In this Thanksgiving edition of the Investment Roundtable, Léa, Teddy, and Integrated Operations Manager Chris Martin explore the investment crowdfunding market for food startups. They analyze why plant-based foods, once hailed as the future, are losing investor interest, while sustainable meat and dairy companies are gaining traction. The conversation highlights top-performing food categories, key factors for evaluating consumer packaged goods (CPG) startups, and the evolving dynamics of the industry.
Key insights include:
- The rise and fall of plant-based food investments.
- How companies like Porter Road and Plainview Beef are redefining sustainable meat.
- Essential tips for assessing early-stage CPG startups.
Why has the plant-based food sector seen a decline in investments recently?
Teddy Lyons: The initial hype around plant-based foods—such as products from Beyond Meat and Impossible Foods—was driven by novelty and marketing, with promises of health benefits and meat-like taste. However, the realization that these products aren’t necessarily healthier, combined with their high cost, has led to consumer fatigue. Inflation and premium pricing have further dampened interest in the sector.
What types of plant-based food companies exist, and how are they performing?
Léa Bouhelier-Gautreau: There are three main categories:
- Meat imitators (like Beyond Meat) that aim to mimic real meat.
- Protein substitutes that don’t try to resemble meat but provide protein (e.g., lentil-based steaks).
- Non-meat alternatives (e.g., oat-based dairy).
Performance varies, but many products in these categories have struggled due to high costs, mixed consumer reviews, and shifting priorities.
How do sustainable meat companies like Porter Road differ, and why are they gaining traction?
Léa Bouhelier-Gautreau: Companies like Porter Road focus on transparency and quality in the supply chain, offering sustainably raised beef and pork without antibiotics. They cater to health-conscious consumers looking for ethically sourced meat, creating a niche market. However, competition in this space is fierce, and scalability remains a challenge.
Chris, you tried Black Bird Foods’ plant-based pizzas. How did they stack up?
Chris Martin: The Supreme Pizza hit the mark for a freezer pizza, but others, like the BBQ Chicken, fell short. Overall, the plant-based options were decent but didn’t surpass traditional options. While plant-based alternatives are improving, traditional dairy companies are also creating lactose-free options, making it tougher for plant-based products to dominate.
What factors should investors consider when evaluating CPG food startups?
Teddy Lyons: Key considerations include:
- Retail vs. Direct-to-Consumer Sales: Balanced sales channels are critical for acquisition potential.
- Retailer Reputation: Getting into Costco or Sprouts holds more weight than trial runs at Whole Foods.
- Product Velocity: How quickly a product sells off shelves is a strong indicator of demand.
- Margins and Cost Control: Sustainable growth and profitability hinge on managing costs effectively.
How did sauces and spreads perform in comparison to snacks and desserts?
Chris Martin: While snacks and desserts raised the most overall ($3.6 million), sauces and spreads had a higher average raise per deal ($295K vs. $210K). This suggests fewer deals in sauces and spreads, but they tend to attract more significant investments per company.
What’s the future of food startups in equity crowdfunding?
Léa Bouhelier-Gautreau: The market is shifting toward sustainable and health-conscious options. Meat and dairy companies with strong supply chains and transparent practices are gaining traction. However, competition and scalability challenges remain key hurdles for new entrants. Investors should assess whether a company has a clear path to profitability and differentiation in a crowded market.
