The plant-based food sector was enjoying a consumption uptick pre-COVID, mainly driven by increasing consumer awareness of the health, moral, and environmental benefits of plant-based diets.
Plant-based offerings are now broadly available across categories in grocery and foodservice, including alternatives for meat, cheese, eggs, and sauces. Protein replacements have lagged adoption due to the difficulty of replicating taste and texture but are becoming more readily available as investment in food technology is catching up to consumer demand. Perhaps the most well-known meat alternatives, Beyond Meat and Impossible Foods, are recognized for their imitation qualities and have seen rapid growth in both grocery and, in particular, quick-service restaurants (QSR)—offerings that spur trial and adoption to mainstream consumers.
The diet preference of vegan, vegetarian, or “plant-based” has become increasingly approachable to the average consumer through continued awareness of its benefits, aided by a change in vernacular and mainstream QSR placements. Vegan diets were the leading force for plant-based options, but more and more consumers are simply adding plant-based items as available (“flexitarians”), which continues to augment the demand function.
The stage was set at the start of the pandemic for increased consumer exploration, and it was compounded by forced changes in consumer behavior toward at-home consumption and a temporary shortage of meat products due to COVID’s impact on the meat processing industry and traditional protein supply chain. These emerging trends have accelerated plant-based food sales in multiple channels. Whole Foods and Sprouts have historically been incubators of plant-based products, but more mainstream outlets like Target and Walmart are now dedicating significant shelf, refrigerated, and freezer space to plant-based offerings.
In 2018, the plant-based protein and meat alternatives market hovered around $4.6 billion, and UBS projects this will increase to $85 billion by 2030. The transaction environment for food technology and plant-based alternatives will rapidly accelerate as investors look for opportunities that align with consumer trends and tailwinds while offering meaningful points of differentiation.
An overwhelming number of emerging brands in the broader food landscape are “copycat” offerings with little true differentiation or innovation beyond the brand. Conversely, the plant-based sector is driven by substantial research, development and innovation requirements. The unique technology and science required to achieve palatable taste and texture profiles that accurately mimic their non-plant-based counterparts make these products inherently more differentiated, and thus more valuable, than counterparts in other categories. That differentiation is attracting new pools of capital, from both the private equity and strategic communities.
Much of the current transaction activity is occurring with growth equity because many of these companies are nascent in their lifecycle and need capital to fund their high growth trajectory. As the companies advance and scale, strategic exit opportunities will proliferate.
What’s Your Why?
I have a personal interest in “better-for-you” nutrition options and positive sustainability outcomes, and plant-based products align with my passion to help resolve larger global food supply chain issues. Additionally, the opportunity to work with clients who are passionate about their product solutions and company missions, combined with the ability to deliver transaction outcomes that are both quantitatively and qualitatively satisfying, is incredibly rewarding.
About Erik Einwalter, Managing Food, Beverage & Agribusiness
Erik provides leadership of Cascadia Capital’s transactions in the food and beverage sectors, working with branded companies in the space, as well as those who manufacture for others in the form of contract manufacturing, private label, and foodservice. Throughout his career, he has completed over 40 transactions with over $2.0B in total value. Prior to Cascadia Capital, Erik worked at Salem Partners in Los Angeles where he delivered sell-side, equity placement, and valuation services to clients across numerous industries.