Key takeaways

• New US laws put the CCM industry in a tough spot, with Alabama and Florida imposing state-wide bans and penalties on CCM production and sale as well as the REAL Meat Act of 2024 seeking to prohibit the use of federal funds for CCM-related activities. This poses additional challenges to cultured meat producers already struggling with high production costs, potentially pushing back commercialization. On a positive note, Singapore continues its commitment to food tech innovation with a new proposal to streamline approval for novel foods. 

• Food tech funding increased for the fourth consecutive quarter, raising USD 409 million across 26 rounds, the highest since Q1 2023. Early- and growth-stage rounds were at the center of this recovery, accounting for ~75% of total funding, with ingredient and technology suppliers being the biggest beneficiaries. Funding was primarily allocated to commercialization, capacity scaling, and market expansion. Meati’s USD 100 million megadeal was the largest, followed by Prolific Machines (~USD 55 million) and Voyage Foods (USD 52 million).

• PBM launches rose to a two-year high (39 vs. 29 in Q1 2024), with innovations from Chunk Foods, Oshi, and Tofurky debuting at The National Restaurant Association (NRA) Show. Plant-based egg launches also saw an uptick, with Eat JUST’s launch of “JUST Egg v5” being the most notable. Eat JUST’s GOOD Meat became the world’s first to begin retail sales of CCM in Singapore.

• Incumbent activity spanned across the F&B value chain, with Unilever, Starbucks, Cargill, and Danone focusing on joint product, distribution, and process improvements. CCM startups focused on AI and robotics integrations to improve the precision and efficiency of production processes. PBD&E companies focused on cross-industry collaborations with alternative meat, coffee, and nutritional drink producers.

• The Ahimsa Company's acquisition of the UK-based Wicked Kitchen was the only recorded M&A activity. The absence of distressed acquisitions compared with recent quarters resonated with PBM’s underlying recovery theme.

• PBM showed early signs of recovery: PBM has been on a downtrend since 2021 on account of higher prices and issues related to taste, texture, and quality. However, recent quarters have shown signs of a turnaround. Producers remain strong on the innovation front, developing more clean-label ingredients and launching improved products (Beyond IV, Marble 3.0) to tackle consumer concerns, duly backed by renewed investor interest. With new funds mainly allocated to commercialization, capacity scaling, and market expansion efforts, we expect product and market activity to gradually increase over the next 1–2 years. Additionally, the launch of innovation centers and pledges from industry and non-profit organizations (~USD 135 million from Protein Industries Canada, Bezos Earth Fund, and the University of Illinois ARCS) are likely to accelerate R&D in sustainable protein ingredients, supplementing PBM’s recovery.

• CCM startups likely to target more conducive markets: CCM startups recorded their highest funding levels since Q4 2022 on the back of large deals from Mosa Meat and Prolific Machines. Product announcements also reached its highest since Q2 2023. On the flipside, Aleph Farms cut down its workforce by 30% due to scaling challenges and SCiFi Foods ceased operations citing financial difficulties. The regulatory environment has also been a mixed bag, with the recent headwinds overshadowing the FDA’s landmark decision last year to approve US CCM sales. Given the tumultuous situation in the US, companies may increasingly target the UK and Singapore markets for their product launches, where the regulators are taking steps to be more accommodating and streamline the approval processes for lab-grown meats.