Cereal Docks’ CVC chief tells CVC Unplugged that getting plant-based proteins competitive again will be difficult but not impossible.

One of the most exciting prospects of the past several years in the food space has been alternate meats – the idea of guilt-free burgers has been incredibly attractive, that is, until the past couple of years.

“There was a huge excitement [for alternate meats] in the last five years,” says Giacomo Fanin, managing partner of Grey Silo Ventures and business development manager of its parent company, Italy-based Cereal Docks, on the CVC Unplugged podcast.

“What we are missing more than anything else is the taste along with, in some cases, the price.”

Exacerbating their ability to compete on the shelf is the inflationary environment of the past couple of years – if it was hard to convince a critical mass to buy non-animal-based before, hiking prices won’t help.

This time three years ago, explains Fanin, everyone was expecting plant-based meat to hit double-digit market share, but that just hasn’t materialised. “Today, nobody is predicting this anymore,” he says.

As a consequence, a lot of companies are recalibrating their expectations, and many are struggling. Meanwhile, VC interest in consumer plant-based meat products has all but dried up, and the stock prices of the public alternate protein companies have taken something of a nosedive.

Inflation has also driven up capital expenditures in the manufacturing process, providing another bottleneck to scaling up production and, by extension, keeping the shelf prices even higher than they otherwise would be.

“You have the chicken and egg problem, you have the need to scale, but you do not yet have the proper volume for that scale. So what is lacking is the bridge in between,” says Fanin. Demand is not where it should be to justify big investments in production capabilities, but until that happens prices are likely to remain relatively high and demand will reflect that. It’s not just making the product itself, it’s establishing large-scale packaging, quality control, operational efficiency – something startups have been surprised to find are as difficult as they are.

Part of the solution, says Fanin, is simplicity. The market is not looking for an overly complicated product right now, especially one with a high price point. Pare it down – not only does this make it easier for people to relate to, but it’s also easier to eventually achieve economies of scale.

“I think it will take time because it will take a lot of experience that has to be accumulated by the companies – the ones that will survive,” he says, highlighting the reality that some alternate meat producers may naturally go out of business before things get better. “It really depends on the attitude of the founders and the help that the investor can give to them.”

Grey Silo’s own portfolio includes companies like Juicy Marbles, which specialises in producing alternate fats for meats to give them texture and flavour, and Planetarians, which has developed zero-waste technology that produces plant-based proteins through fermentation.

From commodity to ingredients

The company is going through a transition period, moving from commodities to ingredients, as Fanin put it. The focus is increasingly turning towards sustainability and the production of healthy food ingredients. Fanin, who is a second-generation member of Cereal Docks’ founding family, has largely spearheaded the company’s innovation initiatives, starting with its open innovation programme in 2018, which began with a food tech accelerator before setting up the CVC unit,

“We really need, as a second generation [of the family], to bring our own impact into the company. And we really need to push the company in order to go in the direction that we want to establish a better food system,” he says.

With revenues of approximately €1.5bn ($1.6bn) Cereal Docks is one of the largest processors of grain, particularly oilseeds, in Europe and is positioned right in the middle of the supply chain.

Grey Silo has one full-time investor who is supported by two scientific advisors, who help with the deal flow, and two external venture partners who help with the business side. Fanin himself splits his time between the CVC and his other responsibilities at the corporate level.

Currently, Grey Silo has roughly 60% of its focus on food tech and the remaining 40% on agritech.

“The food tech focus is really on new types of ingredients, enabling technologies for the evolution of the food system. On the agritech side, instead it’s enabling tools for the farmers. To make their life and their working life easier, and less impactful for the environment.”

Meats are not the only “alternates” drawing attention – Grey Silo’s portfolio includes alternate dairy providers like Formo –  while the market is also growing for alternate chocolates amid rising cocoa prices.

On the agritech side, Grey Silo’s investments include XFarm, a farm management software company with which Cereal Docks had an existing collaboration before the CVC invested in its series B round – a later entry than its typical seed-to-series A range.

Fernando Moncada Rivera

Fernando Moncada Rivera is a reporter at Global Corporate Venturing and also host of the CVC Unplugged podcast.