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Can we feed the world without meat?

Food production is about a tenth of the world's approximate global GDP of $88 trillion1 and a recent study found that if everyone alive ate meat at the rate of the average American consumer, we would need to use 138 percent of the habitable area of the planet for agriculture alone2. It's just physically impossible.

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Carmine De Franco, Head of Research at Ossiam, on how alternatives to meat could be the key to a sustainable future – and a significant investment opportunity.

Carmine De Franco, can you break down the relationship between meat consumption and environmental damage?

There’s no getting around it: stopping eating meat is the single most impactful thing an individual can do to help the environment. Drastically reducing meat intake is the second most impactful. It’s important to grasp the scale of the global food industry and the challenges it places on the environment. Food production is about a tenth of the world’s approximate global GDP of $88 trillion1 and a recent study found that if everyone alive ate meat at the rate of the average American consumer, we would need to use 138 percent of the habitable area of the planet for agriculture alone2. It’s just physically impossible. As it is, meat production is responsible for 35-40 percent of global methane emissions3, and 13-18 percent of total global greenhouse gas emissions4. Meanwhile, water is set to be an increasingly scarce resource this century - it requires more than 15,000 cubic liters of fresh water to produce one kilogram of beef5.

«This presents investors with a significant opportunity»

I could go on, but to sum up: the global agricultural industry has embarked on an enormous de facto geoengineering experiment whose negative outcomes are becoming increasingly clear. Consumer awareness of this picture is growing, and in response, they are modifying their behavior more and more. This, we believe, presents investors with a significant opportunity. This opportunity can be broken down into two broad categories: the growing industry offering plant-based alternatives to meat, and – taking a longer view – lab-grown or «cultured» meat.

If we look at plant-based proteins first, where is this market at present?

Let’s define what we’re talking about – instead of specifically vegetarian products, we are talking about burgers, sausages and so on made from soy or other plant proteins, then treated to create a meat-like taste and texture. We can’t exactly express it in data, but it’s clear that the quality of these foods has come on in leaps and bounds in recent years.

«The market has reflected this ballooning demand»

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We can, however, express the growth in the market in data: in the U.S., sales leaped 200 percent year-on-year for a given week in April last year, when many consumers were stocking up due to uncertainty around the pandemic6. This surge was sustained: sales doubled every month for all of 20207. The market has reflected this ballooning demand: Impossible Foods is worth more than $4 billion8, with competitor Beyond Meat more than quadrupling in value to over $8 billion last year9. These valuations make sense given the industry’s projected annual growth of 15.8 percent between now and 202710, and there are few reasons to believe this will slow down in the long run. If we turn now to lab-grown/cultured meat, this is an industry that’s still in its infancy. It’s important to not conflate meat substitutes with lab-grown meat. We don’t need to invent a method of deriving protein from plants, people have done that for thousands of years, but so-called «test-tube» meat is something entirely new.

«This sounds impressive»

This is borne out by the cost profile. The world’s first lab-grown burger was created in 2013 by the precursor to the start-up Mosa Meat – it cost more than $300,000 to produce11. Costs are now down to $10 or so12, which is a remarkable achievement but still at a premium price point. Last December, a company called Eat Just was approved by Singapore’s regulator to sell cultured chicken for human consumption13. It’s still expensive but operates as a useful proof of concept that, at the very least, cultured meat can be marketed as a premium product. We expect the American and European regulators to follow suit.

What chances do these companies have of truly disrupting the «traditional» meat industry?

Realistically, this is not going to be a true disruption in the sense of, say, the internet firms totally claiming classified advertising from print media. Some research suggests that 60 percent of the meat people eat will be either plant substitutes or cultured meat by 204014. This sounds impressive, but there is the caveat that there will of course be more people in 2040, and more people around the world living what we would now consider a «western» lifestyle. Also, «blended» products are highly likely to be become increasingly prominent, where cultured meat and plant-based substitutes are combined in creative ways. «It’s unlikely that a day will come when nobody will eat a steak in a restaurant»

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Overall, though, the key takeaway is that there are better ways of getting the protein our bodies need and given the demonstrable environmental impact of this incredibly inefficient method of production, the incentives to change are clear. It’s unlikely that a day will come when nobody will eat a steak in a restaurant, but it’s fair to say that the global food industry will look very different in the coming years.

1https://www.plunkettresearch.com/industries/food-beverage-grocery-market-research/

2https://www.omnicalculator.com/ecology/meat-footprint

3https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6518108/

4https://skepticalscience.com/animal-agriculture-meat-global-warming.htm

5https://waterfootprint.org/en/water-footprint/product-water-footprint/water-footprint-crop-and-animal-products/

6https://www.ft.com/content/0127984a-6def-4040-9bca-002b6ffd4e0a

7https://gfi.org/blog/plant-based-sales-covid-19/

8https://www.cnbc.com/video/2020/08/31/impossible-foods-turned-plant-based-burger-into-a-billion-dollar-brand.html

9https://finance.yahoo.com/quote/BYND/key-statistics/

10https://www.polarismarketresearch.com/industry-analysis/plant-based-meat-market

11https://www.bbc.com/news/science-environment-23576143

12https://sifted.eu/articles/mosa-meat-raises-55m/

13https://www.nytimes.com/2020/12/02/business/singapore-lab-meat.html

14https://www.kearney.com/documents/20152/2795757/How+Will+Cultured+Meat+and+Meat+Alternatives+Disrupt+the+Agricultural+and+Food+Industry.pdf/06ec385b-63a1-71d2-c081-51c07ab88ad1

All investing involves risk, including the risk of capital loss. This material is provided for informational purposes only and should not be construed as investment advice, or a recommendation or an offer to buy or to sell any security, or an offer of services. Investors should consider the investment objectives, risks and expenses of any investment carefully before investing. The views and opinions expressed are as of the date indicated and may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted. In Switzerland: This material is provided by Natixis Investment Managers, Switzerland Sàrl, Rue du Vieux Collège 10, 1204 Geneva, Switzerland or its representative office in Zurich, Schweizergasse 6, 8001 Zürich. OSSIAM – An affiliate of Natixis Investment Managers. French Société Anonyme, is under the management of a Board of Directors and a Supervisory Board with a share capital – do sustain 261 240 € - RCS Paris: 512 855 958. 6 place de la Madeleine, 75008 Paris, France. www.ossiam.com

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