FoodTech (Q3 2023): Cell-cultured meat arrives in the US; plant-based counterparts continue to struggle

Key takeaways

• New Products
  • CCM made its US debut; plant-based food companies also had some notable product launches: Following the USDA’s approval in Q2 2023, UPSIDE's cultivated chicken was highlighted in a six-course meal at Bar Cren in New York. Additionally, Chef José Andrés introduced Good Meat's cultivated chicken at China Chilcano in Washington, DC.
  • Product launches picked up (+17% QoQ). New PBM products from Juicy Marbles, Biff's Plant Shack, Cocuus, and various plant-based cheese options from Daiya Foods, Miyoko's Creamery, and GOOD PLANeT were the main debuts. There was also a notable increase in new products in the other alternative foods space, with innovations focusing on alternative snacks (ZenB, Sabra, Planet A Foods), nutraceuticals (Groupe Berkem, Mars Food & Nutrition), and plant-based pet foods (The Pack, Superlatus).
• New Market Developments
  • Market activity remained sluggish; the US retail channel drove PBM distribution expansions: FoodTech market activity (market entry and market penetration activities) remained flat QoQ but dropped significantly YoY (-36.8%). PBM market activity continued to slow down, but retail expansions remained steady, with notable developments from Everything Legendary and Konscious Foods. Outside the US, unMEAT made significant strides with its expansion into Australia. PBD&E distribution expansions reached their lowest levels in the past five quarters, although Veg of Lund made significant progress with its entry into the Asian market.       
• Partnerships
  • Plant-based foods concentrated on menu expansion, while CCM was R&D-oriented: Partnerships in PBM and PBD&E were predominantly aimed at introducing new menu items for retail and foodservice. Several disruptors secured distribution agreements across the US (Meati) and Europe (Oatly, Redefine Meat, and THIS). In the cell-cultured segment, focus on R&D was evident, led by Steakholder Foods’ partnership with a Gulf Cooperation Council (GCC) governmental body to advance 3D bioprinting technology for commercialization. 
• M&A
  • Two smaller acquisitions recorded in the US: Livekindly Collective, a US PBM startup, acquired California-based plant-based frozen food producer Alpha Foods. Pharmaceutical exchange platform provider Superlatus acquired The Urgent Company, which includes consumer brands like Coolhaus, Brave Robot, Modern Kitchen, and California Performance Co.
• Funding
  • Investments remain low in line with broader VC activity: Startups in our FoodTech coverage raised USD 185.5 million across 23 funding rounds in Q3 2023, down 72.4% YoY but steady QoQ (+0.3%). PBM dominated funding, securing ~56%. The other alternative foods segment saw a resurgence in funding, with seven funding rounds that raised USD 26.6 million in Q3 (vs. one round raising USD 175,000 in Q2). The average size of funding rounds dropped by 57.3% QoQ, while late-stage funding rounds were absent for the second consecutive quarter.
• Regulations
  • The regulatory landscape for the alternative protein industry remains largely conducive: The UK aims to streamline its regulatory processes by removing unnecessary steps for alternative meat approvals, while France is challenging regulations on labeling for PBM products. Meanwhile, alternative protein companies, such as Nature's Fynd and Imagindairy, successfully obtained regulatory approval for their products.
• Outlook
  • The PBM industry is at a critical juncture, navigating the complexities of affordability and consumer adoption: Since 2021, PBM sales have steadily decreased and saw a near-21% drop in volume sales over the 52 weeks ending on July 2, 2023. This drop is due to the elevated costs of PBM products and issues related to taste, texture, and quality. Still, the market predominantly serves higher-income consumers, and achieving price parity with conventional meats remains a significant challenge. 
  • CCM to focus on product innovation and scaling following its commercial debut: Companies like Believer Meats and UPSIDE Foods have made substantial investments in establishing manufacturing facilities that have the potential to produce millions of pounds of meat in the coming years. However, customer adoption rates and feedback are yet to be observed. As of now, lab-grown meat remains accessible to only a limited portion of the population and is available in limited varieties. In our newly updated market sizing, we estimate that the CCM market can be worth over USD 1 billion by 2030.  

