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Alternative Ingredients
Overview
Alternative ingredients use advanced processing techniques, such as precision fermentation and cell culture, to replicate the taste and texture of conventional food ingredients while providing additional health and environmental benefits. Beanless coffee, cocoa-free chocolate, nut-free spreads, seed-free oil, and bee-free honey are examples. The industry is still relatively nascent, with most startups focused on product development. However, a few products, such as natural sweeteners, have been commercialized and are gaining momentum among early adopters.
The need to decarbonize the food sector and focus on ethical sourcing to address child labor and human rights violations drive the industry. Growing demand for allergen-free and other healthy foods is also playing a role. Alternative ingredients currently in the market have a significant price premium. The main hurdle for the industry is to keep manufacturing costs low enough to ensure economic viability.
Note: The hub excludes ingredients for novel food products such as Plant-based Meat, Plant-based Dairy & Egg, and Cell-cultured Meat, which are covered in their respective industry hubs.
Industry Updates
Market Sizing
The US Alternative Ingredients market could reach USD 1.3 billion–2.9 billion by 2028
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Use cases
Alternative ingredients use cases are somewhat limited, given the nascent status of the industry. Most current use cases are in food products (mapped under consumer staples), while consumer discretionary (specifically hotels and restaurants) and healthcare sectors also have some commercial uses. Among these, ingredient replacement, reduction, and optimization-related product development use cases are more common.
We have identified key alternative ingredient use cases below:
Market Mapping
Cell-cultured and fermented protein ingredients as well as the alternative flavor, texture, and coloring segments are the most prevalent in the industry. The majority of startups are in the minimum viable product or go-to-market stages, indicating that the industry is still in its early phases of development and is yet to successfully commercialize its products. The incumbents primarily focus on cell-cultured and fermented protein, alternative flavoring and coloring, sodium alternatives, and technology/equipment suppliers, with limited engagement in alternative ingredient segments like beanless coffee, fermented oil, and cocoa-free chocolates.
Sugar substitutes
Salt substitutes
Cell-cultured and fermented protein ingredients
Cell-cultured and fermented cooking oil and fats
Alternative flavour, texture, and coloring ingredients
Alternative honey and spreads
Cocoa-free chocolates
Beanless coffee
Technology & equipment suppliers
The Disruptors
Funding is concentrated among a few established players mainly in the technology and equipment suppliers segment. Fewer than 10 companies had raised more than USD 100 million as of November 2023. The industry is relatively young, with the majority of the startups having been established after 2013. Business models usually revolve around the manufacturing, supply, or retail of alternative ingredients, with companies catering to both businesses and end consumers.
Funding History
Competitive Analysis
Incumbents
In-house incumbent activities primarily involve the development of cell-cultured and fermented protein ingredients, sodium alternatives, and sugar alternatives. Several food tech and ingredient incumbents provide technology and equipment for alternative ingredient production. Most incumbent partnerships also focus on product collaborations related to c ell-cultured and fermented protein ingredients , while M&A activities mostly focus on leveraging synergies to venture into alternative flavor, texture, and coloring businesses and expand existing portfolios.
Notable Investors
