With the rise in veganism and people increasingly choosing a plant-based lifestyle, more startups in the sector are mushrooming across the globe. However, will it be able to replace meat-based businesses?
Ross Forder, an ex-Tesla employee is the founder of Halo Burger, the vegan eatery which sources patties from the US-based vegan company Beyond Meat. His former boss inspired his own entrepreneurial journey. “During business meetings with Elon Musk, I was inspired to dream bigger and I realised I could have more impact [by] starting my own business aimed at reducing animal product consumption,” he recalls. Forder strongly believes plant-based products will soon annex the meat industry entirely. “Some meat substitutes such as burgers and sausages will become totally indistinguishable from the real thing,” he says. Forder isn’t the only one.
Given how the global vegan industry was worth £10.5bn in 2017, according to statistics portal Statista, you don’t have to go out on a limb to venture a guess as to why a cohort of startups are venturing into the sector. Add to that business consultancy ATKearny estimates only 40% of the global population will be consuming meat by 2040, 35% consume lab-grown meat and 25% having vegan meat replacements, the food industry seems ripe for disruption. “Vegan products will move from being a fringe product offering to something more mainstream,” says Al Shariat, director at Coconut Merchant, the coconut-based vegan startup.
Veganism is particularly prevalent in the UK where more than half of Britons changed to a meatless diet in the last year, according to GlobalData, the data analytics and media company. “Demand has grown due to campaigns like Veganuary and high profile celebrities promoting a vegan and environmentally-friendly lifestyle,” believes Michael Nagle, co-founder of Veganish, a vegan tech startup. The spike can arguably also be attributed to celebrities like Beyonce, Miley Cyrus and Benedict Cumberbatch jumping on the vegan bandwagon. “In parallel, people’s awareness of how a vegan lifestyle improves health, prevents animal suffering and positively impacts climate change is stimulating more people get involved and start new businesses and movements,” Nagle adds. “The industry is seeing significant growth across all sectors, it’s encouraging innovation and the rate of change makes it a very stimulating industry to be in. In some ways, it reminds me of the early dotcom days.”
Furthermore, figures prove how the meatless market is gaining traction in Blighty as the UK even overtook Germany with the highest number of new vegan food products launched in 2018, according to Mintel, the market research company. Startups like AllPlants, the vegan food delivery service, secured £8.3m over two rounds and plant-based burger joint The Vurger Co. bagged £900,000 in a combination of venture and crowdfunding. And British streets are witnessing a plethora of such plant-based chains sprouting every few months, leaving no cuisine out. “As lifestyle choices continue to become more sustainable, fuelled by access to the vast information out there increasingly pushing this agenda as necessary for our planet, I only see it continuing,” says Loui Blake, founder of plant-based joints Erpingham House and Kalifornia Kitchen. These will inevitably have more investors salivating to pump in money in this sector.
And it’s not just fringe startups that’s leveraging the growing demand – big global companies are joining the party too. In the UK alone, chains like KFC, Greggs, Papa John’s and McDonald’s have brought vegan options for burgers, sausage rolls, hot dog pizzas and chicken nuggets – although sometimes to the furore of Piers Morgan. In the States, Burger King plans to test Impossible Foods’ burger patties calling it the Impossible Whopper.
The demand is clearly a contributing reason why VC investors are injecting huge amounts of cash in the vegan market. Until June 2018, more than $600m went into the alternative meat industry, according to Crunchbase. Inevitably, the funding issue for vegan startups is changing. “There are now vegan-focused VCs and investors and we’re seeing vegan companies do extremely well on crowdfunding platforms too,” Blake notes. “As the customer base grows, I believe we’ll see more capital being pumped into these types of projects.”
Even though the global vegan meat market sales hit $19.5bn in 2019 already, according to market research firm Euromonitor International, entrepreneurs entering the sector still have a few challenges. “Convincing some people who may not be aware of the benefits and opportunities of a vegan enterprises [isn’t easy] – some people think veganism is a fad,” says Nagle.
Moreover, given the onslaught of new enterprises joining the sector, budding entrepreneurs must offer something unique. “The vegan industry is already a very competitive industry which means startups need to have a clear value proposition so investors, partners and customers understand why they are different and better than their competition,” Nagle adds.
Additionally, to ensure companies are able to attract customers as well as investors, Blake advises newcomers in the sector to branch out when marketing their brand instead of being entirely vegan-based. “The word vegan still carries negative connotations and can alienate some sections of the market that don’t fully adopt a vegan lifestyle,” he says. “We’re still very much in the early adopter phase of the trend, so with growing competition and a comparatively smaller audience, it can be difficult to generate enough customers. That being said, a smart play is to position the company in such a way that the fact it’s vegan isn’t the lead selling point.”
A trend to look out for is how companies are going beyond using just plants and are leveraging biotechnology to prototype meat. This is created using cells extracted from living animals sans any slaughter. For instance, startups like Impossible Foods, Beyond Meat and Memphis Meats are already serving these meat replacements to supermarkets and food chains across the globe. Beyond Meat’s IPO achieved a 160% increase in share value on its first day and Impossible Foods received over $600m in funding with backers like Bill Gates, Jay-Z and Google. This is proof that the sector is growing massively. Building on food companies utilising tech, Spanish startup Novameat developed a 3D-printed meat that’s reportedly indistinguishable from real meat. “Technology is breaking down how animal products are structured and then allowing us to rebuild them from plants,” Forder says.
The competition will seemingly continue to rise as the vegan industry is growing in all directions. Food isn’t the only space. With brands such as Adidas now offering vegan trainers, startups have much room for innovation. The vegan cosmetics market is reported to have grown by 38% in 12 months between February 2017 to 2018, according to The NPD Group, the global information company, with small brands like Pacifica and UK high street retailer Lush already offering vegan cosmetic ranges. “Whether it is vegan alternatives to conventional products or coming up with something completely new within the vegan space, there is so much room to innovate and be creative,” adds Shariat.
The question is if these developments are just the latest fad or could they become the ultimate industry disruptor? “I think we can expect the vegan industry to be significantly bigger and go from niche to the norm in the next five years,” Nagle opines.
As Mintel is predicting that the UK vegan sector will grow to £658m by 2021, more startups seeds will surely be planted in the coming years. “I think the great thing about this sector is that so many of the startups are what I call startups of conscience – by this I mean [there are] people who are committed and focused on making a difference as well as making a profit,” Nagle concludes.