Fake Meat, Real Food

year was a hamburger. So when I started seeing fake burgers showing up on menus and at the grocery store, and I'm not talking about a veggie patty but something that actually resembles a hamburger, I was pretty excited about it. So, yeah, I take it you like these they cut the mustard no pun intended. Okay, So years ago, my then girlfriend, no wife, and I would go to this vegetarian restaurant, a Sunflower in Vienna, Virginia. If you know it, you

know it's fantastic place. But it always struck me as odd the attempts at replicating meat with like things like satan and like I thought it really wasn't worth the effort. I still don't, certainly not good enough to be worth the effort. But I've tried the impossible burgher and all that, and it seems fake meat has really come a long

way since then. And that's what we're here to talk about today, This alternative to animal protein, be that poultry, fish, beef, or pork, and what it means to be fake meat, whether made of plants or actual animal tissues growing in the lab. So today we speak with Hume Bromley, who looks at consumer trends here at B A E F, and he's going to talk to us about a report titled Alternative Proteins Fake It Till You Make It. The full report is available on the Bloomberg terminal, at BENF

dot com or on BNF's mobile app. And as always, BENF does not provide investment or strategy advice, and you can hear a full disclaimer which will play at the end of today's show. Now, let's hear about alternative proteins. I'm Dana Perkins and I'm Mark Taylor, and you're listening to Switch on the BENF podcast. Hi, Hi, thanks for coming on the show today. Yeah, thanks having to be back. So the title of the no that we're talking about today, it's about, well, we're going to call it fake meat,

but alternative proteins fake it till you make it. So I want to know how fake is it. I have a friend who actually refers to these, um, these alternative hamburger patties that they actually have in the United States is frank and food. So does it resemble the real food that we interact with or is it something that I wouldn't even recognize due to the processing. Look, I've had to try a bunch of things through you know

what you call market research. I guess for this this report, right, and you know it's all it's all subjective, it's all going to be individual opinion. But I mean, I think the best ones I have tried that the best companies that faking meat and the best ones are cooking it afterwards probably do the same job as really poor quality beef.

Right now. You know, they might get better over time, but no, certainly, no one's doing that I've tried has done a great job of replicating, you know, a great hamburger. And and no one's anywhere clotis on on replicating a steak or anything like that. But what are they actually made of, Like, what's it comprised of? Most of the stuff out there on the supermarket shells, but at the moment are are plant based, right, So they'll typically use

either a soy protein or a yellow p protein. So basically you're growing that crop, you're extracting the protein from it, you're basically running it through a big macerator and eventually extruding it's mixing it with other ingredients and extruding it like you would pasta or cereal into a form factor. We recognize, you know, something that looks like like ground beef, or if you've turned into a paddy, it might kind of look like you can squint, you know, a chicken

fill it. I was just to get back when I used to go to vegetarian restaurant and they would have fake meat back in the day, made out of like satan and stuff like that. I don't know, it was just not good. My conclusion back then was, you know what, let's get it. Just give me the veg. I'm good. Look, I don't I don't disagree that there's new products out there for decades, right at least or MILLENNIU if you

count things like tofu. There's been an alternative as protein, alternatives to animal meats out there for for people that don't need it. What's different about this, what's different about plant based meeting the culture, the lab growing meats that are coming, is that they're not trying to offer a new product of vegetarians and vegans. Really they want to win over the omnivores or at least the flexitarians, but but ideally the omnivores or other people who eat meat.

It's got to look, taste, feel, smell just like meat to do that, because otherwise, you know myself and you will have that response. Just give me a vegetable, give me meat, don't try and trick me. I mean, this was fifteen years ago too, and you know, I'm sure technology has approved. I've had a what beyond burger or whatever, and I thought it was good, it was great. I'm really excited for this actually to happen. I would call myself one of the flexitarians or I haven't even heard

that word, but I'd say that's what I am. You are at the target market, I think I am. Actually yeah, definitely, you and me both so This is a bit of a departure for benf Why did we actually choose to

write about alternative proteins. It's a good question, but being has been involving for a long time now right where we're no longer just a clean energy research firmly moved into transport industry decoganization, and I guess the common narrative here is that we have these century old industries and supply chains that are being threatened and disrupted by by new incumbents, and those new incumbents are enabled by technology, you know, whether that be falling prices of solar panels

or or or electric vehicles, or whether in this case it's you know, the potential cost reductions of making plant based or lab grown meats that will disrupt you know, some of the biggest trading commodities of the planet meat.

