Are cultured meat companies a good future investment?
What is cultured meat and could meat grown in a lab change the food industry for ever?
Last week, BP made a commitment to reducing its carbon footprint to net zero by 2050; and huge investment funds targeting sustainable companies were unveiled by Jeff Bezos and KKR. Events such as these underline the fact that commerce is starting to get serious about tackling climate change.
Yet there is one action which academics have suggested would seriously help reduce carbon footprints that industries, governments and consumers have been slow to consider. And that is reducing meat consumption.
On the one hand humanity’s taste for meat is seemingly insatiable. Global meat consumption has increased by 58 per cent over the 20 years to 2018 with demand especially high in the developing countries that are becoming more affluent.
Yet a 2018 study by Tulane University and the University of Michigan published in Environmental Research Letters found that meat, dairy and egg consumption was responsible for nearly 84 per cent of food-related greenhouse gas emissions in the US. Meanwhile, In 2018 researchers at the University of Oxford posted in the journal Science that cutting meat and dairy products from a person’s diet could reduce an individual's carbon footprint from food by up to 73 per cent.
The significant growth of veganism in Europe and the US (in the UK for example between 2012 and 2016 there was a 185 per cent increase in the number of vegan products) as well as growing numbers of consumers who follow largely vegetarian or flexitarian diets is having an impact too. It has led to huge demand of meat-free products from existing businesses such as Quorn (owned by the Monde Nissin Corporation) as well as the creation of companies such as Beyond Meat which IPO-ed in May 2019, and has been a favourite not just of ethical investors but also those seeking fast returns. It shot up from $25 to $225 per share in a matter of weeks.
Yet even though the fake meat companies are growing in popularity, there are cynics who challenge whether they can truly replicate the taste and texture of meat to the extent that consumers will finally eschew eating animal-based products.
A technologically based solution
There is, however, a solution and inevitably it is tech based. It is a concept called cultured, or lab-processed meat. The key difference between cultured meat and what is offered by Quorn, Beyond, Linda McCartney and others is that the latter have developed meat-style products from plants. The former is based on animal cells grown in a lab and its champions say that its taste is a lot more authentic than, say, burgers derived from vegetable protein.
A huge amount of time and money has been invested in taking the concept forward, but put simply it is rooted in tissue engineering techniques that were first developed for regenerative medicine. The hard part for scientists has been taking that initial breakthrough and then working out how to grow meat on an industrial scale.
In theory, cultured meat is vegan as no animals are harmed in its creation (they are based on DNA which can be removed from the animal painlessly). Lab-based meat’s trump card, however, is not about animal rights. Its USP is that it is massively less damaging to the environment than farmed animal meat. For example, this study found that cell-based beef could use 95 per cent fewer global greenhouse gas emissions, 98 per cent less land use and up to half as much energy as farm-based beef.
From an investor’s perspective cultured meat is a significant market opportunity. The global cultured-meat market is predicted to be worth $15.5m by 2021 and $20m by 2027. And it is not just about reducing beef consumption for humans. There are companies working on cultured chicken and fish, and some are already eyeing up the colossal $113.08bn dog and cat food market too. One report estimates that 35 per cent of all meat will be cultured by 2040.
However, the journey from the lab to the supermarket has been a long one. Much of the initial research was done in the Netherlands more than a decade ago as scientists perfected the way in which they could grow meat from cells in a petri dish.
At the current time, the number of people who have tasted cultured meat is limited to a very small circle of entrepreneurs, industry influencers and journalists. The race to get cultured meat into high-end restaurants, where it will be sold ironically for much more than animal-farmed meat, is in the home straight though.
Mosa Meat, a Dutch company, was first to present cultured meat and cook it live at a press conference in 2013. It now says it expects to have a product on sale in the next few years. Its huge problem for now is scalability. Mosa Meat’s first cultured hamburger which was created in 2013 cost an eye watering €250,000 to produce. Developing products that it can sell for roughly the same price as animal-farmed meat is clearly going to take time, though the company does claim to have made recent breakthroughs which will enable it to scale quickly.
