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Asia’s start-ups in the alternative protein space

Source:Food Pacific Manufacturing Journal

Date Published:9/5/2019 09:09:52 AM

Looking ahead to what is predicted to become a massive market in Asia, start-ups confidently foray into the alternative proteins space. In his report, SAM GAO, Owner, TopGuide Advisory Shanghai, and Consultant for Hong Kong Tung Fung Investment Group Co., Ltd, analyses the success factors.  

ASIA has been late in setting up presence in the plant-based alternative protein space but is now slowly waking up to the opportunities therein. So coveted are the few Asian start-ups that most of them have won investment from eager investors so far.

Over a matter of three years, Asia has seen start-ups in almost every type of alternative protein that the West has: plant-based and cell-nurtured meat, cell-nurtured shrimps, insect food, and plant-based yogurt.

Who’s who in Asia’s plant-based protein start-up scene

Green Common in Hong Kong was founded by David Yeung, a former senior executive of a major fashion company, in 2015. He produces Omnipork, which he names his “pork”, mainly out of mushrooms, soy, peas and rice. He processes the mock pork in his six restaurants in Hong Kong and distributes it to other caterers in Hong Kong and Singapore, and plans to take the product to China and Thailand in a few months this year. His restaurant also has half of its space set aside as a supermarket selling nearly 100 plant-based food and cosmetics brands from across the world, which include Beyond Meat and and Califia of the U.S., for both of which he was an early investor. He has won investment from some of his like-minded friends and enjoys quite good cash flows.

In India, Good Dot was founded by Abhishek Sinha and Deepak Parihar in 2016, and raised USD 200,000 in an Angel round in April 2018. The company claims to have achieved break-even five months afterwards, and a year after it started trial production. RCM, one of the largest direct selling company in India is its distributor for India for its entire shelf stable range of mock mutton, chicken, fish and eggs.

In Malaysia, Jack Yap and Jin Yin started Phuture Foods in August 2018, aiming to launch their plant-based pork in Hong Kong and Singapore, where Omnipork, Impossible Foods and Beyond Meat have created a receptive market for plant-based meat, end of this year. Two months ago he got USD 750,000 from Brinc, Artesian Capital and some individual investors. After taking up a firm foothold in Hong Kong and Singapore, he is eyeing the rest of the Asia market.

In the area of cell-nurtured meat production, also referred to as clean meat, Avant Meats was established last year by Kai Yi Carrie Chan, a former Senior Project Manager in a property developer, in Hong Kong. This company has received investment commitment of half a million US dollars from Lever VC for its research and development.

Singapore’s Shiok focuses on cell-nurtured shrimps, targeting to disrupt the USD 40 bn global shrimp market. Established by Sandhya Sriram and Ka Yi Ling, two food scientists, in 2018, the company completed seed round fund raising of USD 4.6 mn in May this year from Y Combinator and Kevin Brennan, CEO of Monde Nissin (owner of Quorn Foods) and some other investors. Shiok already showcased their first ever cell-based shrimp dumpling at The Disruption in Food and Sustainability Summit (DFSS) on 29 March at the Grand Hyatt Singapore.

The Asian start-up world of plant-based yogurt is a bit lonely as the author knows only Christiana Zhu, a New Zealander of Chinese descent, who established Marvelous Foods to produce coconut yogurt in Beijing in 2016. This company is soon to receive USD 500,000 from Lever VC to help it expand its production and team size. She struck upon the product idea in Beijing when she could not find coconut-based yogurt she had been used to in New Zealand.

Three companies in Asia produce insect-based food. Two are established by Massimo Reverberi from Italy: his Thailand-based company Bugsolutely produces cricket flour-based pasta and his China company produces silkworm flour-based crispy chips, which look and taste like roasted potato chips. The other in China took off the ground with some funding from Shanghai-Bits x Bites last year, and in February 2019 Reverberi exited from the China company by selling it to a Shandong Province-based sauces and condiments manufacturer, which also backs Bits x Bites financially. He remains the owner of the Thai company.

The third insect-based food company was launched by Wan Zilu, a Chinese with a food science master degree from the Ohio State University of the U.S., producing silkworm peptide beverages added with fruit juice and collagen. This is the only company that has yet to obtain funding from an investor. Wan, founder of Avaento, said that he has met with strong consumer resistance as most people harbour a natural aversion to eating insects. In distribution, he found some beauty parlor who are willing to sell the product to their patrons but pressure him to lower cost and thus end prices by half, which he refused to do because then the product will not achieve the health result that he desires in consumers. In addition, the beauty parlor were also against his idea of selling on Taobao.com as they want to control prices.

A green common restaurant serves dishes with Omnipork meat (Photo provided by Sam Gao)

International investors camping up in Asia

The initial bunch of start-ups in Asia are finally offering investors some meagre choice of investment targets. Some of Asia’s investors, particularly Li Ka-shing’s Horizons Ventures, was one of the earliest and most active investors into the world’s earliest plant-based protein start-ups. Horizons Ventures invested in Hampton Creek (now named Just) as early as in 2011, and invested again in 2014. The year 2017 saw Singapore’s Temasek entering the alternative protein scene, and has so far, joining Horizons Ventures, invested twice in Impossible Foods, once in Perfect Day. In April 2018, Sailing Capital, a Shanghai- and Hong Kong-based private equity firm featured also as a big-ticket investor in Impossible Foods.

Shanghai-based Bits x Bites invested in overseas alternative protein start-ups such as Future Meat Technologies of Israel, and China-based start-ups such as Bugsolutely, in 2018.

