Can Meat Become Animal-free?

Since the dawn of civilization, food has come from two sources only: plants and animals. The hunter-gatherers got plants from foraging and hunting. The later farming culture would plant crops and raise livestock.

Meat consumption has been part of most food cultures ever since. So while veganism is definitely a growing trend, there are a lot of consumers that are very reluctant to give up meat. There are also a lot of vegans avoiding meat consumption over ethical grounds (animal rights) but who would love a suffering-free meat option.

And there is also the environmental concern. Cattle farming is a massive methane producer (a powerful greenhouse gas) and also a massive consumer of land and water.

This is why a new category of innovative startups is working on an alternative, with $2B invested in the sector in 2022. What you could grow in a lab is the final product, animal muscle tissues, without having to ever kill an animal.

Growing a steak directly in a lab is far from an easy task. Muscles are complex tissues that are hard to replicate artificially. And most of the culinary qualities come from an elaborate mix of different tissues, highly specialized cells, and a complex chemical mix.

The first problem is acquiring good stem cell lines. It can be a technical and expensive process.

The next issue is having the muscle cells grow in the form of a solid and tasty steak, instead of a half-liquid mush of cells. The solution is to use scaffolding, using material like cellulose or artificial material to provide the shape of the future meat. The difficulty of missing blood vessels in the meat is an extra complication.

And lastly, there is the question of cost. The lab-grown meat industry uses a lot of high-tech solutions and highly-trained scientists. But it has to compete with just feeding a cow and then killing it.So scaling-up and cost-efficient methods are a must for the product to go beyond a small niche.

This list has been made from a subjective analysis of assessing technology and the financial position of the companies. They are ordered from largest to smallest market capitalization. This is for educational purposes and not investment advice.

Tyson is a giant in food production, especially meat products, providing 20% of the meat consumed in the US. So this is an investment that might be putting off investors seeing it as an ethical issue.

It is nevertheless a large investor in alternatives to meat through its venture capital branch, Tyson Venture.

It includes a 5% stake in plant-based meat substitute Beyond Meat and investments in Future Meat Technologies and Upside Foods. Upside food became a $1B company in 2022 and Future Meat reach a cost of $7.7/pound of chicken in 2021.

Tyson also invested in mushroom fermentation technology, genomic food safety, a food ordering app, and plant-based shrimp products.

Tyson Food is a $21B company, with 2022s revenues of $53B and $3.4B in net income. This makes it a very safe bet for investors looking for exposure to meat-substitute, both plant-based and lab-grown.

If society starts to turn away from conventional meat products, Tyson will be able to rely on its investment to keep its business stable. And if it does not happen, it will continue to benefit from its dominant position in the traditional meat market.

Another meat giant, but from Brazil, with 250,000 employees. While it is primarily focused on meat, it is also involved in afferent business like cold chain, leather products, collagen and logistics, for a total of 42 brands.

The company has invested $100M in 2021 for acquiring Spanish startup BioTech Foods and building an R&D center in Brazil. Commercial production is expected to start in 2024.

In 2021, it also acquired Dutch company Vivera, Europes largest independent plant-based food company, for $341M, adding to a previous similar acquisition of Seara. All significant investments for the $7.8B company.

As for Tyson, this is a bet on dominant meat processors staying the leader of the industry, either with traditional products or with new alternatives. It also provides exposure to South American and European markets.

Agronomics is a venture fund focused on lab-cultivated cells.

This includes lab-grown meat, but also alternatives to leather, eggs, dairy, as well as plant-based alternative, lab-cultivated chocolate, lab-cultivated cotton, and lab-cultivated pet food.

The portfolio is quite diverse, with various geography, segment and startup maturity and the largest investment in one companyjust 11.4% of the total portfolio, and most below 5%.

Source: Agronomics

The company was a pioneer in the field, starting in 2018.So far, gross IRR (Internal Rates or Returns) have been an excellent 23%, with Agronomics Limited leading 14 funding rounds.

This company offers an interesting option for diversified exposure to the sector, while letting VC specialists handle the research and pick what they consider the most interesting deals.

Another venture focused on innovative food products. The company was founded by Brendan Braziers, one of the co-developer of the Beyond Meat burger.

It is currently invested in 18 companies, including Eat Just, the first company in the world to have commercialized lab-grown meat (approved in 2020 in Singapore). The rest of the portfolio includes lab-grown meat, eggs, coffee, seafood, dairy, honey, gelatin, and chocolate.

Like for Agronomics Limited, as it only invests in pre-revenue startups, it is too early to use earnings or cash flow as a metric. It is a bet that lab-grown meat will reach the point where it is widely consumed and is profitable thanks to a decrease in costs and technological improvements.

Together, these 2 venture investments can offer very diversified exposure to lab-grown food products.

Also formerly known as MeaTech 3D Ltd. The company has 80 employees, with a presence in Israel, Belgium, and the USA, and raised a total of $54M. It is also one of the rare lab-grown meat companies that have not been acquired by a larger company and chose to be publicly listed.

Steakholder relies on tissue 3D printing for the production of its meat and submitted 18 patents on that topic (4 patents granted so far). It should allow it to fully replicate the look and texture of full-animal meat, aka structured meat.

The company is aiming to submit its products to regulators in early 2023 in Singapore and in late 2023 for the USA and EU. So the company is, for now, pre-revenue but could reach commercialization soon.

With barely a double-digit market cap, Steakholder is a bet that their 3D printing technology can allow for a superior product, quick growth and more fundraising.

The company had $11M in cash in Q3 2022, for a quarterly loss of $2.5M. The stock listing might be forced to move from NASDAQ to the OTC market as it has recently been trading below $1/share.

Investors interested in that sector can choose between a few different strategies.

The first one is to count on the dominant meat sellers to keep their grip over the market, through their marketing firepower, distribution network, and deep pocket. In this context, lab-grown meat would not really change the market structure, just the products sold.

Another option is to hope for newcomers to be more innovative and efficient, and able to create a whole new segment that they will come to dominate. In that case, if the bet is on the sector in general, investment in diversified venture firms allows to not have to pick a winner and just let VC do the leg work of research and due diligence.

Lastly, investing directly in individual companies is an option. For now, the choice is quite limited, but many of the currently private cultured meat companies will try to IPO in the future. This can be riskier, but also more profitable if the stock selection turns out to be the right one.

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Top 5 Lab-Grown Meat Stocks to Invest In ([month] [year]) - Securities.io