Meat alternatives will spill blood as the market grows exponentially

Published on 27 October 2020

London, 28 October 2020 – Innovation in plant-based proteins is creating a meat alternatives market expected to grow to US$27.9bn by 2025. Whilst this 15% increase every year will continue to deliver a constant stream of consumer-trend headlines, investors will enjoy returns from takeover battles – as well as an increasingly broad and attractive set of opportunities – spanning producers, distributors, retail, packaging and supplement manufacturers.

These are the key findings of Edison Group’s latest report ‘THE LEAN, GREEN MONEY-MAKING MACHINE´, written to give investors an in-depth analysis of the investment case for plant-based products and provide an overview of the leading players shaping the key markets.

The report predicts that the fight for control may be far bloodier than the products themselves as many plant-based companies are expected to be exposed to the threat of acquisition. With low-margin sales and high-cost R&D expenses, long-term loss-making will make them vulnerable. Acquirers are also likely to be attracted by the ESG credentials of plant-based businesses.

COVID-19 may even have accelerated these market shake-outs as many non-meat alternatives stocks have performed exceptionally. Since the March sell-offs, pure-play plant-based food producers have recovered more strongly than the broader food producer category. For example, Burcon NutraScience is up 276% to a high of US$2.26/share and Beyond Meat up 241% to a high of US$184/share. Over the past 12 months, Burcon and Beyond Meat have outperformed the S&P 500 Packaged Food and Meats index by 65% and 37% respectively.

Yet the report also predicts these early leaders may have more competition coming on stream earlier than expected. The cell-based meat sub-sector is currently nascent – with global investments in 2018 totalling just US$50m, 6% of that invested in plant-based food. With conventional meat sales in decline EdIson expects greater investment cell-based technologies as early as 2025, when cell-based meat may be produced at an industrial scale, with at a price equal to conventional meat.

These lab-grown meats are created by taking cells from an animal and then exponentially growing them in a bioreactor, which involves no animal slaughter and is expected to become far more efficient than traditional livestock farming.

Max Hayes, Analyst at Edison Group and report author said: “Plant-based meat alternatives have managed to pass their first stress tests during the pandemic, with pure-play companies navigating the market volatility much more effectively than broader food producers. We see an increasing attractiveness in the sector on the back of growing consumer demand and reduced government support for traditional meat producers. Moreover, although the plant-based market is already sizeable, the ongoing innovation particularly on cell-based products could see both markets grow considerably in the next decade.”

Summary

Global revenue for the plant-based market expected to grow 160% between 2019 and 2025
Listed meat alternative companies are having a stronger recovery than non-plant-based ones
Low margins and high R&D costs are likely to spark furious battles for control over these
on-trend and rapidly expanding markets

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