Alternative proteins see future in Asia as deal count grows

A Taiwanese-styled stew made using Life3 Biotech's Veego-branded plant protein. Source: Life3 Biotech

Are alternative proteins the next big food trend? Veteran investor and commodities trading guru Jim Rogers seems to think so. Last month, he put his name behind little-known Singapore startup  Life3 Biotech that produces plant-based protein products.

“I was impressed that a local startup with limited resources is able to germinate such advanced technology from a humble NUS lab,” Rogers, who now heads Life3’s board of investors, said in an e-mail interview.

Life3 Biotech's founder Ricky Lin (left) with its new board of investors head Jim Rogers (right). Source: Life3 Biotech
Life3 Biotech’s founder Ricky Lin (left) with its new board of investors head Jim Rogers (right). Source: Life3 Biotech

Starting off as an alternative protein research unit within the National University of Singapore in 2015, Life3 spun out as a commercial unit in 2019 producing plant-based protein products.

The startup is positioning itself as a B2B manufacturer of legumes-, grains- and mushroom-based protein under the Veego brand. The products can be made into different forms – cubes, slices, patties – depending on what their buyer wants. The company also has another ready-to-eat minced ‘meat’ product called ‘Peasy’.

“Our five-year plan is really to be a formidable player in this value chain of alternative proteins in the region,” Lin said, adding that the firm will be moving to a 50,000 sq ft plant in Singapore by the end of the year from its current smaller factory.

Lin declined to disclose how much the firm has raised so far, only that it’s a seven-digit range.

Lin joins a host of global entrepreneurs and investors who have placed their bets on the success of alternative proteins as climate change and growing populations threaten to disrupt food supplies.

Alternative proteins can typically be broken down into three categories: plant-based – protein sourced from the likes of soy, beans and vegetables; fermentation – a process that uses microbes to produce proteins; and cell-based – meat and dairy grown in laboratories using animal cells.

These methods of producing proteins have been gaining traction globally amid unsustainable animal meat consumption. The world’s population will rise from 7.7 billion currently to 9 billion in 2050, according to the United Nations, alongside a growing middle-class that can now afford to eat meat. 

Producing proteins through such novel methods is also seen as a way to curb zoonotic diseases – as the proteins are produced in a cleaner environment or do not involve livestock – and animal cruelty. 

Deal record

Mirroring the growth in the sector, deals in the alternative protein space too have shot up in the past five years. Venture capital into alternative protein companies globally went up from $675 million in 2017 to $2.8 billion last year, while nearly $1.2 billion has already been invested so far this year, Pitchbook data showed.

Global alternative protein deals between 2017 and 2021. Source: Pitchbook
Global alternative protein deals between 2017 and 2021. Source: Pitchbook

While deal pace in Asia picked up, following global cues, deal values made up for less than 10% of global capital ploughed into the nascent industry. Asian alt protein startups secured $155 million last year against just $5.3 million in 2019.

Asia alternative protein deals between 2017 and 2021. Source: Pitchbook
Alternative protein deals between 2017 and 2021 in Asia. Source: Pitchbook

“There’s probably a general conservative sentiment among the Asian investors, as well as the infancy of the alternative protein industry that is limiting the faster growth [but] we see some activities in the region,” said EY’s ASEAN consumer products & retail leader Olivier Gergele.

The Big Asian Market

While venture deals in the alternative proteins startups may be smaller-sized in Asia, the region is marching ahead as a hub for global majors seeking to expand to gain leading position in some of the world’s largest consumer markets.

US meat processor Tyson Foods announced in June it will sell its Halal-certified plant-based nuggets, strips, and bites in Malaysia under its First Pride brand, before expanding it to other parts of the region. Global alt protein makers such as Eat Just, Oatly and Perfect Day have already drawn up plans to set up local research and manufacturing facilities in Singapore.

What is enabling the entry of global players is proactive policy approaches from regional governments as they promote food sustainability. Singapore became the world’s first country last year to approve the sale of lab-grown meat as part of a move to establish itself as a food-tech hub.

Meanwhile, Chinese authorities had, in 2016, issued guidelines to cut meat consumption by half by 2030.

China is what the US was like in 2014 right now, said Albert Tseng, the co-founder of China-focused alt protein incubator and fund Dao Foods. “If you are in San Francisco or New York, you go to any restaurant you see all these [alt protein] items,” Tseng said, adding, “You don’t see that in China yet. But, China is the largest consumer market in the world.”

