“The challenge we’re focused on is taking plant proteins and making meat out of it. We’re using purpose-built hardware that we’ve built over five years, we’re effectively an engineering company that’s been working on making a hunky, tasty chunk of meat.”

Sunfed is not the only plant-based meat outfit facing difficulties.

V2food, a joint venture between CSIRO’s venture capital fund Main Sequence Ventures and billionaire Hungry Jack’s founder Jack Cowin, last year closed its $20 million Wodonga facility and CEO Nick Hazell departed the company. V2food opened the factory just two years earlier and it employed 30 staff.

The start-up, which raised $77 million in funding in 2020, created a meat alternative using protein extracted from legumes to make “mince” that looks, tastes and cooks like meat. Its products are still available on supermarket shelves and in Hungry Jack’s stores, and the company now supplies about half of Australia’s plant-based meat.

“The market has seen an enormous hype curve and volume of companies and products emerge in the market. I’ve honestly never seen anything quite like the surge that happened,” Main Sequence Ventures partner Phil Morle said in an interview.

“There’s a couple of things that we all got wrong. We got the timing wrong ... We made the classic assumption that VCs can make, which is that the market will change faster than it actually will.

“Especially when thinking about what people eat, if you think about what guides our eating decisions and the habits that we have, these are hard, entrenched habits and any change in the market happens over a long period.”

The second thing that investors got wrong, said Morle, was that consumers would be moved to buy products because of their benefits to the planet – such as buying a Tesla over a combustion engine car. He said V2food was growing its revenue by about 6 per cent a year, despite subdued consumer sentiment.

“I don’t think the consumer market is there yet,” he said. “So, now what you’re seeing is the consolidation happen. There were hundreds of products that appeared over the past couple of years, which in the end weren’t great food companies. They’re starting to fall away and the products that are ultimately food that people like to eat, they’ve continued to grow.”

Those sentiments were echoed by George Peppou, chief executive and co-founder of Australia’s first cell-based meat start-up Vow.

Founded in 2019 and backed by venture capital firms Square Peg, Blackbird and Grok Ventures, Vow creates new meats from animal cells, including those that have never existed on supermarket shelves before. The company made headlines for its woolly mammoth meatballs that debuted last year, although no human can eat them, given their cells are 1000 years old.

“In my view, what we’re seeing now is there’s been an inevitable realisation that their approach to behaviour change was the wrong one,” Peppou said of the current crop of alternative protein start-ups. “You’re not going to change consumer behaviour by offering them something which is a similar enough version of what they already consume.

“If you’re in the supermarket and you’re making spaghetti bolognaise for dinner, grabbing beef mince is the thing you’ve done for decades. Grabbing a pack of meat-free mince is something that adds no value to you … All these companies have just misunderstood the way people choose what they eat.”

Vow is first targeting the luxury market, said Peppou, with products that are novel and distinct from typical meats, and boast extra nutritional benefits.

“We think we can offer a rich and tasty red meat, but with the nutritional profile of a salmon fillet.”

The lack of demand for plant-based meats has flowed through to US-based giants of the sector. Beyond Meat’s share price has collapsed by 90 per cent over the past three years, falling from a record high of $US234.90 in July 2019, to $US8.29 today.

“The lack of a clear route to profitability for the business in the short term is keeping investors away, with gross margins deeply negative,” eToro research analyst Josh Gilbert told this masthead. “Progress is being made to improve margins, but this will take time. Quite simply, there are far better investment opportunities than Beyond Meat for investors right now.”

Gilbert said companies such as Beyond Meat are struggling, given plant-based meats are still more expensive than the average protein, and simply don’t taste as good.

“Plant-based meat companies’ main challenge is achieving the level of consumer adoption necessary to scale and lower prices – a hurdle that’s becoming increasingly unlikely under current market conditions. Their products’ high production costs, coupled with the macro environment, have significantly increased expenses, leading to substantial cash outflows in recent years.

“Despite the challenges, the alternative meat industry has legs, but the road ahead will be challenging, and long-term adoption may still be years away,” Gilbert said.

For both Morle and Peppou, the alternative meat sector is still potentially lucrative, as well as an environmentally pressing one.

“We’re going to need to feed 10 billion people,” Morle said. “We have to make twice as much food over the next couple of decades, and crop yields and so forth are going down, and it’s very difficult to fit more animals on the planet.

“We still feel very confident in the overall mission because everyone’s got to eat.”

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