Is lab-grown meat the future of the meat industry?
Hi, this is Viram from Vested. Most of us have heard of emerging themes like artificial intelligence, cloud computing or electric vehicles. But today we are going to be talking about one such theme that doesn’t get mentioned often which is artificial meat.
Believe it or not, the world loves meat. Over the last decade the global consumption of meat has increased significantly, and as countries become more and more prosperous the consumption increases even more.
Today, the US,Australia and Argentina are the top three consumers of meat.
Why do we need artificial meat
First, let’s look at why do we need artificial meat:
There are multiple reasons. Apart from harming the animals themselves, the meat production process consumes a lot of energy, water, plants and antibiotics. The entire process is highly inefficient. It involves nourishing an animal for months or even years before it can be finally consumed.
Apart from this inefficient process, animal farming is one of the largest contributors to greenhouse gases globally. It’s even more than all of the vehicles combined.
Meat production is one of the big contributors to global climate change. You can even watch a documentary that talks about how meat contributes to global warming, it’s called Meat The Truth.
Lastly, Covid-19 has made it all the more evident why we need artificial meat. Animal-borne diseases have the potential to cause large-scale disruption to the human population.
How artificial meat is produced
Next, let’s look at how artificial meat is produced:
The core proposition of this industry is that we want to eliminate animals from this entire process and there are two ways to do this:
Plant-based artificial meat
The first is plant-based artificial meat. In this method, plant-based proteins are used to create the texture and taste of meat. This is the more traditional way of generating artificial meat and is the most widely used today.
Cell-based artificial meat
The second method is cell-based artificial meat. In this cells are harmlessly extracted from animals and they are then nurtured to create muscle tissues that form the main component of meat that is consumed. This meat is exactly the same as biologically generated meat and in fact, can be made even healthier as we can infuse amino acids, vitamins and proteins into this cell-based meat.
Overall, lab-grown meat is way more eco-friendly than regular meat. It reduces the need for livestock which reduces the energy consumption by up to 46 percent. Second, we don’t need land anymore and so the land requirement is reduced by 99% and importantly the greenhouse gas emission is reduced by up to 96%. Of course, in addition to this we are not causing any harm to animals anymore.
Is artificial meat a good business?
Having said this, saving the world is great but is this really a good business?
Well, it certainly seems so. The industry is growing very fast. The global meat industry is about $1.4 trillion, whereas the artificial meat industry currently is one percent of that or $14 billion.But over the next decade, it is going to expand to 10% of the entire meat industry or $140 billion.
Among the companies that are operating in the space – Beyond Meat and Impossible Foods are probably the two largest players.
Beyond Meat is actually a listed company in the US markets and has a market cap of $8 billion. Over the last five quarters, the average gross margin of Beyond Meat is about 31%. This is already three times the gross margin of the most traditional player in this space Tyson Foods. The company has not even reached scale and production and it’s already way more profitable than the traditional incumbents.
Over time we believe that we’ll see a lot more players entering this space. However, right now investors’ hopes are all based on Beyond Meat as it’s the only publicly listed company in the space.
So that was a quick overview of one of the emerging industries today –
Stay tuned for more.