Tech should take a stake in plant-based meat
Friday night is TV dinner night in the Sridhar household. We switch into sweatpants, gather on the sofa, balance sushi takeout on our laps, and eat dinner while watching the latest episode of British Bake-off. Or Schitt’s Creek. Or Avatar: The Last Airbender. What did we do before streaming services existed?
In 2006, just as internet speeds were picking up, the Sequoia Capital-funded startup YouTube was taking off. By the end of the year, it had been bought out by Google. In 2007, Netflix launched its own video streaming service. Then on, media bigwigs saw the potential in streaming and pushed forth Hulu, then Amazon Prime, Disney Plus and HBO Max. Video streaming is great - I can choose what I want to watch when I want to watch it, and I haven’t suffered a cable TV ad in years.
When there’s room for improvement, there’s reason for change. Just as cable TV was ready for disruption, the fish-based sushi takeout is ready to be disrupted too. Raising animals for nutrition is an inefficient technology, detrimental to the environment, and falling out of favor with customers across markets. In the US, more meat-eating customers are trying out plant-based options and making a concerted effort to reduce their intake of meat. Furthermore, plant-based buyers are sticky, with 60% of customers making repeat purchases. It is unsurprising, perhaps, that millennials and Gen X are driving this wave of change. Four in every five millennials eat meat alternatives, and contribute to 67% of plant-based meat sales compared to only 57% of traditional meat sales.
Most telling are Burger King’s findings after it launched the Impossible Whopper last year. The new product generated a 28% increase in Burger King’s sales compared to a 2% increase for McDonald’s products in the same market. In addition, only 10% of those buying the plant-based burger were vegetarian, while the remaining 90% identified as meat-eaters. Plant-based options have come a long way to now appeal to flexitarian customers and not just vegetarians, notes Rabobank, the food and ag-tech sector’s leading financial services provider.
The takeaway here? Traditional meat eaters will flex towards plant-based options when presented with the choice. Restaurants have picked up on the trend – plant-based eats are on the menu at Dunkin’, Subway and TGI Friday’s – a total of 25,000 locations across North America in the Fall of 2019. Grocery stores are finding success in a similar approach – instead of relegating plant-based options to a separate section of the store, retailers are finding success in moving plant-based proteins into the meat and dairy aisles and increasing household penetration. Purchases of plant-based products have risen 264% since the beginning of 2020.
Venture investors have taken note, raising over $1B in funding for plant-based meat and dairy alternatives this year alone. But it’s not just traditional venture capital firms entering the fray – the top six US meat companies are either launching their own plant-based product lines or investing in other companies, essentially betting that as production scales, the plant-based category will woo customers with evolving preferences. This is strongly reminiscent of the investment in video streaming technology – when you build the tech, the investors come. Rabobank notes the similarity, and recommends that traditional meat producers invest in alternative meats to avoid becoming obsolete. For industry incumbents like Tyson, Cargill Inc. and Conagra Inc., a failure to participate in alternative protein innovation would be a risk to their business.
From a technological perspective, the decision to promote plant-based alternatives is straightforward. Why grow plants to feed animals to feed humans, when we can just make the plants nutritious and tasty? As Marisa Drew, head of the impact advisory and finance group at Credit Suisse Group AG, notes, “At the end of the day, to reach scale in this space, you have to deliver something that is as tasty as meat…” Investors who choose to enter the market now have the opportunity to accelerate the growth of the industry, hedge against the risks of animal proteins, and bring plant-based options to the table sooner and at more accessible price points. Customer acceptance is at an all-time high and the food technology market is replete with players vying for funds to get their product out the door and onto dinner plates.
When Netflix launched as a rent-a-DVD platform in 1997, no one expected it to be the streaming business’ poster child, but here we are. It’s Friday night and we’re not watching cable. Similarly, disrupting the meat industry won’t mean a change in dinnertime traditions, it will only mean that families are eating improved meals. My takeout sushi this evening is a crispy “no shrimp” roll with panko-crusted shitake, masago pearls and a shoyu glaze. It’s all plant-based. I’m not surprised that this is the future of food.