Six Predictions for the Alternative Protein Sector in 2023
• Market Update • Opinion
2022 has been a landmark year for the alternative protein sector, with breakthroughs across the globe – from major progress in bringing cultivated meat to market in the US, the first food and agriculture pavilion at COP27 in Egypt, and alternative proteins being included for the very first time in China’s Five-Year Plan. The stage is set for even more significant progress in 2023 – and here we will be discussing some of our key predictions for the upcoming year.
1. The Bubble Bursts – But Opportunities Will Be Found in the Downturn
The last five years has seen an explosion in the number of alternative protein-focused companies. At Synthesis, we estimate that today there are over two thousand companies[i] operating in the sector, across the whole value chain. This is symptomatic of the early stages of a S-curve adoption – an exciting point in the development of any industry.
The next year will bring flat-rounds, down-rounds and bankruptcies…
Inevitably, not all of the companies founded at this early stage of the S-curve will succeed, indeed many will fail. This process will likely accelerate in 2023 due to the funding environment we now find ourselves in. The frothiness of recent years (high valuations and plenty of capital) is coming to an end. As a result, we expect significant impacts to the fundraising plans of start-ups in 2023 – some of which we have already seen through cuts to round size, flat equity rounds, and an increase in bridge rounds, generally funded by existing investors.
Founders need to adapt their business plans and their expectations in this new environment. Even with companies reducing cash burn and re‑working business plans to align with higher investor expectations, many will not be able to raise the funds they need to continue – and there will be inevitable downrounds and bankruptcies.
Most at risk are those concentrated areas within the sector where undifferentiated competitors have multiplied, including plant-based consumer brands with substandard products. Many of these companies have been overfunded over the past several years, driven by multiple factors including the deployment of capital by generalist investors looking to increase exposure to the food tech sector.
… But there will still be ample opportunity to be found
For specialist investors with capital to deploy, 2023 is set to be a great year to invest at better prices and with more investor-friendly terms.
These opportunities will extend to start-ups too. For well-capitalised companies in leading positions, there is an opportunity to further entrench their competitive advantages. For example, we expect to see increased consolidation within the sector through M&A. Examples of this consolidation could be cultivated meat companies looking to expand their cell lines to additional species (as was the case in UPSIDE Food’s acquisition of Cultured Decadence), or to gain access to proprietary cell culture media formulations.
Those companies with strong balance sheets, differentiated intellectual property, and unique product offerings will only strengthen their positions through this downturn.
2. Cultivated Meat to Reach the Plates of US Consumers for the First Time
In November 2022 the FDA issued UPSIDE Foods with a “No Questions Letter”, regarding their cultivated chicken. While the USDA still needs to inspect and approve UPSIDE’s EPIC facility[ii], we expect products to launch in the US in H1 2023. The first commercial sales will be in chef Dominque Crenn’s three Michelin-starred restaurant Atelier Crenn in San Francisco. This will be a momentous point as consumers in the US are able to try cultivated meat for the first time!
In 2023, more companies will move through the same FDA process as UPSIDE. Companies known to be in the process with the FDA include cultivated salmon producer Wildtype[iii], and GOOD Meat[iv] whose cultivated chicken is already approved in Singapore. We could even see a seafood product leapfrog UPSIDE to the consumer, due to the simpler regulatory process required to bring seafood to market.
Regardless, the US regulatory progress is paving the way for cultivated meat approvals in other countries, with several other nations known to be developing specific regulatory frameworks for cultivated products, including Israel and Japan.[v]
In 2023, we expect construction to start on even bigger cultivated meat facilities, which will bring these products to even more US consumers. Believer Meats (formerly Future Meat Technologies) recently announced they had broken ground on the first commercial cultivated meat plant in the US, while UPSIDE are also planning on a commercial facility with an annual production of “tens of millions of pounds”[vi].
3. New Government Initiatives Will Drive Progress Globally
It is not just the US that will see movement – progress will be made on the global stage in 2023.
In a 2022 breakthrough, food finally made it onto the agenda of COP27 (with the first food and agriculture dedicated pavilion). We expect food to be an even more prominent part of COP28, which is in Dubai in November 2023 – a region with a known food security issue.
This is not a new discussion for the Middle East; NEOM in Saudi Arabia is an existing project to build a whole new region from the ground up on a model of “sustainable living, working and prospering”. One city in NEOM, Oxagon, will be a hub for manufacturing and innovation, and novel food and breakthrough technologies will be a huge part of this. While this vision is a way off coming to fruition, at Synthesis we welcome this move to making alternative proteins a key part of the discussion even in this planning stage.
Further afield, in China, the 2022 Five-Year Agricultural Plan specifically mentioned cultivated meat[vii], in a move that sent a clear signal that we will likely see investment from the government into cultivated meat and other alternative protein technologies.
While some regions (such as Europe) are moving slower than others, we expect further positive initiatives taken by governments across the world in 2023, which will drive even greater momentum in our sector.
