Some of the world's biggest investors are gearing up for a food fight

Companies making plant-based milk and meat products are heating up

Hot on the heels of Beyond Meat, the plant-based burger company that scored the most successful IPO of 2019, I see the beginnings of a non-dairy milk war. Producers of plant-based milk substitutes are racking up record sales of products made from oats, peas, soy, almond, coconut and rice.

In July, Blackstone, Oprah Winfrey, Natalie Portman, Howard Schultz and Jay-Z’s Roc Nation took a 10% stake in the Swedish oat milk company Oatly at a $2 billion valuation. The market is potentially huge and while Oatly is clearly the front runner with sales in 2019 of $200 million, investors are sniffing around other dairy substitute companies, realizing there will be many other creams in the crop. Noops, a newcomer offering non-dairy oatmilk desserts, closed a $2 million seed funding round in July led by 25Madison.

Meanwhile, Beyond Meat is still on fire. Its second quarter sales, announced August 4, jumped 69% to $113 million. Its main rival, Impossible Foods, creators of the plant-based Impossible Burger and Impossible Sausage, increased distribution from 150 grocery stores in March to 5,000 stores and 22,000 restaurants in July.

We are in the middle of a huge transition to plant-based alternatives – first from meat, and now dairy. Venture investors, more used to the clean technology of enterprise software, cloud and edge computing, have smelled the winds of change in the multibillion-dollar food industry and they are ready for a scrap.

The food industry is ripe for disruption

The food industry is ripe for disruption. Plant-based alternatives to meat and dairy have long been shown to be better for the consumer and for the planet. A 2018 study by Oxford University researchers suggests that production of a single glass of dairy milk creates almost three times more greenhouse gas emissions than substitutes made from plants, and uses nine times more land than any plant-based alternative.

But the search to replace animal-based food has not been without setbacks. Hampton Creek’s plant-based mayonnaise and cookie dough became Silicon Valley’s flavor of the month with backing from Bill Gates, Jerry Yang and Li Ka-shing before becoming embroiled in scandal and rebranding itself as Just Inc.

I’m betting that, like the princess in the fairytale, the milkless market will follow the meatless market and face the biggest disruption from the humble pea. Peas are a source of more protein, less fat, less sugar and less allergic risk than many of the alternatives. Last year, Time magazine tipped the pea as the “Frontrunner in the Race to Replace Meat and Dairy,” citing its high protein and low environmental impact. Peas require 25 times less water to produce than dairy milk, and 1,000 times less water than almond milk, Time reported.

Humble pea shows big promise

The Beyond Burger is made from peas and so is Ripple, a non-dairy milk, yogurt, creamer and ice cream whose sales have soared this year as customers cleared grocery shelves in their search for healthy milk alternatives, sending 2020 revenue projections north of $45 million. OurCrowd is investing in Ripple after learning how its nutritional ingredients stack up against other dairy products and their substitutes.

“Compared to other plant-based milk, which often only has one or two grams of protein per-serving, Ripple offers a full eight grams of protein per serving, which is the same as a glass of dairy milk,” Ripple CEO Laura Flanagan told the OurCrowd Pandemic Innovation Conference. “We offer 50% more calcium than dairy milk, and only half the sugar. So the nutritional credentials either meet or exceed that of dairy milk.”

The company also measures its own “Ripple effect” – the sustainability impact of the product compared to alternatives in terms of greenhouse gases, water use and other metrics.

We are moving away from farm-based meat and milk but this quest is unlikely to end with plants. We are already seeing the first successes in what could be the final stage of this journey: cell-based protein grown in a laboratory.

Yanking the food chain

Perfect Day, based in the Bay Area, produces animal-free dairy proteins through fermentation in microflora instead of cows. In July, it expanded its Series C round to $300 million. In June, cell-based seafood pioneer BlueNalu announced a major expansion of its cellular aquaculture technology in which living cells are isolated from fish tissue, placed into culture media for proliferation, grown and cultured into muscle tissues using bioreactors, and then assembled into fresh and frozen seafood products.

OurCrowd invested in BlueNalu and we are also running two food technology incubators in Israel. As investors, and as consumers, we are watching closely to see just how far technology can yank the food chain – and waiting to savor the results.

(Full disclosure: OurCrowd is an investor in Ripple, Beyond Meat and BlueNalu).