Newswise — Hofstadter’s law: an appropriate adage for alt proteins
“It always takes longer than you expect, even when you take into account Hofstadter’s Law.” –Douglas Hofstadter, Gödel, Escher, Bach: An Eternal Golden Braid
About half of the world’s habitable land is used for agriculture, which means that global food system change is an enormous, intensive, and lengthy pursuit. Scaling alternative protein sectors from virtually nonexistent to commercial volumes is a monumental task.
The alternative protein industry has made significant progress over the last decade-plus as products have increasingly approached the taste and texture of conventional meat, bringing a new population of meat-eating consumers to the market. Cultivated meat is now approved for sale in multiple countries, fermentation partnerships and distribution have proliferated, and global retail sales of plant-based meat, seafood, and dairy reached $29 billion in 2023. (Source: Euromonitor International Limited 2023 © All rights reserved.)
But the road ahead—toward widespread taste and price parity, improved accessibility and nutrition, and significant market penetration—remains lengthy. Our latest State of the Industry Reports review advancements made by the alternative protein industry in 2023 and look at what’s ahead for the sector. Let’s dive into some of the key takeaways from those reports.
The state of the industry
A complex picture of the alternative protein industry emerged in 2023, one in which growth and progress were paired with setbacks and slowdowns.
Rising interest rates, multi-year price increases, and an uncertain economic outlook moderated retail sales and private capital markets across sectors in 2023. While topline inflation slowed in 2023, prices remained elevated relative to recent years, and rising interest rates restricted the ease at which money flowed through the economy. Consumers had less disposable income to spend on food, and companies had increased difficulty accessing financing.
The alternative protein industry was not immune to these trends. According to SPINS data commissioned by GFI and PBFA, year-over-year (YOY) plant-based meat sales fell by both dollars (-12 percent) and units (-19 percent) in U.S. retail, following the broader food and beverage industry trend of lower volumes and subdued dollar sales. For example, U.S. retail conventional meat unit sales—operating from a much larger base than plant-based meat—declined two percent YOY, while dollar sales were steady.
That said, according to Euromonitor, the global market for plant-based meat experienced slight growth in 2023, as did the global market for conventional meat and seafood. Notably, in the last decade, global plant-based meat retail sales nearly tripled from $2.2 billion in 2014 to $6.4 billion in 2023. (Source: Euromonitor International Limited 2023 © All rights reserved.)
And there are some promising consumer tailwinds—lapsed users who have not purchased plant-based meat in the past year remain open to repurchasing if products can more closely match the taste, texture, and cost of conventional meat. This underscores the importance of industry efforts to reach taste and price parity.
Private funding slowed in the alternative protein industry and beyond. According to data from Net Zero Insights, private investments in alternative protein companies fell 44 percent in 2023—in line with global venture funding across all sectors (-42 percent YOY), climate tech equity investments (-40 percent YOY), food tech investments (-61 percent YOY), and fintech investments (-50 percent YOY).
The sales and investment slowdowns in 2023 weren’t unique to the alternative protein industry, but as a relatively nascent sector relying on private investments to navigate early-stage operations and strong sales performance to secure favorable placements on retail shelves, they played outsized roles in the sector’s 2023 performance.
More facilities mean more jobs
New, retrofitted, and expanded alternative protein facilities boosted product volumes, created jobs, and added value to communities—but technical hurdles remain.
Globally, seven new fermentation, 10 new cultivated meat, and several new plant-based facilities opened their doors in 2023, growing and diversifying the economic value these agricultural innovations provide to communities. According to a 2023 analysis conducted by ClimateWorks Foundation and the Global Methane Hub, alternative proteins could support up to 83 million jobs globally by 2050.
However, the alternative protein sector is not yet positioned to capture those levels of economic impact. The plant-based, fermentation, and cultivated industries exist in distinct stages of industry development, but the average quality and availability of alternative protein products do not yet meet consumer expectations. To approach significant market penetration levels, alternative protein companies need to continue to improve product cost, taste, and volumes.
Government support
Governments around the world invested in alternative protein commercialization and research. At the same time, some policymakers challenged producers’ rights to create, sell, and advertise alternative proteins on the free market.
