The food sector is in the midst of radical change, driven by innovations in alternative proteins, AgTech and sustainable food production. While ‘new food’ companies have grown strongly in recent years, doubts are now emerging about their future viability, which are manifested in a much more difficult financing environment.
To better understand this situation, it helps to take a look at listed companies such as Oatly and Beyond Meat, but also to look at the broader global and national financing situation.
Oatly and Beyond Meat: the case of the pioneer shares
Oatly and Beyond Meat were once at the forefront of the alternative protein revolution. Beyond Meat (BYND) went public in 2019 and quickly became a favourite of investors betting on the plant-based meat market. Similarly, Oatly (OTLY), which was founded in 1994 but only went public in 2021, capitalised on the wave of oat milk popularity. However, despite initial hype, both companies have suffered drastic falls in value in recent years.
Beyond Meat’s share price fell from its high of over USD 200 in 2019 to below USD 15 in 2024, while Oatly, which started at USD 17 after its IPO, was trading below USD 2 in 2024. These drastic price falls raise the question of why the markets are so negative about the potential of these companies.
One of the main reasons for this is the disappointing financial results of both companies. Beyond Meat struggled with declining sales figures, which indicate an oversaturation of the market and a levelling off of interest in plant-based meat alternatives. Added to this were problems in the supply chain and tougher competition. Oatly, on the other hand, was faced with production problems and high operating costs, which made it difficult to make a profit. As pioneers in their industry, both companies also had to spend heavily on marketing to publicise their products and brands, which put further pressure on profitability.
Another factor is the macroeconomic environment. Rising interest rates and the associated higher cost of capital have made investing in growth-orientated but unprofitable companies less attractive. Investors have increasingly turned away from risky bets such as Oatly and Beyond Meat and are instead looking for more stable investments.
Beyond Meat and Oatly as indicators of the sector’s financial situation?
These developments raise the question of whether listed companies such as Beyond Meat and Oatly can actually serve as indicators of the general financing situation in the ‘new food’ sector.
At first glance, not only the falling share prices of Beyond Meat and Oatly, but almost all share prices of relevant companies on the stock market could be interpreted as a bad omen for the entire industry. But the reality is more complex. Listed companies are subject to a number of factors that do not necessarily apply to the industry as a whole. The performance of these companies does not necessarily reflect the innovative strength or long-term growth prospects of the sector. On the contrary, many of the most dynamic developments in the ‘new food’ sector are taking place in start-ups that are still privately owned.
Despite the challenges faced by some listed companies, the new food sector is showing robust growth worldwide. In the first half of 2024, USD 7.3 billion was invested in FoodTech start-ups worldwide, an increase of 20% compared to the previous year.
Remarkably, the increase in investment has taken place despite a difficult macroeconomic environment. However, a closer look at the details reveals that this increase was driven by some mega deals, including USD 700 million for Wonder, a virtual restaurant company, and USD 665 million for Zepto, an Indian fast food delivery start-up.
On the one hand, this shows that investors continue to have high confidence in the sector’s long-term opportunities, particularly in delivery services and AgTech, while other areas, such as alternative proteins, are seeing a decline.
Europe: a mixed picture
In Europe, FoodTech start-ups recorded investments totalling €4.3 billion in 2023, a decrease of 35% compared to 2022. Despite this decline, Europe was able to increase its share of the global FoodTech investment volume from 14% in 2020 to 32% in 2023. However, a significant share is also attributable to categories such as delivery and AgTech in this case. Alternative proteins also recorded significant growth in 2023 compared to previous years. However, a large proportion of the approximately 550 million euros is attributable to Oatly, which secured 425 million dollars from investors in a new financing round in the spring.
A closer look at the first half of 2024 shows a decline in investments in the market for alternative proteins.
At the same time, the dynamics within the sector are also changing. While companies from the field of traditional plant-based solutions still accounted for the majority of deals in 2023, a clear trend towards fermentation technologies is emerging this year. In the first six months of 2024, relevant companies were already able to attract over 164 million euros in investments – more than in the whole of 2023. The growth in the biomass fermentation sector is particularly remarkable, with around 115 million euros raised by mid-2024, compared to 67 million euros in the previous year. Precision fermentation also recorded a significant increase with 49 million euros compared to 33 million euros in the previous year.
The situation in Germany
Germany has established itself as one of the leading markets for alternative proteins in Europe. In the first half of 2024, German start-ups in this field raised €74 million, which is more than twice as much as in the entire previous year. Companies such as Infinite Roots, which specialises in the development of food made from mycelium, were able to secure significant investments. Germany has also made strong progress in the field of fermentation, a key technology for the production of meat alternatives. The start-up ProteinDistillery from Ostfildern, for example, was able to raise 15 million euros.
Despite the positive developments, the industry in Germany and Europe still faces challenges. EU authorisation for new products and the scaling of production are key hurdles that need to be overcome in order to achieve market maturity and acceptance of these new foods and to convince investors that their products are not just empty promises, but long-term solutions for an alternative and sustainable food economy.
Philipp Wolf, author of this guest article, is the founder and operator of swyytr.com, a digital food hub that brings together relevant topics from the food sector under one roof and reports on news and trends in the form of several newsletters every week, in addition to his full-time job in private label marketing at REWE.
