By: Yohan Albo & Ezra Kohrman
Place a burger patty on a grill and it will put on a performance: sizzling, crackling, bleeding, darkening, forming a layer of crispness and filling the air with a rich, wafting aroma. It’s an experience that is unmistakable. Well actually, not quite.
That experience is now being reimagined and reconstructed, most notably by Impossible Foods and Beyond Meat, plant-based meat companies that produce meatless burgers mirroring the classic beef patty. For their creations, Impossible and Beyond are attracting copious amounts of investment, leading to valuations in the billions.
With so much attention on the two giants, however, it’s easy to overlook a broader, industry-wide transformation underway that could revolutionize the world’s food system.
The livestock industry is a powerful economic force. Globally, it accounts for 40% of agricultural output and supports the livelihood of 1.3 billion people, according to the FAO. Meat production, in particular, is a rapidly growing sector of the market, with production tripling over the last half-century.
Yet in the wake of such meteoric growth, factory farmers now face a storm of potential challenges. For one, the world’s population is projected to reach 11 billion by 2100 and meanwhile, the share of middle-class consumers in developing countries, like China and India, is ballooning. With more and larger bellies to feed, it is no surprise then that global demand for livestock products is expected to double by 2050.
But that creates a problem. Considering its current rate of growth, it is unlikely the livestock industry can scale up its production fast enough to catch up with changing demographics. A meat supply shortfall, in other words, could be on the horizon.
Though even if factory farmers could theoretically ramp up production, it would only spell environmental catastrophe. That’s because the livestock industry consumes vast amounts of land and water, contributing to deforestation, soil degradation, losses in biodiversity and greenhouse gas emissions. In fact, the industry contributes to 14.5% of all anthropogenic emissions.
The complications don’t stop there. Among consumers, there are growing ethical concerns about the mistreatment of factory-farmed animals. Attitudes surrounding health are also beginning to shift, particularly in western countries, where more consumers are seeking alternatives to traditional, cholesterol-heavy diets. Meanwhile, the public health community is warning that the widespread adoption of antibiotics in the livestock industry could magnify the likelihood that strains of bacteria grow resistant. And finally, there is a formidable risk that factory farming could proliferate new infectious diseases. The H1N1 virus outbreak in 2009, for example, originated from an industrial pig farm in the U.S.
In response to these spiraling concerns, a generation of entrepreneurs, academics, activists and investors are attempting to pave another path forward. They call themselves the alternative protein industry.
A GlobalNewsWire report found that the global alternative protein market is projected to grow at an annual rate of 9.5%, reaching $17.9 billion by 2025. Due to early supply-chain disruptions in the meat industry, the Covid-19 pandemic looks to be accelerating the industry’s already robust growth. For instance, Beyond Meat saw a 141% increase in revenue in the first quarter of 2020.
As the global market for alternative protein heats up, Israel’s melting pot of innovation is quietly bubbling with opportunity. A report from The Times of Israel showed that currently there are more than 30 Israeli startups in the alternative protein field with investor backing. That should not come as a surprise. Israel possesses all of the right ingredients: a startup-driven economy, government support, a growing culture of veganism and a heavy reliance on meat imports (e.g., 85 percent of locally consumed beef is imported).
Plant-based meat products are popping up on some of the most widely recognized menus in the world. Burger King now serves an Impossible Whopper, Subway sells a Beyond Meatball Sub and Starbucks offers an Impossible Breakfast Sandwich.
Israeli entrepreneurs are not far behind. Redefine Meat is an Israeli startup using 3-D printing technology to produce plant-based steak that mimics the characteristics of traditional beef, but without cholesterol and at a reduced price. Redefine recently secured $29 million in its series A funding round, which comes only a week after the company successfully launched a blind-taste test, where hundreds of customers lined up in front of a food truck serving its signature 3-D printed “meat.” Over 90% of the customers reported that the product was comparable to traditional beef.
Cultured meat is another area in the alternative meat space with budding potential. Sometimes called clean or cultivated meat, the field is starting to gain increased traction in Israel.
Aleph Farms, for example, is a cultured meat startup based in Rehovot. By extracting non-GMO cow cells and nurturing them to grow and form tissues in bioreactors, the company can produce steak in a mere three weeks, in contrast to the two years it takes through industrial farming. The technology is partially derived from research in regenerative medicine conducted by Professor Shulamit Levenberg from the Technion — Israel Institute of Technology.
Ambitiously, Aleph Farms is looking well beyond the Israeli market. Through the Aleph Zero initiative, the company is partnering with space agencies to set up long-term research and development projects aimed at taking its product to space. Back on planet Earth, Aleph Farms is working with Mitsubishi Corporation’s Food Industry Group to deliver cultured meat to the Japanese market. The agreements represent a broader strategy of Aleph Farms (and other alternative meat producers) to integrate its products into established manufacturing and distribution channels.
