Lab-grown meat: The promising alternative that may be years away from appearing on dinner plates – PitchBook News & Analysis

Several months ago, when the pandemic disrupted production at US meatpacking plants and caused panic about a potential meat shortage, some consumers may have turned toward plant-based alternatives from Beyond Meat, Impossible Foods and others.

But many might not know about the burgeoning lab-grown meat industry, and the companies looking to deliver a knock-out product designed to dethrone the likes of a filet mignon or T-bone steak.

The pandemic-induced panic around meat production could have posed a unique opportunity for many cultivated meat startups to make their way into the industry limelight as viable protein alternatives. But at this point in their journeys, many of those companies are years away from having anything market-ready, and consumers will likely have to wait awhile to see lab-grown chorizo or cultured salmon on their dinner plates.

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"Novel technologies in the past, such as cell phones, took awhile to fully enter the market in a very significant way, and it is going to take a long time for the benefits of cultivated meat to reach a tipping point and become ubiquitous," said Nick Cooney, managing partner at Lever VC, an investor in alternative protein companies.

That's partially because the production of such a game-changing product requires the right recipe: streamlined technology, good flavor and a retail cost that can compete with conventional beef, chicken, pork and fish. Many startups in the space just aren't quite ready to deliver their product at scale yet.

So what else has prevented meat-loving customers from seeing lab-grown chicken, pork or beef on the shelves of their local grocery stores?

Many alternative food startups get one real shot at convincing their target audience to warm up to an innovative product. And many of them don't necessarily want to reach the market first with only an average product. They want an exceptional one.

"It is very important to make sure that we launch a good product and we are not rushing to release," said Aleph Farms co-founder and CEO Didier Toubia. "Culinary and sensory qualities are as important as nutritional value."

Aleph Farms hopes to develop cultivated beef steaks by mimicking cows' muscle-tissue regeneration. The Israel-based company grabbed headlines in October 2019 when it became the first company to produce meat in a 3D bioprinting experiment on the International Space Station, collaborating with Finless Foods, Russia-based 3D Bioprinting Solutions and others.

One of the biggest challenges facing cultivated meat products is the replication of conventional meat's texture, taste and nutritional characteristics.

For startups, that means lots of R&D costs, according to Matthew Walker, managing director at S2G Ventures, a VC firm that invests in sustainable foodtech and agriculture companies.

To develop lab-grown meat, scientists must isolate stem cells from an animal and allow them to multiply in a lab, regenerating muscle, fat and tissues.

A few companies are spending $100 to $150 per pound to develop products, but hope to reduce costs to around $5 to $10 per pound to compete with the conventional animal protein market, Cooney said.

"On average, companies expect about three weeks of production to cultivate the same amount of meat you would get from a beef cow that had to live for 18 months," he said.

To help their cultivated meat products become a household name, some founders are seeking support for technologies and supply-chain processes designed specifically to create their products.

Brian Frank, a general partner at sustainable food-focused firm FTW Ventures, said cultivated meat startups essentially need "Amazon Web Services for biology" to scale production. Processes need to be automated and tracked through software and services, he said.

"Right now, most founders have no one they can go to and say: 'I have the design, can you build an infrastructure and produce the product for me?'" Frank said.

The coronavirus pandemic has raised questions about food sustainability and the reliability of supply chains. That could result in beneficial attention for alternative food startups.

Memphis Meats co-founder Uma Valeti said consumers are now more eager to hear about what cultivated meat startups are doing than they were in the past. That heightened interest has snowballed into venture funding. Venture capital investment in cultivated meat startups for 2020 has so far jumped about 116% compared to last year's total, according to PitchBook data.

Investors have also gauged interest in alternative protein products from market research studies and consumer surveys.

"Consumer feedback has been great for a product that virtually no one has been able to see, taste or touch yet," said Cooney.

Government regulations present another hurdle for startups, as authorities still have a lot of ground to cover in the development of firm frameworks. In March 2019, the US Department of Agriculture and the Food and Drug Administration agreed to share regulatory responsibility for cell-cultured livestock and poultry products in what was a breakthrough for the industry.

The FDA is expected to regulate processes involving cell collection, cell banks and cell growth, while the USDA will oversee the production and labeling of cultivated meat products.

Because most of the product development takes place in a lab, the FDA will play a larger role in cultured meat regulation than it does for conventional meats, which are largely governed by the USDA. And on the flip side, lab-grown meat won't have to go through inspections for things such as bacterial contamination or be subject to slaughter regulations, like conventional meat.

Memphis Meats doesn't have a product on the market yet. But Valeti said that during the pandemic, his team has intentionally made an effort to increase brand awareness by educating consumers about how they create their products, hosting tasting experiences with food experts and using consumer surveys to understand potential demand.

"Consumer polls are helping investors recognize the opportunity of getting behind a scalable product," Valeti said.

But will that exposure among investors ultimately translate into mass production?

Cell-based meat companies won't just have to compete with the skyrocketing popularity of plant-based products. They'll also face consumer skepticism around whether lab-grown meat can be just as good as conventional meat, and whether it will whet their appetites in the same way.

"Cultivated meat companies will need to do a good job of making clear to consumers that their products are real meat and not another plant-based replica," Cooney said.

Despite a rise in demand for plant-based products, BlueNalu president and CEO Lou Cooperhouse remains skeptical, pointing out that while those products offer a vegan solution, they're often made with highly processed ingredients.

"Cell-based meat is the holy grail to make an animal product without an animaltruly, extraordinarily disruptive," he said.

BlueNalu develops cell-based seafood made directly from fish cells and tissue. The company says its products are free of plastics, pathogens, toxins and other contaminants.

Cooperhouse has ambitious goals for his company, and anticipates that in the next five years, its first factory will be producing 10 million pounds of lab-grown fish annually.

That's the kind of production rate that cultivated meat startups will need in order to compete with other, cheaper proteins.

"Most startups are pretty far off from competing with a $2 McDonald's burger, and a lot of work needs to happen to achieve that price point," said Frank. "No one can make a baby in one month."

Feature illustration via Julia Midkiff/PitchBook

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Lab-grown meat: The promising alternative that may be years away from appearing on dinner plates - PitchBook News & Analysis