Mosa Meat isn’t alone. There are now more than 60 companies working on cultured meat. The second most high profile is California-based Memphis Meats which is currently building a pilot plant to scale its production of cultured meat.
Its big rival in the US is JUST which has largely focused on replicating chicken and claims to be on the verge of releasing its chicken nuggets in high-end restaurants in an Asian country once it gets approval from food regulation authorities.
In addition to Mosa, The Netherlands also boasts the start-up Meatable, while the UK has Higher Steaks, Spain has Cubiq Foods and Israel Future Meat Technologies. In fact Future Meat claims to have shortened the manufacturing process of its cultured meat down to just two weeks, and is apparently confident of getting the cost for its meat down to $10 per pound by 2022.
So where does this leave the investor keen to grab a slice of the future of meat?
In the short term most companies are venture-backed, privately owned and out of reach for everyday investors. It is possible, however, that several, especially those based in the US, could IPO at some point in the future following the footsteps of Beyond Meat which took this route in May 2019.
More likely is that companies could acquire some of the most innovative start-ups and build businesses around them. There would be no shortage of potential suitors from existing food giants through to start-ups such as Beyond and its key US rival Impossible Foods, who would be looking to take their offering to another dimension. Interestingly almost all the giant tech start-ups have investments in the cultured-meat industry. So it is not beyond the realms of possibility that Amazon or even Google could end up as a market leader in this space, providing they can get the acquisitions past regulators.
Yet the days when cultured meat starts to replace animal-farmed meat are likely to be a long way off. Some analysts believe it could be as much as 30 years.
Also there is a series of impediments cultured meat manufacturers will have to address first.
The biggest of all is convincing consumers to buy the products. In spite of its claimed advantages over existing meat products (cultured meat is apparently lower in harmful fats and can be bolstered by vitamins and minerals) consumers may be wary of eating food that is lab grown and heavily processed. There is clearly a massive education and marketing push to be undertaken.
Then there is the inevitable backlash which is likely to come from both ends of the food spectrum. Cultured meat has the potential to decimate the beef industry which globally is worth $945.7bn. The farming industry is fighting back on two fronts. First it is calling into question the quality and safety of cultured meat. And secondly, and perhaps more effectively, it is attempting to ensure that the new product is not labelled meat. Pushed by its powerful agricultural lobby the EU has already discussed if terms such as burgers and sausages can be used to describe plant-based products.
In the US, too, as many as 30 states are considering preventing words such as “meat”, “beef” or “pork” being used to describe cultured or plant-based meats.
Key players in animal rights and environmental movements are also split on cultured meat. People for the Ethical Treatment of Animals (Peta) and Friends of the Earth are keeping an open mind on the products. Yet there are groups of activists who think that society needs to reject eating meat per se and still see the products as part of the meat industry.
Concerns about the impact of cultured meat on health could also railroad its development. A scare, for example, that mutating cells could cause cancer could prove disastrous, though admittedly this is a scenario to which very few scientists have so far alluded.
Finally there are questions about the speed in which these products will reach the market. On one hand Max Elder, research director in the Food Futures Lab, told Forbes: “I worry most start-ups in the cultured meat space are overestimating their short-term timeline to get to market and underestimating their potential long-term impact on completely redesigning our food system from the cell-level up.”
Conversely the world needs products that are not only tasty and nutritious but also safe, That may mean a slower roll-out than evangelists such as Max Elder would want.
The next few years will be pivotal for the cultured meat market. Expect to see companies rolling out products targeting flexitarians in western countries and aspirational consumers in the developing world. It is clearly an area on which investors need to keep a very close eye. For the winners the rewards are potentially colossal. Is it time to invest in cultured meat companies? Not yet, but it maye be soon.
FURTHER READING: Why you might want to invest in plant-based brands
FURTHER READING: Breakthrough in race to deliver credible lab-grown meat