And the only thing that leads that's come with all of them is is massive emission reduction potential if this happens, and if the company's offering plant based meat and cultured meats, get it right, So you mentioned just now cultured meat, and actually the very beginning of December, I saw an announcement that Singapore approved the very first lab growing meat to be sold for regular people like you and meat

to consume it. So my question is about that, how is it made and what are some of the concerns around the lab grown and cultured meat that have made it kind of lead us to the market. That hasn't been on the shelves for fifteen years, it's been on the shelves for maybe fifteen days. It's really interesting stuff and exciting stuff that we finally have a product on the market of coming to market soon in Singapore. Lab grown meats, cultured meats, clean meats are sometimes called very

different plant based. So you haven't tried this stuff before. It's only been tasted in kind of experimental settings. And what it is is basically, it's it's real meats. It's

just grown inside inside an incubator inside a machine. So it's where you're basically extracting animal cells from a live animal from from a from a placenter, growing in a machine by feeding it this kind of concoction of kind of what you call food culture and basically exercising that inside this machine to make it grow like muscle would grow muscle and that tissue and then when that's you know, whether that's finished growing inside this machine and you're you're

scraping it out and you know, and using it like you would ground beef. Eventually, maybe down the track you could even grow up an entire fiel it inside. So you know, it's it's a it's a process that they're basically lifted from medical science. Not that uncommon at all, but clearly very costly um and clearly new for the food industry. The development Singapore is a company called it Eat Just. They're certainly at the forefront of of the industry.

They're working across a whole bunch of different animals. The development in Singapore looks to just apply the chicken right now, but it's it's the first step in bringing these products to market. So when people are talking about potentially growing organs, this is a similar technology they're using to grow the

meat that will go on our plates. Yeah, very similar. Obviously, you've got different cells, different culture every animal you grow, and it requires a different environment, so different different temperature, different culture. Obviously different cells that you're extracting, and different timelines as well. But that it's it's just the same as what you're seeing in some of those some of those therapeutic or generative medicine practices. This feels very futuristic

to me. It does, look at it is futuristic. It comes with that futuristic price tag as well. You know that the original burghers that were being process this way, we're costing something like a hundred thousand dollars a burger. Supposedly, there's certainly companies out there that's you know, you're still paying kind of hundredfold of premium of what you would

for for animal meats. But there are companies out there, but certainly hope to bring that down to something that's you know, more more like tenfold in the next few years. Really costly. No reason why those costs couldn't come down. Not you know that there's many reasons to beleeve the costs should come down, just like we kind of I said before, you know, very similar to solar panels or batteries and e v s. You know, you've got this

cost curve, You've got a process that's infinitely scalable. You just need to make more of these incubators, you know, put more cells inside machines and you get more and more product. A lot of the costs at the moment comes from the culture. So you have specialized firms are basically brewing up this culture to feed your your cell lines and grow the meat that would need to come down. But it's got to have a learning rate behind it.

It's way too early to even put a number on what that learning rate might be right now, but you know, it's it's a very scale, little repeatable process that that that that that should come down. And you contrast that to a very inefficient sector putting animals out to pasture for for months or or years at a time to grow meat, you know, and and wasting the male metabolic cycle to work to grow an animal that then butcher it to then waste a decent chunk of the carcass.

There is a whole lot of old waste there that that can be undercut by a futuristic, mechanical, automated process. How is it going to be rolled out in these first adopters in Singapore? You know, is it going to be high end restaurants with people waiting out the door to get a shot at this, or is it going to be you know, through more I guess fast food chains or places that'll sell this. Look. I imagine in Paul with this cultured chicken, it's got to be high end.

