ImpactAlpha, April 25 – The initial public offering of plant-based meat maker Beyond Meat signals the arrival to the public capital markets of a wave of innovation that will reshape how we eat.
It’s not only that plant protein-based meat actually tastes good. Nor that it’s better for you than meat that comes from, you know, animals. Nor even that it’s easier on the planet.
Its that the $7.8 trillion global food industry is now squarely in the sights of food entrepreneurs, tech innovators and public and private investors.
“We’ve got a total disruption happening across the value chain in food and agriculture,” says Walter Robb, who was co-CEO of Whole Foods before becoming a sustainable food investor in 2017. That disruption has “created more opportunity than I’ve ever seen in my lifetime,” he says.
ImpactAlpha’s Dennis Price interviewed Robb this month at the Social Innovation Initiative at McCombs Business School in Austin.
Investor rush to alternative meats and healthy eating accelerates the disruption of food systems
The growing consumer appetite for quality food is giving an edge to smaller and midsize companies developing healthier and more sustainable alternatives to processed foods, Robb says. Science and technology breakthroughs, and new business models, can lighten food’s carbon footprint and expand food distribution channels for healthy food into low-income communities.
>>Watch ImpactAlpha’s on-stage interview with Walter Robb.
When food innovation goes public next week, alternatives to animal-grown meat will be in the spotlight.
The stakes are high for alternative proteins. Plant-based dairy, as a comparison, has captured 13% of the U.S. dairy market. If plant-based meats meet the same success, the early market for alternative meats could be $35 billion in the U.S. alone, or 13% of the $270 billion U.S. meat category.
And that’s only one of the opportunities in food. Last year, venture capital investment in the food and agriculture startups was up 40% to $17 billion.
Beyond Meat raised more than $100 million in the private markets and is expected to command a market valuation of more than $1 billion. Its alternative to animal-grown meat attracted not only billionaires Bill Gates and Gigi Pritzker, but impact funds including Closed Loop Capital and Obvious Ventures; food and agtech investors such as S2G Ventures, PowerPlant Ventures and Cleveland Avenue; corporate venture funds from General Mills and Tyson Foods; and venture capital firms Kleiner Perkins and Innovation Fund. Not to mention the Humane Society of the United States.
And if Beyond Meat is alt-meat’s Lyft, the Uber of the industry is Impossible Foods, which has raised nearly $400 million in debt and equity capital. Earlier this month Burger King introduced its Impossible Whopper, a meatless burger made with Impossible Foods’ plant-engineered meat. Hip-hop artist Questlove launched a Philly cheesesteak made with Impossible Foods’ meat at the Phillies home opener.
“It’s a proxy for where we’ve come as a society when one of the largest fast food chains in the country would say, ‘we’re now going to put this on the menu,’” says Robb. “Do you think that would have happened five years ago? Hell no.”
A third company, Memphis Meat, which produces lab-grown meat from animal cells, has raised capital from Gates, Richard Branson and Cargill, as well as Tyson Ventures. Gates, in fact, is an investor in all three companies.
All told, “innovative food” companies, which include plant-based and lab grown meat firms, as well as plant-based dairy startups and other alternative ingredient companies, raised about $500 million last year, according to AgFunder.
And here come the mainstream meat producers. Ahead of Beyond Meat’s IPO, Tyson Foods sold its 6.5% ownership stake. Tensions had risen between the two companies after Tyson announced a plan in February to develop its own plant-based meat product. Tyson, which first backed Beyond Meat in 2016, says it’s keen to make tasty plant-based protein a mass-market alternative.
“We plan to launch an alternative-protein product soon with market testing anticipated this summer,” Tyson confirmed to Axios.
Motif Ingredients uses biotechnology and fermentation to engineer proteins derived from dairy, egg and meat. Motif’s plan is to sell alternative protein ingredients directly to food companies, allowing them to deliver such products at an accessible price and mass scale. In February, Motif launched with $90 million from the Breakthrough Energy Ventures, the billionaire investing vehicle backed by, yes, Bill Gates.
Robb likes the trend, but don’t ask the former Whole Foods co-CEO to eat a plant-based burger. “I wouldn’t eat them,” he says, though he admits to tasting one. “To me, if you want to eat healthy, you just eat whole food” (in lowercase letters).
Robb’s aim is to reshape the food industry around more sustainable practices. The global meat industry, for example, contributes nearly one-fifth of all global greenhouse gases. Shifting to a plant-rich diet is one of the top five carbon-reducing solutions on Project Drawdown’s list of solutions to reverse global warming.
Since leaving Whole Foods, Robb has stood up his own investment firm, Stonewall Robb, and invested in more than a dozen food and agriculture companies. He’s an executive-in-residence at S2G Ventures (for seed-to–growth), one of last year’s most active food and agtech investors. And he’s an advisor to the food and agriculture team at the Rise Fund, TPG Growth’s $2 billion impact investing fund.
“I want to support the companies I think are ushering in that new world order of food and agriculture,” he says.
Apeel Sciences, in Santa Barbara, Calif., turns food waste into an organic spray for fruits and vegetable that freezes the oxidation process, and preserves their shelf life. Robb invested in Apeel and joined the board to both cut food waste, and boost food access.
It may not be surprising that Whole Foods distributes both Impossible Foods and Beyond Meats products and has just signed on to use Apeel’s spray as well. But Robb says he’s astounded at the adoption of alternative proteins at places like White Castle, Fatburger, Fridays and Carls Jr., as well as supermarkets like Kroger, Safeway and Publix.
It’s a signal, he says, that mainstream customers are demanding choice. “I’m excited because it says now, these fast food joints that have the purchasing power they do, can begin to use it in a way that’s going to support more sustainable agriculture.”