Last month, Paris-based family office Creadev announced a major investment in Kebai Sciences, a Chinese ag-tech company that develops sensors and big-data algorithms for precision farming. Creadev Asia director Alan Zhu notes that the agriculture sector in China “has a strong trend of scale and intensification.”
Indeed, Creadev’s investment highlights the intersection of two strong and growing trends: investor interest in sustainable farming, alternative protein and other ag-tech sectors and international investor interest in the massive and fast-growing Chinese economy.
That interest is coming from institutional investors around the world. Nicole Davis, partner and senior wealth manager at Veris Wealth Partners, says many of her family office and foundation clients are very focused on investments that have a positive impact on climate change and the environment.
“A big area of interest for our clients is in sustainable and regenerative agriculture,” she said on a recent CleantechIQ webinar. The landscape for sustainable agriculture has changed over the past several years and “there are quite a bit more opportunities to invest there.” And the vast majority of interest in this space is in the private markets, she added. (Click here to view the webinar – Creating More Sustainable Food & Ag Systems w/ Veris, Creadev, The Christensen Fund & The Ida & Robert Gordon Family Foundation.)
The opportunity set definitely includes plant-based meats and other alternative proteins, an area that is poised to become an even larger sector in the global ag-tech sector. Consumers in Asia, and China in particular, are showing an increased appetite for plant-based foods to replace some of their meat intake.
The private sector is responding with more alternative protein products. However, much more is needed, on the supply side as well as the demand side, if China is to make serious strides in reducing its reliance on traditional agriculture, according to two investors that are making sizable forays into the country’s alt-protein markets.
“The challenge today is that we are operating in a very broken food system,” said Manav Gupta, founder and CEO of venture capital investor Brinc, speaking on a panel at the Asian Financial Forum in Hong Kong last month. With more people living longer lives, “We just do not have the infrastructure nor the systems and the tools currently available to successfully deliver food at scale globally. It’s extremely unsustainable.”
Brinc’s investments include Chinese-based ag-tech firms that produce plant-based foods. Another investor that backs such startups is Dao Foods. “We believe alternative proteins can be a solution in transforming a lot of Chinese mainstream consumers into part of the solution,” said Dao cofounder Zhang Tao on the same panel discussion. “If they consume more plant-based and alternative protein products, that will reduce their reliance on the traditional livestock industry.”
That’s crucial given the greenhouse gases produced by traditional animal husbandry, not to mention the water, land and other resources required by livestock. The United Nations’ Intergovernmental Panel on Climate Change has said that reducing meat consumption is key to mitigating and adapting to climate change.
China overall already consumes more meat than any other nation; the country is responsible for a quarter of total meat consumption and more than half of all pork consumed globally, Zhang said. As China’s population and economy keep growing, so will its meat consumption, which will lead to more greenhouse gas emissions.
That’s a frightening thought from an environmental perspective, and it creates opportunities for private companies to sell meat substitutes to Chinese consumers. Some are coming from overseas: US-based Beyond Meat started selling a pork substitute in Shanghai in November, for example. Meanwhile, Beyond Meat’s major rival, American firm Impossible Foods, is also looking to enter the Chinese market, though it has yet to receive regulatory approval for its products.
At the same time, numerous domestic companies are offering a range of plant-based meats, dairy products and other foods to Chinese consumers. Many of them are receiving backing from investors like Brinc and Dao.
Chinese food companies that Brinc has backed include plant-based seafood manufacturer New Singularity; Shandi, which makes plant-based meats; and Rainfed Foods, which uses millets to make alternative dairy products. Dao’s investments have included Fresh Foods, which makes plant-based yogurt, and a company offering plant-based smoothie drinks called Raw Plant-Based.
Dao has also invested in Starfield Food and Science Technology, which last year partnered with six restaurant chains whose menus now offer plant-based foods across the country. “That’s the kind of demand we would like to see,” Zhang said.
Still, despite the growing availability of such products, consumer awareness and demand both remain below the levels they ideally need to be at, he added.
“As far as we can tell, consumer awareness of alternative protein products is far from being there. especially compared with the North American and European markets,” Zhang said. “There was a lot of hype, especially after the Beyond Meat IPO [in 2019]. But the mainstream Chinese awareness of alternative protein products is not there yet.”
Dao intends to work with its portfolio companies to help increase that awareness, and boost that consumer demand. “We want to identify and engage the right Chinese entrepreneurs to work with us to top-up the consumer demand,” Zhang said.
Experts note that Asian cuisine has traditionally used more plant-based proteins, like soya curd and tempeh, which should make consumers more accepting of plant-based meats.
Worldwide, consumers are demanding more traceability and sustainability in the food supply chain, said Delphine Descamps, managing director at Creadev USA, also speaking on the CleantechIQ webinar. They also want more local food and better environmental practices in the food production process, she added.
These trends have driven Creadev to invest in urban farming company Gotham Greens, aquaculture system developer Kingfish Zeeland, and InnovaFeed, a producer of insect protein for the aquaculture sector. These companies provide closer proximity of food production to the consumer and control the quality of the food they grow without the use of pesticides, Descamps said.
Back in Asia, “We need a lot more homegrown heroes,” Gupta said. “We need more local startups” in the alternative protein sector. He said he is also hopeful for additional government spending to support such companies, as well as assistance from regulators.
For now, though, the trend lines in the Chinese alternative protein sector look promising, Gupta said.
“There’s been a lot of good growth in the last two to three years,” he said. “We’re pleasantly optimistic in terms of where it’s heading.