Blended & Hybrid Meat: Why Investors are Divided About Using Animal Proteins as an Ingredient
9 Mins Read
While still a niche category, an increasing number of brands are working with blended and hybrid meats – some nascent startups, others established meat producers. Funding is critical if this sector is to grow and reach its potential, but how do investors and VCs feel about these protein solutions?
This article is part of our content series exploring the world of hybrid and blended meat products – those blending cultivated or conventional proteins with plant-based ingredients, respectively, and why some think this is the future of reducing meat consumption.
In October, Andrew Arentowicz, founder and CEO of blended meat company 50/50 Foods, told me: “Our investors are very bullish on our potential.”
It’s a statement that has stuck with me, especially since later interviews we’ve done for this series about blended and hybrid meats have featured a similar rhetoric. “We’ve found investors – including those who are strongly anti-meat – are committed to the welfare of the planet and animals and see the blended solution as an immediate and achievable means of reducing meat consumption,” offered blended meat ingredients provider Mush Foods’ founder Shalom Daniel.
Meanwhile, hybrid meat producer SciFi Foods has raised over $40M in funding, after emerging from stealth with a $22M Series A last year. Newer brands are adding to the category – cellular agriculture expert Parendi Birdie just this week announced her blended meat startup to the world, while Paul’s Table has raised $500,000 in pre-seed funding.
This has come on the backdrop of a global drop in food tech VC funding over the last year. “In the current economic environment, fundraising is not only challenging for companies in the hybrid space, but across all of the food tech industry,” ProVeg International’s cellular agriculture lead Julia Martin recently told me.
So we at Green Queen were curious: in a more volatile environment than usual, and a category that is confident about its funding potential, how do investors see it? We spoke to Steve Molino, principal at Florida-based Clear Current Capital, and Heather Courtney, general partner at New York-headquartered Alwyn Capital.
Their views highlighted the often contrasting opinions among investors, and a need for consolidation and enhanced value propositions on the part of blended and hybrid meat startups. Here’s what they had to say.
This interview has been edited for clarity and concision.
Green Queen: Do you believe blended meat has potential as a food systems solution?
Steve Molino – YES: I’m very bullish on blended meat as one of the many food system solutions if it’s done right. ‘Done right’, to me, means blending conventional meat with plants in a way that won’t make consumers think twice. This means using natural plant ingredients and spices and avoiding unrecognisable ingredients that give people pause. If consumers think it’s simply meat and plants combined, and realise it doesn’t feel like a sacrifice on taste or experience, then the potential is legitimate.
Heather Courtney – NO: Blended has been tried before and the market wasn’t ready for it. We have asked a lot of omnivores in our circle, and none of them are overly excited about a blended product – they would prefer to make a periodic plant-based option to reap the health benefits of integrating more plants into their diet. We are not overly bullish on blended, but we hope to be proved wrong and see it reduce meat consumption.
GQ: Is hybrid meat a viable option?
HC – YES: Hybrid meat is how cultivated will enter the market on a broad scale, so we see this as a meaningful food systems solution. Technology that revolutionises a long-standing industry will always face pressure, and the cultivated industry is no different. Despite negative press, we are still bullish on the cultivated meat industry, and we see hybrid technology as a means of entry into the broader market.
SM – UNCLEAR: Hybrid meat’s viability is still tied to the overall viability of the cultivated space, which has many question marks. I view hybrid meat as both a long-term solution and a short- to medium-term necessity. In the long term, I think it could be viewed in the same vein as blended meat products, but in the short term, it’s likely the only way to make cultivated commercially feasible… as the chances of being able to economically produce 100% cultivated products that can compete on price with commoditised meat are slim to none in the next 10+ years.
Hybrid products will allow the cultivated market the chance to build and become normalised with consumers, while also – importantly – generating the revenues and business necessary to keep dollars flowing into the space, so scale can be further achieved.
GQ: What is more attractive to you as an investor, blended or hybrid meat?
SM – UNCLEAR: It depends on what’s driving an investor’s strategy. Blended meat companies should only be interesting to true CPG investors attracted by CPG business profiles and fundamentals. Alternatively, I think hybrid products are attractive to investors who have a deep interest in synthetic biology and trying to radically change the way meat is produced in the future. The latter has blatantly more risks and hurdles to overcome, but the perceived potential upside is greater.
Regardless, one key commonality between both approaches is that they have the ability to radically improve the impact of the food system on the planet, people and animals.
