It takes a lot to get a person to change their eating habits.
Things like cost and improved health will often work on smaller scales like individuals and families, but how do you change the habits of entire countries and societies?
The big-name food manufacturers have been doing it for decades, mostly in the name of profit, but over the last few years, we’ve been seeing the question get asked in the name of sustainability and ethics.
The world’s population has only grown over time and it’s going to continue doing so. That means more people to feed and more strain on the environment to produce that food.
It’s with that in mind that companies have been exploring how to produce food in a way that has less of an impact on the environment while still meeting growing demand.
Producers that deal in meat, seafood, and vegetables are all undergoing drastic changes to the way they do business, and that means consumers will be changing how they buy and consume food, no matter what their diet is.
The public has been seeing a gradual change over the past few years in the form of alternative meats and dairy. Behind the scenes, companies have been exploring new methods of farming that are more sustainable, energy-efficient, and take up less space.
The trends are pointing to many of these alternatives gaining traction over the next few years as we tackle issues like climate change, public health, food security, and a growing world population.
Let’s take a look at a few key areas in the future of food and see what’s on the horizon.
You’ve probably heard about plant-based meat substitutes that have been popping up over the years.
Brands like Beyond Meat and Impossible Foods have had their products on grocery store shelves and in fast-food restaurants for a while now and have enjoyed enough success that they’ve been able to expand to new markets.
These kinds of products have proven to be hits with people who’ve sworn off meat for health or moral reasons.
They’ve proven to be hits with people who want to try and consume less meat for those same reasons.
These products have even won over consumers who tried them merely out of curiosity.
They’ve gone from being niche products to being featured on the menus of places like Burger King and other national chain restaurants in just a few short years.
But there are still plenty of people who have their own reasons for not wanting to try plant-based meat products.
That’s where a different kind of alternative meat can come in and win over consumers while doing its part to cut down on things like the environmental impact that raising livestock to produce meat can have.
It’s called cultured meat and it’s in a place now where its plant-based counterparts were not that long ago.
Once more people know about it, it could see a rapid rise in popularity and adoption that dwarfs plant-based offerings simply because it has the potential to appeal to people who don’t want to change what they eat but are willing to change how they source it.
You might hear it called cultured meat, cultivated meat, or lab-grown meat. Essentially, scientists take stem cells from animals and bathe them in a liquid that provides them with the nutrients they need to grow until the cells can divide and increase their population.
From there, the cells are placed into a machine called a bioreactor, which is like a brewery tank designed to help the cells develop under ideal conditions. Those cells are seeded to scaffolds, which are molds designed to encourage the cells to organize into a larger, cohesive structure.
There’s much more to it, and the process to bring the product from stem cell to meat product is involved and still undergoing improvements, but there are many factors in its favor when you compare the finished product to conventional meat.
Foremost among those concerns is the environmental impact.
The production of meat impacts that environment in several ways. It starts with fossil fuels but also involves methane produced by the animals as well as how much land and water get used in the production of meat products.
Of the different meat products available, beef is the biggest culprit when it comes to impact on climate.
Cows require more resources than any other livestock, grow more slowly, reproduce more slowly, and require much more land than animals like chickens and pigs. Their waste produces methane, a greenhouse gas that traps 30 times more heat than carbon dioxide and is one of the biggest contributors to climate change because of it.
When you throw in the facts that 50% of the planet’s habitable land is used for agriculture and 77% of that land is used for livestock, you start to get a sense of just how big an impact something like cultured meat can have.
It also starts to make sense that many of the pioneering developments in alternative meats start with beef products. Even though it comes behind pork and chicken when talking about how widely consumed different meats are, a lot more goes into raising cattle and getting beef to market, so makers of plant-based and cultured meats can have the most noticeable impact in that particular part of the sector.
The benefits of shifting to cultured meat don’t stop at doing something to address environmental concerns, either. The science behind creating cultured meat demands that the environment in which the work is done be a sterile one, which is a far cry from many meat processing plants.
