Challenges and breakthroughs: contextualizing alternative protein progress

The state of the industry

A complex picture of the alternative protein industry emerged in 2023, one in which growth and progress were paired with setbacks and slowdowns.

Rising interest rates, multi-year price increases, and an uncertain economic outlook moderated retail sales and private capital markets across sectors in 2023. While topline inflation slowed in 2023, prices remained elevated relative to recent years, and rising interest rates restricted the ease at which money flowed through the economy. Consumers had less disposable income to spend on food, and companies had increased difficulty accessing financing.

The alternative protein industry was not immune to these trends. According to SPINS data commissioned by GFI and PBFA, year-over-year (YOY) plant-based meat sales fell by both dollars (-12 percent) and units (-19 percent) in U.S. retail, following the broader food and beverage industry trend of lower volumes and subdued dollar sales. For example, U.S. retail conventional meat unit sales—operating from a much larger base than plant-based meat—declined two percent YOY, while dollar sales were steady.

That said, according to Euromonitor, the global market for plant-based meat experienced slight growth in 2023, as did the global market for conventional meat and seafood. Notably, in the last decade, global plant-based meat retail sales nearly tripled from $2.2 billion in 2014 to $6.4 billion in 2023. (Source: Euromonitor International Limited 2023 © All rights reserved.)

And there are some promising consumer tailwinds—lapsed users who have not purchased plant-based meat in the past year remain open to repurchasing if products can more closely match the taste, texture, and cost of conventional meat. This underscores the importance of industry efforts to reach taste and price parity.

Private funding slowed in the alternative protein industry and beyond. According to data from Net Zero Insights, private investments in alternative protein companies fell 44 percent in 2023—in line with global venture funding across all sectors (-42 percent YOY), climate tech equity investments (-40 percent YOY), food tech investments (-61 percent YOY), and fintech investments (-50 percent YOY).

The sales and investment slowdowns in 2023 weren’t unique to the alternative protein industry, but as a relatively nascent sector relying on private investments to navigate early-stage operations and strong sales performance to secure favorable placements on retail shelves, they played outsized roles in the sector’s 2023 performance.

Government support

Governments around the world invested in alternative protein commercialization and research. At the same time, some policymakers challenged producers’ rights to create, sell, and advertise alternative proteins on the free market. 

GFI estimates that newly announced global public funding for alternative proteins in 2023 was on par with 2022’s record levels. Governments prioritized both research and development and commercialization efforts, including Canada’s announced CAD 150 million for Protein Industries Canada and Germany’s €38 million in federal funding for a sustainable protein transition in 2024. That said, total public investment in 2023 satisfied only a tiny fraction of the estimated $10.1 billion in annual support needed to realize the full benefits of alternative proteins.

Despite increased global recognition of alternative proteins’ benefits, the governments of Italy and Uruguay banned the production and sale of cultivated meat, and some U.S. state legislatures introduced similar legislation. Similarly, labeling restrictions largely remained in 2023, as select governments proposed new restrictions or upheld prior restrictions, while others loosened or dropped them. These restrictions continued to limit how alternative protein companies can communicate with consumers about their products.

The alternative protein market opportunity is immense, and it’s up to companies to capture it.

An evolution in how alternative protein companies operate will continue in 2024. Phrases such as “shakeout,” “normalization,” and “stabilization” were frequently used to describe the dynamics of the alternative protein sector in 2023, and all three pillars were impacted by last year’s broader economic trends. The factors that shaped the environment in 2023 are likely to extend into 2024. 

Though there’s optimism for some relief in 2024, interest rates remain elevated, meaning it will be difficult for startups to access free-flowing funding. Investors and stakeholders will expect the capital that companies raise to go further and last longer. Many companies will look to near-term strategies that prioritize cost reductions and quality improvements to reach consumers—even as consumers remain concerned about high costs and personal finances. For early-stage products and those not yet on the market, identifying intermediate revenue streams in technology licensing and ingredient markets—plus clear progress toward scale-up milestones—will be essential to securing additional funding.  
To fill the gaps left by the private capital markets, it will be increasingly important for governments around the world to continue to support the growing alternative protein sector through investments in R&D, grants, loans and loan guarantees, and other forms of financing.