Challenges of the meat industry
The global meat industry (currently worth approx. EUR 1 trillion) is at a tipping point driven by 3 global challenges:
- Supplying enough meat to feed an estimated 10 billion people by 2050. The global meat industry is already at the limit of its capacities today, and the process of conventional meat production is notoriously inefficient (e.g. the breeding of cattle takes 2 years).
- The fight against climate change. To keep global warming below 1.5°C, greenhouse gas emissions must be drastically reduced. Today, animal feed is responsible for about 14% of global greenhouse gas emissions. Its share could rise to over 80% of the maximum emissions by 2050 to stay within 1.5°C global warming.
- Mitigating the risk of diseases (e.g. zoonotic diseases – that may have caused Covid-19). Infringing on the habitat of exotic animals increases the touchpoints between our species and theirs which again increases the risk of diseases being carried over between each other.
One massive innovation that could help to mitigate the challenges is cultured meat. Another promising innovation is the commercialization of plant-based alternatives such as the bean-based burger from “Beyond Meat” (already available for mass markets in the USA since 2012). To put the current state of these 2 solutions into perspective, we looked at the difference in global investments. As of today, plant-based alternatives have attracted EUR 1’400 Mio. in global investments, while Cultured Meat options have received only EUR 270 Mio.
What is “cultured meat”?
- Cultured meat is real meat that is grown in a laboratory instead of in living animals. Under the microscope, it cannot be distinguished from conventional meat.
- To produce it, animal muscle and fat stem cells are taken from the living animal and cultivated in a nutrient solution. Further muscle and fat cells are formed, whose arrangement can be “designed”. The piece of meat you want to breed, be it T-bone steak or medallions, can therefore be customized.
- The process does not involve genetic modification. The cells multiply naturally. From a single extraction of such stem cells, which is similar to taking a blood sample, about 800 million muscle strains can be obtained, enough to produce 80,000 Big Macs. The nutrient solution is currently still animal-based, but a plant-based substitute is being researched.
Let’s take one step back – when did this disruption kick-off? The first cultured meat burger patty was created in 2013 by Dr. Mark Post at Maastricht University. It was developed over a period of 2 years at a cost of approximately EUR 250’000. Since then, more than 50 early-stage ventures started to create cultured meat through various procedures and with different focuses (e.g. steak, pork sausage, fish).
Why are incumbents (meat producers, retailers et al.) increasingly interested in cultured meat?
Future: Opportunity of the Meat Industry
Today, the main challenge for incumbents and challengers is twofold.
First, it is not possible with a high confidence level to quantify the exact size of the future opportunity in terms of Eurocents. Second, it is difficult to define the exact point in time when cultured meat will be available for mass-market distribution – this depends on when a scalable and affordable solution is available and when and what legal frameworks will be in place at that time.
Regardless of all the market uncertainty, the race to find a scalable solution is on, and none of the incumbents want to be left out.
Size of the opportunity
According to Stryber estimations, “cultured meat” will have a global turnover of CHF 200 billion in 2040
Predictions for the market growth of cultured meat vary widely, but many experts peg a 31% compound annual growth rate (CAGR) between 2025 and 2040 as realistic. Conversely, conventional meat is predicted to face a significant, sustained decline in sales (see figure 2). This is based on the following trends: global sales of meat and meat substitutes are growing at a 3% CAGR but are declining in developed countries such as Germany due to an ongoing shift in consumer preference towards a meat-free diet. In the most optimistic case for change, the global market for conventional meat will decline by over 33% by 2040. Even in the conservative case, the global market for conventional meat increases only minimally. Vegan meat alternatives and cultured meat will cannibalize the conventional meat market – but they hardly compete with each other.
The expansion into the mass market depends mainly on the production costs and the corresponding purchase price for the end customer. This is expected to be achieved within the next 5 to 10 years with some start-ups promising commercialization in 3 years and institutions such as the German Bundestag predicting 10 years.
Consumer Acceptance (hypothetical):
In Germany, cultured meat is still unknown to the majority of society. This is shown by the representative survey conducted by BMU and UBA (2019) as part of the 2018 environmental awareness study. According to the survey, 38 % of Germans had already heard of or read about cultured meat, while 60 % had never heard of it and 2 % were uncertain (n = 2’021). In addition, 27% of Germans were keen on trying cultured meat. However, most of the current global studies on hypothetical consumer acceptance report a wide range of feedback from consumers. (Bryant & Barnett, 2018; Stephens et al., 2018).
Cultured meat: startups with high growth projections within this space?
Taking a closer look, it becomes clear that cultured meat startups are seeing some momentum based on the significant increase of venture capital in recent years.
Also, on the basis of the CrunchBase dataset, we could identify the “hottest bets” within the venture ecosystem.
At the beginning of 2020, 55 cultured meat (incl. fish) ventures had publicly announced themselves. More than half of the companies (32) have attracted external capita, and more than one-third of the companies (20) were founded in the last 18 months, with 13% of companies focusing only on cultivated seafood. 19 Countries were represented in the survey, with American companies making up 19 of the 55 most prominent players.
Currently, Memphis Meats is without a doubt the “hottest bet” in this vertical. To date (31.08.2020), Memphis Meat is the only venture that attracted a funding round after a Series-A – they closed a Series-B round in early 2020 of USD 161 Mio. Investors range from Corporates (Tyson Foods, Cargill Ventures) to Business Angels (Bill Gates, Richard Branson) to Venture Capital Funds (SoftBank, Norwest Venture Partners, and others).
