Case Study

New Crop Capital: Ripening $6 billion alternative protein market ready for picking

Launched in 2015, New Crop Capital (NewCropCapital.com) is a $25 million venture capital fund that invests in sustainable start-ups developing “clean” (i.e. cultured) and plant-based meat, dairy and egg products, as well as in supply chain and distribution channels for these products. An investment strategy, the firm says, that is about both saving the planet and making money.

Ripening $6 billion alternative protein market ready for picking

Bruce Friedrich, Chief Executive Officer at New Crop explains, “In 2014, the global meat substitutes market was worth about $3.4bn and is forecast to grow by 7.5% a year over the next
five years – making it worth nearly $6bn by 2022. And these are conservative estimates, so it is an exciting sector.”

Anticipating the effects of climate change and other mega-trends

New Crop Capital believes global mega-trends such as climate change and a growing global population will accelerate the growth of alternative proteins. “If we are going to feed 9.7
billion people by 2050 and stay within the twodegree limit set by the Paris Agreement, we have no choice but to shift away from animals for protein”, says Friedrich. “The livestock sector
contributes about 40% more than transport to climate change, and it’s a vastly inefficient way for us to meet our protein needs. Clean meat products present a big opportunity for companies that can devise a tasty and affordable plant-based or cultured substitute for meat, and for those who invest in them.”

“Clean meat products present a big opportunity for companies that can devise a tasty and affordable plant-based or cultured substitute for meat, and for those who invest in them.” – Bruce Friedrich, Chief Executive Officer at New Crop Capital

Changing consumer preferences are driving the growth of the alternative protein market, argues Friedrich. He continues, “Consumers are increasingly aware of the impacts of agriculture be it on carbon emissions, land and water pollution, resource use or human health. If we can make alternatives that are cheaper, delicious and convenient, then we will see big growth. The alternate meat market could mirror the success of alternative milks, where options such as soy and almond milks now account for more than 8% of the milk market. That could make  the industry worth more than $16bn in the next ten years just in the United States.”

Scaling up has started

Although New Crop Capital’s typical investment is in the $100-500k range, which is small compared to institutional investment, they believe there are already signs of the alternative protein market being ready to scale up. Friedrich says, “The UK alternative meat company Quorn was sold for more than $800m in late 2015. And the company has experienced significant growth sales in the US increased 30% in 2016.”

Exciting opportunities

Though relatively young, New Crop Capital has a strong deal pipeline and has already invested in more than two dozen companies, including:

  • Memphis Meats – a “clean” (i.e., cultured) meat startup developing chicken, duck, pork and beef, which has already raised more than $20 million in funding. While
    not yet commercialised, the company is accelerating beyond expectations, including serving hundreds of clean meat tastings to luminaries, investors and influencers.
  • Kite Hill – a manufacturer of popular nut dairy products, and which secured an $18 million investment from food conglomerate General Mills.
  • Beyond Meat – a plant-based meat company that is putting its burgers in the meat aisle, and also counts Bill Gates and some of Silicon Valley’s biggest venture capital firms
    as investors.
  • Miyoko’s Kitchen – an artisan plant-based cheese company.
  • Alpine Roads – an agri-science company developing new transgenic plants capable of producing animal proteins, which can then be harvested and used as ingredients to make
    animal-free food alternatives.
  • SeaCo – a plant-based seafood company, with a soon-to-launch plant-based tuna under the “Good Catch” brand, developed by world-renowned chefs.
  • Geltor – a start-up using genetic engineering and fermentation techniques to manufacture gelatin without animals.

Big names are taking notice

It isn’t just New Crop Capital that is excited about the opportunities in the future of food. Big name investors such as Bill Gates and Google co-founder Sergey Brin are also investing in
alternative meat companies. In March 2017, the National Academy of Sciences released a report, “Preparing for Future Products of Biotechnology,” written by more than a dozen top scientists that identified clean meat as one of the top biotechnology products expected to be produced in the next decade.

And more tellingly, the meat industry itself is taking notice, too. For example, Meatingplace Magazine, a magazine for the meat industry, ran a cover story about the plant-based meat substitute market in their March 2016 issue. The feature indicated that plant-based proteins and vegetables are the top trends for the year, and in the January issue of the same magazine, the editor suggested that the meat industry itself should put R&D and M&A resources into plant-based and clean meat companies like Beyond Meat. This year, Tyson Foods did just that. Tyson’s CEO publicly recognized the growing demand for meatless protein, and the company launched a $150 million venture capital fund to invest in meat alternatives.

Alternative proteins also have their own nonprofit, The Good Food Institute, which includes a team of scientists, policy experts, and other professionals dedicated to promoting plant-based and clean meat alternatives to conventional meat, dairy, and eggs. New Crop Capital works closely with The Good Food Institute’s team of senior scientists to develop a thorough understanding of the landscape for both clean meat and plant-based protein R&D. A new trade group, the Plant Based Foods Association, has also been established.

The transformation of the food system is well underway and New Crop and their allies are determined to advance the next generation of food industry disruptors.

More information:
newcropcapital.com