New products: CCM makes US debut; plant-based meat, dairy, and other alternative food innovations thrive 

Analyst Take: Following the USDA’s approval of CCM in Q2 2023, UPSIDE's cultivated chicken was featured in a six-course meal at Bar Cren in New York in August, priced at USD 150, and Chef José Andrés served Good Meat's cultivated chicken at China Chilcano in Washington, DC, marking lab-grown meat’s commercial debut in the US. However, this doesn't imply that lab-grown meat will be available in supermarkets immediately. Currently, both companies have received permission to exclusively sell chicken products at a limited number of restaurants. They would also require further approval to introduce cell-cultured beef, pork, or seafood to the market.

• We observed 34 new product launches in the PBM segment, with plant-based beef (10), poultry (8), and pork (8) being the most prominent categories. Total PBM launches remained consistent with the previous year. However, there was a notable difference in the product mix, with beef and seafood alternatives expanding YoY.

• Morningstar Farm’s Steakhouse Style Burger, THIS’ upgraded plant-based beef burger, Beyond Meat’s Stack Burger patty, and Juicy Marbles’ plant-based ribs with edible bones were among the noteworthy PBM product releases.

• The PBD&E launches (13) more than doubled YoY. This growth was driven by a surge in plant-based milk and cheese activity.

• We observed new plant-based cheese launches from Daiya Foods, with its plant-based Goat Cheeze and Feta Cheeze Crumbles; Miyoko's Creamery, with a plant-based Cheese Spread; and GOOD PLANeT, with a new olive-oil-based cheese range. 

• The notable plant-based milk launches were Ripple Foods, with its sugar-free version of Ripple Kids plant-based milk; NotCo, with its shelf-stable NotMilk Barista; Koko, with its upgraded coconut-based milk and yogurt products M!LK and YOGRT!; and Mooala, which debuted a range of three-ingredient shelf-stable plant-based milk products.

• On the flip side, NotCo decided to withdraw from the refrigerated milk category in the US and shift its focus toward establishing a presence in the small but expanding shelf-stable segment. In alignment with this strategy, they also entered the US foodservice sector.

• Following the USDA’s approval of CCM in Q2 2023, UPSIDE's lab-grown chicken took the spotlight in a six-course dining experience at Bar Cren in New York in August. Concurrently, Chef José Andrés unveiled Good Meat's cultivated chicken at China Chilcano in Washington, DC, signifying the commercial debut of lab-grown meat in the US.

• Re:meat, a Swedish cultivated meat startup emerged from stealth and unveiled what it claims to be the world’s first cultivated Swedish meatballs.

• Cocuus partnered with Foody's to develop what it claims to be the world's first 3D bioprinted plant-based tripe. Tripe, the edible stomach lining of pigs and cows, is the main ingredient of the Spanish dish Callos.

• We observed only a single upcycled food and beverages (F&B) new product launch during the quarter. Renewal Mill launched its 100% upcycled flour blend RenewALL, made from byproducts of plant-based milk such as soy bean pulp, oat milk pulp, and corn fines. RenewALL is marketed as a substitute for all-purpose flour or conventional alternative gluten-free flour blends in baked goods such as cakes, cookies, muffins, and crackers.

• Alternative snack product launches were notable during the quarter. ZenB entered the snacking market with its Cracker Crisps, crafted from yellow peas. Sabra introduced Roasted Garlic and Spicy Harissa Mediterranean Garlic Dip. Meanwhile, Planet A Foods launched three new flavors for its ChoViva brand, offering lab-created chocolate alternatives.

• Other notable launches include products in the nutraceuticals and pet food segments:
  • The nutraceuticals market was the focus of at least two launches: Groupe Berkem, with a range of plant-based active ingredients, and Mars Food & Nutrition, which introduced a new plant-based protein source called Super Grains through its Seeds of Change brand.
  • The Pack introduced plant-based oven-baked dried dog food, while Superlatus launched a range of baked plant-based treats in various flavors in the pet food market.

New market developments: PBM activity remains low; PBD&E momentum halts

Analyst Take: PBM market activity (market entry and market penetration activities) continued to slow down, but retail expansions remained steady, with notable developments from Everything Legendary and Konscious Foods. Outside the US, unMEAT made significant strides with its expansion into Australia. PBD&E distribution expansions reached their lowest levels in the past five quarters, following two standout quarters in Q1 and Q4 2022, although Veg of Lund made significant progress with its entry into the Asian market. 

Market activity: Market entry and penetration were sluggish despite a few notable international expansions

• Market activity during the quarter remained flat QoQ while dropping significantly YoY (-36.8%). In both the PBM and PBD&E industries, we tracked 24 company expansions that involved entering new markets or penetrating existing ones in Q3 2023. 

