Alternative proteins continue to take a healthy bite out of the traditional meat industry’s profits. One estimate puts the plant-based meat market at over $3.7bn in the US alone,[1] and annual global growth of close to 6% is predicted to 2026.[2] And now, one of the biggest names in this burgeoning sector is to become the first alternative protein company to go public.
Last week, California-based start-up Beyond Meat filed for a $100 million initial public offering (IPO) with Goldman Sachs, JPMorgan Chase and Credit Suisse selected to lead the offer.[3]
The future of protein
It has been a meteoric rise for Beyond Meat since the company was founded in 2009 with a mission to create the future of protein by developing plant-based products with the taste, texture and other sensory attributes of popular animal-based meat products, while offering the health and environmental benefits of plants.
The company’s flagship product, the Beyond Burger, is now available in over 27,000 grocery stores and restaurants in the US, and recently arrived into the meat aisles of UK Tesco stores. Earlier this year the company launched its second product, the Beyond Sausage, into the US restaurant market,[4] with the sausage subsequently named one of the “best inventions of 2018” by Time.[5] Beyond Meat recorded net revenue of $56.4 million for the first nine months of 2018, a 167% increase from the same period a year earlier,[6] after tripling production capacity to meet demand.[7]
But is this booming growth really a surprise?
The megatrends driving growth
While the alternative protein sector grows, investment in the animal protein sector is being weighed down by mounting concerns over its impacts. Food safety scandals and animal epidemics such as rotten meat in Brazil and African Swine Fever in China continue to present a challenge for the meat industry with its complex and opaque supply chains. And this is on top of the already huge environmental impact of the sector. Livestock production alone is responsible for 14.5% of greenhouse gas emissions and the sector’s poor management of water and deforestation are profoundly unsustainable — as the recent findings of the Coller FAIRR Index show.
In response to these impacts, emerging legislation is also beginning to affect the animal protein sector. Earlier this month, new laws to improve animal welfare standards were overwhelmingly passed in a Californian ballot. The possibility of a meat tax, which has gained considerable steam since being discussed by FAIRR’s Livestock Levy White Paper last year, could pose a $172 billion per year threat to the meat industry.[8]
Investor appetite for plant-based opportunities
FAIRR continues to make encouraging progress in its discussions with food companies on alternative proteins. And its notable that the investor coalition backing FAIRR’s engagement with 16 food multinationals urging them to diversify their protein sourcing away from a reliance on animal proteins has more than doubled in 2018 to reach $5.4 trillion in supporting assets.
Global food companies are beginning to get the message. Canada’s Maple Leaf Foods recently announced the formation of a new subsidiary called Greenleaf Foods dedicated to plant-based food businesses after purchasing Field Roast and Lightlife Foods. And Tesco, which along with Nestléwas found to be the best prepared for the shift to alternative proteins in FAIRR’s Plant-Based Profits report, announced recently that it is more than doubling the Wicked Kitchen plant-based food range launched earlier this year.[9]
This month, we also saw the US Food and Drug Administration and its Department of Agriculture announce a joint path to regulate cell-based meat, providing clarity to the regulation process and giving a boost to other innovative alternative protein start-ups keen to get their product to market.
The ability to produce protein to feed the growing global population efficiently while reducing environmental and human health impacts creates a compelling business case. Beyond Meat’s IPO is a historic milestone for this burgeoning industry, but don’t expect it to stop there. Consumers, investors, start-ups and global food companies all have a growing appetite for alternative proteins.
[1] https://www.gfi.org/newly-released-market-data-shows-soaringp
[2] https://www.persistencemarketresearch.com/market-research/plantbased-meat-market.asp
[3] https://www.forbes.com/sites/michaelpellmanrowland/2018/11/18/vegan-ipo-beyond-meat/#209c9685314c
[4] https://seekingalpha.com/article/4223944-beyond-meat-starts-u-s-ipo-process
[5] http://time.com/collection/best-inventions-2018/5454413/beyond-sausage/
[6] https://edition.cnn.com/2018/11/17/business/beyond-meat-ipo/index.html
[7] https://www.beyondmeat.com/press/view/triple-produciton
[9] https://www.tescoplc.com/news/news-releases/2018/tesco-launches-new-wicked-kitchen-range/
FAIRR insights are written by FAIRR team members and occasionally co-authored with guest contributors. The authors write in their individual capacity and do not necessarily represent the FAIRR view.
