Can Alternative Proteins Scale?

Expectations for alternative proteins like plant-based or cultured meat are high. Firms such as Lux Research and AT Kearney project that they will make up roughly a third of the global meat market around 2050. Most ambitious is the rhetoric of some of the startups themselves, such as Impossible Foods' corporate mission to completely “replace the need for animals” by 2035. Although we at Breakthrough have written favorably about these products (here and here) and are hopeful about their companies’ success, scaling production enough to achieve anything near such lofty goals will mean overcoming some stiff headwinds.

To date, most of the attention of the startups, the media, and industry analysts has been focused on the products themselves, rather than the systems that produce them. But while creating tastier, “meatier,” and more affordable products is a necessary first step to entice consumers and grow market share, it’s not enough. As revealed by Impossible Foods’ recent reversal of plans to supply their burgers at McDonald’s restaurants, the alternative protein industry has already reached supply bottlenecks that threaten to stall its momentum. In order to scale successfully, the alternative meat industry will need major advancements in the economic efficiency of food processing and in production capacity.

To appreciate just how high expectations are, consider that if 2013-2018 annual global growth rates continue at 5.77%, meat alternatives would capture about 6% of global protein consumption in 2050. That's not nothing, but it's far short of the third of global meat consumption that Lux Research and Kearney's project, and it’s a complete failure compared to Impossible Foods’ goal of completely eliminating animal agriculture by 2035.

Comparison of projected global growth of plant-protein at 2013-2018 annual growth rate and AT Kearney's estimate of alternative protein consumption.

The growth rate needed to capture significant market share is not outside the realm of possibility, but it would require turning the constellation of protein alternative startups into a fully-fledged global food industry, built mostly from scratch over the next few decades.

Success would depend upon, firstly, increasing raw ingredient processing and finding novel, low-cost ways of extracting protein from new sources. Recent bottlenecks in the pea protein supply chain illustrate this challenge. Although there is a plentiful supply of pea crop, its supply chain has experienced interruptions arising from an expensive and inefficient extraction process. Peas are 24% protein and nearly 60% of pea volume is starch, so processing pea protein results in high amounts of starch by-product with no economically valuable product application. Processors must find new markets or profitable uses for this starch, or invest in developing crop varieties with greater protein-to-starch ratios.

For cultured meat, a major barrier to economically efficient production is sourcing ingredients for the culture medium. Growth factors, an ingredient key to cell proliferation, are difficult to obtain. The serum containing these growth factors comes from the blood of fetal cows from pregnant cattle at slaughterhouses. Acquiring this fetal bovine serum (FBS) for cell culture media is costly and the cost of cell culture medium ends up representing 80-90% of the marginal cost. Some cultured meat companies have developed alternatives to FBS, like Memphis Meats, Mosa Meats, and Meatable, but it is unclear what they are made of, how costly they are, and how widely available these alternatives will be.

Plant protein production chain. Source: AT Kearney

Second, alternative protein companies would need to dramatically expand production capacity for the final consumer products. CEOs have identified that while demand is growing rapidly, their companies and industry do not have the physical capacity to produce enough final product right now. In other words, these companies need to expand rapidly just to meet current demand, let alone projected future demand. We saw this crunch in real time earlier in 2019 when Impossible Foods experienced shortages from limited production capacity. To address such limitations, companies will need to develop new production facilities. Impossible Foods President, Dennis Woodside, says working with food and meat processor, OSI, will quadruple their production, but based on our back-of-the-envelope estimate, the company would still need nearly 36 additional similarly sized plants by 2050, about one new plant per year, to grow at the rate Lux Research and AT Kearney project the industry will grow.

All of this is possible, but it’s expensive. Currently, investments in the plant protein and cultured meat industries represent less than 7% and less than 1%, respectively, of investments made in the FoodTech industry ($10.4 billion). More than $2 billion has been invested in plant protein in the past decade, with more than half being invested since 2017, but plant protein currently represents just 1% of the global meat market.

Public sector investment could have a major impact, especially for cultured meat, which is still in its infancy. Government-funded initiatives — such as support for research into finding low-cost growth factors and establishing an animal cell-line library for companies and researchers — can set the industry on a path to lowering production costs and bringing a variety of products to market.

Growing the alternative protein market requires far more than developing and successfully marketing new and appealing products — it amounts to creating a new industry at a global scale from the ground up, and wholly changing the protein industry’s supply chain, institutions, and infrastructure. Credible optimism about the future of the industry calls for a hard look at the challenges ahead.