Most recently joining the Asian investors scene is Feast, which offers early stage funding to alternative start-ups but operates with a slightly different model. Because of the founders’ nearly two decades of experience of food distribution for imported brands, it offers itself as a de-facto China team for any foreign country-originated and based start-ups it chooses to invest in. “We are their strategic investors, distributors, marketing managers, and manage their social media accounts,” said Nicolas Stoekert, one of the founders of Feast, to FoodPacific Manufacturing Journal. “We wear many hats.”

Among the start-ups that Feast has invested in and does promotion and distribution for in China is the Dresden-based chocolate manufacturer of Nu-Choc, which produces chocolate with all plant-based ingredients and nothing from animals such as whey protein from cow’s milk and uses biodegradable materials in packaging.

Still more investors are setting up shop in Asia to tackle this populous market and fast-growing economy. Nick Cooney, a former founder of New Crop Capital of the U.S. (invested, along with David Yeung, in Beyond Meat in 2014), is building an investment team in Hong Kong for his Lever VC. He and his Hong Kong partners are also in talks with prospective investors in Hong Kong and the Chinese mainland, who have expressed strong interest in joining the fund either as limited partners or general partners.

Presence of foreign start-ups in Asia

While the number of start-ups in the alternative protein space are relatively small, an increasing number of foreign brands are coming, and in style! Just, which produces man-made chicken nuggets, started selling via online and offline channels in China in May this year, forging strategic cooperation with Alibaba and JD.com.

In late June, a start-up vegetarian restaurant named Planet Green (青苔行星) started serving Impossible Burgers of Impossible Foods of the US, selling each burger for RMB 88 (USD) in Shenzhen, China. It surprisingly finds that more than 90% of patrons are non-vegetarians.

Beyond Meat and Omnipork are expected to enter the China and Thailand market soon this year, so announced Green Common of Hong Kong, which has been distributing products of dozens of international brands, including Beyond Meat, Gardein, Daiya and Califia, in Hong Kong, Singapore and Thailand since 2015.

David Yeung, founder of Green Common, wrote recently in an article for plantbasednews.org that he observed first-hand the tremendous traction of some international brands: “Beyond Meat sales in this region have tripled every year since entering the market in 2015. Non-dairy brands including Oatly and Califia are natural fit and instant hit because many Asians are lactose-intolerant.”

Oatly is making quick inroads in Asia as well. Founded in Sweden in the 1990s, the company uses patented enzyme technology to process fibre-rich oats into nutritional liquid food. Its product is available in over 20 countries throughout Europe and Asia. It entered China in July 2018, first selling in over 300 cafés of Pacific Coffee under China Resources, following an investment by a joint venture between China Resources and Verlinvest of Belgium. Now its products are available in 3,000 retail and catering outlets in China.

Starting April last year, Oatly supplies have often fell short of demand in China, forcing Zhang Chun, General Manager of Oatly China to request his staff to “pass along any orders exceeding 100 carton boxes (of products packed in Tetra Pak cartons) to me for approval so as to temper the demand,” he said in a speech in the annual Food Beverage Innovation Conference (FBIC) conference in Shanghai in April.

Also planning to arrive in China, though by no means a start-up, is France’s St Hubert, a leading player in plant-based yogurt, beverages and dessert. St Hubert’s mother company, Brassica Holdings, was acquired by Shanghai-based Fosun Group and Beijing-based Sanyuan Dairy for 625 million euros in January 2018. In late February this year St Hubert established a Shanghai trading company. Fosun is a big business empire with presence in tourism, pharmaceuticals, insurance and entertainment, while Beijing Sanyuan is one of China’s leading dairy manufacturers, with its own broad distribution network in Northern China.

Quorn Foods, which originated in UK in 1985, has already been operating in the Philippines since late 2015, when it was acquired by Manila-based Monde Nissin. Quorn Foods makes chicken patties, nuggets, and beef products from mycoprotein, a protein cellular mass-developed in England around the 1960s to address food shortage. The company saw its sales soar globally by 16% between 2017-18 to 205 million British pounds. Quorn Foods Chief Executive Kevin Brennan has stated: “We are investing in these uncertain times because we see long-term growth in the sector, particularly in the US, Australia and Asia.”

Success factors for an alternative protein start-up

Based on developments such as those cited in this report, from Beyond Meat in the U.S. to successful start-ups such as Green Commons and Oatly, as well as mature but still fast-growing companies like Quorn, the following appear to be success factors:

1) Sales products using alternative protein in the catering channel tend to outpace those in the retail channels, thus, successful start-ups should prioritise restaurants and the like as their top customers and distribution channels. 

2) In countries like China, where online sales and digital payment are becoming common, online channels, or those offline retail channels that have embraced the online selling technology to the full – the so-called New Retail, are also helpful.

3) Respect of local cultures and customs is vital. This often starts from branding. Oatly packages its product in China by creating a Chinese character that emphasises on its plant origin: placing a premix suggesting of plants above a character meaning milk. Shanghai-based Feast changed the brand name from Nu-Cao to Nu-Choc because the former sounds like a word alluding to something vulgar in Chinese. Nu-Choc is easily interpreted as New Chocolate to the average Chinese with some basic English.

4) Product development is key. This means developing products suiting a particular market or channel. For instance, Oatly develops a milk product for the café channel, which supplements the coffee’s original aroma with a light oat aroma and can be also used to make fancy latté art. The product appeals to lactose-intolerant people and vegetarians, and is the most popular product Oatly has in China.

 

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