Think about the many times you’ve heard about how E.coli and other bacteria spread in plants that handle meat and you’ll see the advantage. During the pandemic, many meat processing plants had to shut down because of the spread of COVID-19, causing a shortage of chicken, beef, and other meat products on grocery store shelves.
It’s also worth considering antibiotics, which are often given to livestock to keep them healthy but at the cost of antibiotic-resistant bacteria becoming more common. Cultured meat doesn’t need to be treated with antibiotics, so antibiotic resistance is something that would become less of a concern with more cultured meat on store shelves.
Even with all of these benefits, cultured meat products still face an uphill battle before they can carve out a meaningful market share.
Like any new technology, cost is first and foremost among those challenges. In 2012, the first lab-made hamburger came in at a total cost of $325,000 after it was produced. That cost has already come down as time has brought about improved technology and increased scale, but it still has a ways to go before the average person will be able to afford a lab-grown beef patty. Still, the good news is that research shows cultured meat could hit a competitive price by 2030.
There’s also the challenge of public perception. After all, a company can make the cheapest, healthiest lab-grown meat in the world but it won’t mean much if no one wants to buy it.
Think about how many people are hesitant to eat genetically modified organisms (GMOs) and the perception that they’re unnatural. The arguments against cultured meat could be much the same. Change isn’t something that comes overnight, so producers of lab-grown meat will have to do what they can to make their products marketable on top of making them affordable.
But even with these challenges, companies are forging ahead to get lab-grown meat to the market.
One of the companies set to come out ahead is a startup called Upside Foods. This name stands out above others in the somewhat crowded cultured meat sector because of who is behind it.
The company was originally founded as Memphis Meats in 2015 by Dr. Uma Valeti, a cardiologist, and Dr. Nicholas Genovese, a cell biologist, and is based in Berkeley, CA. The company has a stated goal of feeding 10 billion people by 2050 while preserving the environment. It has already proven its technology works through the creation of cell-cultured beef meatballs, chicken, and duck but aims to create more thanks to a production method designed to be flexible across a variety of animals.
As of now, Upside Foods is a private company like pretty much every company in the sector, but it stands out from others because it has the backing of some big names. Food industry giants Cargill and Tyson have invested in the company, and so have billionaires like Bill Gates and Richard Branson. In 2020, the company completed a $161 million Series B fundraising. It’s for reasons like this that many believe Upside has the best chance at being first to get a cultured meat product to customers, cementing its place as the leader in the industry.
That may become a reality, as the company’s name change coincided with an announcement that it intends to get its first product, chicken, on store shelves in the very near future. That, coupled with the fact that the company recently opened a production plant that will produce, package, and ship all of its products has the company and enthusiasts hopeful for the future of the sector.
We’ve talked about meat, but it pays to mention vegetables too.
One area that saw positive attention during the 2020 pandemic was indoor farming and growing operations. Agriculture is one of the biggest, most important industries in the entire country, but much of the produce we get comes from Mexico, which can lead to supply chain issues as we saw during the pandemic. When it comes to domestic produce, California feeds much of the country, alongside Texas and several states throughout the midwest.
One of the main issues that the farming industry contends with is one of possible disruption along the supply chain. Think about all the things that can happen to a shipment of fruit that has to get from California to, say, Virginia. Delays, accidents, and other incidents lead to lost revenue, less choice for consumers, and increased insecurity in a time when the population is growing and food sources have to grow right alongside it.
Indoor farms go a long way in helping to reduce that risk, but that’s hardly the only advantage this emerging sector brings to the food industry.
Another big reason indoor farming is taking off is that it offers the advantage of protection against adverse weather. Operators of indoor farms don’t have to worry about whether the season is right for producing crops. The controlled environments made possible by indoor farms mean that crops can grow even during the winter months. Beyond that, farmers don’t need to worry about production windows and the potential to lose crops because of adverse outdoor conditions like droughts, storms, and floods.
