The cell-based meat industry could be entering a period of consolidation amid inflationary pressures in the macroeconomic environment, according to a new report by Oghma Partners. The F&B industry finance advisor also reveals the US has become the preferred destination for cultivated meat players, given the country’s favorable regulatory framework and huge consumer market.
Currently, the sale of cell-based meats is regulated and approved in only two countries (the US and Singapore), and just two companies enjoy regulatory approval (Upside Foods (US) and Eat Just’s Good Meat (US and Singapore)).
As cultivated meat players battle to win over consumers, improve cost-effectiveness and achieve wider regulatory approval, the global economic downturn has restricted new investment in the emerging industry.
“Money for new investment is now harder to come by, as the slowdown in funding so far in 2023 demonstrates. But the slowdown in funds is not sector specific — we have seen an across-the-board reduction in investment activity in early stage businesses due to the changing interest rate,” Mark Lynch, partner at Oghma Partners, tells Food Ingredients First.
“The industry will be challenged to deliver sales to consumers and stretch funding runways to the point of delivering profitability. We see a shake-out similar to what we are seeing in the plant-based meat sector, with consolidation among the players most likely.”
Destination America
According to Oghma Partners, the US is paving the way for the cell-based meats industry globally with the largest number of investors and producers. Approval for cultivated foods in the country is seen as a critical development due to the size of the consumer market.
“A favorable regulatory environment and ease of business is seeing the US become a hub for industry activity. Multiple overseas companies are looking to relocate or move certain operations to the US,” says Lynch.
“Israel and the UK are the second and third most active countries in terms of the level of funding for cell-based meat start-ups, which reflects a combination of the level of innovation in their respective food industries and universities and the capital market pool available, combined with a flexible regulatory environment.”
Lab-to-fork challenges
Cell-based meat production is seen as a way to generate cheap, low-carbon alternative protein without the need for animals and antibiotics and in a safe and controlled environment. For Lynch, cell-based agriculture has, therefore, substantial potential as an alternative to traditional agriculture.
“We believe this potential has driven interest and speculative investment in the industry. It is unlikely in the near term that full replacement of conventional proteins will occur. However, if the costing is right, then cell-based meats have the potential to become a significant part of the supply chain,” he tells us.
The general challenge the industry faces — aside from a friendly regulatory environment — is consumer acceptance and cost-effective production. “Both of these issues will require investment in marketing and production processes and technology,” continues Lynch.
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