There is this disconnect between costs and price. When it comes to plant based meat, yes, it's price that are premium, but cost you could argue should be the same or lower than animal meat. When it comes to cultured meat, it's costly and its pricey, and it's probably going to stay that way for a while. So that there's the barrier. They're kind of trying to find enough people willing to sample it at that cost, and then you know, where

do you grow from there? Every country you go into after Singapore you need to jump, you know, really strict and high regulatory hurdles. You know, in the US we're

going through that process right now. And because it's a meat product but also an agricultural product, you're basically regulated twice by the FDA, the Food and Drug Administration, and by the U S d A, the U. S. Department of Agriculture, so all of which already have processes in place for regulating livestock, for regulating meat and butchering, and for regulating basically all food supply chains. And you've got to meet all those existing hurdles, even though your product

might look and behave very differently. So that's specifically in the United States. How about an other parts of the world. Does the FDA have the most stringent standards and therefore they translate over to other countries or you know, I've had a beyond Burger here in London's I mean, there definitely is an equivalent here in the UK. What's the

view on these products in other parts of the world. Well, I think you see these companies kind of pushing for some sort of consistency amongst different regions and how they regulators, But it is an entirely different process right now. If you want to go into the EU, you need to

go through the regulator. If you want to go the US, you go through the USD, usd A and f d A. They're pushing for consistency, but at the same time, they really want to protect their their secret source, protect their processes, protect protect their recipes, so they can't be open book with their competitors. The push for industry stands across the world because they're trying to be market leaders at the same time. Now, for a very short break, stay with us,

so let's talk about adoption of alternative proteins. Both kinds the plant based and then maybe someday the cultured meat

coming to a plate near you. In this research note, you talked a lot about the United States, and my question also has to do with whether or not that is the primary market for these products at this point in time and where the real growth is coming from, because what immediately comes to my mind is, you know, the consumer preferences in Asia, for example, are really gravitating increasingly towards animal proteins and meats with raising GDPs and well,

I mean the maybe taste are changing as well. Can you give us some color on that. There's a couple of questions in there, right, But first of all, where where's this stuff being trial today? Who's eating it? If you look at the leaders companies like Beyond Meat or Impossible Foods and where they're actively marketing and selling their products,

it is certainly biased towards the Western hemisphere. They target North America, US and Canada a target primary markets, certainly the European Union UK in the preferences are changing there, there's healthy decisions being made. And in some other places like like like Australias on their radar as well, you do see a lot of announcements coming out of Asia. Sometimes it's the same firms moving into Asia. A landmark

deal with Starbucks recently struck in China. But you also see a lot of local firms as well, local startups getting traction in places like Japan and career in China. In Singapore, we've seen these firms pop up. And these are countries they're the more, but I guess the more they're the wealthier Asian countries. It's still with changing consumer preferences and servicing the greater Asia market. With with growing

meat appetite. The challenge there I think will be one the meat attachment levels and outside of China and the countries Malaysia, Singapore, meat attachments or not all that high meat consumption the past has not been all that great. And what you see when you look at kind of meat consumption over decades and generations as an economy comes with wealthier certainly the rate of meat intake, the annual

the per capita intake of meat increases. But if you start from a very low base, you don't catch up to the US, you don't catch up to Western Europe. You just grow from your lower base. You start at a high base, you know now I'm thinking kind of Latin America, maybe you will catch up to the US on a per capita basis, but they're small, population small, but populations with growing wealth. So really the opportunity is

huge my population perspective in those countries. But chances are they one don't have the meat attachment because they haven't had as much meat in their diets historically. As their meat appetite grows, it's just not going to be the same level as what you see in kind of in the West. I mean this has a lot to do

with cultural factors. When you say meat attachment, I mean it has to do with like the recipes that somebody knows, Right, So if I'm going to make something for dinner, I'm going to go to a recipe that maybe my mom taught me, and that may not necessarily involve animal protein. Are there other things that come into play here that maybe I don't know about. There's certainly trends happening in meat.

