Investors continue to hear stats like 44% of consumers seek to reduce meat intake and >50% care about ESG (environment, sustainability and governance) ... but what consumers report and what they actually do (now that we know the majority of plant-based consumers are flextarians) are two diff things
You may want to add to your analysis the growing global middle class. About 3B people are expected to move into the middle class by 2050. As people have more money their taste moves to meat. Given feed conversion ratios, we need to double global protein production to meet the demand. There is not enough arable land to produce that much soy and convert it to meat through animals.
These emerging markets don't have an established preference between animal or plant.
3G cellular was adopted in Pakistan before the US because there was no installed base (wireline) in Pakistan. Potential improvements in soy nutritional qualities offer the possibility to lower cost of plant based meat below animal. What is the unmet demand for plant based meats at 1/2 the current cost in these new markets?
Improvements in protein cost will go down much like Intel drove down chip costs. The CPGs, like Beyond, will reconfigure in 100s of ways to pick off various forms of emerging demand at different price points and configurations. GenZ is a high user of PBM. They are influencing their parents. The 2050 market will likely be an increase in animal based meats and a dramatic increase in plant based meats globally. This may include a sizable young cohort that grew up on plant based and find animal based to strong.
Thanks Carter - excellent points from the bull perspective. I agree with the point about there being non-obvious places where plant based meats fit into a cultural and economic scenario that makes sense, though I wonder if plant based meats will win those markets as fermented or cell-based meats come online. How do you think about that?
Open question. There need to be some big innovations in cell based meats to make them cost viable. Like nobel winning type technologies. Many of those technologies will seek the health care world first because of the available premiums in healthcare.
There are more incremental innovations on fermentation that can provide scale. Precision fermentation is an interesting investment space in the mid term.
I have wondered if we would see more fortified ultra processed food using plant based protein or fermented. Bonumouse for example is healthy sugar, with some protein and prebiotic benefit. Shoudl we amplify that so that people eating ultra processed food (Cheap and convenient) get some enhancement.
We should recognize we have two food systems:
1) Fresh, healthy, expensive
2) Cheap, shelf stable, scalable
It is unclear #1 is a platform whose price crosses in to #2 in time.
I wonder if CPGs or animal feed (More likely animal feed) start to use more fermented proteins to fortify feed, improve sustainability and drive down cost.
I am not a Animal or Plant Based Bull or Bear. My observations is aggregate demand for protein needs to nearly double to meet demand under current forecast and feed conversion ratios. Current production techniques (Farming/Ranching) are at their limits. That creates tremendous economic opportunity for innovation. A large part of the new demand does not have a specific taste bias yet.
We are at the begging of a new innovation cycle. US consumer data and behavior does not scale into Asia. But Asia is the market pressuring the change. The early adopters of a PBM movement are more likely in Asia.
There are two PBM markets
1) Health, ESG, expensive
2) Cheap protein
If PBM can deliver to the consumer for half the cost of ABM, it will open up large markets.
You are making very valid points. The only problem I see is that you are using growing emerging market demand while using current developed market production yields. Emerging market production is nowhere near their limits. South Africa is a good case in point, we have a dual economy with both emerging market and developed market characteristics. Almost half our cattle population is in traditional/subsistence farming operations, the other half in commercial farming operations. The commercial farming operations produce more than 80% (probably closer to 90%) of the meat in the market. Africa is a huge continent and the potential increase in yields with conventional agriculture is still huge - it can possibly even meet the projected global demand and alternative protein isn't the only solution. It's a question of changing how food is produced vs how food is consumed.
Raw material costs up 100% so far since last Autumn (pea protein) - all start-ups head for same raw materials - 1/2 cost still leaves the issue of macro & micro nutrient gap - and ultra-processing, which consumers swerve ...
Excellent topic. I am not a plant based product bull. I do think the product phenomenon is an excellent example of the kind of excitement you can create with professional sales and marketing efforts. The American consumers are always looking for the next shiny sexy looking or sounding products. These companies have huge marketing budgets to grow the product category quickly. The goal is to attain enough volume to reduce overhead and product cost in order to be profitable. I really doubt this category can sustain this amount of marketing funds and will fizzle out as the marketing wears down.
Yes that's exactly right - the two functions that the vast amounts of venture has funded are product development and marketing! The mania is a result of venture subsidization, and once that dies down....hard to imagine the mania sticking around. Thanks David - hope you are well!
