Beyond Meat is considering restructuring its operations in China due to declining demand What are the market opportunities in China for meat and dairy alternatives?Thank you for reading this post, don't forget to subscribe!
When it comes to plant-based meat, Matilda Ho, managing director of Chinese VC firm Bits x Bytes, had some sharp jabs during a panel debate to launch AgFunder’s Asia Pacific AgriFoodTech investment report in Singapore last week: “The 2019 “There was so much FOMO (fear of missing out) around the Beyond Meat IPO around the time that alternative protein companies didn’t even need to send samples and they got money in the bank,” she observed.
“And so a lot of mediocre products got a lot of funding and a lot of startups [in this space] Will be out of China by 2022. Beyond Meat currently only has one full-time employee in China who is basically working as a sales representative to five-star hotels for foreign travelers. [Beyond Meat, which opened a factory near Shanghai in spring 2021, has not responded to requests for comment on product availability or staffing in China],
He added: “The biggest enemy has always been tofu, which was invented by China more than 2,000 years ago, and is very cheap, very tasty, soy-based and clean-label. the only problem is [short] shelf life. To truly solve the protein security challenge, we need better tofu, not cheaper. [plant-based or cultivated] Hamburger Patty.
“However, dairy alternatives are growing rapidly. Not because of stability, but more because of diversity [of options], Chinese people grew up having a soy grinder at home and making their own soy milk, so it’s very familiar. So now it’s about creating many more diverse products from coconut milk to all the different plant-based milks to really give consumers additional options.
“Shanghai is number one in the world when it comes to density of coffee shops per capita, so it really creates a lot of opportunities for all the different plant-based milks.”
Dao Foods International,* which has invested in several startups in the alt protein sector in China, including major domestic player Starfield, was equally enthusiastic about plant-based dairy, and more so than Ho about plant-based meat. The response was positive, although co-founder Tao Zhang acknowledged the challenges facing startups in the region.
AGFunderNews Met him at the Asia-Pacific Agri-Food Innovation Summit in Singapore last week:
- How would you characterize the plant-based meat market in China right now? Which players are driving this market?
- What kind of infrastructure exists in China to support plant-based meat (extrusion, fermentation)?
- What message resonates with Chinese consumers for plant-based meat?
- What types of companies is Dao Foods investing in?
- How supportive is the Chinese government when it comes to alternative proteins?
- Are there many startups in the farmed meat sector in China and is there a clearly defined regulatory pathway to bring these products to market?
- In the US, the media narrative about alt proteins has changed significantly over the past 12 months as sales of alt meat have declined, Beyond Meat has continued to lose money and it has become increasingly clear that cultured Meat is not going to affect it. mainstream meat industry any time soon. How is the situation looking in China?
- How challenging is it for Chinese startups in alt proteins to raise money right now? And what support do they need besides money?
According to Zhang:
Market: “As far as next-generation products are concerned, the plant-based meat market for China is still in its infancy. A lot of nutrition and ecosystem building work is still needed to take this forward.
“China has a long history of plant-based foods, which seems like a good thing for alternative proteins, but it’s actually a challenge because traditional imitation meat products are not considered as healthy or tasty and they have very positive reviews.” The perception is not with mainstream consumers. We want to work with entrepreneurs who can overcome these negative consumer perceptions with solid and attractive products.”
consumer message: “Taste, price and convenience are still the top purchasing factors that drive mainstream consumers to buy food products on a regular basis. But health and nutrition are also playing an increasingly prominent role in purchasing decisions.
“As far as I can tell, mainstream Chinese consumers are not yet easily influenced by ethical considerations, although this may be changing, especially with the younger generation. So this requires people like us to not only invest but also do ecosystem building work to increase consumer awareness about such innovative products, and the benefits they bring not only to consumers, But can also bring benefits for the planet.
basic infrastructure: “Starfield, the first plant-based meat company we invested in in China, has raised enough money to build its own factory, so it’s in good shape. Some other less financed plant-based meat companies still need to outsource part of their production.
“But I would say that China definitely has a competitive advantage as far as fermentation capacity is concerned. For some international companies in biomass or precision fermentation, my advice is to take advantage of what China can offer so you can reduce costs, achieve price parity and create products that are more interesting to mainstream consumers .
Dao’s investment strategy: “We support and invest in all types of alternative protein companies, plant-based, fermentation and cell-based. That’s why our companies create plant-based yogurt, plant-based milk, plant-based snack foods, and plant-based meat and seafood. We are a patient capital provider, we are impact investors, so we typically get involved at a very early stage, because we intend to play a catalytic role.
Chinese government support: “On a macro level the Chinese government is actually very supportive of the new protein. The Chinese President made some comments last year, which sent a good signal to the entire industry.
[In a speech to the Chinese People’s Political Consultative Conference last year, President Xi Jinping said: “It is necessary to expand from traditional crops and livestock and poultry resources to more abundant biological resources, develop biotechnology and bio-industry, and seek energy and protein from plants, animals, and micro-organisms.”]
“And as far as food security is concerned, a big part of it is protein security. “So what we do is very much in line with what the Chinese government cares about and is looking for from a strategic perspective.”
meat is cultivated in china: “Existing pathways exist for government approval of innovation products and materials. But as far as cell-based meat is concerned, I wouldn’t say there’s any clearly defined path to getting products approved and brought to market. We published an article on the legal route for farmed meat products in China on our website [cultivated meat is included in China’s agricultural five-year plan, as well as in the National Development and Reform Commission’s five-year plan],
Investors’ attitude: “As far as the investment community is concerned, there has been some momentum in plant-based venture investing in the last two years. But I wouldn’t say the mainstream investing community knows enough about plant-based or alternative proteins to make more informed decisions.
“But this may change and that is why at Dow Foods we do not only investment work, but also ecosystem building work by raising greater awareness with consumers, but also mainstream investors and government stakeholders.”
Grant: “Due to the economic downturn entrepreneurs are facing an uphill battle in terms of raising funds. Like any emerging sector, entrepreneurs need to be mentally prepared for the ups and downs, so in addition to our funding we also help entrepreneurs refine their narrative. [to attract investors]Refine their business model and provide mentorship and tailored incubation services so they are better positioned to raise more funding when the time is right.
Portfolio Companies to Watch: “I can give you three examples. The first investment we made in China was in Starfield, probably China’s fastest growing and best financed next generation plant-based meat company. They’ve hit nearly 60,000 restaurants and retail stores, so you can find them at chains like 7-Eleven, KFC, Sam’s Club, Family Mart, and Luckin Coffee – the equivalent of Starbucks in China, so they’re selling quite well. – Based on beef, chicken and tuna products.
The second company, based in Shanghai, is called New Night Tea (PlantNow), and makes plant-based milk tea products. They recently entered more than 500 convenience stores in Chengdu, a new tier one city on China’s east coast, and are set to enter nearly 10,000 convenience stores and university campuses.
“The third company is called 70/30, which is using fermentation to develop mycelium-based meat analogs and pre-packaged meals. They have sold over half a million meals since launching in Shanghai and have 100 different food service companies in their network that they have partnered with with the ambition to include more from across China.
* Dao Foods International is an investment firm established in China to create alternative proteins. It was founded by Tao Zhang of Dao Ventures and Albert Tseng of Moonspire Social Ventures with support from New Crop Capital.
The number of alt protein deals in mainland China has declined in recent years, although investment has increased. The 2022 figures were somewhat skewed by a $100m Series B round in plant-based meat company Starfield. Source: GFI analysis of PitchBook data