Let's let's put plant based on cultured meat aside for a moment, But just the big trends happening and meat right now are consumers are making healthier decisions, They're switching from bread, meat, beef and lamb, and some extent poor chicken and seafood. That's a trend that's happening already, or the eating smaller portions in Europe for example, in some case of the US. So they're making those healthy decisions regardless of alternatives that are that are available to them,

and certainly they're looking for convenience. So yeah, you're seeing the majority of meat I think you meant for most animals being consumed in your prepackaged, preportioned individual cuts. It's actually quite rare now to go and take a whole chicken home in many of these countries, or bring home

a whole whole cut of lamb or beef. You know, people are looking for convenience, and that's great news if you are a supplier of alternative meat, because it means you don't need to make your product look like an animal. You need to make it look like the regurgitative product

that comes out of the end. Can you tell us a bit more about who's involved in who's producing these alternative proteins, and who's investing in them, so people are generally familiar with the real market leaders here and possible foods and beyond meat, and those firms have got enormous traction off one know, I p o S and secondly through announcements and partnerships with fast food chains in many cases with McDonald's, with Starbucks, with Burger King. But there

are others out there. I mean, certainly if you're sitting in the UK, be familiar with corn. It's been around for decades now, Good Catch foods, doing seafood, you know, Primaries, Alpha Foods. There's lots out there. These are the brand names that are selling the alternatives, but actually what's interesting is what's behind them right as some are still venture backed. The top six players here have raised about two and

a half billion dollars since eleven. A lot of that's come from venture, you know, from really big name venture as well, also Richard Branson, Bill Gates, Jeff Bezas, Jay z Serena Williams. Really broad pool of venture that it's backing these companies. I guess. More recently we've seen a wave of acquisitions and internal business units being started by massive food conlawance. You know, Kellogg's has a stake here, Maple Foods, Nestle, Craft, Hyn's, they're all getting in on

this space early really, but before we see massive baptech. Okay, so you just mentioned Serena Williams, and I can't help but immediately think. You know, she's a professional athlete. She has got to have an extremely healthy diet, and she's looking at this and she may have had the same thoughts that I originally did when I went to take a bite into my first beyond burger, which is, oh, it's made of plants, so therefore it must be healthier. Is that the case? It's complicated right to start with.

So certainly when you asked why they would choose or become interested in plant based meat, the most common reason they site is health. And then there's other attributes like environmental you know, lower emissions or land use or water, animal welfare they might care about, but health is certainly number one. Firstly, what's interesting is if you are concerned by health, is a greater chance you just eat less meat than you you'll eat plant based meat. So if

there's complicating fact to number one. But secondly, let's talk about the health of plant based meat, and it's really debatable is whether it's healthier or not. You know, in many cases you'll see that plant based meat has higher fat content necessily saturated fat content. But if the higher fat content, then meat lower protein content, and depending on

how you look at it, you know, higher sodium. What's really complicated about this stuff is when you go and buy some plant based meat off the shelf at a test you or your local supermarket, it's already been mixed with all these other ingredients to make it kind of a final product, so it's already loaded with the sodium or arrest of it. You're going by a container of mints off the shelf next to it, and it's not

it's a raw ingredient. So quite often consumers are comparing kind of a raw ingredient with a process ingredient, the plant based. When you start comparing plant based products like burger patties and sausages to meet burghers and sausages and over comparing ingredients to products or comparing products to products, then it starts to look a little bit better. Still, the protein content is lower. Still, the fact content killed can be higher, but suddenly the sodium would worry a

whole lot of consumers. Tends the balance out. Okay, so we've spent a lot of time already today talking a lot about this in terms of ground beef, and this raises another point around what these alternative proteins actually are what they're looking to mimic. So we're talking about what we've got. You mentioned sausages, so we're talking pork, beef, chicken. I think I've seen a toe fur ky in the past,

but maybe that doesn't fall into the scope here. And then also fish, if you could give us a little bit of insight into what this fish is like and kind of what the potential uptake is of that. Sure, so if you can name and animal, chances are there there's a fake version out there. Most of the attention to date has been around ground beef products. I think one it's because there is That's where I'm most health concerned lives. Secondly, it's because actually it's pretty easy to replicate.

