Investors foresee the China opportunity in alternative proteins

The country's demand for protein in all its forms is set to continue growing as the population gets wealthier.

In addition to the resolutions that most of us fail to keep, the start of a new year always feels like an appropriate time to make predictions.

At this week’s Asian Financial Forum, organized by the Hong Kong Trade Development Council and the Hong Kong government, one panel was devoted exactly to this when asking: what is the future of agriculture?

In particular, the two investors on the panel – Zhang Tao, founder and managing director of Tao Ventures, and Manuv Gupta, founder and CEO of venture firm Brinc – were bullish about the prospects for the development of alternative proteins in China and the wider Asia-Pacific.

On China specifically, Zhang expressed his belief that as the country’s middle class grows, demand for protein will also increase. This is a commonly held view and why many have been keen to invest in Australian livestock, for example.

But looking further, he anticipated a need for China to address the environmental challenges that come with meat production on such a large scale, suggesting that alternative proteins could be the key to solving them.

He noted that China consumes more meat than any other country today, responsible for a quarter of global meat consumption and half of global pork consumption.

“The average Chinese person today consumes only half as much meat as the average American, a gap that an increasingly wealthy China will fill,” Zhang said. “If you look at this from a protein or meat perspective, China is going to be confronted with [this] protein security issue down the road. At a national level, this is definitely something that China needs to resolve sooner rather than later.”

Both investors acknowledged that investing in alternative proteins in China was at a nascent stage, but Gupta said he was “excited” by the companies working in this space who will be looking for investment in 2021 and beyond.

“We’re pumped about the volume of opportunities we’re seeing, and excited to bridge the gap between markets to bring some companies in who would like to enter the Chinese market,” he said. “We’re hopeful there will be more government funding and regulatory commitments as well.”

As is often the case with China, though, finding local partners will be vital for investors who have the appetite to take on the risk.

“We need to find the Chinese entrepreneurs who are capable of executing on things quickly in the China context,” Zhang said.

“There’s a lot they need to learn from some of their counterparts in the West, particularly in product R&D and the way they do business,” he added, explaining that while Chinese entrepreneurs are good at adapting their strategies for the local market, their main challenge right now is getting the product right.

And this is true of most alternative protein products. The quality keeps improving, which is the first battle. The second is to then convince consumers that they can be a decent substitute for animal protein.

China, as it does with most other commodities, presents a major opportunity to consider for those who are betting big on the sector.