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Is lab meat an existential threat to the animal feed industry?

By Paul Cuatrecasas

- Last updated on GMT

'Executives at feed companies need to take this risk seriously. Even if they do not believe this future will actually come to pass, they need to admit it is feasible. Moreover, much like sensible business people take out insurance for risks, the feed industry needs to hedge against this possibility.' © istock/anyaivanova
'Executives at feed companies need to take this risk seriously. Even if they do not believe this future will actually come to pass, they need to admit it is feasible. Moreover, much like sensible business people take out insurance for risks, the feed industry needs to hedge against this possibility.' © istock/anyaivanova
Will an acceleration in the meat reduction trend and the hunt for substitutes spell eventual doom for the feed sector and the livestock industry it serves? Yes, says Paul Cuatrecasas, CEO of Aquaa Partners. He claims there is increasing evidence that the future could be, largely, meat-free. For this investment banker, it is really just a question of when, and, he says, one way feed companies can hedge their risk is by investing in lab meat.

The animal feed industry cannot ignore the threat of lab-grown meat. 

Hampton Creek plans to sell lab-grown meat into US supermarkets next year; others will surely follow. While high costs are holding it back right now, there are strong reasons to believe lab meat will be a significant part of most people’s diets in 10 to 15 years’ time. 

Cost will be a primary driver of consumer adoption

Lab-grown meat companies tout its many benefits: longer shelf life; the ability to add in extra vitamins and minerals; reduction in greenhouse gas emissions, and the elimination of E. coli and other bacteria. However, I think the biggest driver for consumers will be cost.

Within 15 years, lab-grown meat is likely to be significantly cheaper than traditional meat. The first lab-grown burger was produced to much fanfare by Mosa Meat in 2013, but it cost the equivalent of $1.2m per pound (lb), retail. The price has since fallen to $11.36 per lb, according to company's founder Professor Mark Post. A dramatic and rapid fall.

Right now, ground beef retails for around $3.54 per lb, so there’s still some way to go. However, the more these companies produce, the more they will benefit from economies of scale. Memphis Meats plans to reach cost parity with grocery store meat by 2021. Mosa Meat's Professor Post said the company expects to reach that same benchmark by 2024.

However, the real disruption takes place after that point. As with all new technology, we should expect prices to continue to fall – just like the price of electronic components has fallen continuously for decades. Moreover, the lower it falls, the lower the barriers to access and the greater its popularity worldwide.

Of course, the cost of traditional meat may fall too. However, its price will always be held up by the fixed cost of land, feed, and water needed to raise livestock and poultry. Lab meat does not face the same obstacles. According to a joint study by the Universities of Oxford and Amsterdam, cultured meat uses 99% less land, emits 96% fewer greenhouse gases, consumes 96% less water, and demands 45% less energy. 

Paul Cuatrecasas - headshot
Paul Cuatrecasas, CEO of Aquaa Partners

Faced with the choice between two types of meats: one that is cheaper, cleaner and more environmentally friendly, and the other – which is not – I cannot see traditional meat winning out long term.

Customer fears about 'Franken-meat' are exaggerated

Many agriculture companies still think lab-meat faces an obstacle it can’t overcome: consumers’ natural aversion to anything artificial and their cultural preference for the real thing. Consumers will always see lab meat as alien 'Franken-meat', they claim.

Janet Riley, a spokesperson for the American Meat Institute, put it like this: "Trends show a new interest in how meat is produced and a growing desire among many consumers for local and natural products. A laboratory grown meat product derived from stem cells is unlikely to satisfy the trends currently at play."

However, the latest evidence does not bear this out. A US survey run by the University of Queensland this year found that two thirds of people were willing to try lab meat and a third thought it might become a regular part of their diet. Only 8.5% said they definitely wouldn’t. The others were either uncertain or erring on the side of no. Even more encouraging for the lab-meat industry is the fact that participants’ biggest concerns were not ethical at all: 79% were concerned that lab meat would lack flavor and many were put off by the idea of paying more. These are obstacles that can be overcome. Only a quarter were worried about it being unnatural.

This should come as no surprise. Many people are already reducing their meat intake and looking for replacements. According to a 2016 survey by NatCen in the UK, 29% of people said they had reduced their meat intake in the last year. In addition, the trend of consumers replacing natural products with cheaper artificial products has form; in particular, synthetic wool has replaced traditional wool in a large amount of products. In 2010, synthetic fibers made up 60% of the world apparel market, rising from zero only a few decades earlier.

Feed companies should hedge their risk by investing in lab meat

The implications for animal feed companies are obvious. If even half as many people move to lab meat as have moved to synthetic wool, the meat industry would likely face significant bankruptcies. Demand for animal feed and even fertilizer would decline. Executives at feed companies need to take this risk seriously. Even if they do not believe this future will actually come to pass, they need to admit it is feasible. Moreover, much like sensible business people take out insurance for risks, the feed industry needs to hedge against this possibility.

The best way forward for feed companies is to invest in or acquire disruptive companies in the new lab-meat supply chain. If their core feed business is challenged by lab meat, these investments will become a new fuel for growth.

There are some natural opportunities for feed companies. In the lab meat process, for example, cells need a food source to grow and develop into fully fledged meat. Now, this nutrient-rich medium is usually made of costly fetal bovine serum. However, some companies, such as Future Meat, are trying to replace this with an inexpensive, plant-based substitute. SuperMeat has ambitions to do something similar. This seems like a natural place for feed companies to inject themselves into the supply chain: providing plant-based 'food' for cells. Feed companies could look to acquire or invest in these types of companies to hedge the risk.

Lab meat looks to dramatically change our eating habits, and animal feed companies must decide whether they see themselves as part of this new future – or not.

Paul Cuatrecasas is CEO of Aquaa Partners, a specialist investment bank focused on technology that works with traditional companies to help them find and acquire the right technology company.

The views in this article do not necessarily reflect the opinions of the FeedNavigator editorial team.

Related topics: Alternative proteins, Market Trends

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