Satisfying Asia Pacific’s growing appetite for alternative proteins

From plant-based ingredients to cultivated muscle cells, Asia Pacific’s (APAC) AgriFood sector is growing its appetite for alternative proteins, with rising interest from both consumers and governments.

A study by DuPont Nutrition & Biosciences forecasted a 25 per cent increase in market size for plant-based meat alternatives from 2020 to 2025 in APAC, with demand expected to grow by 200 per cent over five years in markets like China and Thailand. In Singapore, a recognised food hub in the region, vegan food app abillion found that consumer interest in plant-based pork and chicken products increased by almost seven-fold in 2020 compared to a year prior. Singapore also became the first country in the world to approve the commercial sale of cultivated meat in December 2020.

These innovations could help meet the region’s goals regarding healthier living and sustainable food production, but roadblocks still exist, preventing some alternative protein startups from reaching commercial success. Significant investments are still needed to support such startups before they can make a dent in achieving APAC’s health and economic goals.

With this vision in mind, stakeholders and category leaders converged at a virtual roundtable titled “Performing Due Diligence on Alternative Protein Startups”, hosted by the Good Food Institute Asia Pacific during the Good Food Conference 2021. Here’s what industry leaders found were the crucial ingredients needed to drive further development in this space.

Instead of a steady stream of capital investments, the alternative protein sector is expected to see a gradual, almost flat build-up followed by explosive and exponential growth. With the segment still in a nascent stage, increased market demand is needed to spur subsequent investments from venture capitalists.

For market demand to grow, alternative protein startups still need to overcome the twin challenges of taste and price, the top factors influencing consumer preferences. While innovating alternative products that rival – or even outdo – the palatability and affordability of current protein options could tip consumers and investors to buy into the sector, developing competitive products relies on investments to turn research into market-ready offerings.

Besides relying on direct-to-consumer channels to build consumer understanding and brand awareness, alternative protein startups can also pursue business-to-business deals to create a more compelling case for investors. Other players, such as restaurants, have also begun exploring the segment. Compared to a decade ago, plant-based proteins are now more accessible, as retailers and quick service restaurants recognise that carrying these products can drive cash flow.

As these exits and economic benefits become more distinct, it becomes easier for startups to build a case for investors.

Investment risks are inevitable, regardless of product category. Within the alternative proteins sector, stakes are especially high for cultivated meat, as the industry needs heavy infrastructure investment upfront. For instance, patient capital is required to invest in equipment such as large bioreactors that allow companies to scale up production from thousands to millions of litres.

While much of investment funding currently supports consumer end-products, championing ingredient and texture innovations is equally vital to sustain the sector’s momentum and ensure scalability. These research and development (R&D) efforts tap into novel ways of sourcing ingredients and emulating meat muscle texture, but startups may lack the means to demonstrate their concept’s viability.

As alternative protein startups prepare for launch, more collaboration between the public and private sectors can help to defray these infrastructure and R&D costs. For example, corporates with labs and trained personnel may be able to support continued innovation and investment through partnerships with startups, crucially diversifying funding sources to prevent momentum from collapsing in the later stages.

In theory, alternative proteins are already a socially impactful concept — whether by being more resource-efficient than traditional agricultural methods or having the potential to provide nutrition in a much more scalable manner. However, there may be a need for more detailed and rigorous environmental, social and governance (ESG) analysis to quantify the impact of such ventures.

Startups may lack the resources or expertise to pursue ESG studies specific to their innovations, and a centralised toolkit of shared standards would greatly benefit the whole sector. From water savings to carbon emissions, nuanced calculations likely vary per product type and consultant, but a core set of guidelines would enable a more objective evaluation of companies.

Besides measuring impact, establishing these metrics could also help build credibility in the market. In a recent study by Vodafone Business, 67 per cent of businesses in APAC noted consumers had increased expectations for ethical behaviour, while four in 10 recognised that customers prefer buying from socially responsible organisations. A well-established ESG label could spur consumer adoption of alternative protein products for reasons and values beyond taste and price.

The combination of rapid urbanisation, a growing middle class and rising purchasing power is expected to drive increasing demand for high-value animal protein in Asia. This voracious appetite is an opportunity the alternative protein industry can address in a sustainable and scalable manner. A thriving alternative protein sector will depend on significant market interest, private and public sector investments, and clear indicators for ESG impact. Meeting these three conditions will enable the segment to expand its market share, ensuring that promised health and economic benefits come to fruition.

Alternative protein innovations have already begun the exciting journey from test kitchen to market. Through collaborations all around the ecosystem, APAC’s AgriFood industry can usher in this next generation of change for better health and sustainable food production.

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