• North America and Europe continued to have the most activity. Nevertheless, there was a noticeable decrease in momentum during Q3 2023. North America had a substantial 40% YoY decrease in activity, whereas the more robust Europe segment recorded a 20% YoY decline. 

• Activity outside North America and Europe remains limited. Outside the US and Europe, we observed market activity in Asia with Veg of Lund expanding into Japanese and Chinese markets with plant-based milk, while in Australia, Upfield launched its plant-based whippable cream for Australian retail. 

• PBD&E saw seven market initiatives in contrast to no activity the previous year. Meanwhile, PBM had a sluggish period, with only 17 activities recorded, showing both YoY (-55.3%) and QoQ (-32.0%) declines.

Distribution network: PBM distribution expansion slows down, but US retail expansion remains strong; PBD&E segment experiences lull

• PBM distribution network expansion in the US was mainly driven by growth in the retail channel, with the addition of 2,309 new establishments in the sector. However, the total distribution expansion was notably lower than the previous year (-33.7% YoY) and the previous quarter (-68.1% QoQ). Nevertheless, the increase in distribution within the retail segment was attributed to Everything Legendary, which rolled out at 850 Publix stores; Konscious Foods, which secured nationwide distribution for its Sushi at 529 locations; and Actual Veggies, which expanded into 515 Whole Foods Markets.  

• Expansion of distribution channels outside the US experienced a mixed quarter with 3,517 new additions in the retail and foodservice sectors, a notable decrease over the previous year (-52.1% YoY), but an improvement over Q2 2023 (+17.8% QoQ). Notably, Germany contributed to ~46% of the new additions, with the majority (1,600) in the retail channel. This expansion in Germany can be attributed to the launch of Beyond Meat’s Beyond Nuggets and Tenders at REWE supermarkets. Additionally, UnMeat launched its vegan luncheon meat in Australia at 960 Woolworths Stores, marking a notable distribution milestone in Oceania.

• The PBD&E distribution in the US experienced a lackluster quarter, marking a substantial slump following two consecutive periods of high distribution expansion. The distribution network expanded by 937 locations, a 28% YoY decline. The retail channel was the only active segment, accounting for 100% of the expansion. Nature’s Fynd’s launch of Dairy-Free Original Cream Cheese at select Whole Foods Market (515) and WayFare Foods’ launch of its dairy-free pudding lineup at Albertsons stores (384) across the US were the highlights.

• Outside the US, PBD&E activity was virtually non-existent. We only observed 60 new locations added in the retail channel, indicating a significant decrease in activity from the previous year (-96.2% YoY) and Q2 2023 (-87.0% QoQ).

Partnerships: Product collaborations and sales partnerships take center stage

Analyst Take: Partnerships in the PBM and PBD&E industries mostly centered around final form products, with several firms like Impossible Foods, Beyond Meat, and The Raging Pig collaborating to introduce new menu items for foodservice. Furthermore, multiple disruptors secured distribution agreements for foodservice and retail across the US (Meati) and Europe (Oatly, Redefine Meat, and THIS). In the emerging cell-cultured segment, a focus on R&D was evident, led by Steakholder Foods, which partnered with a GCC governmental body to commercialize 3D bioprinting technology. 

• Our FoodTech coverage saw 15 distribution partnerships, 22 product collaborations, and 12 sales partnerships during the quarter. PBM witnessed the highest number of partnerships with 27 (55.1%), followed by PBD&E with 10 (20.4%).

• Collaborations with food service establishments were prevalent in the industry, with several disruptors such as Impossible Foods, Beyond Meat, The Raging Pig Company, Chunk Foods, Omni Foods, Better Balance, and [MOCK] joining forces with various restaurants. Notably, they partnered with IHOP, Sausalitos, SIGGIS, Neat Burger, Veggie Grill, Kale My Name, and The Queen Inn, respectively, to launch innovative plant-based menu items.

• Innovation in product development took center stage in several collaborative efforts. Alpha Foods, in partnership with Eat JUST, overhauled its brand lineup to incorporate high moisture extrusion (HME) technology. Meati joined forces with AI company PIPA to enhance the nutritional content of its PBM products; Climax Foods partnered with Benchling for ML-based product innovation. Meanwhile, The Plant-Based Seafood Co. teamed up with ICL Group Ltd. to pioneer novel replication technologies for plant-based seafood alternatives. Nourish Ingredients collaborated with Boston Bioprocess to expand the production of animal-free fats. Further, Mycorena partnered with Atria Sweden to introduce fresh mycoprotein-based products.

