The alternative protein market has been one of both unbridled enthusiasm and uncertainty. The news in recent years has been focused on faltering sales and market slumps—certainly compared to the booming years of the recent past. But this year’s Horizons report from CRB shows an industry that is not only resilient but that is growing in maturity, becoming more cognizant of what the business model needs to look like and how they will get to where they want to be.
For the past few years, CRB has called on its corps of subject matter experts to survey and analyze key sectors of the food and beverage industry. Though CRB tackled alternative proteins for its 2021 report, it decided to revisit the topic for its 2023 Horizons report. “It was just irresistible for 2023 because that market has changed so much,” says Tony Moses, director of product innovation at CRB.
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Almost 60% of the more than 150 alternative protein producers that responded this year are manufacturing at commercial scale, up from 25% in 2021. Almost two-thirds of those surveyed have seen an increase in sales volumes since 2021 as well.
The players are becoming savvier and more sophisticated, becoming more strategic with their budgets. In 2021, the business drivers were strongly leaned toward sustainability. Although sustainability remains important, “now the picture is more complicated and nuanced,” Moses says.
Although sustainability remains an important business driver, the picture is more complicated and nuanced than it was two years ago.CRB
The top six influences run neck and neck—including inflation pressures/costs, labor availability/expectations, sustainability, changing product demand, supply chain constraints, and achieving price parity with traditional proteins. Moses points to this list of drivers as a sign of maturity in the market.
“That looks very much to me like a typical CPG company. Maybe it’s amplified a little bit by some of the failures in alt protein that we’ve had on the market,” he says of the changing product demand influence. “Our opinion in general is these companies have matured quite a bit, and there’s more data in the survey that indicates this, and they’re starting to try to operate like successful food companies that have sustainability as part of their mission.”
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Lower down in the ranking of business concerns are manufacturing onshoring, regulations, access to capital, retailer requirements, all similarly ranked, and then e-commerce even lower. “This is good news that access to capital is not in the top tier, but I think it’s certainly risen since we took the last survey,” Moses says.
Looking at top factors for retaining customers, the top three are clean label/ingredients, selling price, and taste/smell. There’s a noticeable drop to sustainability in fourth place. “I think the industry is acknowledging that, if they don’t have a product at the right price and that consumers like to eat, sustainability doesn’t matter to them as much,” Moses says. This doesn’t mean that sustainability isn’t still important, he adds, but that producers are better understanding the need for a successful commercial model. “We’re starting to see a little bit more savvy and nuanced producer out there, even though these are weighted very heavily to small companies. That’s a big change we’ve seen since 2021—they’re not so myopic on the sustainability mission; they’re acknowledging all the other challenges that food producers have to deal with.”
Clean labels, price, and taste have become more important factors in retaining customers.CRB
Producers in the alternative protein space have also gotten savvier about what it takes to build significant capacity, according to Moses. In 2021, the percentage of respondents expecting to build or expand facilities was at 48% even though those expecting to have capital projects valued at $25 million or greater was only 35%—a significant gap, considering $25 million tends to be the entry point for significant expansions or builds. In the 2023 report, that gap has narrowed: 38% expecting to build or expand facilities, and 32% anticipating capital projects of $25 million or more.
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“I still think that there is ambition to build capacity in this space, but I think it’s being more right-sized to the size of the company,” Moses says. “We’re not going after these large ambitious projects where we really haven’t proven that there’s a market demand for some of these productions.”
Plant-based meats still optimistic
There are plenty of sad stories out in the press about the demise of the plant-based meat category—big names like Beyond Meat and Impossible Foods struggling in the marketplace. “Our data is telling us, though, that the underlying story is a little bit more optimistic,” Moses says. A look at where producers are in terms of their commercial sales distribution shows progress. “Roughly 50% of products in the pipeline are at some kind of significant commercial sales level, and that’s a large increase compared to what we saw in 2021.”
An additional 21% of products are in test markets, Moses points out, which is also encouraging. “They’re out there getting market data, figuring out what works and what doesn’t in real time, which I think is really powerful,” he says. “What we were seeing before was 50% had no commercial sales. Now we’re seeing only 25% have no commercial sales, and we’ve got 75% now out in the marketplace. So that looks really healthy to us.”
The cost to produce plant-based meats has fallen by almost 10% since 2021.CRB
Another healthy sign for the sector has been its ability to reduce the cost of the products—dropping from an average $3.52/lb in 2021 to $3.32/lb in 2023. “This is likely not where we want to see it; I would think we’d want to see that at $2/lb or lower,” Moses concedes. “But in the last two years, we’ve seen almost a 10% reduction in the cost to produce these products.”
