‘40 over 40: Issue #30
capital markets vs. consumer demand
by Chris Kerr, with Kara Davis
Ever get tired of business rags featuring standouts under the age of 40? As a 50-something guy, that tires me almost as much as the recent media frenzy about Beyond Meat’s stock price falling. Many articles are ringing the death knell for novel proteins, saying it was a “fad, has “failed,” and has “sizzled out.” 🤯
I’m not denying that Beyond’s stock price has fallen and that other plant-based protein companies are seeing their valuations slip. But I expected this. Here’s why:
Emerging technologies and innovation follow a path known as the Gartner Hype Cycle. Cannabis has followed this pattern in the markets, as have cloud technology, AI, and mobile wallets. Based on the capital markets (and the media), alt-meats seem to now be in the trough of disillusionment. Mercifully, we see an upturn nearing and, in some cases, happening already.
I admit that it was great fun to watch the ringing of the stock market bell that day in 2019 when Beyond went public, and to see the stock nearly triple in price on the first day of trading, making history. But I knew then and after that many if not most valuations, and expectations, were inflated. I don’t worry too much about that, or this current trough, because it’s the steady and ongoing plateau of productivity that I’m in it for, not hype. I believe the leadership at Beyond probably feels the same way.
Our work is ultimately not a capital markets story—it’s about consumer demand. And consumer demand for novel proteins is on the rise.
Alternative meat products constitute about 1 percent of the U.S. domestic protein market. Ernst and Young forecast that novel proteins will make up 40% of meat consumption in the U.S. by the year 2040. That’s 17 short years from now when our companies will be young adults. For this timeline to be realized, an enormous amount of work needs to be done—from supply chain to infrastructure to distribution. And we are already behind schedule.
Ernst and Young, How alternative proteins are reshaping meat industries
Today, Beyond Meat is a 14-year-old company. Impossible is a preteen at 12. In Unovis’s NCAP Fund II, Gathered is only 7 years old, and Wicked is 6 (and not even 2 here in the US). Consider the age of the biggest meat companies: Bunge is 195, Louis-Dreyfus 172, Cargill 148, ADM 121. These companies were built slowly over long periods of time. “Young” meat companies were started after World War II, like JBS, which is 70 years old. National Beef, now part of Marfrig, is the youngest at 31 and is seeking to become a plant-based commodities powerhouse.
All this is to say that alternative proteins are still in the very early stages of development. I, personally, think that it’s going to take more than a mere 17 years to gain that much of the market but it’s worth the heavy lift and long-term vision. With time, investment, and technological improvements, the parity gaps that currently exist between conventional meat and alt-proteins will shrink, which will increase customer adoption. Price parity has already occurred under specific economic circumstances. In 2022, for example, the Netherlands saw the price of plant-based alternative proteins drop below that of conventional meat, due in part to meat price increases caused by European drought and the Russian war in Ukraine, while the price of alt proteins remained relatively level.
Our work is ultimately not a capital markets story—it’s about consumer demand. And consumer demand for novel proteins is on the rise.
Innovation is exciting, but staying power is critical as well. Me taking care of my aging teeth and knees aren’t as cute to document as the changes I went through as a kid, but they matter a whole lot for my longevity. Similarly, hygiene and strengthening make for successful long term companies.
I look forward to seeing the standouts these companies will be when they’re a significant percentage of the market and as they continue to mature.
🌏 LEST YOU THINK we’re only about fund profitability, I’ll say for the record that I got into this business to reduce animal suffering. Happily, that leads to a lighter footprint on the Earth, which is good for people, as well. For me, at least, it’s been hard these past couple of months to not think about climate change, and the effect it’s having on all of us animals. If you’d like to do something about it, give this article a quick read.
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