After stunned the world with its Impossible Burger, the vegan burger that “bleeds,鈥� in 2016, plant-based meat seemed like the natural next step in sustainable dietary consumerism 鈥� one that meat-eaters would happily flock to. Funding to plant-based meat startups between 2016 and 2019 saw a whopping 鈥嬧��1,110% increase, and that percentage shot up during the pandemic.

Much of that success depended not on vegetarians and vegans, who only make up a small slice of the consumer market, 聽who were looking to plant-based alternatives for the sake of their health and the environment.

But it looks like flexitarians鈥� attitudes are changing. Inflation, supply chain issues and dwindling customer satisfaction has brought startup investment into plant-based meat to a standstill. Funding went from almost $2 billion in 2021 to around $800 million in 2022, according to SA国际传媒 data. And these challenges are likely to continue in 2023 as startups work to find ways to deliver healthy plant-based meat products at a reasonable price.

While the outlook for plant-based meat is dismal, the far quieter cell-grown meat industry saw some good news in 2022. California-based got word from the in November that its lab-grown chicken is safe to eat.听

For the first time in years, funding for plant-based and cultivated meat has nearly reached dollar parity. But investors aren鈥檛 putting all their eggs into a new basket. It鈥檚 clear that meat alternatives have not delivered on their promises to consumers.

鈥淎 lot of meat consumption is emotional,鈥� said , CEO of food venture firm . 鈥淎nd a lot of the plant-based consumption and purchase is rational.鈥�

An unforgiving market

In November, plant-based meat giant shared some sobering news during its quarterly earnings call: The company posted net revenue of $82.5 million and losses of $101.7 million. The company said it would lower the amount of product it manufactured and revisit its marketing strategy to only certain consumers.听

It鈥檚 a sharp descent for a company that .听

Other plant-based meat startups face the same reality, and new innovations in the sector will face more frostbite from the venture market than before.听

鈥淚n the past two or three years, a lot of plant-based food companies got funded that should not have gotten funded,鈥� Feria said. 鈥淪o part of what you’re seeing in the market is an adjustment to that. The products are repetitive and not really great.鈥�

According to a 2021 report, for plant-based meat purchases. But it turns out these early movers in ultraprocessed plant-based meat weren鈥檛, on the whole, that much healthier than the real thing.听

Nor were they any tastier, or cheaper. The cost of manufacturing these products has gone up 60% to 70%, and distribution costs have spiked as a result. Everything from plant-based cream cheese to plant-based eggs to plant-based meat have seen shelf prices soar. The GFI report found that more than 60% of consumers would eat more plant-based meat if it was cheaper or less processed.

All of this contributed to the sector鈥檚 economic decline in 2022.听

鈥淭here was a lot of initial purchase and interest in plant-based meat products, but not as much repeat purchase as was expected,鈥� , managing director of agriculture-focused firm , said in an email. 鈥淵ou have a consumer that purchased a product at a premium price and may not have felt that the taste, mouthfeel, or nutrition sufficiently justified making that product a staple item on their grocery list.鈥�

Tall order for 2023

Plant-based meat startups will face a difficult task this year: to create products that taste just as good as (if not better than) the incumbent, while also being healthier and cheaper.听

鈥淭he strategy we see as top of mind involves those solutions that make plant-based meats perform better for the consumer, have cleaner labels, and introduce nutritional benefits that go beyond the 鈥榟alo effect鈥� that this recent wave of products enjoyed but seems to have declined,鈥� Walker said.

Cultivated meat, which uses stem cells to grow proteins streaked with fat and tendons in petri dishes, has emerged as a possible alternative for those discerning flexitarians. But we won鈥檛 see them on the grocery shelves any time soon.听

The industry is still working out how to scale its products in expensive labs. Singapore became the first country to approve cultured meat for sale in 2020 with 鈥檚 lab-grown chicken. (The startup has raised $225 million since then.) And following the FDA鈥檚 鈥渟afe to eat鈥� letter for a lab-grown chicken startup, the U.S. is on its way to seeing cultivated meat reach small-scale distribution levels, like how Impossible Foods opened in a few select restaurants.听

But investors are hesitant to promise too much too fast. Studies show that consumers will be far less forgiving of cultivated meat than they were of plant-based meat.听

鈥淸For plant-based meat], I’m going to give some space for that because I want a trade off, which is nutrition and health,鈥� Feria said. 鈥淲hen it comes to [cultivated] meat, because you’re trying to deliver the same product you have to deliver the same experience or better.鈥�

Illustration: Dom Guzman

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, a Zurich-based startup that uses the protein and fibers of yellow split peas to create mimic meat, and has partnerships in casual eateries as well as fine dining. The company just raised 7 million Swiss francs (approximately $7 million) in seed round, with investment from , , , Mica Ventures, , the and some private investors.

Per a blog post, Planted will use the capital to scale production and research and development, as well as expand its alternate-meat offerings beyond Swiss markets. The uptart was founded just a few months ago, in June 2019, by Pascal Bieri, Lukas B枚ni, Eric Stirnemann, and Christoph Ianni.

The startup was spun out of the labs of ETH Zurich, the Swiss Federal Institute of Technology. From there, it got funding from , part of Digital Switzerland鈥檚 startup program. In fact, according to the VK team, Planted met one of their VCs when catering a Venturelab barbeque this summer.

A Different Flavor

Instead of focusing on DTC, Planted has an emphasis on being incorporated into Swiss restaurants. Currently, it can be found in a range of restaurants from a Vietnamese eatery in Zurich to a fine dining spot in Lucerne.

We鈥檝e been tracking the alternative meat space for a while now, from VC funds created to invest in brands like Planted, to the future of seaweed-based 鈥渟hrimp鈥� and 3D printed 鈥渟teak.鈥�

We even stepped beyond the brands and looked at how innovation in fake meat is a global phenomenon resonating throughout the entire supply chain. So far it appears that once a startup learns how to find the sweet spot between processing and fermentation, the result is a meaty product with market potential. That鈥檚 tasty news to customers and investors alike.

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