NEW YORK -- The success of mock meat makers in the U.S. has investors seeking even bigger opportunities in pork-hungry China, where a swine fever epidemic is pushing up pork prices and raising questions over the sustainability of the industry.
Among those investors is Nick Cooney. When Beyond Meat surged over 160% in the strongest U.S. IPO this year, he was elated. Cooney and his team invested in the Los Angeles-based startup in 2015 when it was valued at just $147 million. The company's market capitalization now stands at over $9 billion, a sign that the future of food can be both profitable and sustainable.
Cooney is taking that idea to China through Lever VC, a new venture fund with offices in New York and Hong Kong. He is one of a growing number of investors on the look out for homegrown startups ready to disrupt the country's carnivorous diet.
"We're most excited by companies that are producing plant-based meat products tailored to the local cuisine," Cooney said. "There is a huge amount of market opportunity for companies that start here."
According to nonprofit Good Food Institute, China's plant-based meat industry grew at an annual rate of about 14% over the past five years to reach $910 million last year, surpassing the U.S. retail volume of plant-based meat of about $767 million.
Still, China consumes about a third of the world's meat, including nearly half of its pork, OECD data shows. Shifting part of this consumption to plant-based meat substitutes would go a long way toward alleviating the pressing dangers posed by global warming -- livestock farming contributes about 15% of greenhouse gas emissions, according to the Food and Agriculture Organization of the United Nations.
The African swine fever epidemic sweeping China has thrown a light on the sustainability issues facing its meat industry, particularly highlight the pork industry's vulnerability to epidemics and sending pork consumption in the country to a five-year low.
"Our animal protein supply chain was bound to collapse," said David Yeung, founder of Hong Kong-based social enterprise Green Monday, which has been championing a healthier, more sustainable diet in the region since 2012. "I think African swine fever will actually be a potentially massive catalyst for China's plant-based protein market."
Plant-based protein products are by no means a foreign concept to China. Tofu, which is treated as a meat substitute in the West, has its own place in the local cuisine. The concept of mock meat also dates far back in history, thanks to the country's Buddhist population.
In the absence of large-scale vegetarian movements seen more often in the West, however, the mock meat market has remained niche and lacking in innovation, as meatlike flavors and textures -- which are essential to winning over meat eaters -- are not a priority for those already practicing vegetarianism.
Albert Tseng, co-founder of impact investment vehicle Dao Foods, is hoping to change that. His company has been tapped by San Francisco-based New Crop Capital to explore and grow the alternative protein industry in China, and he says companies are keen to reach new customers.
"There are companies that have been making plant-based meat analogues in China for 30, 40 years," Tseng said. "They have been focused on the 2-3% of population that is Buddhist vegetarian. Many of them now are seeing what Beyond Meat is doing, what Impossible Foods is doing, and saying 'Okay, can we now change our focus to the larger market?'"
Dao Foods has been connecting these companies, which possess manufacturing expertise, with so-called new-age entrepreneurs, who understand how to connect with China's millennial consumers, who tend to be more health-conscious and concerned about the environment.
Tseng says that overall the plant-based protein scene in China reminds him of where the U.S. was six to seven years ago. "But we all know China accelerates really fast," he said, pointing to how quickly coffee took off in the traditionally tea-drinking nation.
Breaking into the more "difficult" China market will require a high degree of cultural agility, said Green Monday's Yeung. The social enterprise group, which became Beyond Meat's first distributor outside the U.S. market in 2015, last year launched its own plant-based protein products under the label Omnipork with Asian culinary traditions in mind.
"For us, pork is a staple, a foundational ingredient that is used in everything," Yeung said, pointing to shrimp dumplings in dim sum and Sichuan delicacy Dandan noodles, dishes that contain mince pork but omit the ingredient in their names.
Based on this observation, Omnipork developed a plant-based ingredient to mimic the flavors and texture of mince meat. The product is now used by restaurants across Hong Kong, including Lung King Heen, the world's first Michelin three-star Chinese restaurant. Yeung is planning for Omnipork to enter the mainland market as early as this year.
Local startups' foray into the plant-based protein space has encouraged Asian investors to search for the next Beyond Meat in their home field, according Lever VC's Cooney, who has raised funds from Asian family offices as well as companies in the food industry.
Asian investors "have been investing in alternative protein companies in the West because that's where most of these companies are," Cooney said. "But as there are more and more good startups here in China and Asia generally, there will be all this local capital flowing from investors who strongly feel this is a winning space."