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Fake meat, real trend

April 20, 2020

reading time: 8 minutes

by Andrew Genung, guest author

meat substitute investments

Fake meat is en vogue – not only on our plate, but also in our portfolios. And the public markets believe the hype. The biggest trends and players to watch out for.

On the eve of its Nasdaq IPO in early 2019, Beyond Meat, a US company specializing in realistic “fake meat” products, announced it was amending its prospectus to both release nearly one million additional shares, and set its stock price 20% higher than previously planned. The move effectively raised Beyond’s market cap from USD 1.21 billion to USD 1.49 billion just two days before the company went public.

Investors barely blinked. The stock, ultimately priced at USD 25 per share, began trading at $46 and never looked back, peaking at USD 73 and ending its first day at USD 67.75. Shareholders who held on after hours saw another 4% increase on top of that first day’s 163% rise. MarketWatch said it was the biggest single-day gain for an IPO raising more than USD 200 million since 2000.

Before the IPO, Beyond and its closest competitor, Impossible Foods, had been attracting glowing media attention for their innovative attempts to mimic the taste and textures of real meat in vegetarian hamburger patties, but this was proof that the public markets believed the hype. “Alternative protein,” “plant-based meat,” “meatless meat,” Impossible, Beyond — whatever you want to call it — had officially arrived.

Private markets had seen this coming

Private markets, of course, had seen this coming for a long time. Vinod Khosla’s Khosla Ventures financed Impossible Foods with a USD 9 million Series A back in 2011, followed very quickly by Bill Gates joining for a USD 25 million Series B, and, after seven further injections of capital from various funds, a celebrity-filled USD 300 million Series E round led last year by Hong Kong’s Horizon Ventures and Singapore’s Temasek Holdings. Serena Williams, Jay Z, and Katy Perry were among the famous names chipping in. The company, which remains private and has so far said it has no plans for an IPO of its own, is reportedly looking at raising a similar round soon, setting its valuation between USD 3 to 5 billion according to Reuters.

While numbers like those still represent a fraction of the market caps of some of Impossible’s traditional meat counterparts, these are clearly boom times for plant-based replacements of animal products around the world.

Meat substitutes vegan investments
Laboratory work in the search for meat substitutes.

In the dairy sector, after years of mostly soy and nut-based “milks” dominating the market, Swedish oat-milk brand Oatly saw year-on-year sales grow from USD 68 million to USD 110 million between 2017 and 2018, and planned to reach USD 230 million by the end of last year according to Bloomberg. The company is building new factories and launching new products, including lines of oat milk ice cream, to meet demand.

On the poultry front, international fast food mega-brand KFC recently partnered with Beyond to trial fake fried chicken, and Eat JUST Inc.’s mung bean-based “Just Egg” egg substitute is now available in some of America’s most popular upscale grocery stores, both on shelves and in the prepared foods sections. Locally, smaller start-ups enter the market too, for example in Switzerland.

3D printed meat

In China, where concerns over the environment, food safety, and African Swine Flu are opening minds to more convincing pork alternatives, Beijing-based startup Zhenmeat, and products like Omnipork (from early Beyond Meat investor David Yeung’s Green Monday company) are aiming to beat Impossible Foods to the world’s largest pig meat market.

Meat alternatives as an investment opportunity?

Stefan Hofer (LGT) explains what the search for meat alternatives means for investors in his article "The next revolution".

And in an effort to cater to consumers concerned about the effects of seafood consumption on ocean health, companies like Good Catch, Sophie’s Kitchen, and Ocean Hugger Foods are developing fake fish using, among other things: Roma tomatoes (raw tuna), eggplant (eel), and konjac root (smoked salmon).

Add an alt-text
Spanish company NovaMeat's 3D beef.

At this point, there so many players vying for a piece of what UBS Wealth Management and others estimate could be an USD 85 billion market for new alternative proteins by 2030 that it's hard to keep track of them all. Complicating things further are still more novel meat-replacement technologies, like Spanish company NovaMeat’s 3D printing method, which is designed to mimic whole beef muscle as opposed to the easier to replicate ground versions sold for burgers. And then there are the possibly less vegan-friendly “lab-grown,” cell-cultured meat technology companies, still mostly in R&D (not to mention regulatory) infancy. 

Traditional meat companies have taken notice. After first investing in Beyond, Tyson Foods, one of the world’s largest meat processing companies, sold its 6.5% stake early last year and announced it would be launching its own line of plant-based meats. Looking further down the supply chain, American agricultural giant Cargill has invested USD 100 million in Puris, the company that supplies Beyond with the pea protein essential to its end product.

Losers and winners

The opportunities seem endless, but it is still early days for most of these companies and investments. As press release after press release touts major innovations, blockbuster funding rounds, and lucrative corporate partnerships, it’s important to remember that not only will there be losers here, but the long-term winners may not even exist yet.

Beyond’s Nasdaq launch may have signaled the beginning in a long series of successful exits, but investors would do well to note what happened after the last comparable IPO jumped over 150% on its first day. That was when Palm Inc., the maker of PalmPilot, a “Personal Digital Assistant” precursor to smartphones, first went public in early 2000. Seven years later, the first iPhone was on the market, and three years after that, Palm went defunct.

Images: Keystone, Cristina Pedrazzini and NovaMeat

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