You know, it's already highly processed, so therefore you know you've mashed up all your vegetables or your plant into this paste and arrive at something that isn't too similar to ground beef. And further, I guess there is that environmental impact as well, beef resulting a whole lot more emissions than these other livestock animals do. That's why they

get attention, and hype has been around beat today. But if you look at what's available on the shelf, and you look at kind of sales by value out there, and it broadly alignes with meat sales. You know, about a third of it is beef in the US, about a quarter of it is fake chicken, Nearly a quarter of it is fake pork and fake bacon, and then

there's kind of this mix of other stuff. And that other stuff you're right, includes fish, includes turkey, includes duck, and often nondescript kind of you know, here's some fake meat. Moculan animal name. Fish is a really interesting one. Actually,

see food more broadly is really interesting. I've seeing fake shrimp, fake prawns, fake fish out there, and it's interesting because from a plant based perspective, sure, you're basically doing it the same why you're mashing together proteins, adding some different ingredients to make it seem more like like fish or

sea food than than others. But when it comes to cultured meats, it starts to get really interesting, really strange because fish is a cold blood animal, and it's the only cold blood animal we we we listed there in

terms of animals that humans consume. It's actually much easier to grow in an artificial environment as much less energy intensive, and it can be faster, so you can incubate the as so long as you have the settings right, you can grow them inside these artificial artificial environments for potentially a lower cost than you could for for any of these other farmed livestock. The complicating fact you're here is

that fish are not growing. You know, they're caught in almost every you know, basically ever in any country in the world. There's no massive supply constraint apart from over fishing and which is which is huge, but there's also not the same emissions consequence as you get from beef and from pork. Over fishing problems. Definitely, I'd love to solve that. I mean, as a consumer, I am now you're our get market for the fish when I also think of diseases associated with farm grown fish as well.

Instead of farm growing fish, get me some lab grown fish. You know what's amazing about fish is most people that covered this stuff don't look at fish because the only c D and IRONPHO stuff. When they look at meat, they not fish and seafood they just think about red meat and poultry basically and look at appetite over over time. And if you do that, you see economies like you're peeking out a few years ago in terms of meat

consumption per capita and starting to fall. Now it's only once you add seafood back on top of that, but you realize they're not peeking in their meat consumption, they're just switching to seafood um. So there is growing demand there. And it was taking a lot of data assemble to put this together so we can look at meatst land based meats and seafood in one report and realize, actually

the trends totally different. Common misconception because I definitely didn't even think about fish until we got ready to prepare for this show today. So I feel like the other side of it, that side of the coin has to have something to say about this, right, So the meat and fish lobby, right, they've got to be having something to say about alternatives to their product, right. Yeah, And the meat lobby groups are enormous and powerful. They're certainly

watching this space. But you know a lot of the data is coming from there. You know in the US that cattleman's Association saying look at look everyone, it's okay. Only point three percent of meat consumed or substitutes, only half percent of beef. It's it's it's small. You know, it's nothing to worry about yet. But Mark, I mean you're you're back there for in yours and then in

the mid two thousands as well. Around is it's it's it's very familiar, small numbers, industry being potentially being disrupted, technology changing all the time, and an enormous powerful incumbent lobby groups. I think what's different this time around is that energy companies in an economy were big and they could be disrupted, but we kind of knew that knew

the extent of the of the scope. When you talk about livestock, you know where I where I'm sitting right now in Australia, I think animals a year, some of them are ark for our second or third biggest export. It's it's enormous and enormous late you know, enormous from a labor perspective as well, in terms of farmers and and and rural and agricultural community, enormous in land holdings, enormeless in money, enormous in trade um enormous in foreign investment.

