Alternative Proteins, Alternative Policies
“Food is national security. Food is economy. It is employment, energy, history. Food is everything.”
- Chef José Andrés
ARTICLE SUMMARY
Given the pervasive impact of the food system, governments’ active interest in the industry is understandable. Governments can marshal formidable resources alongside their unique ability to introduce rules, guidelines, and laws, which can be the difference between success and failure for a nascent industry. Governments wield this wand of support in areas such as financial assistance, regulatory oversight, and fiscal provisions as the industry develops the value chain from R&D to manufacturing, packaging, and distribution. The alternative protein industry has certainly come a long way on its own merit, but if it is to compete with the conventional meat and dairy sector, it must garner the support of governments across the globe.
After a lifetime of promoting environmentally-friendly food consumption, Chef José Andrés recently achieved the groundbreaking feat of preparing and serving a dish using GOOD Meat’s cultivated chicken in Washington. With Chef Dominique Crenn serving UPSIDE’s cultivated chicken in San Francisco, the coast-to-coast takeover of alternative proteins has begun. Chef Andrés is right to highlight that the impact of our food system is expansive, spanning national security, employment, economy, and history. It is not surprising, then, that governments play an outsized role in the food industry.
Government agencies can make magic happen when they decide it’s a priority. Industrial Policy enables them to implement plans that encourage resources to shift from one industry to another, by changing input costs, output prices, or using other regulatory tools1. This umbrella term encompasses trade protection, tax credits, direct subsidies, loan guarantees, favorable government loans, and so on. Government industrial policy is a major reason why solar-powered electricity costs 89% less today than it did a decade ago2. Chinese industrial policies focusing on solar photovoltaics (PV) enabled economies of scale and supported continuous innovation resulting in cost decline3. Government-led industrial policies in Japan, South Korea, and Taiwan assisted substantially in the growth of the semiconductor industry in the 1990s. More recently, Washington and Beijing have been utilizing industrial policy to bolster domestic semiconductor manufacturing4. The U.S. government has also taken an active stance on the electric vehicle (EV) market, which has contributed to tripling the share of EVs from 4% to 14% of total car sales over the past decade5.
The unwavering support of governments in the form of, but not limited to resources, funding, talent, and knowledge sharing has the potential to leapfrog any industry. Thankfully, alternative proteins remain in the good graces of most governments around the world. Government-led funding to the sector has crossed US$1.6 billion6, representing a little over 10% of the all-time private funding (US$15.2+ billion) that the industry has received. However, funding (grants or otherwise) is just one tool in the government’s toolbox. Depending on the stage of the industry’s development, a variety of policies may be utilized. Government support typically ramps up slowly and steadily, gradually impacting the entire value chain of a startup from R&D to manufacturing, packaging, and distribution. Let’s explore the different stages of governmental support.
Stage 1: Financial Assistance
The initial stage of government involvement mainly consists of financial support. During this stage, governments can foster collaboration between academic institutions (universities and research organizations, amongst others) and private companies. This collaboration can result in knowledge-sharing of experimental data, technology transfer, and the development of innovative solutions to industry-specific issues. Governments can also provide mentoring programs for researchers and entrepreneurs, thereby fostering cross-pollination to drive innovation. The fundamental benefit of this form of government support is to get the industry off the ground, especially since R&D tends to be cost and time-intensive with limited near-term payoff. An ancillary benefit is to engage other stakeholders who begin to take notice of the industry following the governmental involvement.
In the alternative protein sector, early-stage R&D grants have crossed US$630 million to date. This includes funding for research, university projects, and setting up government agencies and initiatives to promote new innovation. Grant funding makes up the largest component of all government-led funding in the sector, accounting for approximately 38% of the total. Singapore has the highest public funding in R&D initiatives in the sector along with a robust ecosystem of agencies to foster innovation and development.
A second method of early support is by establishing Public-Private Partnership (PPP), which may be more efficient. In all, there are currently around 10 PPP initiatives globally in the alternative protein sector. The most elaborate of these is the initiative by Protein Industries Canada (PIC). PIC is an industry-led, not-for-profit organization that co-invests in alternative protein projects alongside private sector stakeholders. PIC has received CA$323 million in funding from the Canadian Government and CA$30 million under the Pan-Canadian AI Strategy7 which be rolled out between 2018-2028, making it the most extensive PPP initiative globally.