• Several disruptors also secured key supply agreements. Oatly made strategic moves to broaden its distribution network, establishing a new pan-European arrangement with Amazon. Furthermore, it collaborated with Deutsche Bahn to introduce its plant-based soft serve in Deutsche Bahn lounges. In the PBM sector, Redefine Meat secured distribution agreements with several wholesalers, extending its distribution reach in the UK. Meati partnered with Dot Foods, the largest redistributor in the US, for its large-scale retail launch. Meati also partnered with Whole Foods Market for a nationwide launch. Furthermore, THIS partnered with Albert Heijn, the largest supermarket chain in the Netherlands, to facilitate its entry into the Dutch market.

• Cultivated meat technologies were the focus of product collaborations for Steakholder Foods, which partnered with a GCC governmental body to commercialize 3D bioprinting technology. Meanwhile, CellRev partnered with Saint-Gobain Life Sciences to develop novel processes for cell media rejuvenation.

• Other notable partnerships:
  • The Cultivated B and denovoMATRIX partnered to explore scaled cultivated meat production.
  • Ivy Farm and Finnebrogue collaborated to develop cultivated Wagyu beef.

• No notable partnerships were observed for this segment during the quarter.

• Product innovations took center stage in the other alternative foods segment. Bühler partnered with NRGene and Entocycle to advance large-scale black soldier fly (BSF) farms for alternative feed protein sources. 

• Other notable partnerships:
  • MeliBio partnered with Charlie’s Acres to create a pollinator hotel and garden.
  • Petco partnered with Wild Earth to launch a vegan line of dog food and treats.  
  • Konscious Foods partnered with FreshDirect to sell its plant-based sushi rolls and onigiri via FreshDirect’s ecommerce platform.

M&A: Two smaller acquisitions recorded in the US

• In August, leading plant-based food company Livekindly Collective acquired California-based plant-based frozen food producer Alpha Foods. The terms of the acquisition were undisclosed. With the acquisition of Alpha Foods, Livekindly Collective aims to significantly expand its presence in the US market and venture into the ready-to-eat breakfast and burrito snacking category. This strategic move is expected to strengthen Livekindly’s position in the global plant-based market and enable further growth and innovation within the industry.

• In August 2023, Superlatus, a diversified FoodTech company, entered into a binding agreement to acquire The Urgent Company (TUC), including its consumer brands Coolhaus, Brave Robot, Modern Kitchen, and California Performance Co., from Perfect Day for USD 1.25 million. TUC is a spin-off from Perfect Day and focuses on the D2C business. The company uses precision fermentation to develop its products, which are available in over 6,000 stores across the US, including Whole Foods, Kroger, and Costco.

Funding: FoodTech funding remained low, aligning with the broader VC activity trend

Analyst Take: PBM funding continued to decrease on the back of the industry's gloomy outlook, underpinned by higher prices and issues related to taste, texture, and quality.

PBD&E funding showed a slight recovery during the quarter, reaching USD 18 million (from USD 8 million in Q2 2023). However, this was notably lower compared with USD 53 million a year ago. The other alternative foods category rebounded from its Q2 2023 dip, securing USD 27 million across seven funding rounds (compared with USD 175,000 in the last quarter from a single round).

Q3 2023 funding summary

• Our FoodTech coverage saw USD 185.5 million raised across 23 funding rounds in Q3 2023. This represented a significant decrease of 72.4% YoY but almost flat QoQ (+0.3%). The performance in funding mirrored the overall Global VC market, where funds raised were up slightly QoQ but down YoY. The funding landscape was led by PBM, securing USD 103 million (55.6% of total FoodTech funding) with nine funding rounds. After a quarter with only one funding round, the other alternative foods segment saw a resurgence in funding, with a total of seven funding rounds that raised USD 26.6 million.

• The average funding round size saw a substantial 57.3% QoQ decline in Q3 2023 but was flat YoY. Meanwhile, the median funding round size in Q3 2023 showed a decrease of 26.3% compared with the previous year and a more substantial slump of 44.8% QoQ.

• Late-stage funding rounds were absent for the second consecutive quarter. In contrast, the previous four quarters (Q1 2022–Q1 2023) registered an average of ~52% of total funding going toward growth-stage rounds. 