4. Hybrids Are Here to Stay
Hybrid food products are nothing new. In fact, many of the novel foods consumers are eating today are a hybrid formulation. Impossible burgers contain precision fermented heme, and Perfect Day’s whey protein has been incorporated into a range of consumer goods from protein powder, ice-cream, chocolate and most recently milk[viii] .
However, 2023 will see more of us eating foods containing some sort of novel food than ever before, whether the ingredients are cultivated meat, mycoproteins, precision fermented or plant-based. The fact that these new technologies are providing an ingredient in an otherwise traditional plant or even animal based food is important. For consumers it allows new ingredients to gain market entry in a way that is familiar, while expanding their options. For food companies, it means an expanding toolbox of ingredients to play with.
At Synthesis we believe this is why all the available novel food technologies have a part to play; you can take the greatest parts of each and mix them together to produce the best tasting food, at the optimal cost. We would go as far to say that those plant-based companies that do not incorporate some of these new technologies into their products are at risk of being the ‘Kodaks’ of the alternative protein industry.
5. Not Just Fermentation Capacity – But Efficiency and Product Quality Too
Increasing focus on fermentation efficiency…
We expect a growing focus through 2023 on fermentation efficiency. This year most of the investor discussion has been around capacity. This has been born out in the number of new start-ups emerging in the fermentation capacity area[ix]. However, fermentation efficiency – the amount of output produced at a given capacity over a certain period at an optimal cost – will also be crucial for fermentation technology to scale-up meaningfully. To date, we have seen much less discussion amongst investors about this second, just as critical, part of the equation.
Fermentation efficiency is not just measured by fermentation titer – the grams per liter – but extends to optimization of the whole process. This includes everything from the operational inputs such as feedstock, energy, and water use; to the microbes used in the process (which can be optimised through strain engineering); and even the fermentation environment or method. Ultimately, this is not just a “hardware” problem; bioprocesses can be improved using computational and biological platforms.
Fermentation efficiency and capacity are not mutually exclusive; improvements will happen in parallel to and with capacity scale-up. We expect the discussion to expand to encompass both aspects more fully in 2023.
…and product quality
For the alternative protein industry to be successful, efficiency must come hand-in-hand with quality. If optimal efficiency is the only goal, the outcome could be large quantities of cheap product that just isn’t good enough to appeal to the consumer. The conventional animal agriculture industry has seen problems with being too efficient, for example with “woody breast” chicken, which is suspected to be in part a result of the birds growing too fast[x].
Maintaining the quality of the produce is important for alternative proteins – especially for those more complex proteins where the structure of the protein is integral to its functionality – something we discussed in our molecular farming insights post as being particularly important for the protein casein.
This is also true across other food technologies. High moisture extrusion of plant-based proteins is a highly efficiency process in terms of output but sub-par on quality, as it is unable to recreate the structural complexity of an animal-based product. In order to be successful, companies must balance both efficiency and quality. Synthesis portfolio company Redefine Meat is a great example of this; they have developed a proprietary high-throughput and scalable 3D printing process, which is able to biomimic the complexity of a steak and other structured products such as lamb.
Meanwhile, for cultivated meat, efficiency gains have been made in the form of reducing cell culture media cost, but this can result in cell lines not performing as well, with the overall impact felt in the end-product.
6. Data is King
2023 marks a key point in the convergence of two important data focused trends in the alternative protein sector.
First, the sector is now old enough that it contains many companies that have generated very large datasets. Some of the earliest plant-based companies like Impossible Foods and Beyond Meat spent a lot of time, R&D resource and investor cash developing a fundamental molecular understanding of what makes meat look, behave and taste like, well, meat[xi]. Therefore, from the earliest days of alternative proteins, companies have been generating a huge amount of data. Today we have hundreds of companies doing the same, resulting in thousands of very large datasets.
Second, there is an expanding set of public data and tools available that can now rapidly analyse these datasets. Artificial intelligence (AI) and machine learning (ML) tools like AlphaFold are game changing for the protein design space and will likely become part of the everyday toolkit for many companies – and not just those in the alternative protein space.
It is the convergence of these two trends – the number of datasets available and the tools there to analyse them – that will allow companies to accelerate faster and develop products more efficiently. For example Synthesis portfolio company Equinom has a proprietary computational biology platform, named “Manna”™, which connects genetic and other crop data with functional data on ingredients and end-products, resulting in breeding better pea, sesame and other crops with higher protein content, improved flavour, better processing capabilities, and other attributes that contribute to better plant-based food product.
At Synthesis we are excited by the future technologies and trends in alternative proteins. As for 2023, we cannot wait to see what it brings, what we predicted right, what we predicted wrong, all the new scientific breakthroughs and regulatory milestones.
See you in 2023!
[i] From Synthesis internal database
[ix] Companies like Liberation Labs, Pow.bio, Planetary, Boston Bioworks to name a few!