Overview

Technological developments have time to time disrupted certain industries, and such industries have grown exponentially when this happened. For example, the retail industry was taken by storm with the growth of e-commerce, and companies that emerged as e-commerce giants gained substantially in market value and some companies eventually became multi-billion dollar ventures. Think of Amazon for example which became one of the most-valued companies in the world with the growth of e-commerce.

This teaches a simple lesson to investors; earlier you identify an industry with the potential to grow exponentially and invest in companies representing that industry, the better your chances are of beating the markets substantially and gaining attractive investment results.

After years of being in research and development stages, clean meat is finally ready to hit the markets and the clean meat industry might turn out to be one of the most attractive investment opportunities available for investors at the moment. Clean meat is produced by taking a sample of stem cells from animals without harming them.

(Source – Vier-pfoten)

To validate this thesis , we are analyzing the outlook for the clean meat industry on a global scale in this article.

Why is there a hype behind clean meat?

Clean meat is not yet produced commercially at a large scale, but the idea is gaining traction around the world. In a world where sustainable development is considered a key theme for economic growth, clean meat is gaining the attention of investors and entrepreneurs alike. The simple idea of being able to produce meat in a lab without slaughtering animals is gaining widespread attention as animal activists are pushing regulators to take notice of the developments in this industry.

The growth of clean chicken is expected to use between 35-67% less land than traditional meat production facilities, and clean beef is expected to provide even better results.

(Source – The Good Food Institute)

A recent study revealed that farm animals in the U.S. produce over 1 billion tons of manure each year, resulting in water pollution and the spread of certain diseases. Even though the world is more concerned than ever of preserving the environment, a solution to this problem could not be found for years despite various technological experiments. This is where the clean meat industry comes into play, and the growth of this industry can significantly reduce the water pollution levels resulting from manure. This is one of the reasons for the hype around the clean meat industry.

Apart from the appeal of clean meat from an environmental friendly perspective, clean meat is seen as the sole alternative for the growing problems arising with the exponential growth of population.

With a population over 7.4 billion at present and the expectations for strong growth, global population is expected to reach well over 9 billion by 2040, and a growing problem is how to serve meat for such a large population.

(Source – Our World in Data)

The Food and Agricultural Organization of the United Nations predicts that world food production needs to rise by over 70% to meet the demand of this growing population by 2040, which is a near-impossible feat to achieve.

These macro level developments are raising the need for an alternative method to produce meat, and clean meat is the perfect solution for this rising problem. As clean meat would be produced inside labs, further technological developments will pave the way for more efficient production and possibly cost advantages as well.

Big money is getting behind the clean meat industry

For a growing industry to prosper, funding coming in from big players in an industry matter significantly, as it is not only about the money that is flowing into the industry, but about building consumer confidence and gaining regulatory approval. The backing by large-scale investors is a sure sign of growth prospects for an industry.

Big money is certainly flowing into the clean meat industry, and I expect this to drive the growth of the industry for many years to come. Prominent investors such as Bill Gates and Sir Richard Branson have already invested billions of dollars in the clean meat industry, and are betting that the industry will become the only sustainable solution that can address the growing demand for meat while preserving the environment. In any case, both of these investors believe that no nation has the capability to produce a sufficient level of food to address the demands of the growing population.

Bill Gates and Richard Branson backed Memphis Meats has already been successful in producing synthesized beef, chicken, and duck and as far as investors are concerned, it’s just a matter of time until these products hit the market on a large-scale.

Tyson Foods; the world’s second largest processer and marketer of chicken, beef, and pork, invested in Memphis Meats in 2018, which is a green light given to the industry by one of the largest players representing the industry.

Memphis Meats Timeline(Source – Company website)

I believe this is just the start and many renowned investors and investment institutions will get behind the clean meat industry, just the same way they got behind the electric vehicles industry upon the realization that electric vehicles are poised to become the future of the automotive industry. As a reminder, it’s always better to be an early stage investor in a growing market.

When can we expect clean meat to hit the market?

As per latest available information, cultured meat is expected to be available in 2019, and this will mark the beginning of a revolutionary industry that is expected to change the way we consume food forever.

As commercial scale production begins, industry participants will ensure to involve in a higher level of advertising and marketing activities as well with the intention of popularizing cultured meat products.

The opportunity

The clean meat industry is expected to be worth around $15.5 million by 2022, and then grow at a steady Compounded Annual Growth Rate (CAGR) of 4% through 2027 to become a $20 million industry. One might think that these numbers are not appealing by any means, but the catch here is that the industry is still in its infant stage and once clean meat products hit the market, and more technological innovations are unlocked, the industry could grow well above the rates predicted.

(Source – Markets & Markets)

In any case, considering the number of limited players in the clean meat industry, we can expect these existing firms to gain in value substantially as and when the clean meat industry becomes commercialized.

Beyond 2027, I expect the clean meat industry to grow at a much higher CAGR driven by higher adoption of cultured meat products and lower costs associated with such products.

One of the primary challenges recognized by many investors a few years ago was the absurd costs related with producing cultured meat. However, costs involved in the production process have decelerated substantially over the last 5 years, and this is a secular trend which would bring down the costs of cultured meat to very affordable levels by 2021.

Year

Production cost of a lab-grown burger

2013

$315,000

2015

$11

2021e

$4.30

(Source – Fast Company)

With production costs expected to decline significantly, the industry is in better shape than ever and the cost reductions are helping the industry in two fronts.

  1. Lower production costs will incentivize companies to produce more cultured meat and further economies of scale could be unlocked through mass production. Higher profitability will attract renowned companies to the industry as well. This will certainly drive the supply side of the equation.
  2. Lower production costs will result in lower prices for cultured meat products, and this should drive the demand side of the equation.

I believe there is a significant investment opportunity in the clean meat industry, and prudent growth investors should embrace this opportunity.

Regulatory outlook

In the U.S., mass production of cultured meat will require the regulatory approval of the Food and Drug Authorization (FDA), and companies would have to file necessary reports to get this approval. I believe regulators around the world would be keenly following the actions of the FDA in regards to the cultured meat industry, and the FDA will probably provide guidance regarding the production of clean meat.

Investors need to be wary of developing regulatory concerns to gauge a measure of how production will be impacted by regulatory requirements.

Conclusion

The clean meat industry, or the cultured meat industry, is poised to grow exponentially over the next several years driven by favorable macro level developments. I believe there is an attractive risk-adjusted investment opportunity in this sector, and investors should consider the cultured meat industry as one of the highest growth profile sectors at the moment.