Mycelium-based meats look to production levels
When CRB first reported on alternative proteins in 2021, the company was really only looking at plant-based meat, plant-based dairy, and cultivated meat, Moses notes. Since then, precision fermentation and mycelium-based proteins have really emerged, so have been broken out in the latest report. However, since mycelium-based meat is still a relatively small subsector, it is often still grouped with plant-based meats for analysis.
The analysts did take a closer look at mycelium’s growth on its own, however. “What we hadn’t anticipated in this survey was how rapidly the mycelium-based market has advanced,” Moses says.
He points to survey results showing an average targeted bioreactor size of 25,400 L by 2027. “For reference, we consider about 20,000 L or less to be more of a pilot size. To take it up to production levels, we like to see our clients get to 50,000 L or greater,” he says. “So we’re pushing past that pilot range now.” In fact, 11% of the respondents say they’re targeting production-level bioreactors in 2027, with 7% expecting 100,000 L or more.
Mycelium-based meats are pushing past the pilot stage.CRB
It’s particularly interesting to compare that to cultivated meat, which has a targeted average bioreactor size of 8,500 L. “That’s telling us that this [mycelium] industry—even though it’s been kind of quiet and certainly not gotten the headlines that cultivated meat has from a technical standpoint—it’s really pushed out in front of that industry.”
Plant-based dairy settles in
Plant-based dairy is perhaps the most mature sector in this space and has continued to grow. Almond milk has dominated, with other activities primarily from soy, coconut, oats, pea protein, and cashews.
“One of the first interesting findings was that the innovation in this space is shifting,” Moses says. “When we did this in 2021, the whole world was just buzzing with what’s going to be the next plant-based milk type. Oatly was new on the scene, and everybody was trying chickpea, and nobody knew what was next.”
By 2023, things hadn’t really changed that much, though. Oat milk certainly moved up the ranks, with the success not only of Oatly but other oat milks and creamers. “But there hasn’t been any really new ingredient that’s burst on the scene here,” Moses says. “I had argued that the innovation in the milk space has essentially peaked. However, we think the innovation is actually shifting downstream.”
With innovation shifting downstream in the plant-based dairy sector, ice cream has taken over more of the market.CRB
While milk and yogurt accounted for almost three-fourths of the plant-based dairy market in 2021, they’re accounting for only about half of the market now. This is not to say those sales are decreasing—rather, the ice cream sector has taken off, with some growth in cheese alternatives as well, Moses says.
Cultivated meat feels its way to market
The cultivated meat sector is showing some maturity as well. “We knew that there were challenges in the funding and venture capital with this sector, but we weren’t sure how this would ripple through the industry,” Moses says. The data paints a pretty clear picture, though. “In general, what we’re seeing is that companies are being more judicious with their capital spending, but they’re not going out of business. They’re not stopping trying to build; they’re just doing it in different ways.”
The first positive sign comes from two questions asked separately: 1) How much time do you think it will be until you have regulatory approval? 2) How much time until your first sales? The results of the two questions look very similar. “They don’t exactly line up, but you could probably swap those titles and still kind of get the same takeaways,” Moses says. “So something to note from that is that the time to first sales is tied to time to regulatory approval. Companies are looking to get that regulatory approval and then have the product on the market.”
People often ask when we might actually be able to buy cultivated meat in the U.S. “I think the answer to that is two years,” Moses says, looking at the data. “Roughly three-fourths of respondents are saying that they anticipate having product to market and regulatory approval in two years or less.”
That might be on the optimistic side, however. As noted earlier, the average bioreactor target volume through 2027 is 8,500 L, what CRB considers a pilot volume. Only 2% of respondents expect to reach 50,000 L within that timeframe. “Our sample size here was 54, so that means only one respondent came back and told us that they’re planning on having bioreactors at that commercially relevant scale by 2027, and that’s quite a ways out,” Moses points out. “So this is telling us that the majority of these companies are being conservative with their infrastructure investments. They know they need to make them. They know they need to get product out there on the market. But they’re going for smaller sizes.”
Cultivated meat's average bioreactor target volume through 2027 is 8,500 L, what CRB considers a pilot volume.CRB
Looking at responses as to how the cultivated meat companies plan to reduce costs paints a similar picture. The No. 1 plan is to target equipment and facility costs, with only a third of respondents planning to focus on raw material costs—even though those raw materials typically make up two-thirds of the cost of cultivated meat. Likewise, only about a quarter of respondents plan to tackle yield and throughput.
