Now is the Perfect Time to Invest in Plant-Based Food Startups, Experts Say
If you've ever thought about investing in plant-based food startups now may be the time. Not only did Jim Cramer of Mad Money tell his viewers that "plant-based is happening" and they should "get on the bus" when it comes to companies like Impossible Foods and Beyond Meat.
Meanwhile, the smaller companies themselves are in need of investment to get distribution and into stores where consumers have started eating more plant-based foods, seeking healthy immune-boosting foods during the CODIV-19 crisis.
One such company is Partake Foods, which was invested in by Jay-Z's fund Marcy Ventures, which infused the vegan cookie maker with $1 million and allowed founder Denise Woodard to expand into hundreds of stores.
These companies promise an innovative plant protein, or a better-for-you dairyless cheese, typically need big dollars to bring their product to the masses. And investors with deep pockets are the catalyst.
Some good news this week signals that more money is in fact flowing into the plant-based food space; for you, that means more options, and perhaps better products at a more affordable price point.
A new report released by the nonprofit The Good Food Institute (GFI) reveals that 2019 and Q1 of 2020 have been recording periods for investment in companies making alternatives to animal-based foods; there was more investment in alternative proteins in the first quarter of 2020 than in all of 2019.
GFI’s report, which analyzes investment activity within the plant-based food sector, shows that US plant-based meat, egg, and dairy companies received more than $747 million in investments in 2019. This is the most capital raised in any single year in the industry’s history; it also surpasses the amount raised in 2018 by 11 percent. This figure includes $457 million in venture capital and $290 million raised by Beyond Meat in their groundbreaking IPO and a subsequent public offering.
Alternative proteins remain the darling of the plant-based food industry. Investment in alternative protein companies in Q1 2020 alone surpassed 2019 entire-year totals: $824 million was invested in 2019, and $930 million already invested in Q1 2020. While the National Venture Capital Association recently released a report that predicts COVID-19 will impact VC funding, thus startups, in the coming quarter, perhaps plant-based companies will not only weather the storm, but thrive.
Demand for plant-based foods, especially proteins are proving their staying power. And so long as there is demand and increased market-share to capture, VC’s will see the money-light at the end of the tunnel. The Financial Times reports that COVID-19 is "reshaping the North American food market," pointing to the plant-based meat sales increase in the last week of April; sales grew 200 percent compared with the same period last year which grew 265 percent over an eight week period.
A Neilson study revealed that in March, plant-based meat purchases increased by 279 percent (compared against the same week the prior year). In comparison, fresh chicken sales grew only by 51 percent over the same time period.
Oat milk showed the highest growth with a whopping 476 percent (while dairy milk saw a 34 percent increase over the same period). Both oat milk and plant-based meats had the highest growth rate in every category. A Self.inc survey found that 23 percent of survey respondents said they were now eating more plant-based meals due to the current health crisis, almost double the 11 percent who said they were eating more meat.
We know that three things need to be present to make eating vegan stick: taste, convenience and price. We are closer on all three of these criteria than ever before. You can thank not only the entrepreneurs, but also the VCs, private equity, and celebrity investments flowing into the space.