Three impact investment companies: Dao Ventures, Moonspire Social Ventures, and New Crop Capital have partnered to launch Dao Foods International Inc., (DFI) a collaborative effort to meet China’s rising demand for protein through plant-based and lab-cultured meat.
Capitalizing upon expertise and relationships already in place in North America and China, including the nonprofit Good Food Institute, DFI is aiming to disrupt the global meat, egg, and dairy markets with the goal of alleviating the environmental and societal impacts of meat production as consumption in China continues to soar.
“With rapid rising incomes and increasing meat consumption in China, our aim is to introduce alternative products into the China market to reduce the consumer demand for animal products from the traditional livestock industry, which has had growing negative environmental, food safety and health impact,” said Albert Tseng, co-founder of Dao Foods and managing director of Moonspire Social Ventures.
A Protein Play
The deepening of the connection between consumers and their food supply chains, along with a rising popularity of veganism, concerns over animal rights, and awareness around the hormones, antibiotic usage, and unsustainability inherent in the global livestock industry have pushed many people in Western markets to look toward alternative ways to get protein into their diet.
Global protein consumption is expected to climb at a compounded annual growth rate (CAGR) of 1.7 percent, reaching 943 million tons by 2054, according to Lux Research. On a global scale, greenhouse gas emissions generated by the animal agriculture industry in place to meet this demand account for 14.5 percent of all man-made greenhouse gas emissions – more than the worldwide transportation sector. Furthermore, China accounts for half of all the pork and one quarter of all the meat consumed in the world.
DFI is not the only investor coalition pushing for a shift toward plant-based protein. At the end of September 2016, a group of 40 institutional investors with a combined valuation of $1.25 trillion called for greater adoption of alternative protein sources including plants, insects, algae, nuts, seeds and grains, and lab-cultured meats. In the treatise, “The Future of Food: The Investment Case for a Protein Shake Up” published by the Farm Animal Investment Risk and Return (FAIRR) initiative, the group claims that over-reliance on livestock production to feed a growing global population would be unsustainable and would “lead a financial, social, and environmental crisis.”
The Players
The $25 million New Crop Capital fund was launched in February 2016 with the sole focus of investing in plant-based and culture-based meat and dairy alternatives and the technology platforms that are designed to advance such products. To date the specialized venture fund has made investments in 16 cutting-edge alternative protein companies, including Memphis Meats and Beyond Meat.
“Diets are radically changing in China, and New Crop Capital is proud to be a part of Dao Foods to steer this change in a direction that supports the health of people and the planet,” New Crop Capital Investment Manager Chris Kerr says. “This is a critical moment for China’s food industry, and we at New Crop Capital believe that Dao Foods is equipped to take advantage of this moment to make climate-friendly foods the norms, not the exception.”
The alternative protein narrative is not lost on the world’s biggest and most iconic food brands either, as Nestlé, the largest food company in the world, secured a significant presence in the plant-based food sector in September of last year through the acquisition of Sweet Earth – a California-based, plant-based food manufacturer – for an undisclosed amount.
Meanwhile, in October 2016, Tyson Foods – the company whose very name is synonymous with the meat industry – surprised all when it announced that it would be the first key meat company to invest in a meat alternative startup that is aiming to reduce meat production and consumption with plant-based alternatives – when it announced that it had acquired a 5 percent stake in California-based, plant-based protein company Beyond Meat.
And in February of last year, Canadian meat company Maple Leaf Foods followed suit, announcing its acquisition of U.S.-based, plant-based protein food manufacturer LightLife Foods Inc. for $140 million.
However one of the more high-profile developments has been the shift in focus of Cargill toward the plant-protein space. In January of this year Cargill made an undisclosed investment in PURIS, the largest pea protein producer in North America, creating a joint venture to accelerate the production of plant-based foods.
Throughout 2016 and 2017, Cargill also sold off its U.S. feedyards – selling its sites in Bovina and Dalhart, Texas, to Friona Industries in July 2016, and then selling its feedyards in Leoti, Kansas, and Yuma, Colorado to Green Plains Inc. in May 2017.
This pivot toward greater sustainability and plant-based food systems continued in July 2017 when Cargill announced it had entered into a strategic partnership with Austria-based Delacon – the pioneering global leader in phytogenic (plant-based) feed additives – through an unspecified minority equity investment. One month later, in August 2017, Cargill announced its participation in a $17 million Series A for Memphis Meats,
In China, a consumer shift away from traditional animal-based protein could have significant impact on the industry. The Chinese government has set a goal to cut meat consumption by as much as half by 2030, according to the latest guidelines by China’s National Health and Family Planning Council, and between 2015 and 2020 the vegan market in China is expected to grow by 17 percent. Given the size of the population, these shifts could result in changes to livestock production on a global scale.
-Lynda Kiernan