stock Exchange.

If it goes through, this SPAC deal will be the largest ever U.S. equity offering by a South-East Asian firm, with the planned deals giving Grab a Pro-forma equity valuation of about $39.6 Bn. Grab will earn up to $4.5 Bn (SGD 6.05 Bn) in cash as part of the SPAC contract. BlackRock, T. Rowe Price, and Fidelity are among the large institutional investors who have poured money into the offer.

Can Grab justify its supercilious valuation?

We Know that Grab has a huge dominance over the South East Asian market and is also a fairly good company but the real thing to ask is that how justified it is to give a massive valuation of around $40 Bn? Is there anything for the investors to be happy about their investment in the company? If we go with the past history of Grab including the recent Private Investment in Public Equity round where it raised around $4 Bn. A total of around $17 Bn has been raised till date in 19 rounds which is way more than any other Southeast Asian startup which suggests that they have raised a huge amount from the market so far.

We believe there’s already a saturation with respect to the addressable market size. Grab has already conquered most of the market in the field with 66 concurrent rides in one second across seven countries, occupying 97% market share in the third-party taxi-hailing market and 72% in the private vehicle hailing market. This data suggests that the company already has attained a humongous market share. Despite this fact, inflating its valuation to $40 Bn seems difficult to digest making it too rich a stock.

The scale of its multi-faceted business model

Grab is Southeast Asia’s leading ride-hailing network, headquartered in Singapore with services including ride-sharing, food delivery, taxi booking, insurance, bill payment, and more. In 2018, Grab bought Uber’s entire Southeast Asia ride-hailing service in 2018.

Grab charges a 16% to 25% commission for using their services. It has around 3.5 million drivers in Malaysia, and the minimum ride cost is RM5. After a 25% cut (RM1.25), the company would gain around RM4 million if every driver gets a verified ride.

Any time the driver completes a booking, the credits deposited by the driver will be deducted in the same amount. In Singapore, Grab offered $4.30 to $5.70 for each ride last year; such offers could cost the company millions per month. Grab does not provide travelers with free or discounted rides.

Consider another example, the average gross earnings of a full-time (12 hours) driver in a month is $1435 — $1670. After a 25% commission cut, drivers will earn $1795 — $2088. Based on this, Grab would have gotten about $360 — $418 of commission from a single driver.

Scale and Leadership in South East Asia (Source: Grab S-1)

Dominance in the Southeast Asian Market

Since launching in 2012, Grab has evolved from a humble taxi-booking app to Southeast Asia’s largest land transport company, with over 200,000 drivers and over 11 Million mobile downloads.

Since mid-2015, GrabCar rides have increased by 35% on an average monthly basis, while GrabBike rides have increased by 75% on an average monthly basis. Ride-hailing services have become invaluable to Southeast Asia’s infrastructure, and the region’s industry has been shaken by the sudden emergence of now-dominant player Grab. With the departure of Uber Technologies of the United States, the sector is entering a new era of competition. Grab will not go unchallenged, and will need to prepare for competition from new corners and in new fields as it expands beyond its core business.

Stellar growth with no profitability

Though Grab currently is far off from achieving profitability in its financials, it has been growing tremendously in the past few years. Recently, the coronavirus pandemic has spurred growth in Grab’s food and grocery delivery business, turning them into some of the company’s biggest revenue streams.

Mobility segment profit and EBITDA (Source: Grab S-1)

Through the SPAC Merger, Grab will have hands-on cash proceeds namely, $4.0 Bn (SGD 5.37 Bn) in fully committed PIPE financing, led by $750 Mn (SGD 1.07 Bn) from Altimeter Capital Management, LP, the firm that owns Altimeter Growth Corp.

Snapshot of key financial metrics:

  • Revenue: $1.19 Bn in 2020, up from $455 Mn in 2019.
  • Loss: $2.7 Bn in 2020, which was $4 Bn in the year 2019.
  • Profits: The company is also expecting its earnings before interest, taxes, depreciation, and amortization to turn profitable by the year 2023.

Grab’s edge over its competitors

Grab has a lot of benefits, most of which include easy booking, insured drivers, rider ratings, and low or at least confirmed wait times.

Positioned as a forum for a variety of services; Grab offers:

  • Licensed and Insured Drivers: Grab drivers must register as a local business, convert their vehicle to a commercial vehicle, sign up in person at the Grab office, and buy commercial insurance to protect themselves and their property. If you use GrabTaxi, you will only be connected with licensed taxi drivers, not novice ones.
  • Flat rate fees: Grab charges a flat rate that you can see before you ride. This feature removes the element of surprise from many taxi fares and helps you to choose the best ride for your budget. Shorter wait times — With over 30,000 drivers in 30 cities, Grab rides are readily available.
  • Accessibility as a Super App: The network effects are one of the most important force multipliers for the business model of a super-app, which Grab is positioning itself as. i.e., as there are more rides available at any given time, more people can use services like ride-hailing from you, which makes it lucrative for drivers to register on your platform.