GFI estimates that newly announced global public funding for alternative proteins in 2023 was on par with 2022’s record levels. Governments prioritized both research and development and commercialization efforts, including Canada’s announced CAD 150 million for Protein Industries Canada and Germany’s €38 million in federal funding for a sustainable protein transition in 2024. That said, total public investment in 2023 satisfied only a tiny fraction of the estimated $10.1 billion in annual support needed to realize the full benefits of alternative proteins.
Despite increased global recognition of alternative proteins’ benefits, the governments of Italy and Uruguay banned the production and sale of cultivated meat, and some U.S. state legislatures introduced similar legislation. Similarly, labeling restrictions largely remained in 2023, as select governments proposed new restrictions or upheld prior restrictions, while others loosened or dropped them. These restrictions continued to limit how alternative protein companies can communicate with consumers about their products.
Opportunities abound
Alliances, partnerships, and collaborations continued to support alternative protein industry development.
Strategic partnerships, alliances, and associations can accelerate alternative protein production scale-up, allow companies to leverage distribution efficiencies, and help the industry address common challenges.
The alternative protein sector continued to build these networks in 2023, and diversified companies remained active in the space. This collaboration laid the groundwork for future advancements benefitting the entire ecosystem.
The alternative protein market opportunity is immense, and it’s up to companies to capture it.
An evolution in how alternative protein companies operate will continue in 2024. Phrases such as “shakeout,” “normalization,” and “stabilization” were frequently used to describe the dynamics of the alternative protein sector in 2023, and all three pillars were impacted by last year’s broader economic trends. The factors that shaped the environment in 2023 are likely to extend into 2024.
Though there’s optimism for some relief in 2024, interest rates remain elevated, meaning it will be difficult for startups to access free-flowing funding. Investors and stakeholders will expect the capital that companies raise to go further and last longer. Many companies will look to near-term strategies that prioritize cost reductions and quality improvements to reach consumers—even as consumers remain concerned about high costs and personal finances. For early-stage products and those not yet on the market, identifying intermediate revenue streams in technology licensing and ingredient markets—plus clear progress toward scale-up milestones—will be essential to securing additional funding.
To fill the gaps left by the private capital markets, it will be increasingly important for governments around the world to continue to support the growing alternative protein sector through investments in R&D, grants, loans and loan guarantees, and other forms of financing.
A sizable runway
The long-term market opportunity for alternative proteins is vast and will require significant innovation and funding from companies, governments, and investors. The alternative protein industry is in its early stages, and a sizable runway for expansion exists as consumers discover both new and existing products.
Combined alternative protein market forecasts for 2030 range from $77 billion to $570 billion. Such market growth would demand unprecedented investment and innovation in the sector, and meeting even the low-end estimate requires notable advancements in production efficiency, costs, and capacity. Given the current environment, significant growth from today’s market size is possible, but it necessitates levels of public and private investment many times higher than today’s norms.
Companies must continue to refine their processes to achieve maximum efficiencies that create delicious food to generate demand, and brands need to reach consumers about the unique benefits of their products. They will do so in a tighter private capital funding environment than in recent years. Companies must also contend with global regulatory obstacles, manufacturing capacity bottlenecks, and limited consumer understanding of their products.
What’s at stake
While consumers’ financial standing, the health of individual alternative protein companies, and the media’s sentiment regarding alternative proteins are constantly changing, the challenge before us is not. Animal agriculture alone, including the crops and pastures to feed those animals, accounts for between 11 and 20 percent of all emissions (FAO, Nature Food).
Regardless of external market forces, if governments, companies, and investors are serious about improving food security, reducing emissions, and achieving climate goals, they must dedicate more research and funding toward alternative proteins. Consumers report sustained interest in reducing their conventional meat consumption for aspirational benefits, including health benefits, environmental benefits, and more.
By scaling, reducing costs, and improving taste and texture, alternative proteins—alongside other advances and innovations—can continue to shape the future of food and agriculture.
As Hofstadter’s Law and similar adages dictate, this will take time. However, keep our eyes on the goal post and the vision all of us in this industry are working towards – a brighter food future for people and the planet.
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