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Update I – Cultured Meat SWOT Analysis and Scenario Planning

9.1

SWOT Analysis

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SWOT Analysis

The purpose of this “Strengths-Weaknesses-Opportunities-Threats” (SWOT) analysis is to inform companies, investors, and various business players in a concise form about the current state of the cultured meat industry and the major factors influencing it, both from inside the industry and from external forces. It offers an overview of the strengths of the companies in this sector, the problems they are currently facing, and potential future positive or negative developments in this sector.

Besides offering more information for companies outside the cultured meat sector (e.g., potential investors, businesses considering partnerships or extending their spheres of activity, farmers, or various players in the supply chain), this update may also prove beneficial to companies within the industry by informing strategic decision making and identifying opportunities, which should help them tackle challenges before they escalate and adapt to the environment in an agile way.

9.2

Overview

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Overview

The cultured meat sector is considered to be a radical innovation within the food industry. Unsurprisingly, that comes with a lot of challenges. These companies not only have to build up their businesses from scratch while researching and developing entirely new products, they also have to act as trailblazers when it comes to public opinion and governmental regulations.

The pressure on these companies is enormous, mainly because they don’t have the advantages of large budgets, strong marketing, and specialized PR departments.

Given the fact that the likelihood of survival of innovative enterprises is 10 per cent lower than that of non-innovators,[1] the cultured meat industry is a challenging business environment. Nevertheless, both the research in and of itself and its potential applications outside the food industry are essential and worthy of being pursued.

The challenges facing a company in the cultured meat sector
Source: Supertrends

Considering that this field is still in its infancy and most of the companies are not yet firmly established, the borders between what can be considered strengths, weaknesses, opportunities, and threats are fuzzy and sometimes not clearly defined. These are also highly dependent on the region and even the country where the company is located. A factor that might be considered a threat in one country can constitute an opportunity in another.

For example, in certain countries, governments may be interested in forming strong partnerships with the cultured meat sector. By contrast, in areas where the traditional meat industry has a powerful lobby, meat alternatives are likely to struggle to gain official support or may even encounter resistance.

However, with the right support from investors, bright researchers, and efficient leadership, these companies could strengthen their positions and build up their core strengths.

SWOT Summary
Strengths
Very sound and marketable business vision and PR message
Strong support network and potential for creation of strategic partnerships
Highly qualified human resources
Substantial assets –state-of-the-art equipment, technology, and patents.
Diversification – the sector already covers a large variety of products (chicken, beef, seafood, pork, pet food) as well as technical equipment (bioreactors, scaffolds, cell culture media, cell line development)
Multiple applications of the technology, besides the cultured meat end-product
Weaknesses
Customer base – challenging to acquire
Gaps in the value chain, a tendency towards verticality with limited partnerships
Limited or no return on investment in the near future
Most of the benefits and advantages presented are hypothetical and not yet proven on a larger scale
High risk-business modeling
Gaps in the team/higher turnover (lack of profit; when funding ends, employees leave)
Lack of regulatory approval
Opportunities
In line with major current megatrends (animal welfare, sustainability, etc.)
Current COVID-19 crisis
High demand for protein and increasing demand for meat
Increasing investment in this sector and other markets for alternative protein
The traditional meat production has become unsustainable
Research centers and advancements in cellular agriculture
Demographics (growing world population)
Threats
Innovativeness, the liability of newness[2]
Meat industry strikes back
No clear regulations (can it be labelled “meat”?)
Theft of technology
Naturalness trend
Problems with supply chain for raw materials / accessing cell lines
Consumer acceptance
If the product price is low, large sales volumes are needed to compensate for production costs, which might be not feasible in the beginning
Mixed messages (target group, type of industry)
9.3

Strengths

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Strengths

One of the significant strengths of the cultured meat sector lies in its marketing message and unique selling point. Once developed and scaled up, the product has the potential to solve some of the world’s most pressing problems, such as lack of access to food in less developed countries, pollution, and food-borne diseases. The product also promises to improve animal welfare and restore thousands of hectares of land that are now used in an unsustainable manner to grow feed for the growing number of farmed animals.

Another strength of this nascent industry lies in the human resources that it employs. As highly qualified professionals with a deep understanding that cuts across a range of life science topics, employees have the knowledge and drive to advance the development of this field and commercialize its technological developments. Research presented by cell-based meat company Wild Type[3] showed that approximatively 80 per cent of the roles in cultured meat enterprises are scientific, which increases the chances of fast developments and tangible results. Since team expertise and cohesion are among the main factors determining the success of startups, this might be one of the core strengths of the cultured meat sector.