Concerns surrounding Grab’s SPAC merger route

Getting regulatory approvals for an IPO would have been difficult for a cash-burning business like Grab (where all the promised land of gold is in the forecasts and excels). Recent cases, such as WeWork’s failed IPO, are fresh in the minds of aspiring public companies. When there are no positive cash flows, it is easier to sell the forecasts to a SPAC rather than the general public. The markets are overflowing with the supply of cash-rich SPACs looking for big enough startups to invest in.

However, because of the SPAC’s nature, many aspects are inherently opaque, making it easier for big companies to dupe retail investors. In the case of a SPAC, unlike a conventional IPO, a company decides on the valuation, and if Grab had chosen a traditional approach, it would have been impossible for the company to achieve the same in such a short span of time.

SPACs are appealing to people who want to go public in a volatile market. IPOs are considered riskier because there is always a possibility that the papers will not be accepted until they are filed publicly. The same thing happened with WeWork’s IPO, which was canceled after the company’s details were made public and investors were forced to withdraw.

Some other relevant concerns that will arise post Grab’s SPAC Merger:

  • Disproportionate Voting Rights: The founder Anthony Tan will receive a voting share that is 30 times greater than his equity stake in the company as a result of this transaction.
  • Grab’s Cash Burn: Grab is at a point in its growth where it has a high valuation but is also cash flow negative. Shares in the SPAC that were purchased at the start of the company can be redeemed. If redemptions meet forecasts, cash availability becomes unpredictable, forcing SPACs to seek PIPE funding to make up the difference. Grab’s cash burn may be exacerbated by this contract.
  • Shareholding Dilution: SPAC sponsors usually hold a 20% stake in the SPAC in the form of founder stock, or “promote,” as well as warrants to buy more shares. They also benefit from an earn-out component, which allows them to gain more shares if share prices reach a certain level. This could result in more dilution, which could lead to mismanagement at Grab.

Should you invest?

Despite being Singapore’s largest unicorn, Grab, like many other startups, is still burning cash and isn’t expected to turn EBIDTA positive until 2023, according to Moody’s. Grab’s value has more than doubled to $39.6 Bn, up from $16 Bn in the last round of funding. Grab, on the other side, would have $4.5 Bn in cash on hand.

At more than 3 times its GMV, the company’s valuation leaves very little space for new investors, at least for the time being.

A lot would hinge on Grab’s ability to maintain its remarkable 96% CAGR in net sales over the last three years. The company may lose some of its moats in the long run as a result of legislation, market changes such as customers shifting away from ride-sharing, and competition from other regional players such as Gojek, Urge, and others.

A long way to go

SPAC Mergers are seen as a simple way to avoid the conventional IPO enforcement procedures. Many critics believe that the SPAC merger is used by low-performing companies that have no other way to get listed on the stock exchange. Even though the company has a positive outlook, it is still too rich, driving such a large valuation, encompassing negative returns (EBITDA), and generating negative emotions among many investors.

Grab’s valuation premium will take some time to catch up with the promised cash flows. However, the sheer potential of being in inherently high-growth markets with penetration levels in the single digits and lower double digits, combined with technology-enabled day-to-day services and Fintech solutions for markets with very low banking penetration (only 40% penetration), could eventually propel Grab to emerge from a long list of failed SPAC mergers. For the time being, the valuations are on the verge of becoming a bubble, and they are still pricing in a lot of stuff happening for Grab, making us cautious to dive deep into the Grab SPAC at the moment.

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This article has been co-authored by Sargam Palod and Sayan Mitra, who is in the Research and Insights team of Torre Capital. 

Keep up to date with the latest research

Reinventing meat and cultivated proteins: Gauging the investor’s interest through sustainable investment products

by Sandeep Kumar

Keep up to date with the latest research

Overview and Evolution

The popularity of alternative meat products from Beyond Meat (NASDAQ: BYND) and others, as well as early regulatory permission for some cultured meat products, has sparked a flurry of investment in this nascent business.

Despite this enthusiasm, the business is still in its early stages and is mostly pre-revenue, with a number of growth obstacles ahead, including the need for clear legal frameworks, more economically viable products, and scalable technologies. As the traditional cattle industry tries to defend its market share from produced protein sources, providers will almost certainly encounter greater lobbying attempts.

Even while widespread adoption may be several years away, improving consumer sentiment, together with increased demand for more sustainable food choices, will undoubtedly boost investment in grown protein products.

The key industry drivers for alternative meat products industry

· Antibiotics and hormones-free: Industrial farming conditions can be unsanitary, resulting in sick animals who are frequently treated with antibiotics. Hormone injections can also help to promote muscular growth or, in the case of dairy, milk production. These therapies may have an impact on human health, such as the transmission of animal hormones to people or the development of antibiotic-resistant bacterium strains. Cultivated proteins are made in sterile conditions without the use of antibiotics or hormone therapies.

· Free of zoonotic diseases: Zoonotic diseases, such as COVID-19, can be transferred to humans through animal meat intake. Because it is produced in a controlled, sterile setting, cultivated beef is deemed safe from this risk.

· Ability to design and change nutrient profiles: Cultured meat manufacturers can change inputs to generate products with better nutritional value, such as proteins, amino acid composition, vitamins, and minerals.