• Plant-based meat, dairy, and egg products collectively saw a notable funding decline of 63.7% YoY. Specifically, PBM witnessed a decline of 63.4% YoY, while PBD&E experienced an even steeper decline of 65.6% YoY.

• The median funding round size for the PBM sector underwent a significant drop compared with the preceding quarter. Conversely, the PBD&E sector experienced an uptick, reaching its highest levels in the past five quarters, driven by rounds from Solar Foods (USD 5.9 million) and Kern Tec (USD 9.0 million). Specifically, PBM decreased from USD 6.5 million to USD 1.8 million, while PBD&E surged from USD 4.3 million to USD 9.0 million. Notable funding rounds included Enough securing USD 43.5 million, Konscious Foods raising USD 26 million, and Brevel obtaining USD 18.5 million.

• Funding for CCM also experienced a substantial decrease, with a total of USD 38.0 million raised during the quarter, marking a significant contraction of 49.6% YoY and 43.6% QoQ.

• The median funding round size also dropped from USD 10 million in Q2 2023 to USD 2 million in Q3 2023. The significant funding rounds during the quarter included Meatable (USD 35 million); Eat JUST (unspecified); and 3DBT, BioBetter, and LenioBio (USD 1.8 million).

• There was only one funding round by Kern Tec, which develops plant-based alternatives using oils extracted from upcycled stone fruit pits, for USD 12 million. However, this round is categorized under the PBD&E industry.

• The segment experienced a notable resurgence in funding, with a total of seven funding rounds that raised USD 26.6 million. This marked an impressive increase from the USD 175,000 raised in Q2 2023.

• Notable funding rounds during the quarter included Goodles (a nutrient-packed noodles brand; USD 13 million), Yerbaé (a plant-based energy beverages brand; USD 4 million), Nuu (a carbon-neutral cassava-based products brand; USD 4 million), and OCEANIUM (a seaweed-based products brand; USD 2.6 million).

Regulations: Landscape for alternative protein remains largely conducive

Analyst Take: Some regulators, like in the UK, aim to streamline their regulatory processes by removing unnecessary steps to simplify approval, while France is challenging regulations on labeling for plant-based meat products. In the midst of this, alternative protein companies, such as Nature's Fynd and Imagindairy, successfully obtained regulatory approval for their products during the quarter.

• UK ministers and regulators are seeking to expedite the approval process of lab-grown meat and consider omitting unnecessary steps to simplify the approval process for cultivated meat companies in the UK. Further, the Food Standards Agency (FSA), the UK’s regulatory body for novel foods, plans to sign a bilateral agreement with Israel to foster cooperation in the novel foods sector and aid in its bid to fast-track approvals.

• In September, The Cultivated B (TCB), a German bioengineering firm, initiated the pre-submission phase for regulatory approval in Europe to offer hybrid cultivated meats. This stage represents the initial step toward securing regulatory clearance and is typically requested at least six months before the official submission. TCB, in partnership with its sister company, The Family Butchers, is developing hot dogs crafted from plant-based ingredients and pork cell cultures.

• In August, Chicago-based alternative protein company Nature’s Fynd obtained approval from Health Canada. After a thorough assessment of its Fy Protein, the company received the green light to market meat alternatives produced using Fy. Fy, derived through the fermentation of the Fusarium strain flavolapis found in the geothermal springs of Yellowstone Park, is touted as being free from GMOs, antibiotics, hormones, or pesticides. It boasts twice as much protein as raw peas and 50% higher protein content than tofu.

• In the same month, Israeli FoodTech startup Imagindairy achieved self-affirmed Generally Recognized As Safe (GRAS) status for its animal-free whey protein, meeting FDA requirements. This designation allows the company to sell its products within the US and serves as essential validation for collaborations with other F&B companies. 

• The Plant-Based Food Association (PBFA) criticized the FDA's draft guidance on plant-based milk labeling, which advises plant-based milk to have a nutrient statement comparing it to cow milk. The PBFA deemed it "unprecedented, unwarranted, and a solution in search of a problem" and called for its removal. 

• In September, France submitted a revised proposal to prohibit the use of meat-related terminology for PBM products to prevent misleading claims. The updated decree bans 21 specific terms, like "steak" and "ham," exclusively for PBM products within France. In response, Jasmijn de Boo, CEO of the plant-based advocacy group ProVeg International, criticized the labeling rules as "counterproductive" and suggested consumers are not misled by animal-type descriptions on alternative-foods packaging.

Summary of new FoodTech startups added in Q3 2023

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