Alt proteins: supply chain, hype & dumb $
If you’ve looking for a thought provoking read this holiday, I suggest Chloe Sorvino’s new book, Raw Deal: Hidden Corruption, Corporate Greed, and The Fight for the Future of Meat. If you recognize this author, it’s because Chloe leads coverage of food and agriculture for Forbes.
Although the main topic is about industrialized meat, a good deal of the book looks at the protein trend in general and has some hot takes on how the rise of alternative proteins is shaping the culture, investment, and future of food.
Here’s what I found interesting that applies to any food startup or diversified ingredient business:
· Much of the trend toward plant based isn’t improving supply chains, so if yours is, call it out
· When hype brings the wrong investors, they bring the wrong board
· Why dumb money in alt proteins is problematic for the rest of the industry
Since the plant-based trend is often assumed to be causing a systems change – building better, more resilient supply chains – I really love that Chloe tracked down the soy at Impossible Foods. Brands like Impossible are investable for their IP which takes a commodity like soy and many other ingredients through a highly processed secret method to make something that consumers can feel good about. But what she found was Impossible, along with other alt meat brands, are not sourcing directly from farmers, but from the same processors as everybody else contributing to monoculture. Neither Impossible nor the United Soybean Board (who represents the industry and are a source of information) could say that the plant-based movement is bringing premiums to farmers or helping to build a regenerative future. If your co is making headway here, this should be central to your sell-in and brand story.
Danone is well known for being the largest public benefit corp in the world. But when the CEO gets fired by the board for taking their sustainability goals to heart, the promise of conscious capitalism just feels like hype.
Chloe lays out a great example of how an over-hyped brand ran into issues when ethical problems arose in one of the first vegan mayonnaise brands to come to market, with star studded investors including a VC who was buddies with the CEO of Whole Foods. As the story goes, the Whole Foods buyer was pressured by higher-ups to give prominent placement in stores to the brand despite poor performance. To appease investors (who appoint board members) the founder told tall tales about their sales. The lies caught up to him though, and he almost lost the business. The lesson here is the wrong type of investors will make for the wrong board members that can steer your company in a direction you don’t want (like by firing you, see Miyoko’s)
Too much money pouring in too soon to all these alt protein brands means less capital availability for other food startups. Chloe calls it dumb money when the wrong investors invade a sector. That’s because cultivated meat is not ready for the VC model, yet VCs are the main backers.
Lab grown meat, which saw $700 million in funding last year, is mostly backed by VCs, and VC’s push for revenues. But lab meat is incredibly capital intensive to produce, so cos operate at a loss. Couple that with huge valuations, and these cos are forced to show skyrocketing growth only attainable through mass market adoption. But these analogs, priced at high retails, are affordable to only the premium consumer. The remedy the book offers is to keep cellular ag out of the private markets and allow it to develop in academia until it can scale profitably.
Tech Crunch Courtesy of Meati Foods Meati mega ranch. The facility is larger than 100,000 square feet and, when operating at full capacity, will produce more than 45 million pounds of product a year. Now, the company’s total funding to date is over $250 million.– Food Dive
Which brings me (actually Chloe, but since I’ve thought of this too I’ll make it my idea) to a concluding thought that perhaps the best and most immediate prospect for alt meat, specifically lab meat, is as an ingredient.
It’s funny to me that when I was working at Big Food we struggled to stretch our food costs for meat products by adding as much cheap filler, called textured vegetable protein (or TVP which is essentially soy) as we could. “As much as we could” meant within the limits of the standard of identity– for example you can’t label it a “ground beef taco” if the whole thing is not at least 40% meat. Flip that on its head for a moment where the filler becomes the thing that makes the item desirable and affordable to consumers. So how about it? “Animal-free taco” made with 1/2 lab meat 1/2 TVP.
All my best,