Finally, governments can provide debt financing through loan guarantees and favorable debt terms. Bpifrance has provided an exceptional blueprint for how government-linked banks can play a role in nascent industries alongside private banks. Bpifrance co-finances long and short-term loans for large companies and provides loan guarantees for smaller entities. They even provide unsecured loans to cover unexpected increases in working capital requirements. A supportive ecosystem can accelerate the timeframe to bring novel food products to market. Once the product has been introduced to consumers, government support in forms such as debt financing can be instrumental in scaling production. Investing in infrastructure, such as research facilities, processing plants, and distribution networks, are essential to take the alternative protein industry to the next stage of development. Governments can collaborate with the private sector to build the necessary infrastructure and help overcome logistical challenges. Most public agencies have initiated transitioning from financial assistance for R&D to supporting commercial scaling. As of mid-2023, there are 43 government projects focused on scaling alternative protein infrastructure. Of these, 28 were introduced in the last two years, signaling the maturity of government involvement which is reflective of the progress the industry has seen.
Together, the combination of research grants, PPP projects, and favorable debt financing lay the foundation of governmental support. As a young industry, alternative protein startups have already benefitted from these programs, providing them the fuel to propel them into the next stage of the value chain where other forms of government support are required.
Stage 2: Regulatory Oversight & Support
As any industry progresses from R&D to commercialization, government entities play a crucial role via regulatory oversight and support, creating a framework for the industry, and setting boundaries to manage various stakeholder concerns such as regulatory approvals. The recent approval of cultivated meat in the U.S. provides a timely example. In this case, on a federal level, both the Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) were involved, and each played an important role in addressing product safety and labeling. GOOD Meat and UPSIDE Foods had to receive approvals from both organizations before going to market.
There are, of course, differences between the requirements for plant-based products versus cultivated products. In the U.S., the FDA conducts pre-market consultations with companies and provides a ‘Generally Regarded As Safe’ (GRAS) declaration before introducing products with novel ingredients to the market. Alternatively, companies can enlist the help of a panel of experts to provide the GRAS declaration and then inform the FDA. The next step is to receive the FDA ‘No Questions Letter’ which indicates that the product and the production process are both approved for commercialization. Next, the USDA first provides a label approval and then a final commerce approval following which a company can bring its product to market. An added layer of compliance comes in the form of U.S. state government regulations which differ widely, such as rules prohibiting meat-like labelling in Mississippi and Arkansas, both later dismissed.
Even though the U.S. has granted approvals to two cultivated meat companies, Singapore was the first country in the world to do so when it approved GOOD Meat’s cultivated chicken for sale in 2020. Singapore has a thriving ecosystem of various governmental agencies to promote alternative proteins as one of the key pillars for its ’30 by 30’ food security initiative i.e. to produce 30% of its nutritional needs locally by 2030.
Economic Development Board (EDB) maintains a global footprint to attract large companies and startups to Singapore. Currently, Singapore boasts 70 alternative protein companies employing upwards of 790 employees.
Enterprise Singapore is responsible for creating avenues for domestic companies to grow in Asia and beyond.
Singapore Food Agency (SFA) provides oversight on food safety and the ‘30by30’ initiative. A three-step process governs the approval of all novel food products. First, the ingredients are inspected for toxins, after which the production process is reviewed to ensure no contamination, and finally, the end product is tested for safety. GOOD Meat’s cultivated chicken was approved for retail sales following the successful completion of this process.
Agency for Science, Technology, and Research (A*STAR) assists startups in the transition from research to commercial market opportunities. In 2021 alone, it undertook 1,800 projects with companies. The Singapore Food Story is a S$309 million initiative jointly managed by SFA and A*STAR to improve food security. This is implemented by diversifying food import sources, growing more food locally (including the 30 by 30 initiative), and supporting local companies to grow overseas.
Nurasa is a subsidiary of the government-owned investment company Temasek. It enables and invests in food innovation and manufacturing capacity development. Its Food Technology Innovation Centre (FTIC) serves as a home base for several upcoming food technology players.
In addition, governmental guidance on the environmental, ethical, and health benefits of alternative products via labelling and dietary guidelines can shift consumer perspective. This can also be achieved by setting fair and balanced standards for labelling and production to ensure consumer trust and protection while allowing innovation to flourish. Labels serve as a method of communication between the product and consumers. It details everything from a product description, its benefits, its ingredients, and the similarities and differences with other products. When labelling guidelines are unclear, undefined, or unfair, alternative protein companies pay the cost. They are unable to create an effective product identity and communicate its benefits relative to conventional products. Varied labeling requirements in different regions add to the complexity of bringing a product to market. In this regard, animal products get free reign. Alternative protein companies are fighting to use basic descriptors like ‘milk’, ‘sausage’, and ‘yogurt’ on their labels. Meanwhile, the use of promotional terms such as ‘antibiotic free’ and ‘humanely raised’ have no legal definition and are freely utilized by conventional companies to promote their products.