Indoor farms are also protected against invasive species. Systems can be put in place to reduce the likelihood that crop-destroying insects will contaminate the plants, which in turn means that little to no pesticide will have to be used to protect the crops. Likewise, because the farm is indoors, the crops will be protected from invasive plant species and wild animals that eat crops. This leads to larger crop yields and the continuous, uninterrupted creation of bulk produce.
Another thing to think about is just how much water is used to grow the food we eat. By some estimates, that number is over 70%, and it’s only going to climb as the population grows and more food needs to be produced. Many indoor farms recycle the water they use by drawing from an on-site pool, using that water to grow crops, and passing it through a filtration system that cleans the water to be used again. This eliminates a lot of the water waste that comes with traditional farming and is a crucial step in ensuring that farming over the next several decades will be able to keep up with growing demand for food.
Indoor farming is also about getting food to the people who eat it faster. These farms can be built closer to the communities that will be buying and eating the food, thus cutting back on transportation costs and reducing carbon emissions. It also cuts back on the risk of supply chain disruption.
These are just a few of the big advantages offered by indoor farming, but as the sector scales and becomes more widespread, it will become apparent to more people that indoor farms are the future of agriculture.
AppHarvest (NASDAQ: APPH)
There are several companies in the sector right now positioned to take advantage of this trend as it moves from a niche to becoming the standard.
One of those companies is AppHarvest, a Kentucky-based company that owns several indoor tomato farms and has the goal of shaping the future of the agriculture industry.
The company was founded in 2017 and prides itself as being driven by scalability and sustainability thanks to the technology that it uses in its practices. This includes a hybrid lighting system that makes use of sunlight, energy-efficient LEDs, and high-pressure sodium grow lights that double as a heat source during cooler months. This hybrid system makes it possible for the company to produce robust crop yields year-round.
In addition to the hybrid lighting system, AppHarvest also uses a recycled rainwater system that draws from a 10-acre pond to water its crops. This system employs a closed-loop drip irrigation system that gives every plant exactly the right amount of water it needs, and any water that’s left over is put through filters and recycled back into the system.
AppHarvest also uses artificial intelligence to monitor crop health and deal with pests while also predicting the crop’s yield. This results in making it easier for the company to make decisions related to scheduling workers and transporting products to retail partners. This, on top of harvesting done largely by robots, allows the company to create and pick only the ripest tomatoes to send to its customers.
And speaking of its customers, AppHarvest has strategically placed its farms within a day’s drive of 70% of the country's population. It can reach major population centers along the eastern seaboard in a much shorter amount of time than growers in places like California and Mexico can. Its positioning also puts it in easy reach of places like Houston and Chicago. So the company enjoys the competitive advantage alongside lowering emissions and ensuring customers get fresh produce. Some of its retail partners include Target, Walmart, Costco, Whole Foods, and Trader Joe’s, just to name a few.
Its strategy seems to have paid off. The company completed the SPAC process in February of 2021 and is the first company of its kind to go public via reverse IPO. As of this writing, it enjoys a market cap of around $500 million. It’s already acquired a robotics and artificial intelligence company to help increase its efficiency and, on Earth Day, detailed progress that it’s made toward specific impact goals that help inform its mission. The company has approached its goal of creating positive environmental change in agriculture through its practices of recycling water and using fewer resources.
It has created 500 jobs that pay living wages and those employees have benefit packages that are considered to be among the best in the sector. Beyond that, the company has also worked to invest in its local area. It plans to invest $1 billion in capital by 2025 and works with Eastern Kentucky high schools to incorporate curriculum related to its business so that students can have the chance to learn about nutrition and grow their own food.
Its stock price surged after going public amid the SPAC boom, but has sold off sharply since then for several reasons. Not only did SPAC companies largely fall out of favor, but AppHarvest announced mid-year that it was shifting focus from growing to developing its technology so it could “create more long-term shareholder value.”
With that shift also came a shift in revenue, to the downside, as the company said it would generate $7 to $9 million in revenue for 2021 instead of the $20 to $25 million it had previously announced.