The change in meat culture needs institutional financing

Grown from cells, new products are rapidly commercialising, so when will they be investable by pension funds in order to scale?

Climate change offers opportunities. We need to change some ingrained habits and we need technology to beat it back. Have you heard that before?

It raises many more questions than it answers. Where is the technology we need? What does it do? When will it be available? Who will offer it? How does it fit into an investment portfolio? 

And perhaps most importantly: what risks need to be taken?

Here is one example that is close enough to reality to give inspiration and perhaps answer some of those questions: cultured meat. 

The process is easy to understand. Start with some cells, use them to grow other cells exactly like them, and presto, you have a fine piece of meat, and a cow didn’t die for your pleasure. 

But there is more to cultured meat. Livestock farming produces 20 to 50% of man-made greenhouse gases. Cultured meat is therefore a potential weapon in the struggle against climate change and a potential tool for companies and governments to achieve promised zero-tolerance targets. It is also a helpful idea for ESG integrated portfolios.

Nevertheless, for the moment it is a dream not come true; yet on the brink of realization. It started out as an idea of Professor Mark Post of the University of Maastricht, which was turned into reality by food technician Peter Verstraete. The concept became a company, Mosa Meat BV (Mosa is the Latin name of the river Meuse that flows through Maastricht) and the company is working at full speed to make the product ready for marketing.

Consumer acceptance

What is so difficult about marketing cultured meat? 

Well, for starters, people have to accept it as meat. That’s not a rational process. Quick judgements of cultured meat revolve around “unnatural”. 

Sarah Lucas, head of strategy at Mosa Meat, asks: “Why is the same adjective not attached to classical meat?” 

After all, she says, the animals we eat are purpose bred into unnatural creatures, and they are often treated with antibiotics and hormones and kept in unnatural living conditions. 

Good points, but the objections are based on what people are used to, not on reason.

A more rational problem is that cultured meat is more expensive than classic meat – at least for the moment. Mosa Meat is working on making production more efficient, profiting from inside and outside research. Once there is a product on the market, marketing can begin, hopefully leading to ever increasing demand. A larger scale of production would by itself cut cost significantly.

Cultured meat is already available in Singapore. A local company, Eat Just, received regulatory approval for cultured chicken meat in November 2020, proving that the process is commercially viable. China promises to be a key market. Demand for meat – still a luxury product – is growing fast and people are open to new ingredients. But won’t China profit from other people’s research and come up with a cheap alternative, unhindered by development cost? 

Lucas doesn’t think it is so straightforward: “The necessary research should not be underestimated”. Certainly not, but drastically diminishing animal husbandry in China would not just cut the huge cost of imported animal feed like soy, it would also hurt its arch-enemy, the US.

Promising markets

There are other markets where cultured meat would have advantages that can at least partially offset the price difference with classic meat. People who accept religious restrictions on food may be helped by meat that is not from slaughtered animals. Vegetarians and vegans would win an option. Some people will insist on not wanting to eat any meat, but others will embrace the assurance that no animal was hurt, not even when the cells were harvested. Likewise, doctors and hospitals could profit from tailor-made meat that would meet medical requirements, e.g. lower fat or salt, or allergy avoidance. Children may like the idea of meat without skin, bones or tough muscles. Restaurant chefs would appreciate uncontaminated meat of a guaranteed and constant quality. Even those already on vegetable-based meat replacement as part of a personal effort to fight against climate change commitment may be happy with more variety and choice.

Investing in the future

Is the promise of Mosa Meat investable? The company is still small, with 65 employees and a turnover of zero. Yet, it has raised over €80 million in equity that was easy to place even though it did not use an intermediary and did its own marketing. For the moment, there are no plans for more equity or bond issues. Mosa Meat is in a small way what climate change is in a macro sense: customers need to change their ingrained habits, which will be harmful to some traditional producers and helpful to others. 

It also needs a helping hand from technology. 

Both, of course, call for institutional-grade financing.

Peter Kraneveld, former Chief Economist at PGGM, is a pension expert at PRIME bv.