“Our takeaway is that they’re just not yet in the mindset of high throughput and getting out there and being competitive in the market,” Moses says. “They’re in the mode of just getting something out there. They’re getting product to market, figuring out what works and what doesn’t, getting some revenue, and then going from there.”
Precision fermentation surges ahead
With this being the first year CRB included precision fermentation in its report, there was some excitement about what they would find.
Moses mentions Perfect Day as a precision fermentation company that’s making waves in the dairy market. “They’re collaborating with a lot of different companies, like Mars, to make cow-free chocolate,” he says. Brave Robot is a brand of ice cream using Perfect Day’s whey protein, as another example.
CRB analyzed market trends in the media. “There was a huge growth rate in precision fermentation in the media, so we were anticipating this to be big and real,” Moses says. “It is bigger and realer than we originally thought, but it still looks like they’re struggling with their commercial model.”
For one, the large majority of respondents expect their products to be sold at a premium—an average of 18% above traditional products. CRB asked those companies what claims they would use to justify that price premium. “Sustainability [at 81%] was far and away the most commonly chosen feature,” Moses says, followed by functional properties (59%), superior food safety (52%), animal-free claim (44%), and amino acid profile (33%).
Precision fermentation products are expected to be sold at a premium, based largely on sustainability claims.CRB
A question about top business influences, however, paints a different picture. The No. 1 influence there was achieving price parity with traditional proteins. “This tells me that their cost of producing is still way too high,” Moses says. “So they are developing a premium product at the same time that they’re trying to significantly reduce costs.”
Taking sustainability further
For all of these categories—plant-based dairy, plant- and mycelium-based meats, cultivated meats, and precision fermentation—being an alternative protein, by its very nature, has a lot to do with sustainability. In many cases, they provide healthier alternatives, but they also provide alternatives for people looking to reduce their environmental footprint through the foods that they choose.
It's not enough, however, to produce a more sustainable food or beverage choice. These companies are perhaps under even more pressure to produce those products through more sustainable operations.
The good news is that alternative protein companies as a group seem to be committed to sustainable practices. It is a healthy sign for the sector that more than half (55%) of those surveyed have sustainability budgets. However, those numbers don’t align particularly well with the number of companies that have sustainability goals (45%) and a plan to reach those goals (41%).
“There are far more people that have a budget than have goals or plans,” Moses notes. “To have sustainability be at the core of this industry, we’d like to see more companies with goals, plans, and budgets. But given the size of the companies and a space that’s heavily weighted towards startups, that’s typically a tough thing to do for smaller companies; they often just don’t have the resources to do that.”
Asked what they see as the most significant challenges in addressing sustainability goals, 80% pointed to insufficient funding for capital projects. Other major challenges are the lack of available workers (79%) and the inability to find new technology or equipment to meet sustainability goals (78%).
Diving a bit deeper into the technologies that alternative protein companies are using to be more sustainable, Moses points to a good amount of recycling (70%) and compost/food waste reuse (63%). He’s bothered, however, that energy and water conservation measures (57%) don’t figure more prominently into operations.
Looking at the technologies used to improve sustainability in operations, it's concerning that little more than half include energy and water conservation measures.CRB
“To only see half of the companies actively doing that starts to be a little bit concerning because that’s well within their control,” he says. “You can establish an ROI for that. You don’t even have to consider this typically to be a sustainability play; it’s more of a business plan and operational play.”
Food safety drives spending
The alternative protein industry is taking food safety seriously and, in fact, food safety is driving future capital projects. “If you don’t have safe food, you’re out of business. What I want to make the case for is now they’re willing to spend dollars on it,” Moses says, pointing to the kinds of food safety upgrades that are planned for the next couple years. More than half of respondents have plans to upgrade their environmental controls—things like air handling systems separated by raw or cooked spaces or even separate water coming into different areas—which are not trivial and are more capital-intensive.
An increasing number of alternative protein companies are putting money into food safety capital projects.CRB
A significant number of companies are implementing hygiene procedures such as dedicated personnel entrances for different production areas (63%), controlled access (57%), plant uniforms (60%), and captive shoe programs (49%).
“We’re seeing people upgrade from gowning to uniforms and even captive shoes,” Moses says. “That requires the capital to have locker rooms to store all of that, places to put them on, that type of thing. It’s not just a quick transition space as you walk into a facility.”
Companies are paying close attention to hygiene procedures, according to the report, and are showing signs of sophistication. “As companies move to production scale, they are increasingly focused on hygiene, food safety, and product quality,” the report says.
