With funding momentum waning, and consumer education still a steep hurdle for growth, the cultivated meat industry could experience a major “shakeout” leading to the consolidation of key players, a new report from finance advisor Oghma Partners said.
Since being granted regulatory approval in June, Upside Foods and Eat Just have been leading the pack of players and announcing lofty goals of mass production. But even with their past funding success, the report envisions a “challenging outlook in delivering sales to consumers and to stretch funding runways to the point of delivering profitability.” The researchers say this will lead to consolidation in the space.
Upside recently announced the construction of a 187,000 square-foot plant, known as ‘Rubicon,’ that is supposed to house cultivators with capacities of up to 100,000 liters, and will stand as one of the world’s largest and most advanced commercial cultivated meat facilities in the world, the company said.
Other startup companies are flocking to the U.S., as it has quickly become the preferred destination for cultivated meat players, the report said, given the large pool of investors and consumers. 34.8% of investments are later stage venture capital, reflecting growing investor confidence and interest in the market as it matures, the report said. But there are signs that the funding pool may be shrinking.
Funding pool drying up
Cultivated meat giant Upside Foods has been successful in securing a large chunk of available funding. The California-based company has raised around $647 million, or 21.5% of the global total since 2015, the report said.
Meanwhile, other players like Believer Meats, Wildtype, Aleph Farms and Mosa Meat have secured 46.9% of all available funds, and most deals are used for scaling production.
Achieving cost parity with traditional protein has been a challenge for the space — especially under a tight funding environment.
The report says the cultivated space may mimic what happened in the plant-based space with companies consolidating. As the fast-growing space saw slowing demand, many plant-based players either exited the space, curtailed innovation and cut jobs. Planterra, the plant-based meat subsidiary of meat giant JBS, shut down in September, while Maple Leaf Foods cut about a quarter of the staff of its plant-based Greenleaf Foods division. Just this past week, Beyond Meat cut its revenue outlook and announced another round of layoffs as well.
Also similar to the plant-based space, cultivated meat has had a hard time winning over consumers.
Consumer acceptance hump
Many consumers still struggle to understand what exactly cultivated meat is are a long way away from browsing the namesake product on their grocery shelves.
Thus far, the big players only feature their products at high end restaurants and the production process is still too expensive to price the product at a competitive price.
The report also found the U.S. was the region paving the way for the cultivated meat space given the large pool of investors, producers and consumers.
Although the pool of potential consumers may be large, the space may not be ready to address what the consumer pool will demand.