The Rise and Growth of Plant-Based Food
By Theodore Chow and Andy Wang (Analysts 2020–21)
The plant-based meat industry has taken the world by storm. With the rise of vegetarianism and veganism for both climate and health reasons, society is looking towards meat substitutes to fulfil their dietary needs. Overall, the industry was valued at USD 12.1 billion in 2019 and is estimated to grow with a CAGR of 15% from 2019, to reach a value of USD 27.9 billion by 2025.
Industry leaders such as Impossible Foods and Beyond Meat have demonstrated the large significant market potential for plant-based meats. The Los Angeles-based company, Beyond Meat, has successfully penetrated large fast food chains, like Burger King, increasing their sales, which have been doubling annually. Consequently, the capital markets have rewarded Beyond Meat handsomely. Even now, despite the company being in the red due to the pandemic, it has a market cap of over $10bn and is trading at 100 times sales, 300 times cash! While the coronavirus may have slowed the momentum of its sales, we can expect that as the pandemic subsides and restaurants, which constituted around half of their sales before the pandemic, reopen, Beyond Meat’s sales and share price will resume their upwards climb.
While Impossible Foods and Beyond Meat have mainly focused on producing plant-based beef, OmniPork, founded by Columbia Alumni David Yeung, has jumped on the trend of plant-based meat alternatives but focuses on the production of plant-based pork. Omnipork targets the markets in Hong Kong and the greater Pan-Asia region, where pork is more widely consumed than beef. Yeung has recently raised a record US$70m in their fourth fundraising round, the largest ever for a Green Food company in Asia. Mimicking the model of industry leaders, OmniPork has entered into deals with various popular food chains across Asia, like Maxims, as well as international airline service Cathay Pacific.
Apart from the plant-based meat industry, other industries have also adapted to changing consumer tastes. The plant-based milk industry, for example, has recently exploded and is now the largest category in the plant-based sector, which as a whole, is now worth almost US$5 billion. With 41% of American households now buying dairy milk alternatives, the plant-based milk industry has now surpassed US$2 billion.
There has also been an increase in M&A activity in which mature food giants or conglomerates like Nestle, Kellogg and Kraft are slowly developing and acquiring new plant-based brands. The entire ecosystem of start-ups, venture capital, corporate M&A and IPO markets is buzzing with activity in this emerging sector.
Given the increasing trend of adopting a more plant-based or vegetarian diet due to climate and health reasons, this is a great emerging sector with a lot of potential for promising startups to disrupt a traditional food industry dominated by out-dated meat-producing giants.
