What’s going on here?

Singapore greenlit the sale of “cultured” chicken nuggets in December 2020 – marking the world’s first regulatory approval of lab-grown meat, and a significant milestone in the technology’s movement from labs to factory lines.

While well-known companies like Beyond Meat and Impossible Foods use plant protein to manufacture meat-like products, cultured meat is different: it’s actual animal protein, only grown in bioreactors using cells taken from living beings without killing them.

Given increasing societal pressures on the livestock industry, some investors reckon such lab-grown meat could be the next big thing. In light of this, I thought I’d spend today’s Insight outlining the cases for and against buying into cultured meat, as well as listing some of the main companies to keep on your radar – including one backed by Bill Gates.

How lab-grown meat is produced (Source: Dreamstime)

What does this mean?

Whether it’s space exploration or the Internet, it’s no surprise investors get excited by the prospect of juicy opportunities in all-new industries. But the dotcom bubble should serve as a reminder that it’s always worth taking a step back and soberly evaluating the opposing investment cases in relation to terra incognita.

The case for investing in lab-grown meat

✅ Surging demand

Demand for alternatives to regular meat is skyrocketing due to consumer concerns about its impact on health, animal welfare, and the environment. The global meat-substitute industry is now worth almost $21 billion – but according to Barclays bank, that could become $140 billion within the next decade, stealing 10% of the overall meat/“meat” market in the process.

Note that meat substitutes include both plant-based and lab-grown foodstuffs. Still, one advantage cultured meat has over plant-based counterparts is that it’s real meat. That could appeal to both ethical vegetarians/vegans and the large and growing number of environmentally aware but still meat-loving people in particular.

✅ Less taxing on the environment

According to one study, cultured meat involves approximately 78-96% lower greenhouse gas emissions, 99% lower land use, and 82-96% lower water use than conventionally produced meat. The first figure is especially important: animal agriculture is one of the biggest contributors to world methane emissions. Not only is methane 28 times more potent than carbon dioxide as a climate-changing greenhouse gas, but emissions rose by a record amount last year.

Environmental impacts of different meats (Source: Hanna Tuomisto/Joost Mattos)

✅ Potentially healthier

Cultured meat is free from artificial growth hormones and genetic modifications, both of which are used by many animal agriculture companies in order to increase livestock yields. Cultured meat may therefore be better for consumers than some forms of livestock meat and could therefore appeal to health-conscious meat-eaters too.

The case against investing in lab-grown meat

❎ Cost

According to research cited by Bloomberg, cultured meat costs between $400 to $2,000 a kilogram (2.2 lbs) to make. Needless to say, companies are working hard to bring costs down – but there’s still a long way to go until prices can compete with conventional meats. Energy-intensity is one reason why lab-grown meat is so expensive, leading some scientists to question whether cultured meat is really so much better for the environment.

❎ Uncertainty around acceptance

Let’s be honest: “laboratory-grown patty” doesn’t exactly sound as appetizing as a succulent Wagyu beef burger. People, particularly after the pandemic, associate labs with chemicals, test tubes, and perhaps even Dr. Frankenstein. One of the big risks for cultured meat startups and their investors is consumers simply not accepting the product for reasons including trust, perception, and taste.

❎ Competition

Any exciting new industry naturally attracts lots of players competing for the spoils. The number of cultured meat companies has accordingly grown from a handful in 2016 to at least 60 now. And while that’s great for innovation, it’s not necessarily great for investors: fierce competition usually means lower profits for everyone concerned.

Why should I care?

While there are currently no publicly listed stocks of pure-play cultured meat companies, venture capital firms have plowed loads of money into startups, with the eventual goal of seeing these selling shares through initial public offerings (IPOs). And with IPOs hotter than ever right now, some of these startups could go public sooner than you think – so it’s definitely worth having them on your radar.

Venture capital investment in lab-meat startups hit a record in 2020 (Source: Bloomberg)

Here’s a handy list of the lot – but I want to mention a couple in particular. Two of the best-known startups are Future Meat Technologies and Memphis Meats – the latter backed by Microsoft founder Bill Gates, Virgin entrepreneur Richard Branson, and major meat producer Tyson Foods. Mosa Meat, meanwhile, the Dutch food tech company that made the world’s first cultured beef burger, has been raising money to build a full industrial-scale production site as early as the end of 2022.

Eat Just (no relation) is another one to watch – this is the firm that first won permission to sell its cultured chicken nuggets in Singapore. The company is aiming to be profitable at an operating level before the end of 2021, and hopes to list shares publicly soon after. Eat Just could well therefore be first to markets as well as first to market…