Future Meat Technologies is another clean meat startup based in Rehovot, specializing in growing not only beef but chicken and lamb as well. After winning Calcalist’s food tech innovation startup contest in 2020, the company recently announced it had secured $26.75 million in funding from some of the largest food manufacturers such as Tyson Foods, ADM and Müller Group. Notably, the startup has successfully lowered the production cost of a cultured chicken breast to $7.50 per quarter pound and expects its pilot facilities to begin operating in the first half of 2021.
Israeli alternative meat startups are also utilizing fermentation technology. Kinoko-Tech, for instance, produces a burger-like product by fermenting the fungi mycelium in a mixture of grains and legumes. This process of solid-fermentation is both quick and healthy, as there is no artificial processing.
Plant-based alternatives are cracking into the egg market. Zero Egg is an Israeli startup producing an all-purpose vegan egg substitute that is already being sold in the U.S. and Europe. The company offers a powder called EGG Basics for traditional egg dishes like omelets and a powder for baking called BAKE Basics. Both products are meant to replicate the look, feel and taste of a traditional egg, but with fewer calories and no cholesterol. And while currently Zero Egg sells exclusively to foodservice operators and food manufacturers, the startup plans on releasing its vegan egg powder to consumers this year.
In the dairy domain, ReMilk is attempting to bring animal-free milk, yogurt, cheese and butter to market. Through microbial fermentation, the company is able to create milk proteins that are transformed into a dry powder. From there, the powder can be used to make a variety of milk-based products–all without cholesterol, lactose, antibiotics and growth hormones. Importantly, what separates ReMilk from competitors making other milk alternatives (e.g., oat, soy and almond milk) is the fact that its end product is effectively identical to naturally produced dairy.
Yofix Probiotics Ltd. is also leveraging the powers of fermentation to create dairy alternatives. The startup uses a plant-based recipe, consisting of oats, lentils and sesame, to create its signature yogurt. Yofix was the first startup to rise out of The Kitchen Hub’s food-tech incubator and is backed by Müller Ventures, Bel Group and LionTree Partners LLC.
Israeli companies in the protein additive field are leveraging a wide range of ingredients to construct their alternative products. Hinoman, a startup founded in 2010, uses a vegetable called Mankai–a strain of duckweed—to craft protein-packed cubes that can be added to smoothies, pasta or any other meal for a nutritional boost. Mankai is neutral in taste and packed with complete protein containing all nine essential amino acids, iron and vitamin B12. Using hydroponic cultivation, the aquatic green can be grown year-round, requiring little water and land.
Hinoman’s signature Mankai product is served in both Harvard cafeterias and labs, where researchers found various positive health effects associated with its consumption. On a broader scale, Hinoman wants to sell its Mankai cubes in the U.S., Japan and Israel; although, at the moment, the cubes are sold out in America.
Edible insects are another area of protein potential. Backed by Singaporean-based Sirius Venture Capital and Netherlands-based SLJ Investment Partners, Hargol FoodTech is a startup farming grasshoppers on an industrial scale. Hargol’s final product is a powder with 72% protein content, all the essential amino acids and no fat. The startup has collected numerous awards for its innovation, including the SEAL sustainability award, TLV Startup Challenge, Green Impact Summit and others.
Similarly, Flying SpArk is developing a protein powder from Mediterranean fruit larvae. The cultivation process is low cost and low waste (all parts of the larvae are used), allowing for faster and more efficient protein production. The tasteless powder contains 70% percent protein and essential minerals such as calcium and iron. Flying SpArk plans on building a production facility in Thailand, in partnership with the seafood producer Thai Union Group, to ramp up production.
Whether or when the world’s protein source can transition from barns to bioreactors remains unknown. Yet, it’s becoming increasingly evident that forces in the market are churning and consumer attitudes are evolving. The Good Food Institute released consumer market data, showing that in Israel the growth of the alternative protein market in 2020 was 13 times greater than that for animal products. And internationally, data from the 2020 Health and Food survey shows that 28% of consumers are eating more protein from plant sources, 24% are eating more plant-based dairy and 17% are eating more plant-based meat alternatives.
While these numbers do not show a complete upending of the livestock industry, they could offer a glimpse into what’s to come. As technology advances, ideas evolve and companies scale, the alternative protein experiment will only get better.
At DataToCapital, with several successes in the foodtech space, we are particularly well-positioned to assist alternative protein companies in their fundraising endeavors, go-to-market strategy and execution. We recognize that an important, yet understated barrier facing the industry is the high, upfront capital costs required for operation. Machinery and equipment are expensive–scaling even more so. Early investment is therefore vital for new ventures in the field to elevate their business to the next level.
With extensive experience in the food-tech space, our team offers the background, resources and network of connections to serve as a bridge between alternative protein entrepreneurs and the Israeli investment community.
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