In the sub-vertical “fish meat”, another US-based startup has shown significant traction (in terms of funding). BlueNalu, Inc. closed a USD 20 Mio. Series-A round in February 2020 and focuses on cultured seafood production (initially yellowtail tuna and salmon).
Moreover, in August 2019, the leading innovators behind the United States’ cultured meat and fish companies joined forces by establishing a coalition called the “Alliance for Meat, Poultry & Seafood Innovation”. The aim of this association is to push their new food technology into the mainstream by also shaping the legal framework around lab-grown food. Founding members include JUST, Memphis Meats, Finless Foods, BlueNalu, and Fork and Goode).
European players have played an active role in the global cultured meat scene since the industry began. For example:
The aforementioned Mosa Meat (NL based) has developed a 100% animal-free cell growing medium (which is needed to grow cells and stems) and has raised more than EUR 7.5 Mio. in their Series-A.
The Dutch startup Meatable positions itself as a producer of “real and guilt-free meat” and has recently raised USD 10 Mio. Meatable is one of the startups expected to have high growth projections and is using its recent investment to pivot into pork production, as a swine flu epidemic ravages one-quarter of the world’s pork supply.
In Switzerland, there are two significant players: Mirai Foods and Planted.ch, a university spin-off from ETH. In Germany, known players include “Peace of Meat” (EUR 0.8 Mio funding) and “Innocent Meat” (funding n/a).
From a regulatory standpoint, the EU’s European Commission provided Meatable USD 3 Mio to help bring cultivated pork to market, while The Belgian government has initiated a consortium of startups working on cultivated foie gras and granted EUR 3.6 Mio to the initiative.
Rest of World-based Startups
Israel is one of the leading international hubs with players such as Aleph Farms, SuperMeat, FutureMeat and MeaTech receiving significant investment. Aleph Farms is currently leading the pack with approximately EUR 15 Mio in funding. Starting in the early 2020s, AlephFar s plans to sell their cultured meat not only in Israel but also in Germany and Switzerland. If the response from consumers is positive, the 3D printed food will then be sold worldwide. Another startup that should not be ignored when it comes to Israeli meat alternatives is Redefined Meat. The company announced the beginning of the “alt-steak era” as the world’s first company to develop a new additive manufacturing technology specifically for food printing. This animal-free 3D printing meat will be tested first in high-class restaurants.
Only a few ventures are also based in the Asiatic hemisphere (e.g. IntegriCulture in Japan, Shiok Meats in Singapore) and in South America, only two players could be identified: Cell Farm in Buenos Aires and Luyef Biotechnologies in Santiago de Chile.
What are incumbent large food & beverage businesses doing within this space?
Since 2016 global incumbents (e.g. meat producers like Tyson, Cargill or retailer and meat producer Coop) have mainly focused on a company acquisition strategy. Hence, they have invested in high-momentum cultured meat startups seeking to upend the traditional meat industry.
Cargill has invested in lab-grown meat startup Memphis Meats (2017), pea protein producer PURIS (2018) and Calysta (2016 and 2017); a company designing methane-based proteins. Tyson, the world’s second-largest meat processor, sells both plant-based alternatives, such as meatless chicken nuggets and plant-based shellfish, as well as blended, part-meat, part-plant options. Tyson has also invested in Memphis Meats (2018), Beyond Meat, (2016 and 2017) and the Israel-based clean meat startup Future Meat Technologies (2018).
The Swiss retailer Coop invested in the Dutch startup Mosa Meat (minority investment) in 2018 and in 2019, the Migros Group invested in AlephFarms (Israel).
Planterra Foods launched Ozo, a plant-based protein brand that offers burgers, meatballs, and ground meat.
KFC has seen an annual increase in demand for traditional meat alternatives and is working to create 3D-printed chicken nuggets. The chain said that it is targeting flexitarian customers, people who are trying to cut down on their meat intake.
Final words / take away
“The traditional meat industry is in radical decline – the combination of animal born pandemics, health awareness, cost, and vitally spiritual awareness on suffering means humans are on track to stop eating mass-produced animal meat. Lab meat will start replacing animals – a global generation is being born now who will never eat meat.” Garan Goodman (Partner at Stryber and FoodTech Expert)
According to the Stryber Digitization framework, cultured meat can be classified as “Technology Innovation”. Technology innovation is driven by exploring what is technologically just feasible at a given time. Due to the still high production costs, commercialization is not possible in the short term (realistic in 4-10 years) and it is therefore too early for the Stryber innovation instrument “Venture Building” aka Business Model Innovation. https://stryber.com/digitization-framework/
Currently, more venture capital is flowing into vegan meat alternatives than into cultured meat itself – it is still unclear whether, how, and when cultured meat will catch up with this segment. According to Stryber estimations, “cultured meat” will have a global turnover of CHF 200 billion in 2040 – the predictions for the market growth of cultured meat vary widely, but most models anticipate a 31% compound annual growth rate (CAGR) between 2025 and 2040.
Also, it is equally unclear which business model is most attractive in the cultured meat ecosystem. The latest hottest European bet comes from Finland. Solarfoods debuted a new biotech solution in 2020 called Solein: protein production by using air and electricity.