Key takeaways

• Novel Foods and PBM funding picked up: Food tech startups raised USD 429 million across 36 rounds in Q4 (+54% QoQ and but -40% YoY). Novel Foods raised the most (~37% of total funding), marking its highest-funded quarter since Q3 2022. PBM funding increased slightly after a long period of subdued investor interest. However, CCM funding fell to its lowest level since 2022 despite recent regulatory tailwinds.

• Increased product activity around Veganuary: PBM launches increased, led by THIS, Revo Foods, and Beyond Meat, but were notably lower than last year. PBD&E launches hit a two-year high this quarter and mainly featured new plant-based milk and yogurt products. Yali Bio’s first-ever yeast-derived breast milk fat was a notable highlight. CCM launches also picked up with a focus on cultivated seafood products. 

• Product development collaborations remained a key focus: We observed notable collaborations for ingredient launches from Imagindairy and Ginkgo Bioworks (dairy proteins) and Checkerspot (climate-resistant flavoring oils). Partnerships in the PBM and PBD&E spaces included those that introduced chicken products (THIS), burgers (Jack and Annie), pâtés and foie gras (Prime Roots), and ice cream (Perfect Day) for foodservice as well as products to mark Veganuary (THIS, VFC). Impossible Foods also secured a supply agreement to serve PBM to US Army troops. 

• M&A activity cooled down: We observed only four M&A deals in the Food Tech space during Q1 2024 (cf. nine in Q4 2023). Notable deals included Next Level Burger’s (NLB) acquisition of the financially troubled vegan casual dining chain Veggie Grill and Singapore-based UMAMI Bioworks’ merger with Shiok Meats to accelerate the development of cultivated seafood. 

• Individual wins for players seeking approval amid tightening regulations: Regulators in France and Arizona continued to tighten their stance on labeling for meat alternatives and the sale of cultivated meat products. US state legislators in Florida and Alabama moved to ban the sale of cultivated meat products altogether.

• Veganuary 2024 was a mixed bag: The nonprofit reported that 1.8 million people tried giving up meat globally thanks to the campaign in 2024. While this is not directly comparable to the ~700,000 signups reported in 2023, due to a change in methodology, signups for the campaign rose steadily leading up to 2024. On the flipside, Circana’s data indicated that meat alternatives’ retail sales YoY were down 33.6% (as of January 28, 2024). Our coverage in Q1 2024 also recorded ~24% fewer PBM product launches compared with a year ago. Nevertheless, THIS reported a ~25% increase in sales during January 2024 and Aldi’s plant-based sales increased 500% during Veganuary.

• Plant-based startups are taking steps to address consumer pain points and become leaner: Beyond Meat’s new Beyond IV product line claims to be a healthier reformulation to woo consumers back to the meat alternatives camp. Meanwhile, smaller players like Meati Foods are taking steps to make operations leaner by trimming their workforce while maintaining steady retail performance. The industry continues to face most of the same challenges around consumer perception and cost as well as tight market conditions that plagued it throughout 2023. Against this backdrop, we anticipate space for more buyouts and consolidations as well as the rise of private label offerings from major retailers (like Aldi, Asda, and Tesco)

• CCM under the regulatory microscope: CCM continues to face regulatory headwinds, including the potential for closer scrutiny and lengthier approvals in the EU and outright bans in some US states. However, there was an uptick in new product launches and partnerships, notably outside the US and Europe, where the regulatory landscape is more accommodating. We may see more companies looking to outside markets to accelerate product development till there is regulatory clarity at home.