The Rise of Next-Generation Alternative Proteins

Food and Beverages Tech Review | Monday, May 15, 2023

Alternative protein can be an essential component of a reimagined food system. Innovations are crucial for the next generation.

FREMONT, CA: Alternative proteins have been marketed commercially for more than 25 years, but in recent years the category has benefited from the success of new manufacturers and brands. It has also joined a larger movement in alternatives that includes products like milk, sugar, flour, and other food items. As a result, companies in the plant-based category have greatly expanded their product and brand offerings, and there has been increasing innovation in fermented and grown substitutes.

It's possible that the success of alternative proteins has passed its peak, and that depending solely on alliances and marketing spending is no longer sufficient. To satisfy customer needs for healthy, sustainable alternatives with a better product experience and a price point that can support a relatively low consumer elasticity, investments in product and supply chain innovation will be essential.

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The standards for success are shifting as alternative protein synthesis enters a new era. As businesses start to develop their innovation and investment strategies for the next generation to dominate their market, they must take six key market characteristics into account that will determine both the opportunities and difficulties that lie ahead. The next generation of alternative protein products can be introduced to the market and scaled up by those who can manage the enormous headwinds and comprehend tailwind opportunities, resulting in breakthrough acceptance that goes beyond the trail.

1. Consumer preferences: The most important forces behind the reinvented food system continue to be consumer perception, belief, and conduct. Their top priorities continue to be taste, texture, and price, and this is true even with alternative proteins. Despite improvements, the existing consumer value offer is insufficient. To satisfy the four most important buying motivations—taste, texture, affordability, and nutritional value—innovation breakthroughs are required. The category will have severe developmental problems in the absence of notable advancement on all fronts.
There are possibilities to become more customer-centric. The secret to releasing growth may lie in concentrating on the differentiation of value offerings by consumer segment and production technique. Additionally, the emergence of purpose-based purchasing criteria will provide plant-based alternatives with some positive momentum and allow for some premiumisation, particularly within the Gen Z demographic. In places where local resources are scarce and costs are high, grown protein may replace traditional meat. Protein additions may become a common addition to many future ingredient stacks as food and beverage producers continue to review their product lines and align with consumer preferences.
2. Technology and innovation: Given the high cost of capital, the slowdown in capital placement, and the valuation issues certain well-known commercial alternative brands are facing, it is unlikely that investors will continue at this rate. As consumer adoption continues to be slowed by market pressures, poor product performance, and price sensitivity, the next growth spurt will require ground-breaking technologies to increase manufacturing efficiencies, control costs, and enhance flavour. This could manifest as multi-platform improvements that hasten uptake and increase scale efficiency.
3. Supply chain and manufacturing capacity: The majority of protein manufacturing facilities are now set up for more conventional processing. Alternative protein presents a chance for future transformation, diversification, and value creation if market dynamics change favourably. That could entail ingredient diversification in commercial farming to acquire ingredients like wheat, soy, and peas. Alternative protein supply chains will need to change both agricultural diversification and industry production processes to produce protein at scale. It will also be necessary to innovate new goods and procedures due to the rise of cultured and fermented proteins, which are much more dependent on processing than traditional proteins. To expand market share, the category will need to make the shift to intelligent, efficient processing, partnerships, and hybrid manufacturing models.
4. Geopolitical and regulatory environment: The potential for alternative proteins to be less reliant on lands could encourage more regionalized manufacturing. Future global food security plans for nations may include these goods as a key component. The adoption of alternate sources of proteins will continue to be reshaped by growing government participation and regulations on sustainability goals, reporting, and standards.
5. Environmental, social and governance (ESG) agenda: Organisations are trying to incorporate genuine, observable ESG activities to accomplish their reported targets as investors' interest in ESG transparency grows and reporting requirements for carbon dioxide emissions and sustainability initiatives become more stringent. Additionally, consumers favour companies and producers who have made explicit ESG goals, are generating food with lower environmental effects, and use more sustainable production techniques. In summary, companies that can take advantage of consumer interest, the regulatory environment, and the opportunity for ESG-focused finance may be in a good position to gain market share before an uptick in the economy following the recession.
6. Macroeconomics and access to capital: Despite unprecedented government and corporate sector support for alternative proteins in recent years, the macroeconomic outlook and capital availability appear to be conflicted. The likelihood of a global recession in 2023 is dampening category optimism, notwithstanding favourable and supporting federal funding for entrepreneurs and producers of alternative proteins. Alternative protein investment prospects may draw closer attention from private investors, and the likelihood of a global recession is pushing up the cost of financing. However, given the category's recent decline, conditions may be favourable for market consolidation and portfolio proliferation.

By addressing sustainability issues, providing healthier and more nutritious options, appealing to ethical considerations, using technology breakthroughs, and gaining access to a rising global protein market, the next generation of alternative proteins has the potential to promote long-term growth. Businesses and investors in the alternative protein market are anticipated to encounter significant potential for growth in the years to come as consumer demand and knowledge continue to rise.

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