On May 9, 2017, President Obama gave a speech in Milan, Italy at The Global Food Innovation Summit, where he talked about the effects of climate change on the world’s food supply. He warned that climate change will make it harder to produce food, and said the path to the future of sustainable food will require the efforts of our best scientists, engineers, and entrepreneurs.
A combination of the President’s speech, Amazon’s acquisition of Whole Foods and growing up on a farm in rural North Carolina sparked this curiosity about the evolution of agriculture and how food is produced. For one, it’s more mechanised, and technology has taken over many of the tasks formerly done by people.
An unavoidable reality is the need for agribusiness to continue to be more efficient in order feed our growing population. Still, there must be a focus on future of agribusiness, how people participate (and invest) in this frontier that involves their health, the way they live, and the environmental impact of having to feed the world.
The Turn Toward Healthier Food
U.S. consumers have become more health conscious and want improved food options, which has driven changes in agriculture. A major catalyst is the rise of antibiotic-resistant bacteria due in large part to the overuse of antibiotics in livestock. About 80 percent of the antibiotics sold in the U.S. are used in meat and poultry production, according to Consumers Union, and more than 20,000 Americans die each year from infections caused by drug-resistant bacteria. Simply put, the more people are exposed to antibiotics in food, the less effective antibiotics become as medicine
This problem has caught the attention of the federal government and food advocacy groups, and pressure is growing on restaurants to sell meat raised with little or no antibiotics. Campaigns have been developed to limit the use of antibiotics in farming, with the ultimate goal of preserving antibiotics’ effectiveness for the treatment of life-threatening infections.
Although antibiotics are mostly used with healthy animals — to promote growth or prevent disease — the negative effects persist and people are concluding that new solutions are needed. This creates an opportunity for meat and dairy substitutes to take centre stage and offer consumers a potentially safer alternative to traditional food production methods.
A Market That Will Only Grow
The market for sustainable foods, in particular meat and dairy substitutes, is growing rapidly. In 2016, U.S. organic food sales were about $47bn — more than five percent of all U.S. food sales — according to the Organic Trade Association. That rise will continue as the world’s population and its demand for healthy food grows. The United Nations estimates that the world’s population will increase from 7.3bn in 2015 to 9.7bn by 2050 — with much of it concentrated in cities and away from rural areas. What this means is, as cities and towns continue to increase in population, urbanisation becomes a major catalyst influencing the global demand for sustainable foods.
A 2014 study conducted by Sasaki Associates found that urbanites or city dwellers want quality food and have a wide-ranging diet rich in fats and proteins (meat). Add to that the increasingly significant challenge of water availability and management; further stress is put on an already beleaguered food production system.
To keep pace with these challenges, food production will have to grow from its current 8.4bn tons a year to almost 13.5bn tons. This creates an enormous business opportunity for organic retailers, meat substitutes and plant-based food alternatives to play a growing role. Investors know this.
Consider Amazon’s acquisition of Whole Foods. With the purchase, Amazon positions itself to become a premier provider of sustainable foods. For its own account, the Internet giant has been selling groceries online for almost 10 years. The purchase of Whole Foods gives Amazon strong brand reputation as a supplier of organic products, augments its online retail presence and provides them with more than 400 retail stores in the U.S., Canada, and Britain, putting it in close contact with millions of ‘urban’ consumers.
Other investors have taken notice of the increasing need for sustainable food production and lifestyle choices. Investments have been flowing to a number of organic food companies, from the likes of Google Ventures, Khosla Ventures, and Bill Gates. Large investments have gone to startups that are committed to creating meat alternatives using plants. These startups are going after consumers who love meat and dairy — not vegetarians — and to succeed they’ll have to duplicate the textures and flavors that meat lovers want.
A Taste for Startups and Venture
Los Angeles-based Beyond Meat was started in 2009 and has developed and manufactured a variety of plant-based food products. Its meat substitutes are made from mixtures of soy protein, pea protein, yeast, and other ingredients. As of 2014, its product offerings consisted of Beyond Chicken and Beyond Beef. Then in February 2015, it released a vegan and soy-free burger patty called The Beast, which sells in Whole Food Markets. Bill Gates and Biz Stone, among others, have invested in Beyond Meat and in 2016, Tyson Foods bought a 5 percent stake.
Impossible Foods was started in 2011 and its meat imitations use plants to recreate the muscle, tissue, and fat characteristics of meat. In July 2016, it launched the Impossible Burger. To replicate the fat in beef burgers, its used coconut fat mixed with ground wheat and potato protein. The coconut oil stays solid until its heated, then it melts similarly to beef fat. When cooked, the potato protein provides a firm exterior. Investors include Bill Gates, Google Ventures, and Zurich-based UBS. It’s headquartered in Redwood City, California.
San Francisco-based Hampton Creek has replaced eggs (not meat) with plant proteins. Its primary product — Just Mayo — is distributed in 30,000 stores. The company has been working on plant-based recipes for biscuits, crackers, pasta, and salad dressings since 2014. It employs scientists to identify plant proteins for possible food applications. Hampton Creek has analyzed thousands of plant samples, looking for proteins that can be used to create foaming, gelling and the moisture retention. It has received repeated funding from Khosla Ventures.
These investments are flowing into a market that will only grow. According to the U.S. Meat Export Federation, the value of U.S. beef exports in 2014 was $6.3bn, and pork exports, $5.9bn.
Visiongain, a UK-based research firm, forecasts the global market for meat substitutes to be worth more than $4bn in 2017. As startups like the ones above gain traction, the opportunity to generate outsized returns could be considerable.