Investors continue to hear stats like 44% of consumers seek to reduce meat intake and >50% care about ESG (environment, sustainability and governance) ... but what consumers report and what they actually do (now that we know the majority of plant-based consumers are flextarians) are two diff things
ahhhh, the crux of the matter!! Thanks Jennifer - this juxtaposition is such a fascinating one.
You may want to add to your analysis the growing global middle class. About 3B people are expected to move into the middle class by 2050. As people have more money their taste moves to meat. Given feed conversion ratios, we need to double global protein production to meet the demand. There is not enough arable land to produce that much soy and convert it to meat through animals.
These emerging markets don't have an established preference between animal or plant.
3G cellular was adopted in Pakistan before the US because there was no installed base (wireline) in Pakistan. Potential improvements in soy nutritional qualities offer the possibility to lower cost of plant based meat below animal. What is the unmet demand for plant based meats at 1/2 the current cost in these new markets?
Improvements in protein cost will go down much like Intel drove down chip costs. The CPGs, like Beyond, will reconfigure in 100s of ways to pick off various forms of emerging demand at different price points and configurations. GenZ is a high user of PBM. They are influencing their parents. The 2050 market will likely be an increase in animal based meats and a dramatic increase in plant based meats globally. This may include a sizable young cohort that grew up on plant based and find animal based to strong.
We are barely past the first inning.
Thanks Carter - excellent points from the bull perspective. I agree with the point about there being non-obvious places where plant based meats fit into a cultural and economic scenario that makes sense, though I wonder if plant based meats will win those markets as fermented or cell-based meats come online. How do you think about that?
Open question. There need to be some big innovations in cell based meats to make them cost viable. Like nobel winning type technologies. Many of those technologies will seek the health care world first because of the available premiums in healthcare.
There are more incremental innovations on fermentation that can provide scale. Precision fermentation is an interesting investment space in the mid term.
I have wondered if we would see more fortified ultra processed food using plant based protein or fermented. Bonumouse for example is healthy sugar, with some protein and prebiotic benefit. Shoudl we amplify that so that people eating ultra processed food (Cheap and convenient) get some enhancement.
We should recognize we have two food systems:
1) Fresh, healthy, expensive
2) Cheap, shelf stable, scalable
It is unclear #1 is a platform whose price crosses in to #2 in time.
I wonder if CPGs or animal feed (More likely animal feed) start to use more fermented proteins to fortify feed, improve sustainability and drive down cost.
I am not a Animal or Plant Based Bull or Bear. My observations is aggregate demand for protein needs to nearly double to meet demand under current forecast and feed conversion ratios. Current production techniques (Farming/Ranching) are at their limits. That creates tremendous economic opportunity for innovation. A large part of the new demand does not have a specific taste bias yet.
We are at the begging of a new innovation cycle. US consumer data and behavior does not scale into Asia. But Asia is the market pressuring the change. The early adopters of a PBM movement are more likely in Asia.
There are two PBM markets
1) Health, ESG, expensive
2) Cheap protein
If PBM can deliver to the consumer for half the cost of ABM, it will open up large markets.
You are making very valid points. The only problem I see is that you are using growing emerging market demand while using current developed market production yields. Emerging market production is nowhere near their limits. South Africa is a good case in point, we have a dual economy with both emerging market and developed market characteristics. Almost half our cattle population is in traditional/subsistence farming operations, the other half in commercial farming operations. The commercial farming operations produce more than 80% (probably closer to 90%) of the meat in the market. Africa is a huge continent and the potential increase in yields with conventional agriculture is still huge - it can possibly even meet the projected global demand and alternative protein isn't the only solution. It's a question of changing how food is produced vs how food is consumed.
Raw material costs up 100% so far since last Autumn (pea protein) - all start-ups head for same raw materials - 1/2 cost still leaves the issue of macro & micro nutrient gap - and ultra-processing, which consumers swerve ...
Excellent topic. I am not a plant based product bull. I do think the product phenomenon is an excellent example of the kind of excitement you can create with professional sales and marketing efforts. The American consumers are always looking for the next shiny sexy looking or sounding products. These companies have huge marketing budgets to grow the product category quickly. The goal is to attain enough volume to reduce overhead and product cost in order to be profitable. I really doubt this category can sustain this amount of marketing funds and will fizzle out as the marketing wears down.
Yes that's exactly right - the two functions that the vast amounts of venture has funded are product development and marketing! The mania is a result of venture subsidization, and once that dies down....hard to imagine the mania sticking around. Thanks David - hope you are well!