SA国际传媒

There鈥檚 something fishy about the plant-based seafood market.

While consumers in the U.S. latched on to early plant-based meat alternatives, enthralled with 鈥� vegan burger that released the same blood-like substance as meat, vegan seafood didn鈥檛 see the same rise in popularity.聽

This was despite having relatively similar funding patterns. From 2014 to 2019, there was only a 20% difference in venture funding between the two categories, according to SA国际传媒 data. By 2020, investors began abandoning the plant-based seafood category. In 2021, while nearly every industry saw some growth, imitation seafood declined.聽

But the tides are turning for sales of plant-based seafood. Between 2019 and 2022, the number of grocery offerings jumped from 19 to 33, and the category experienced a 53% growth in unit sales, according to the . And after recent 鈥� and jarring 鈥� setbacks faced by the plant-based meat industry, seafood startups and the venture firms that fund them are charting a new course 鈥� one that means more funding is going to fewer startups.

鈥淚 think there’s a lot more enthusiasm for seafood because there haven鈥檛 been as many products on the market that have failed,鈥� said , CEO of food-focused venture firm . 鈥淚 think part of that, to be completely honest, is because there haven’t been any products on the market, period.鈥澛�

In 2022, only 12 startups in the plant-based seafood space saw total funding to the tune of $54 million. , which makes plant-based tuna and salmon bites, raised $18 million in June. raised $34 million in March to make plant-based and cell-grown cuts of fish.聽

Fighting an upstream battle

Plant-based meat鈥檚 reputation, meanwhile, seemingly has only gotten worse. After the initial novelty and sustainability conversation around Impossible Foods and wore off, there were three facts left to deal with: Their products were , they arguably aren鈥檛 particularly, and they didn鈥檛 quite taste like the real deal.

That quickly turned previously interested flexitarians 鈥� consumers who eat meat and imitation meat 鈥斅爄nto a dwindling crowd. ,and Beyond Meat, a first mover in this space, saw its stock price drop a staggering 77% as the company conducted two mass layoffs that affected around 20% of its workforce.

Early entrants into plant-based seafood had it worse 鈥� it鈥檚 not enough for these products to be inherently better for the environment or vegan, they actually have to taste good, be nutritious and relatively cheap. More flexitarians wanted to find replacements for red meat, while fish is already considered a fairly healthy food by many. That immediately put the onus on new products to be better than existing ones.聽

At one time, investors were interested in finding a first-to-market plant-based seafood product that could quickly become a household name like Beyond. Now, they expect food to be cheaper, taste as good and be healthier than current seafood offerings.

As it turns out, it鈥檚 a lot easier to make plant-based seafood healthy. , which received in April, recently unveiled its products for a taste test at the conference in San Francisco. The startup served spicy tuna rolls, salmon crudo and shrimp dumplings.聽

The visually convincing, fat streaked cuts of sashimi are made with fungi that undergoes a fermentation process and, arguably, is actually better for you than current seafood offerings. They can be eaten by people with shellfish, gluten or soy allergies, have fewer calories than real fish, and have added omega-3 benefits. And, the company says, it tastes like raw fish.

鈥淏ecause of the fact that we are targeting flexitarians, we know we’re held to a stricter standard because these consumers are already eating traditional meat, traditional seafood so they know what it tastes like,鈥� CEO 蝉补颈诲.听

The restaurant endorsement

To win over new customers, many of the companies are turning to restaurants and colleges before reaching for the grocery shelves.聽

鈥淚nvestors are being much more selective. The due diligence process is more thorough and it’s taking significantly longer,鈥� Palermo said. 鈥淐onsistent cash flows and revenue streams coming from a B2B play is now much more interesting. Whereas before, keeping a branded product was more interesting.鈥�

, known for its plant-based salmon burgers and deveined shrimp, began selling its products at restaurants and on college campuses before planning its retail launch.

鈥淢ost seafood is consumed away from home, primarily because American consumers struggle with preparing and cooking seafood,鈥� said Christie Flemming, COO of Ish. 鈥淚t can be a high-cost item.鈥�

Indeed, around 65% of seafood consumption in the U.S. happens in restaurants, not the home. That gives plant-based seafood an advantage over plant-based meat 鈥� a foreign product prepared by skilled workers at a restaurant can make a product far more familiar to the聽 average consumer.聽

鈥淚f you really nail a good food-service customer, you’re also building, in an ideal world, your brand,鈥� Stray Dog鈥檚 Feria said. 鈥淎nd then when [customers] go to the store, they already have that brand [in mind]. You don’t have to wait for people to find you on the shelf.鈥�

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