The massive growth of plant-based food investment and what it all means
Updated: Aug 6
Consumers everywhere are buying plant-based foods at record levels and global investors are following closely behind. A recent study the Plant Based Foods Association and the Good Food Institute showed incredible growth across almost all categories. In the US growth in sales of plant-based meat, dairy and eggs exceeded animal products for the third year running. One in 6 American households now consume plant-based meat. Plant based eggs grew 168% - almost ten times the rate of poultry eggs.
The sales of plant-based milk continued to soar to US $2.5 billion. Almost 40% of US homes now buy plant-based milk. The major growth came from Oat milk with a 300% increase from 2020 to see it sit just behind soy milk in total sales.
In Europe too, the growth has been no less spectacular. A report published by "Smart Protein" in 2020 found that Europe’s plant-based food industry grew at 49% overall in a 2-year period. In Germany sales of plant-based meat increased by 226% to 2020. Also in Germany, sales of plant-based fish increased by 623% over the same 2-year period.
Germany has transitioned from a large meat-eating country to one of the leading voices in the vegan revolution. The country now has one of the highest rates of vegans in Europe, with over 4% of the population. With tailwinds like these, it can be no surprise the volume and quantum of deals and investments in this sector is at record highs.
Of the plant-based food investment groups, the hot money is in plant-based proteins. In 2020 investment was 210% higher than 2019 for a total of US 3.1 billion. According to a report from the Good Food Institute, the bulk of the investment went to plant-based protein companies such as Impossible Food’s US $700 million in Funding and US $200 million into Oatly (listed in 2021). There was substantial growth in cultivating meats from cell cultures with US $360 million towards this market.
Consumers and investors are becoming increasingly aware of the contribution of mass-market food supply chains to climate change. Global food systems account for between 10 and 20 billion tonnes of greenhouse gas emissions each year – more than China which is globally the largest emitter.
Technology now provides consumers with data about the food they consume. Applications such as Giki (“Get Informed Know Your Impact”) allows people to track and reduce their carbon footprint and scan barcodes to discover information about the health, sustainability, and ethics behind the companies they may be considering purchasing products from.
In Australia, “Dirty Clean Food” the retail food business of listed regenerative agriculture company Wide Open Agriculture has a website page where customers can track the provenance of the finished product from farmer to processor to warehouse to sales/distribution.
Consumers are now able to investigate and analyse a company’s whole supply chain, and this provides them with enormous power. As consumers move so too do impact and ESG investors.
Triodos Bank in the Netherlands has been at the forefront of investing in sustainable agriculture with a philosophy that money can be a force for good. They finance businesses that contribute towards a food and agriculture system that works with nature, rather than against it. Their investment portfolio includes European leaders in organic food and sustainable agriculture companies in Asia, Africa, and Latin America.
New business models have developed to create partnerships without a pure profit motive. An example is Commonland Foundation in the Netherlands founded by ecologist Willem Ferwerda and entrepreneur Wijnand Pon. The foundation comprises an expert team of scientists, conservationists, farmers, facilitators, ambassadors, and thinkers. Together with landscape partners they develop business cases build on regenerative agriculture, agroforestry, and rotational grazing – from pilot to scale. In Australia, Commonland Foundation have been a foundation partner of listed regenerative agriculture company, Wide Open Agriculture (WOA).
A great video on how regenerative agriculture restores carbon to the soil through a "carbon pump" can be viewed here.
Wide Open Agriculture (ASX: WOA; FSE: 2WO) is the only listed regenerative agriculture company in the world dedicated to a “4 returns” philosophy. The company’s constitution recognised the importance of delivering meaningful and measurable returns across four key areas – financial, social, natural, and inspirational.
Wide Open Agriculture has attracted global investor capital with Commonland Foundation with 13% and high net wealth family of Fanja Pon with 15%. The company's carbon-neutral oatmilk is set to become a globally recognised brand with Australian sales already exceeding expectations and commercialisation of plant-based foods using modified lupin product (MLP) is well underway.
Also, from Australia is v2food which in August 2021 closed a series B funding round worth A $72 million and valuing the business at A$ $500 million. The plant-based protein company launched in 2019 with initial investors including CSIRO and Australian billionaire Jack Cowin. V2food uses protein extracted from legumes to create a ‘mince’ that looks, tastes and cooks like meat. It is used in Australian Hungry Jack’s “Rebel Whopper” burgers. The recent capital round brought in new investors including European venture fund Astanor Ventures. The company plans an aggressive entry into China with a plant-based pork product specifically designed for the Chinese palate.
The stand-out success story of 2021 in terms of investment in plant-based foods is of course Oatly. The company listed through an IPO in May 2021 with the stock soaring more than 30% of first day’s trading. After the dust had settled Oatly in August 2021 is worth around USD $10.75 billion. Oatly has big-name investors on the share registry including Oprah Winfrey, Blackstone Group and Jay Z. Based in Sweden, Oatly first started creating oat milk products 25 years ago and the range now includes yogurts oat spreads, and ice creams.
Oatly’s prospectus mentioned their research that indicated plant-based milk sales will grow at between 20% and 25% over the next 3 years. The marketing is targeting environmental conscious consumer by saying cup of Oatly rather than a cup of cow’s milk reduces greenhouse gas emissions, land use and energy consumption.
What is largely unknown about Oatly is the magnitude of Chinese investment in the company. According to ‘supchina’ a joint venture between China Resources and Belgian venture capital firm Verlinvest owns around 47% of Oatly. This level of investment ensures that that China Resources-Verlinvest JV will have considerable influence over any decisions requiring shareholder approval moving forward.
Oatly has made it clear its strategy to move heavily into the Chinese market where sales are booming. In 2020 Oatly quadrupled sales into Asia. It could be problematic for impact and ESG investors to have this level of ownership of brand that offers a mission statement that reads “Our sole purpose as a company is to make it easy for people to turn what they eat and drink into personal moments of healthy joy without recklessly taxing the planets resources in the process”. In 2020 China Resources was the 19th largest Chinese company with over US $94 billion in annual revenue. As a state-owned entity, it is governed by the investment unit of the State Council in Beijing.
Prolupin, an innovative plant-based protein company based in Grimmen, Germany is also finding strong investor support. The company has experienced significant year-on-year growth since the market introduction of the vegan “Made with Luve” brand in 2015. Early-stage investors have included Capricorn Partners and Quest for Growth – a independent manager of private and quoted equities and Novax, the Stockholm based growth investor powered by Swedish Axel Johnson Family.
The alternative protein market is anticipated to grow by 700% to 2035 and comprise around 11% of total protein market. This growth will transform global markets and investments. Old style agriculture businesses using industrial farming techniques that do not evolve will disappear. New, agile businesses that place transparency, consumer health, animal welfare and the environment at the heart of their business will thrive.
The tailwinds from consumers and investors will create massive disruption to old style industrial agriculture. Consumers are driving change through caring about the environment, the provenance of their food, caring about animal and livestock welfare, nutritional benefits, global warming, farmers, and communities.
Investors are being driven by substantial returns from investing in plant-based food but are also keenly aware of reputational risks from old style agriculture, lower returns from dry and parched farming lands, productive gains from ag-tech, regulatory pressures, and the momentum from impact and ESG retail and institutional investors.