The growth of the industry is further catalyzed by the emergence of associations and institutes such as The Good Food Institute, which acts as a reference point for the industry, provides an ecosystem for the companies, and facilitates access to technical and scientific information. As such, it handles some of the industry-wide marketing, outreach, and consumer education tasks, leaving startups to focus more on the research and development aspects. Such organizations also act as facilitators when it comes to fostering partnerships, networking, and collaboration, as well as strengthening the sector and increasing its credibility.

Traditional meat producers are investing in this technology in an attempt to diversify their product offerings and ensure that when the technology is ready to scale up, they will also have a share of the market. This interest by some industry leaders has significantly boosted the credibility of the cultured meat sector.

Leo Groenewegen, CEO of CellularRevolution and a Supertrends expert, has noted that one advantage of this sector lies in its strong ties with universities and biotech companies, which can provide technical support as well as know-how and workforce. Moreover, most of the established companies in the cultured meat sector already hold approved or pending patents, a factor that increases a company’s survival chances on the market.[4]

“Even if takes five to ten years from a commercially viable perspective on the food/meat side, it’s potentially transformative of an entire industry. And the meat industry is multiple billions of dollars from a value perspective. So, as an investor, I am prepared to wait to potentially be a transformer of a multi-billion dollar industry and potentially capture some of that value.”
Andrew Ive

Andrew D. Ive[5], founder of Big Idea Ventures and investor in alternative protein, points to governmental support as an essential strength of the sector. In countries such as Singapore, where the government has included cultured meat in its list of supported projects, the chances for faster advancements and better consumer acceptance are higher.

Another strength lies in the fact that, even if scaffold solutions have yet to be perfected, cultured fats and unstructured meat could be already commercialized once scaled-up bioreactors are functional. Technological innovations could be applicable in different areas, penetrating new markets and increasing the organization’s opportunities to adjust its business model and pursue more profitable directions (e.g., companies developing bioreactors could sell the technology to other sectors, such as the pharmaceutical industry, or cultured meat could be sold in unstructured form, as part of other products). Investors also see a lot of potential in cultured products such as gelatin that might be used more for cosmetics, science photography, or the life sciences than in the food industry. The fact that some of the applications can become commercially viable sooner than the cultured meat itself gives companies in this sector a significant advantage.

9.4

Weaknesses

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Weaknesses

The biggest weakness of this sector is the lack of a well-defined and supportive client base. Even after the technology is in place, customer acceptance might prove to be difficult due to factors such as mentality, lack of information, and the fact that people view cultured meat as something unnatural (the “yuck” factor). Independent studies conducted in different countries show that even younger consumers (considered to be more focused on environmental benefits and more open to innovative ideas) might refrain from regular consumption of cultured meat due to perceived unnaturalness and disgust.[6][7] Possible associations with genetically modified products might also prevent people from embracing the concept and facilitate the market penetration of this product.

Brett Thomson, co-founder and CEO of Mzansi Meat, anticipates that a serious effort will be required to convince distributors to accept these products or supermarkets to provide shelf space for them, which might lead to distribution issues.

When it comes to the value chain of the cultured meat and fish industry, the general tendency is for companies to focus mainly on cell-line development, cultured medium, bioreactor development, and scaffolds. Most of the companies strive for verticality, trying to own the entire value chain and control the entire process, which might place a serious burden on their resources and slow down development. However, this aspect is already changing, with companies entering this field and focusing on a single issue, such as scaffold development or production of cell growth medium. Nevertheless, the number of partnerships is still low compared to other innovative sectors, and according to Wild Type, aspects such as raw materials and supply chain, packaging, distribution, and shipping are not even being addressed yet.

With many technical hurdles to overcome, lack of cost-competitiveness, and still no proof of the ability to scale up, the cultured meat industry is currently basing its business model on future projections and drawing upon the experience of other companies in the alternative protein business. Nevertheless, it is possible that no return on investment will be derived directly from the commercialization of cultured meat anytime soon.

Further disadvantages may arise from a company’s location, as both Jay Van Der Walt and Brett Thompson of Mzansi Meat have pointed out. Companies established in less developed countries or remote areas might have a hard time accessing the necessary resources, technology components, and raw materials. Location can be an obstacle to the development of a cultured meat company when the government or regulatory bodies in a particular country or region don’t support or encourage research projects and applications in this field.