The alternative meat market was valued at $5-10 billion in 2021, or less than 1% of the global meat industry, per an EY report. Its value could soar to between $77 billion and $153 billion by 2030, making up 5% to 10% of the global meat market, the report projected.

Investors in Asia are already eyeing the alt protein sector, observers said. When Big Idea Ventures initially raised capital for its $50-million New Protein fund, the first investors were Temasek, Enterprise Singapore and Tyson Foods. Subsequently, European investors joined in, and in the final close, Asian investors came into the fold, the accelerator’s founder Andrew Ive said. Of the 15 to 20 LPs in the fund, around five are based in Asia. 

Taste matters

When it comes to alternative proteins, what is different in Asia is the diversity of the food palate. “Unlike the West where alternative proteins are dominated by patties and sausages, Asian cuisines tend to use meat as an ingredient rather than a dish on its own. So, whilst there is potential in Asia, the versatility of the ingredient is key,” said Matthieu Vermersch, founder of foodtech venture capital firm VisVires New Protein, which has three alternative protein companies in its portfolio.

Pointing to the Asian tradition of consuming plant-based proteins, Lever VC managing partner Nick Cooney said, “there is more experience with plant-based meat alternatives historically.” For instance, soy, lentils and mushrooms are common ingredients particularly in Asian diets. Lever VC is aiming to close its first fund at $65 million this month, surpassing its initial goal of $50 million. It has already deployed about $14 million to date.

Asians will go for products that suit their tastebuds and pockets, said Let’s Plant Meat CEO Smith Taweelerdniti. The Thai-based plant protein maker was set up by spice producer Nithi Foods last year. The company has four versions of meatless proteins – patty, minced meat, breaded and meatball-formed. It began exporting to Singapore this month.

At 150 baht ($4.80) for two patties, Let’s Plant Meat’s products are about half the price of Beyond Meat’s signature, which cost around 340 baht ($10.90) for two patties in Thailand.

“People don’t necessarily think that alternative protein products taste great right now [so] we need some hero companies out there…then the embedded money will come in,” said Dao Foods’ Tseng.

There is also the issue of cost. Alt proteins are still more expensive than conventional meat – a matter that may take more conscious consumption and technological development overtime to solve. Meanwhile, startups have to contend with food giants like Tyson Foods and Nestle – which have the resources to mass-produce plant proteins with economies of scale – coming up with their own brands.

Taweelerdniti acknowledged that he is worried about the competition coming from Thai conglomerates such as Thai Union and CP Foods, which have launched their own brands of plant-based substitutes. Besides, Thai oil and gas giant PTT has also teamed up with local food manufacturer NR Instant Produce for a 300 million baht ($9.6 million) plant-based protein project.

He hopes to leverage Nithi Foods’ experience as a spice maker to draw customers. “We have to compete on taste. If it doesn’t taste good, people won’t buy even if it’s cheap.”

Consultancy firm EY's projection on the growth of the global alternative protein market. Source: EY
Consultancy firm EY’s projection on the growth of the global alternative protein market. Source: EY

Too many brands?

For all the confidence startups and early-stage investors have about the alt proteins, there are concerns about market saturation. Supermarket aisles are already stocked with brands of plant-based chicken, yogurt and ice-cream, often next to their cheaper conventional counterparts. And yet, as the figures show, their market share is still small.

In Singapore, for example, data from Euromonitor International showed that though the country’s year-on-year retail sales growth of “free-from-meat” frozen meat substitutes rose by 26.7% between 2019 and 2020 – traditional meat grew only by 7.4% – these substitutes raked in only S$900,000 ($680,000) in retail sales last year, while conventional meat made more than S$1 billion ($755 million).

“It’s important to recognise how early it is,” said Good Startup’s co-founder Gautam Godhwani, likening the alt protein market today to what it was like setting up an internet company in the mid-90s. “I think the growth of the market size from here is going to be dramatic.” His VC, which began raising in January this year, just closed a $25 million round to make 32 cross-border alt protein investments. The final close is expected in August this year.

The low market penetration rate currently shows there is space for more alt protein brands to emerge. What the market could see is a consolidation of brands – the best-tasting and most affordable ones will end up in consumers’ shopping carts, investors observe.

VVNP’s Vermersch acknowledged that the novelty among consumers surrounding plant proteins could be wearing off, so his firm largely invests in technology that targets the supply chain. It was one of the earliest investors in Ynsect, a French producer of animal feed from insects, which is a more sustainable alternative to fishmeal. B2B businesses also tend to have stronger captive buyers.

