Temasek defends faux-meat valuations in US$1 trillion market space

By Jasmine Ng and David Ramli

(Bloomberg) — Singapore’s state-owned investor brushed off concerns about a potential bubble in plant-based food makers, saying that stellar growth and declining costs could help justify the eye-watering valuations for some companies such as Impossible Foods Inc.

There will be “pockets of froth” but top companies have a lot going for them, said Anuj Maheshwari, managing director of agribusiness at Temasek Holdings, which invests in Impossible Foods and several other alternative protein firms. He said it’s too early to say valuations are overly expensive.

Investors are grappling with how to value plant-based food companies, whose products still make up a fraction of the US$1 trillion global meat industry. Even as closely held Impossible Foods is in talks to fund raise at a US$7 billion valuation, shares of rival Beyond Meat Inc. have plunged after a disappointing sales projection sparked concern that growth is tapering off.

“Where the market is focusing on is you’re targeting US$1 trillion industry, the consumer trends are in favour of you,” Maheshwari said in an interview. “If 5% or 10% of the industry becomes plant-based that’s US$100 billion of revenue.”

Alternative meats, from those made from plants to others using extracted animal cells and grown in bioreactors, have emerged in response to concerns about animal welfare, the impact on the environment and increased antibiotic resistance in the food supply chain.

Bloomberg Intelligence forecasts that retail sales of plant-based meat and dairy could swell to US$162 billion in the next decade from US$29.4 billion in 2020. Growth will be driven by innovation, increased production capacity, lower prices and consumer acceptance.

While the Covid-19 pandemic has caused some faux-meat novelty to wear off, the industry’s prospects remain bright, according to Maheshwari.

“The macro is very, very strong. The sustainability, the government mandate, everyone wants to get there, consumers want to make switches,” he said. “We’re not going to wait for 2050 for plant-based products to become mainstream. It’s going to happen in the next five to seven years.”

For cultured meat, which involves growing products from cells without killing animals, the technology needs to be more developed before companies could see the kind of growth and valuation of plant-based peers. Temasek has investments in lab-grown chicken maker Eat Just Inc. and Upside Foods.

“We remain bullish on this, we think the science will develop, we will continue to invest in this sector,” Maheshwari said. “Unlike plant-based sector this is a more longer term game. But for Temasek, it’s exactly the kind of thing we can do, which a lot of our peers might not be able to do.”

Other details from the interview:

• While the boom in plant-based meat’s popularity happened at a time of low inflation, technology will bring costs down and help counter the impact of soaring food prices on demand, Maheshwari said.

• Temasek has invested more than US$8 billion across the global agri-food supply chain since 2013.

• It will set up a platform to accelerate commercialisation of sustainable food in Asia by providing manufacturing capabilities and market insights.

• It will also provide a network of connections and allocate capital to promising food-tech start-ups.

• New platform will partner German multinational Cremer and Archer-Daniels-Midland Co., one of the world’s biggest agricultural commodities traders, in plant-based and microbial proteins.

• Life sciences and agri-food investments made up 10% of Temasek’s US$283 billion portfolio as of March 31, 2021, up from 7% in 2019.

© 2021 Bloomberg L.P.