· Food security: Cultivated proteins offer a potentially large new food source that isn’t constrained by livestock’s significant land, water, and food requirements. This is especially essential in light of expected worldwide population growth and corresponding food demand.

· Environmental advantages: Some people believe that produced protein is a better option for the environment than conventional animal production. According to a 2011 study conducted by the University of Oxford and the University of Amsterdam, cultured meat may be produced with only 4% of the greenhouse gas emissions (GHGs) and 2% of the area required for conventional meat production, while requiring 45 percent less energy. 16 Critics have noted, however, that the energy required to create grown meat may originate from fossil fuels, resulting in worse environmental repercussions than animal agriculture in some ways.

 Ethical ramifications: Some consumers, such as vegans, avoid eating meat because of animal welfare concerns. Because no animals are injured in the manufacturing of cultivated meat, it is considered an ethical advance.

The environmental and ethical advantages of cultivated meat are based on a one-to-one substitution for traditional meat. On the other hand, a single cow can provide hundreds of distinct products. For example, if cultured beef totally replaced conventional ground beef, demand for steak, leather, gelatin, and steric acid would remain unchanged, meaning that cattle demand would remain steady, albeit ground beef demand might shift to new markets.

Competitive Landscape and Market Mapping

Source: PitchBook

Investors’ Trust Growing with Market

Compared to the initial years when alternative meat was first introduced to recent years, the market has witnessed steady growth in VC funding from a single $25 Mn deal in 2012 to a total of $303 Mn invested across over 30 deals in 2020. While the annual deal count has nearly tripled in 2018, the average deal size decreased. However, it is expected that the fundings will increase in tandem with the growth in the industry. The first five months of 2021 have seen a surge in investment with over $772 Mn recorded. With this pace, it is expected that the funding activity will triple this year, as compared to 2020.

Source: Pitchbook

Investment trends suggest that the cultivated protein providers have received the largest share of VC funding. Those among the top recipients include UPSIDE Foods, Eat Just, and Modern Meadow. Each of them have received more than $100 Mn funding, individually. Besides receiving funds from VCs, cultivated meat producers have also started to gain trust of investors like impact investors such as AiiM Partners, impact angel investors including Richard Branson, and even large corporations such as Cargill, Tyson, etc. These large companies have started to realise the importance of the alternative meat and are engaging through strategic investments.

How are Incumbents Reacting to the New Alternative Meat Market?

Combining the benefits of plant-based proteins along with cultivated proteins have proven to have cost and scale efficiencies, without leaving a significant impact on nature. Apart from health benefits like low cholesterol and with a taste similar to real meat, the alternative meat sales reached over $1.4 Bn in 2020. This growth in demand justifies why the existing food companies are venturing into this domain.

Based on location, Singapore is emerging as a hub for cultivated meat and is attracting many companies primarily due to ease of access to funds and required talent, attractive regulatory environment and significant market opportunities in South-East Asia. Companies like Avant Meats, Shiok Meats, Aleph Farms, etc. are considering to set up production units in Singapore.

Challenges Faced by the Culture Protein Production

The alternative meat market is yet to realise its full potential. Despite its wide range of benefits, there are certain roadblocks that are restricting the fast growth of the market. The Cultured protein market has three stages of production — developmental scale, pilot sale, and commercial scale. Most companies are yet to access the commercial scale. Once it is able to attain commercialization scale, plant-based meat will be available at a cheaper price compared to traditional options. It is estimated that cultured protein would be 5x cheaper by the start of next decade.

Currently, these options are not widely available to the customers and still require further advances in R&D processes to ensure the growth of the sector. Food Tech startups are continuously evolving to generate cost-efficient alternative meat. It requires huge amounts of investments and specialised workforce to experiment with different techniques from the use of AI, to bioprocessing and 3D bioprinting. This can be taken care of through greater funding from investors. The median funding for early stage VC rounds in cultivated meat startups have gone up from $4 Mn to $9.5 Mn in the last three years. Companies are trying their best to make the alternative meat very close to the traditional meat in taste and texture so that they are able to fully replace the animal meat in the coming years.

A Nascent Industry with Great Potential

Environmental concerns with the regular meat industry, change in food preferences, health benefits, cost efficiencies are some reasons that are facilitating the growth of the alternative meat market. It is estimated that the market for cultivated food, including meat, seafood, dairy, eggs, etc., would reach close to $18 Bn by the year 2035, with a consumption of about 6 million metric tons. While this may be just 1% of the total protein consumption in the future, the market may witness high growth.

Currently, a huge part of the alternative protein production goes into research and development. However, as the market enters commercialisation scale, costs will come down. Studies suggest that by 2035, cell-based and plant-based meat alternatives will be 10x cheaper than the traditional animal products, and will allow families to save over $1200 in food costs. It is also expected that by next decade, companies’ revenue will also increase 100x for plant-based meat.

Although the overall consumption of plant-based meat is currently very less, the market shows no sign of slowing down. The sector is still in its nascent stage and companies can gain from grabbing the opportunities early, which would be possible only through sufficient funding support from investors.

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This article has been co-authored by Sargam Palod and Tamanna Kapur, who is in the Research and Insights team of Torre Capital.

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