Specialist
Adviser at Lever VC
Agenda
- Cost analysis and scaling challenges given market fragmentation and cellular agriculture developments
- Food service vs retail dynamics – start-up preferences and partnership benefits
- Competitive landscape – new entrants vs legacy players such as Beyond (NASDAQ: BYND) and Impossible vs large CPGs
- Consolidation and investment outlook, highlighting new opportunities and traditional processors’ involvement in start-up funding
Questions
1.
Could you give an overview of alternative meat and how it has trended over the last few years? What developments have occurred, including around new ways to source protein from fungi?
2.
How is market fragmentation affecting pricing? It seems that even legacy players have a hard time passing on price increases, and there are sourcing and ingredient issues.
3.
How reliant is the industry on promotional activity to move products with a high price premium, particularly in a normalised demand environment?
4.
What are the core challenges to scaling products given legacy players continue to face these issues? How long does it take to set up a supply chain? What challenges do Beyond and Impossible have to overcome around capacity and scaling profitably?
5.
What are your thoughts on the rise of lab-grown proteins such as fungi that are able to replicate alternative meat at a much higher efficiency than plant-based?
6.
Could you elaborate on the costs of cellular agriculture? Is this due to the pure innovation around it? Perhaps I have a skewed view where I think of lab-grown or cellular ag as more cost-efficient and scalable in the long run.
7.
What opportunities has coronavirus provided to the alternative meat industry? How willing are consumers to try plant-based or alternative meat products from Kroger or others given the new fragmentation, outside of Beyond and Impossible?
8.
What are the channel dynamics between foodservice and retail? What is the comparative opportunity for a start-up to build a brand or scale a product between the channels? You made a good point with Just Egg, which I understand has had success in establishing foodservice partnerships, but I know players traditionally want to get to the consumer through the grocery channel where they can see the packaging.
9.
What percentage of the alternative meat market is represented by foodservice vs retail? How much success are players having with foodservice partnerships generally? Beyond regularly announces new initiatives with restaurant chains, but then consumers probably won’t hear from the product for 1-2 years. Is consumer adoption in foodservice as robust as in grocery, or could this be a bump that fades?
10.
How is market share fragmented across legacy players such as Beyond and Impossible, start-ups that are making gains and large CPGs such as Kellogg’s that have the balance sheets to compete on pricing? How are CPGs adjusting to the changing market dynamic given you think there’s an opportunity at hand, and I’m sure they’d agree?
11.
At what point could a large consolidation wave start? As you said, CPGs are less effective at innovating but willing to pay a premium for start-ups. Kellogg’s is worth USD 22bn, so a USD 2bn start-up is a reasonable purchase to truly compete in an industry where it’s struggled for the last 10 years. At what market value could a start-up be acquired across USD 1bn-3bn? Is there a valuation at which it becomes prohibitively difficult for a new entrant to sell itself? When does cash run out given the prevalent production issues?
12.
You suggested that alternative meat will continue to grow and you’re overall bullish on the industry, but traditional meat consumption also seems robust. Are traditional processors such as Cargill and Tyson reluctant to compete in alternative meat, and if so, why? How much of the alternative meat industry do they already own through private partnerships or investments? PepsiCo usually invests in every start-up out there to potentially acquire later. How active are such players in funding rounds?
13.
What are the largest alternative meat opportunities by category or around production? You alluded to beef replacements being incredibly hard to develop – anecdotally, I haven’t noticed many alternative steak offerings. Where are the best opportunities to fund start-ups?