“People are focusing on human food, but the big challenge of the world today is not to feed us, but to feed the animals,” he said.

Challenges galore

Within the cultivated meat space, there are several more hurdles to cross. First, the perception. A study published in the academic journal Foods this year found that among the 4,666 respondents in China it surveyed, only a fifth said they were “definitely willing to try” cell-based meat, while nearly half were not willing to eat it regularly. And almost 90% would want to pay less for cell-based meat than traditional meat.

Then there are regulations and costs to consider. Aside from Singapore, no other country has yet to approve its sale, although observers say Israel could be next. And the technology is still so far from commercialisation that it costs about $5,000 to produce a kg of meat. Even at $50, which Eat Just said in 2019 was the cost to produce one chicken nugget, the price is at least 10 times more than the usual golden crisp (the company partnered Singaporean restaurant 1880 last year to make these nuggets available through several dishes priced at S$23). To date, Eat Just has raised $820 million, including $170 million for its cultivated meat unit Good Meat in May.

Expand Table

VC firm Fund sizeAverage cheque sizeStages it invests in Number of alternative protein companies invested in so far Examples of Asia-based companies it invested in
Lever VC$65 million (closing in end-June 2021) $250K to $2 million; follow-up investments up to $6 millionPre-Seed to Series B17 (worldwide); 4 (Asia)Avant Meats, CellX, TurtleTree Labs, and Marvelous Foods
VisVires New Protein*$40 million (Fund I); $150 million (Fund II, still raising)$3 million to $8 million Seed to Series C 3 (worldwide); 0 (Asia - but Ynsect, Aleph Farms, and Mushlabs are expanding into Asia)NIL
Dao FoodsDid not disclose500,000 yuan ($74,780) (incubator stage - will invest in later stage companies in the future)Angel and pre-seed (incubator stage)8 (China - the firm focuses solely on the country) Kitchen 70/30; Fresh Foods; Raw Plant-Based; WOW Foods
Good Startup$25 million (first close - final close expected in August 2021)$250K to $1 million early- to late-stage; secondaries 6 (worldwide); 2 (Asia)Turtletree Labs; Avant Meats
Big Idea Ventures $50 million (New Protein Fund I)$200K (accelerator stage); up to $3.5 million (post-accelerator) Seed (at accelerator stage); Series A onwards (post-accelerator)44 (worldwide); around 18 (Asia)Gaia Foods; Karana; Shiok Meats; Zhen Meats
AgFunderNew Carnivore Fund ($20m, still raising); GROW Impact Fund (undisclosed, still raising)Up to $1 million Seed to Series B 10 (worldwide); 2 (Asia)Green Rebel; IntegriCulture
*VisVires' funds go into food tech firms in general, not just alternative proteinsSource: Company interviews, DealStreetAsia reports

“This space is very capital-intensive,” said Carrie Chan, the co-founder of Hong Kong-based Avant Meats. Not just on the research side, but also costs incurred to operate laboratories and factories. But, with technological breakthroughs, Avant has been able to reduce its production cost replacing the pricey fetal bovine serum – used to grow animal cells that typically cost $300 to $500 for 500 ml – with a protein supplement.

That the startup is not just working on cultivating fish cells for food products, but also a protein containing marine properties that can be used in high-end goods can boost topline, said Lever VC’s Cooney. His firm is an investor in Avant Meats.

“Some of the fish cells they are using are collagen-based [which can be] used for different things – from luxury seafood products like fish maw to beauty and skincare applications,” he said.

Global majors lead the way

For now, industry players are banking on the success of the likes of Beyond Meats and Oatly who have shown a path to exit – though Beyond’s share prices have fallen from a peak of $235 to $143 – while Impossible Foods is said to be mulling a $10 billion listing.

“The market is attractive to investors due to the increasing rate of consumer awareness towards sustainability and promise of high growth,” said EY’s Gergele. “We can expect a lot of activity in IPOs and acquisitions in the next few years once the startups reach scale.”

And though multinationals like Tyson Foods and Nestle are coming up with their own brands of alt protein, most of the successful innovations have come from independent startups so far. What could eventually happen is that global FMCG giants will likely acquire smaller producers. Ive said this occurs when the startups achieve $5-15 million in trailing 12-month revenue.

“The large company – that’s all about scale and distribution. And the small company, which is all about consumer responsiveness, innovation … bringing great products to market,” he said. “Because of that dynamic, there’s going to be a continued opportunity for M&A and investments.”

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.