Appeal of plant-based foods wanes, but Asian startups and investors still in for the long haul

ASIAN players are now pushing into plant-based food, but may be late to the alt-protein party, as investors are starting to back away from the hype.

The industry is struggling with slow mass adoption in the region, even as Asian consumers become increasingly aware of the global food crisis that is behind the growth of the plant-based movement. 

Put off by the price premium, excessive processing and taste issues, consumers in Asia have been hesitant to switch to alternative protein options. Plant-based meat sales made up a mere 0.05 per cent of overall meat sales in the Asia-Pacific (Apac) in 2020, reported The Good Food Institute Apac. In comparison, the report said plant-based meat accounted for 1.4 per cent of total meat sales in the US that year.

In the much larger markets of the US and Europe, a crowded scene and jaded consumers have led to smaller brands failing, with shares in poster child Beyond Meat losing 90 per cent of its value since its peak. 

Still, the market is significant. An outlook report from the Good Food Institute issued in April stated that retail sales of plant-based meat in Europe totalled US$3.3 billion in 2022, up 9 per cent on year. North America sales grew 3 per cent to US$2 billion. In comparison, sales in Apac rose 5 per cent to US$326 million.

“South-east Asia is catching up with the rest of the world when it comes to the flexitarian trend in consumer behaviour,” said Helga Angelina, co-founder of Indonesia food tech startup Green Rebel Foods and plant-based eatery chain Burgreens.

Startups face the challenge of achieving price parity, as the cost of producing alternative proteins exceeds that of traditional meat products. Products which appear to synthetically mimic meat also do not have wide consumer appeal, when it comes to their look and taste.

“Asians are very particular when it comes to the taste,” said Angelina. “Taste is the main driver for people to try, and then come back to the alternative protein options.”

This has pushed startups such as Green Rebel Foods and home-grown Angie’s Tempeh to take on a more localised approach with products.

Karana co-founder Dan Riegler observed that more Asian startups are approaching plant-based food with ingredients and recipes rooted in regional crops and culinary traditions. 

As conglomerates in Asia invest in plant-based products, they also bring attention to alternative protein and accelerate mainstream acceptance, said Green Rebel Foods’ Angelina.

But on the global stage, investors’ appetite for alternative protein is fading. 

In 2021, US$1.9 billion was invested into plant-based protein and dairy globally, 60 per cent more than in the year before, said international think tank The Good Food Institute’s State of the Industry Report 2021. The year 2021 also drew in 312 new unique investors, up by 40 per cent from the previous year.

Then came crunch time. Funding contracted nearly 40 per cent to US$1.2 billion in 2022, as higher interest rates raised the cost of capital. 

Investors became more critical about their investments and did their due diligence before participating in a funding round, by going on factory visits and trying the products, said Angelina.

Pointing to negative press coverage surrounding alternative proteins and poor company performance in the industry, Karana’s Riegler said: “This has raised some valid concerns among investors around what the market really wants.”

Some investors, however, are still biting. Venture capital firm Big Idea Ventures’ Protein Fund II received over 2,000 applications in May, up from some 800 six months before. The fund, banking on alternative protein turning more mainstream, is targeting to raise US$75 million and announced its first close in May. 

Founder and general managing partner Andrew Ive believes investors fall into two camps – those focused on sustainability, and those riding the trend. In his view, investors who understand that the alternative protein industry needs time to evolve and improve are the ones who will stay.

Investing in the agrifood sector requires patient capital, said Harold Au, principal of emerging technology and healthcare at EDBI, the investment arm of Singapore’s Economic Development Board.

It takes time for companies to develop alternative proteins that achieve favourable taste and nutritional qualities at price parity with traditional meats, said Au.

The market’s potential is drawing more interest here. In Singapore, investments in the sector grew to US$170 million by 2022, from just US$6 million in 2019, The Good Food Institute’s State of the Industry Report 2022 said.

Next Gen Foods’ latest funding round in early 2022 raised US$100 million. Temasek-owned Nurasa and German agri-food multinational company Cremer opened their first plant-based protein contract manufacturing facility in Singapore, which can manufacture up to 1,300 tonnes of plant-based protein per year.

And as big-name brands such as Beyond Meat retreat from the regional market, Asian players are taking the opportunity to expand globally, said Green Rebel Foods’ Angelina.

Singapore startups such as Karana and Next Gen Foods now serve their plant-based protein in overseas markets, including the US.

To be sure, the alternative protein industry in South-east Asia and the Apac is still in its early days.

“The ecosystem within the alternative protein sector is relatively nascent in South-east Asia,” said EDBI’s Au. 

While high-profile fundraises in recent years fuelled rapid growth in the alternative protein industry, many startups now face challenges fundraising in a capital-constrained environment, said Au.

Investors prefer companies with strong, replicable cash flows, or at least clear proof of market adoption, he said. To attract investors, “companies must demonstrate economic viability as they scale up their operations”.

Despite the challenges, startups in South-east Asia are keeping the faith. 

Next Gen Foods chief operating officer Alex Ward sees strong long-term potential in South-east Asia, a region with a growing population that is looking for sustainable food options.

Ward said: “Our hope is that with rising education around the connection between food and our planet, and the improvements in innovation of plant-based foods, the region will follow that of the early adopters, and we’ll see plant-based take the mainstream.”