People want in, professor Sylvain Charlebois tells protein summit. Opportunity is overwhelming, investment adviser Jonathan Goodkey agrees. And entrepreneur Christopher Boyse finds investor interest in his small firm is accelerating.
Plant protein is on the map and investors definitely want to go there.
“People are investing in food, despite the margin, despite the slow growth, despite the fact that food has always been seen as less sexy than AI, than robotics, than chips, than computers. Not anymore. People actually want in,” Dalhousie University professor Sylvain Charlebois told agri-food business people at recent Bridge2Food international plant-based summits in Saskatoon and Calgary.
“Who invested in Beyond Meat? Leonardo DiCaprio, Bill Gates,” said Charlebois.
Beyond Meat and Impossible Foods in the U.S. have caught regular investor attention as well. Beyond Meat’s initial public offering took off in May with the company topping $6 billion in capitalization within weeks. Privately held Impossible Foods easily raised $300 million to ramp up production in less than a month.
The sector is also stocked with plenty of big deals yielding big money for entrepreneurs and for the investors who gave them a leg up along the way.
Jonathan Goodkey, senior associate with Calgary-based growth equity investing firm Avrio Capital, outlined a growing list of merger and acquisition deals in the plant-based sector, including Canadian firms such as hemp product firm Manitoba Harvest, bought by Tilray for $419 million, and Vancouver plant-based dairy firm Daiya Foods, bought by Otsuka for $405 million.
“When you see numbers like $400, $500 million next to Canadian-based businesses, investors get pretty excited and the dollars follow.”
Given the unexpected size of the Beyond Meat IPO and a recent entry of investment funds that normally concentrate on technology into the plant-based space, Goodkey said there is some concern that there could be a bubble developing. But he said he thinks the sector is here to stay
“The opportunity is just overwhelming at a macro level.”
Nielsen Data statistics for 2018 show two- and even triple-digit growth in plant-based food categories. Plant-based food sales in the U.S. increased by 20 per cent year over year in 2018, compared to two per cent for all food categories. Plant-based meat alternative sales rose 24 per cent to $670 million. Plant-based coffee creamer increased 131 per cent to $109 million.
The rise of the millennial consumer as the dominant customer in the food market is another factor, said Goodkey.
“Millenials are much more focused on health and wellness. … If you don’t want to be a dinosaur you have to focus on the millennial consumer.”
Those millennials are not interested in the brands their parents buy. And they are consuming less meat.
Goodkey said big food is seeing the writing on the wall and creating corporate venture funds to invest in start-up plant-based businesses. Tyson foods was an early investor in Beyond Meat and has now announced plans for its own half-pea, half-beef burger. Unilever and Nestle are moving rapidly into the plant space.
“They’re pivoting because they want to be known as protein companies whether it’s plant or animal,” said Goodkey.
“I bet 99 per cent of anyone who buys (those brands) would have no clue that they come from Maple Leaf. The Field Roast and Lightlife brands are going to stay intact.”
The investor interest isn’t just for established firms.
Boyse said investor interest in his small firm is accelerating. His networking dance card was full at the Calgary plant-based food summit and he left with a pocketful of business cards. He has been meeting with keen investors since, including some Japanese investors.
“So far (the interest) has been more about seeding the business, helping us get to our near time goals,” said Boyse.
“I’m trying to encourage investors to consider investing in a basket of startups in the plant-protein space. Rather than go all-in, spending on one company, maybe have a plant-based nutrition bar maker, a non-dairy food brand, a block-chain logistics company and an innovative plant-protein ingredient manufacturer.”
Boyse said he would be fine with a big food firm taking on Brain Bar.
“More and more we’re hearing about big fish in the food industry looking to take smaller fish under their wing and giving a startup like me access to their well-established resources of distribution and R&D. So, certainly in the next few years, that would be an interesting thing to consider.”
In the near term, Boyse is seeing a gap in accelerator facilities, collaborative spaces and co-manufacturing, all resources available in the high-tech space, but not yet in the ag-tech space.
Creating an ecosystem for the growth and development of startups and small and medium plant-based firms is one of the goals of Protein Industries Canada (PIC).
And PIC, a federally created supercluster initiative, aims to fill another investment gap in Western Canada — the processing sector.
“Together we will invest with industry over the next four years $300 million into the value-added processing sector,” said PIC’s CEO Bill Greuel.
“We want to build capacity across the value chain and expand current markets and enter new products. This is a whole public policy initiative of the government of Canada,” Greuel told the summits.
PIC closed its initial $40-million call for proposals on June 28. A second call for projects closes Sept. 13.
Several speakers from investment, angel and venture capital firms at the Bridge2Food plant-based food summits offered tips for small firms looking for funding. Here are a few of their suggestions:
Pitch early — Ask for the money before you need it because finalizing a deal always takes longer than expected.
Talk often — Even before you’re ready to make a pitch start talking about your plans to prospective investors. And after you have received money, keep in touch and let investors know as you reach benchmarks.
More is better — Try to get a group of investors rather than just counting on one source of funding.
Not just the happy stuff — Of course you want to talk about unlimited possibilities. But also talk about possible obstacles and risks to let investors know you’ve thought about the roadblocks.
Kathy Kerr, a freelance journalist, covered the protein summits in Saskatoon and Calgary