Governments can amend this by introducing fair guidelines to balance label-related freedoms of alternative and conventional products. Governments can also indoctrinate definitions for terms such as plant-based, fermentation, and cultivated that will allow companies to use these terms conditionally on products that meet specific criteria. For example, ‘organic’, a defined term in the U.S., can be utilized by any product that meets preset requirements. Imagine if we could do the same thing for plant-based milk or cultivated meat. A strong regulatory support system ensures dialogue between the industry and government players. The industry gets a say in the rules that dictate it, and governments get to better understand specific industry needs, thus saving time and resources for both parties.
Stage 3: Fiscal Reinforcement
As the industry moves towards large-scale distribution, governments must augment their support via fiscal tools. This can come in the form of subsidies or taxation – both positive and negative. Significant amounts of government subsidies are already allocated to the conventional meat and dairy industries. These subsidies make conventional products more affordable and create hurdles for alternatives to reach price parity. Shifting subsidies to alternative proteins will shift consumption patterns as well. When animal product consumption declines, it reduces global emissions and creates human health benefits. This also lowers the need for government funding for the environment and human health. It’s a win-win situation.
One approach may be to provide discount coupons to citizens that consume alternative proteins, creating incentives for consumers to try novel foods. Talks of a meat tax have surfaced numerous times. However, it is possible to flip the narrative. Governments can provide tax credits to companies engaged in research and development activities related to alternative proteins or to early consumers of such products. Similar schemes have been introduced for the promotion of EVs as well. Singapore reduced its road tax by 34% for EV users8 while the U.S. rolled out Clean Vehicle Tax Incentives9. These schemes have proven successful in encouraging investment in innovation, leading to advancements in production processes and the creation of more appealing and sustainable products.
On a broader level, carbon credit schemes may also be effective for alternative protein companies. These assist in lowering the sale price of alternative protein products and bridging the gap to reach price parity. This technique is utilized in the solar power industry with the U.S. Environment Protection Agency (EPA) introducing Renewable Energy Credits, similar to carbon credits, specifically to urge companies and individuals to make the shift from conventional to renewable energy. Market access for alternative protein products through international trade policies can boost export opportunities for domestic producers. Beneficial trade practices also can assist startups in gaining access to global markets for ingredients, equipment, and other resources. This includes reducing tariffs on the import of raw materials and reducing export hindrances. Governments can negotiate fair trade practices that remove barriers and tariffs on key ingredients used in novel food production, allowing alternative protein products to compete globally.
Traffic Cop or Driving Instructor?
The public sector’s response towards the alternative protein industry ranges from visionary governments leading the charge to those that are following, to those that are creating roadblocks. The U.S., UK, Israel, China, and Canada have the highest alternative protein startup concentration. Yet, most don’t rank similarly on the list of top five countries by government funding. Canada tops that list with US$350 million, followed by Singapore at US$253 million and Denmark at US$195 million10. U.S. governmental funding, for example, pales in comparison with a paltry US$38 million. There are also countries like Israel and Japan that may not provide significant funding but have managed to establish organizations such as the Israel Innovation Authority and the Japan Association for Cellular Agriculture (JACA) that are fostering the alternative protein ecosystem. Similarly, countries like Taiwan and Saudi Arabia are taking matters into their own hands with the Taiwan Ministry of Economic Affairs launching a startup to produce whole-cut plant-based meat and the Saudi Ministry of Environment, Water, and Agriculture entering deals with several local companies to produce alternative protein products. On the other end of the spectrum, Italy’s Senate passed a bill preventing the production and import of cultivated products to ‘protect national interests and food heritage’. Likewise, Turkey banned the use of dairy-related terms to describe dairy-free cheese alternatives before taking it a step further and banning vegan cheese products altogether.
The alternative protein sector presents government agencies with a huge opportunity to determine their role. As traffic cops, they can ensure rules are followed and clear any congestion. Alternatively, they can be akin to driving instructors – teaching the rules, watching participants learn, and sharing best practices. Ex-FDA Commissioner, David Aaron Kessler said that ‘the history of government regulation of food safety is one of government watchdogs chasing the horse after it is out of the barn’. The proactive approach of leading governments presents an opportunity for the industry to grow in an era characterized by far greater collaboration (without all the horsing around).
Council on Foreign Relations
Our World in Data
Corwin and Johnson (2019), The Role of Local Governments in the Development of China’s Solar Photovoltaic Industry
S&P Global Market Intelligence
International Energy Agency
Based on Good Signal analysis (as of June 2023)
PIC
Singapore Land Transport Authority
U.S. Department of Energy
Based on Good Signal analysis (as of June 2023)