This actually, I think in many cases is bigger than energy and has more powerful voices. Okay, so if you're saying it's that big, then I think you've confirmed that this is a place for some potential huge growth. Those who maybe haven't interacted with this in the past probably will in the future. My question really revolves around how quickly do we see this happening? Because it is consumer lead.

I know there's no science to predicting the future, but Hugh, what do you think is this going to be ubiquitous in five years, ten years, fifty years. Yeah, you've really put me on the spot there. I think in the it's there's a lot of really interestreme developments happening here. Falling castle as ingredients and said that could lead to massive disruption. If you look at what's happening today, you know you've got about forty of US adults. I don't

think it's that different. In Western Europe have tried the stuff. Very few say they don't like it in anyway you know that they're all okay with it. There's lots of repeat sampling, repeat purchasing happening, but but very few Abanity meat and if they are, they're they're not switching to substitutes. They're kind of mixing this into their diets. So it's a small proportion of their diet. Maybe that will grow over time. Maybe the proportion of people that try it

will and eat it will grow over time. But basically where we are today is that we have a number of market leaders who control who control the industry really essentially, and they're pricing this at a premium to everything else that's out there, and generally for most of these animal times, we're talking about kind of twice the cost of animal meat at the supermarkets of reach out pricing now, and

that really doesn't lend itself to massive growth. Where we've kind of got the Tesla strategy here that it's sell this to people who care about these, you know, these aspirational qualities of health for animal welfare, but not expect a huge amount of growth. I think in that scenario, you know, I've kind of said it's somewhat similar to

kind of fair trade products or fair trade coffee. You know, we might get you know, from where we are today point three percent and meat to something like you know, one and a half, maybe maybe a cup four percent of meat sales over the coming decades. What would really become interesting if the pitch changes that that pitch at the moment is justified by the way it's justified because

their supply constraints. There's not enough in particular p protein out there to make the address or market any bigger. But what happens if there is What happens if these bottlenecks to kind of are are untied or solved, and then it becomes really interesting because this stuff could get

really cheap. We could we could be you know, grinding up plant based proteins inter pace performing into into meats that if they can get the recipes right and make it seem like meat could be the same cost or less than animal meats and could have all these aspirational qualities at no cost to consumers. It's free or or even a discount to to meat products. And that's where the numbers will really start to move. In our view.

We started looking at parallels. There two things like genetically modified corn at the far extent, you know that that you know, just a couple of decades has become the dominant plant to crop across the US. And in the middle of something like diet soda. I think they're really strong and ourlogy here with diet soda cost the same desoda when it's sugar field soda when you go to the store, but you're getting that aspirational quality of health and healthy is aspirational, by the way, it's not it's

not universal. Um, I was going to say, diet soda healthy. I don't know. You yeah, but but it's it's something that you don't necessarily need. You could just not have soda. Same with meat, you could not have meat, or you could go to the alternative if it's the same price. But if you can get at that same price, you diet service suggest that you get kind of twenty five

to the market. If you can sell a product for the same price as the competitor, that's roughly close enough to the real thing to convince convince consumers to buy it. At the moment, were certainly on a pathway towards single digit percent of meat sales. We really need the price to change, Maybe the technology costs to come down a bit, but really priced your marketing strategies to change if you're to see really high bunch levels and therefore the emission consequence.

So you. This was a lot of fun. Thank you very much for coming on the show today. And I think it was a lot of fun just because I sudly love the shows where we get to talk about stuff that I'm actually going to get to see and touch. While I do love the electricity that is powering my computer right now, and that is a compelling topic. I am also really interested in what I'm having for lunch today, So you've You've closed the loop for me, Hugh, Thanks

for joining us. Thanks very much, great to be here. Today's episode of Switched On was edited by Rex Warner of Gray Stoak Media. Bloomberguin e F is a service provided by Bloomberg Finance LP and its affiliates. This recording does not constitute, nor should it be construed as investment advice, investment recommendations, or a recommendation as to an investment or other strategy. Bloomberguin e F should not be considered as

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