Report reveals a record US$1.7B investment in alternative proteins in first half of 2022

26 Oct 2022 --- A new report from the FAIRR investor network has evidenced the increased focus by retailers to provide more affordable plant-based meat and dairy alternatives to meet consumer demand while addressing the retailers’ own climate goals. 

FAIRR’s Sustainable Protein engagement is supported by 84 investors (collectively managing US$23 trillion in assets), including giants like Mondelēz International, Walmart, Tesco, Unilever, Kraft Heinz and Nestlé.

Many of these F&B titans have released more affordable plant-based products. Notably, 35% of companies have committed to increase the volume or sales of alternatives to meat and/or dairy. This figure is up from 28% in 2021 and 0% in 2019.

Among notable moves, Mondelez has launched plant-based Philadelphia cheese products at the same price range as the dairy versions. Meanwhile, Walmart has incorporated plant-based products into its store brand Great Value.

In the UK, Tesco’s vegan Plant Chef range is 11.6% cheaper per kilo than comparable own-brand meat products, according to FAIRR research.

Among notable moves, Mondelēz International has launched plant-based Philadelphia cheese products at the same price range as the dairy versions.

However, more must be done, with 48% of companies scoring a “neutral” outlook indicating they will maintain rather than accelerate their improvement.

“Combined with inflation that is driving the price of traditional meat and dairy up at a quicker rate than alternatives, we are starting to see a world where plant-based meat and dairy is just as affordable as conventional animal-based products,” comments Jeremy Coller, Chair and Founder of the FAIRR Initiative.

Sector momentum
Alternative proteins present a unique investment opportunity, combining environmental stewardship with financial return. This is reflected in the increasing numbers of investors joining FAIRR's engagement, and in the fact that alternative protein companies raised US$1.7 billion in the first half of 2022 (1H 2022), demonstrating a stable growth rate (2%) compared to 1H 2021.

FAIRR predicts that plant-based products could reach parity in taste, texture and cost between 2023 and 2031, with the alternative protein market size forecasted to represent 10-45% by 2035 and 25-50% by 2050 of the total protein market.

“From precision fermentation to plant-based meatballs, innovation in alternatives to meat is disrupting the commodities market and bringing new, more sustainable choices to consumers,” adds Coller.

Inflation outlook for sector
Rising inflation is also driving closer price parity. In the UK, for example, FAIRR finds the cost of Oatly oat milk has fallen from almost 2.5 times higher than dairy milk in 2019, to just 12% higher than dairy per liter today. 

However, that is not to say that the alt-protein sector is removed from inflationary headaches. Beyond Meat, for instance, lost US$97.1 million during Q2 2022 and its revenue decreased 1.6% compared to the same period last year. The vegan ringleader also had to cut its workforce by 19% this month.

FAIRR forecasts that fermented-enabled protein could become the next preferred alternative food technology.Still, inflationary price hikes still appear to impact conventional meat more than plant-based protein. FAIRR research shows the average price per unit of plant-based meats has increased by 3% this year, compared to a much greater 6% increase for conventional (frozen and refrigerated) meat.

Fermentation acceleration
Companies involved in FAIRR’s engagement have collaborated directly with food-tech start-ups to incorporate novel technologies into their portfolios. The investor network forecasts that fermented-enabled protein could become the next preferred alternative food technology, with companies allocating significant amounts to R&D budgets to allow for more innovation.

Among recent developments in this space, Calysseo – a joint venture between animal nutrition company Adisseo and protein innovator Calysta – unveiled last week a “world’s first” industrial-scale facility for FeedKind, a novel protein ingredient that does not require animal or plant matter. 

In the US, Perfect Day partnered with egg alternatives specialist Onego Bio to commercialize chicken-free ovalbumin – the most abundant egg white protein – which is extracted through precision fermentation.

A life cycle assessment by Perfect Day reveals precision fermentation processes may use up to 99% less water while producing up to 97% fewer greenhouse gas emissions compared to traditional production methods.

Last August, agri-food giant ADM and New Culture, an alternative dairy company, partnered to develop fermentation-based cow-free casein and melty, stretchy alternative mozzarella in the US food service market, beginning with pizzerias in 2023.

Plant-based engagement has not peaked
The diversification of protein portfolios aligns with long-term recommendations of the EAT-Lancet Commission, which recommends a macronutrient intake split of 60% plant-based protein sources and 40% animal-derived (including meat, fish and eggs).

According to Innova Market Insights, 21% of US consumers increased their consumption of plant-based protein over the past year.

“Over the last few years, FAIRR has been a supportive partner and advisor on Unilever's plant-based journey in Nutrition and in Ice Cream. We have accelerated our portfolio shift and innovations to plant-based, as well as setting an annual €1 billion [US$1 billion] sales target from plant-based foods by 2027,” says Hanneke Faber, president, Unilever Nutrition.

By Benjamin Ferrer