Plant-based meat start-up consolidation begins with merger
Key Points
- Plant-based meat start-ups are struggling to raise capital after exuberant valuations.
- All G Foods and Fenn Foods are the first deal in an expected wave of mergers.
- The industry needs to consolidate as demand for plant-based meat remains weak.
Two rival plant-based meat manufacturers have merged in the hopes of stripping out costs to combat falling demand, and marking the start of a consolidation period for the sector.
Sydney-based All G Foods has divested its plant-based meat operations, merging it with competitor Fenn Foods in a 50/50 deal in which the former’s chief executive will be installed as boss of the freshly branded Aussie Plant-based Co.
Jan Pacas, founder of All G Foods, has spun out his plant-based meat business and merged it with Fenn Foods.
The plant-based meat sector is struggling to raise capital as investors baulk at the high operational costs and falling sales numbers, a stark picture from the excitement in 2021 when tech valuations were stretched and venture investors predicted high consumer demand.
“It’s very difficult now, yes,” Jan Pacas, chief executive of All G Foods, said. “But [plant-based meat] is like almond milk, nobody except people in trendy suburbs know about it now, but this flat year will turn into growth as people become educated.”
The two rivals – understood to be booking around $5 million a year in revenue each – say the combined entity expects to break even within 18 months.
Excitement for plant-based meat took the market by storm in 2021. US-based market leader Beyond Meat had listed with a $US11.2 billion valuation in 2019, but cost of living concerns and a failure for its products to replace meat in the bulk of customer purchases forced the company to cut costs and report a 30 per cent fall in sales.
This disappointing performance in the United States is reflected in the Australian market. Data from v2, another venture-backed plant-based meat manufacturer, shows the amount of retail plant-based meat products on shop shelves has fallen by 33 per cent over the last 12 months.
‘Got the timing wrong’
“We’re ripe for a period of consolidation,” Phil Morle, a venture investor at Main Sequence Ventures, said.
“Everyone got the timing wrong. There’s still a strong belief in the end game, but we underestimated how difficult it would be to change people’s entrenched habits.”
Main Sequence Ventures is not an investor in All G Foods nor Fenn Foods, but is an investor in v2.
Sydney-based All G Foods, which has raised a total $48.5 million in venture capital over the last few years, will shutter its manufacturing operations and pass on its restaurant and hospitality clients to the new combined entity.
Mr Pacas said he would now focus on the development of his synthetic milk technology.
“We needed to split out the businesses because the investor profiles for synthetic biology are different, and the exit profiles are different,” he said.
Fenn Foods, founded by Alejandro Cancino, will maintain the manufacturing of the plant-based meat and its selling arrangements into Coles and Woolworths. It has raised $333,000 in venture capital.
“The whole industry has suffered because there were some crazy valuations and people jumping on the bandwagon,” Mr Cancino said.
“But there will be more consolidation like ours, because there isn’t enough space for that many companies and the demand for the product isn’t there yet.”
Fellow Sydney-based plant-based meat burger chain Flave has shuttered its two Bondi stores after raising $891,000 from an equity crowdfund earlier this year, seemingly to return when market conditions improve.
Mr Pacas had previously been an investor in Flave, but said he was no longer associated with the business run by Stuart Cook, who worked at Mexican food behemoth Zambrero for a time.
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