HC – NO: As investors who see the long-term health of our planet tied to transitioning away from relying on animals, blended products offer a novel short-term solution, but not a long-term goal.
GQ: Is the animal welfare aspect a dealbreaker for you when it comes to blended meat?
SM – NO: Blended meat is a bit controversial with some in the animal welfare space; however, it is an unequivocal win for animals. This undeniable win stems from the fact that impact is only created by getting people who eat meat to shift away from meat products. Since a vegan or vegetarian would never touch a blended product, that means every time a blended product is consumed, there is guaranteed displacement of animal demand that’s directly tied to the percentage of a blended product that is not meat.
The risk with fully vegan products is that when a vegan or vegetarian eats it, there is zero displacement of animal agriculture. For impact, it’s all about what meat-eaters want, and if this satiates them, while reducing meat consumption, then I’ll take that win all day.
HC – YES: Our mission is to see animals fully replaced in the consumer supply chain. As such, we won’t invest in a company that utilises slaughtered animal protein in their products so blended companies are not part of our portfolio construction.
GQ: How would you evaluate a blended or hybrid meat company from an investor’s perspective?
SM: I’d view a blended meat company solely through a CPG investing lens, so I’d be looking to understand how the product offering of conventional meat and plants is hitting on a consumer need that exists in the present day, and how the team is the right one to create a brand that drives strong traction and consumer loyalty. Tech or IP isn’t what will lead to a brand being successful; instead, it’s all about creating a great product that’s positioned to create a cult-like following with consumers.
I don’t think of evaluating ‘hybrid meat companies’. I see this as evaluating cultivated companies that will likely need to have hybrid products for the short to medium term to be commercially feasible. For these types of companies, technical and scientific capabilities (i.e., IP) are paramount, as well as the team that drives innovation on the tech and science, as the only way cultivated has a shot at becoming one of the solutions in the food system is if it can scale and prices drop dramatically. That will almost entirely be driven by tech and IP that are different from what exists and built with the purpose of scaling.
HC: Many of the cultivated companies we have invested in/have diligenced are pursuing a hybrid offering as their first product. We see these products as the way cultivated meat can enter the broader market at a competitive price and prove market fit.
GQ: Do you think there’s consumer demand for these products?
SM – THERE WILL BE: At the moment, no… because consumers don’t know it’s an idea. In the few instances where I’ve shared blended products with friends and family to gauge their interest (I don’t eat meat myself), the responses were overwhelmingly enthusiastic; however, that was for one specific company’s product that had its own approach to blended products.
Ultimately, I think demand can be quickly created as the space becomes a topic of interest for consumers, especially since many of these products will be able to hit on product attributes that consumers actually care about, such as fewer calories, eating more vegetables, and lessened health concerns around meat-heavy diets.
HC – NO: Previous failure of blended products to capture the market share shows there is work to be done and the consumer is likely not yet ready. There needs to be a strong focus on educating consumers about their benefits and unique qualities.
There also needs to be a strong focus on educating consumers about cultivated meat and how hybrid products can provide both health and environmental benefits.
GQ: Is lack of education/demand creation why previous efforts have failed?
HC – YES: Many consumers may not have been adequately informed or educated about the benefits and qualities of blended products. Successful marketing requires educating the consumer about their health and environmental benefits, which can be a significant hurdle.
SM – NOT NECESSARILY: While some have failed (i.e., Tyson’s blended products), Perdue’s Chicken Plus products continue to be a strong seller in the market. I think this simply comes down to building a CPG product in the right way. Blended products are for the here and now, and you can’t make this about technology or saving the planet.
When you look at Perdue’s offering, it talks about getting kids to eat veggies without having to sneak it in. They are clear on their target market – parents who are dying to figure out how to get their kids to eat vegetables – state a clear value proposition, and stay true to the format and offering their target market wants and needs (quick, convenient, frozen chicken nuggets for a reasonable price). Assuming that blended companies can create products that taste good, it will simply come down to traditional food business fundamentals.
GQ: Is foodservice a better way to enter the market for these products?
HC – YES: Ensuring a positive first customer experience is key to creating customer acceptance and trust.
SM – IT DEPENDS: That’s more dependent on the specifics of the product itself and the founders pushing the companies forward. If a founder has a background in building brands and deep relationships with distributors and retailers and has a product that doesn’t need much hand-holding during preparation, then retail is the obvious choice.
On the flip side, if there is more nuance to the product in how it’s prepared or used, and the founder doesn’t have strengths in brand building, then retail would likely be a disaster.
Author
