The dumb money driving the plant-based meat boom


In an exclusive excerpt from Raw Deal, investors see companies like Beyond Meat and Impossible Foods as a way to help save the planet. The problem is, they also want to get rich. Instead, they may die trying.

Climate change has created a very real existential threat to the global food system, which, at current scope and scale, uses far too many resources while leaving far too many consequences in its wake. Scientists and researchers have concluded broadly that if the food industry doesn’t change, humanity will not meet the goals that scientists have laid out to stymie catastrophic climate impacts. That’s why there’s not enough time to throw dumb money at the wrong projects. There’s not enough time for greed to get in the way.

The problem is, within the food system, there are many potential solutions and an infinite amount of factions with competing interests—all of which think they know the best path forward. Many of these folks live in the emerging universe of alternative meat. There are the techno-optimists and the techno-apologists, the lab-grown meat freaks, the lab-grown meat freaks in favor of rewilding, the mycologists, the plant-based bros chasing Silicon Valley money.

But it has its limits.

There’s a reason Impossible Foods was preparing for a potentially $10 billion public listing going into 2022, and that neither Impossible nor Beyond Meat is registered as public benefit corporations, a move that would legally inhibit the companies from putting profit over their envi ronmental mission. Half of Impossible’s investors come from venture capital firms, and the roster even includes a hedge fund, Viking Global Investors. Backers are no doubt ready for an exit, and they want to get Impossible the best deal.

A sustainability halo helps the cause. That’s why it’s sometimes hard to differentiate between businesses that say they are doing right by the environment and ones that actually are. Add to that the pressures of venture capitalists or public shareholders, and decision-making can get muddled further. And the basic tension remains: Is it possible to increase profits while decreasing environmental impact?

Advertising for brands like Impossible and Beyond hinges on the products’ environmental impacts. Impossible claims to use 87 percent less water, 96 percent less land, and 89 percent fewer emissions than beef burgers. Beyond touts 99 percent, 93 percent, and 90 percent, respectively. Given realistic limits for consumption and purchasing behavior, how much could mass commercial adoption actually impact? Despite the hype and fast growth, meat alternatives accounted for 0.2 percent of 2020 grocery meat sales in the United States, according to NielsenIQ.

Alternative milks including Silk and Oatly commanded 11 percent of total grocery store milk sales in 2021, which has stoked expectations for meat alternatives to reach a similar share. But there’s a long way these ambitious forecasts will have to climb. The US plant-based meat industry had $900 million in 2021 grocery sales, according to NielsenIQ. Barclays expects plant-based will rise to 10 percent of total meat consumption, or $140 billion globally, by 2029. Others expect an even rosier picture. One projection puts sales of alternative meat, eggs, dairy, and seafood products at $290 billion by 2035, according to research by alternative protein investor Blue Horizon Corporation and Boston Consulting Group.

The recent adoption of plant-based alternatives comes after several false starts over the decades, which cannot be discounted. Back in 1972, the USDA projected 10 to 20% of all processed meat would be replaced by soy products by 1980.

So what would happen if plant-based meat replaced 15% of projected total US meat consumption by 2030, and what would happen if meat consumption continued to rise and plant-based meat was tacked on as additional? Finally, how much plant-based meat would have to sell at fast-food locations to make a difference?

Richard Waite of the World Resources Institute estimates that the business-as-usual case has U.S. meat production and consumption actually rising by 9 percent by 2030. The main takeaway from Waite is that meat production would fall by an estimated 7 percent if plant-based meat captured 15 percent of the meat market by 2030. Waite called the finding “quite meaningful.” Since the business-as-usual case has meat production at almost double-digit growth, even a tapering off would be big.

Emissions from food production and their supply chains in this case would fall by 65 million tons of CO2. Waite says due to the reduced agricultural land demand, the carbon opportunity cost from avoided global deforestation would fall by more than 320 million tons of CO2. Explained another way, it would be the same as taking approximately eighty million cars, or roughly a quarter of all vehicles in the United States, off the road.



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But the dumb money complicates that equation. Alternative proteins raised $3.1 billion in 2020, the most ever in the burgeoning industry’s history. That breaks down to $2.1 billion for plant-based alternatives, including $700 million for Impossible Foods across two raises, $335 million for Livekindly, and nearly half a billion between dairy alternatives Oatly and Califia. Otherwise, cell-based meat raised $360 million in 2020, while fermentation start-ups raised a total of $590 million in 2020, including big checks for Perfect Day (which raised $300 million) and Nature’s Fynd (which raised an $80 million series B and $45 million in debt). Massive checks continued. Nature’s Fynd then raised another round, a series C, that totaled $350 million and valued the start-up at $1.75 billion, followed by NotCo, a Jeff Bezos–backed company run by a young entrepreneur from Chile, which raised $235 million at a $1.5 billion valuation. In 2021, alternative protein start-ups secured a record $3.8 billion in new funding, according to PitchBook.

These big checks are noteworthy because, two decades ago, fewer investors in the food industry had a steadier go of it. Returns for food business exits were expected at around two to five times the initial investment. Publicly traded food conglomerates, pretty much the main acquirers, could pay only so much—for a food brand, one to three times sales for acquisition value was solid. But the climate crisis is emerging at a time when there’s been unprecedented funding flowing into the food and beverage industry, igniting investors and previously untapped financial heavyweights from Sequoia Capital to Goldman Sachs. They see food as a new frontier of investment.

The bad news is, they see it as a last frontier of investment, which means big returns are expected. Some founders don’t understand when they first start that signing a term sheet means two things: First, those investors expect an exit, one way or another. Second, they expect that exit to come with a return—usually at a multiple of what they invested.

The founders often don’t understand what they’re getting into. There’s all this financial capital funneling in to solve the “problem” of meat—but there’s so much frenzy about how much money investors could make in the process that the entire industry could blow up on greed while Big Meat and its Big Macs kick back and watch the whole thing fizzle out. It seems possible that investors wanting to cash in on the next big thing will ruin one of the last possibilities that exists to prepare for a climate-challenged future.

Excerpted from Raw Deal published by One Signal/Atria Books, a division of Simon & Schuster, Inc. Copyright © 2022 by Chloe Sorvino.