9.5

Opportunities

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Opportunities

Timing is one of the most critical factors in determining whether companies thrive or fail. Despite many good ideas and hard work, startups might fail because their concept has failed to match market conditions.

In the case of cultured meat, the vast majority of megatrends and drivers are highly favorable to this business idea, a fact already exploited by the cultured meat industry in its messaging and marketing approach. Among those favorable societal trends are the new ecology, urbanization, individualization (DIY movement), globalization, animal welfare concerns, efforts to prevent over-prescription of antibiotics and antibiotic resistance, ethical awareness, sustainability, and health-consciousness.[8]

At the same time, external factors – including the constant increase in world population, the high demand for animal protein, and the strain that traditional meat production places on the environment – justify the development of an alternative solution that is as close as possible to the conventional meat, but without its negative impact. The current health crisis generated by the COVID pandemic also underscores the need to develop alternative protein sources.

Cultured meat fits very well in all these visions and lifestyles, and people might be able to overcome the “yuck factor” if the innovation helps to satisfy other needs or convictions. Many companies in this sector are aware of this opportunity and try to exploit it in their marketing messages.

Given increased access to education and the plethora of ways in which consumers currently access information, there are multiple channels through which cultured meat companies can propagate their message and educate the targeted consumers.

On a global level, investments in alternative protein are rising, as is the investors’ interest in cultured meat. Most investors see the benefits and advantages of different types of alternative protein as being complementary, addressing different needs and beliefs. As part of a broader movement to promote alternatives to traditional meat, the cultured meat sector could benefit from the marketing and PR efforts of the entire alternative protein sector.

The company location could also serve as a booster of investors’ interest in this field. According to Thomson and Van der Walt of Mzansi Meat, in less developed countries, investors are incentivized by lower production costs and potentially higher returns. Because these countries might not have strong lobbying powers that can militate against the development of the cultured meat sector (big industrial farming companies and livestock industry), this too might speed up the adoption and acceptance process among consumers and authorities.

The COVID pandemic has the potential to increase public trust in scientific research and in its capability to provide a solution for current public crises.[9] At the same time, it has also undermined public confidence in the traditional meat industry and the current supply chain. In this context, Groenewegen sees the cultured meat sector as part of the solution, potentially helping countries to produce food locally and to become self-reliant and less dependent on external suppliers. This might speed up regulatory approval, support the development of more research centers, and lay the ground for significant breakthroughs.

9.6

Threats

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Threats

Despite some empirical evidence suggesting a positive association between innovativeness and startup’s survival prospects, there is also strong evidence showing that a high degree of innovativeness can also constitute a liability and a threat to an organization’s survival.[10] Pursuing innovations leads to riskier, less linear, and sometimes more convoluted organizational processes, which, coupled with low returns and inconsistent access to financing, might prove challenging for the company.

Despite dramatic predictions envisioning a significant reduction in traditional meat consumption, it is highly unlikely that the industry heavyweights will give up market share so easily. Or, as Andrew Ive remarked, “I don’t see a billion-dollar business disappear.” Companies in the cultured meat industry should expect strong opposition from their traditional competitors. While the technology is not yet sufficiently well developed to justify mass studies and public scrutiny, a backlash may nevertheless materialize as soon as the advancements become more visible. Based on studies conducted and funded by the traditional meat industry, together with strict scrutiny from the medical side, and vocal influencers’ opinions, cultured meat production and commercialization might find itself under attack at least for several years.

Regulators’ attitudes and directives could also have a strong impact on the development of this sector, allowing it to flourish in some regions and limiting it in others.

In a field where intellectual property and patents represent one of the significant strengths, intellectual property (IP) theft could be a substantial threat. In an attempt to protect their IP assets, some companies might choose to work in stealth mode or avoid collaborations and partnerships, thus slowing down the advancements in the field.

Despite the confluence of many megatrends that favor cultured meat from an ethical point of view, the trend towards naturalness (people’s preference for produce that is “natural”, i.e. not genetically modified, but grown naturally with minimal human interference) could undermine acceptance of this industry and its products.

Along with regulatory incertitude, a potential lack of customer acceptance is the most significant threat to this industry. Sociological research in this field is not fully developed yet, and existing analyses have only covered certain regions or been conducted on non-representative samples. Moreover, all scientific studies are based on hypothetical presuppositions (given the fact that the product is not commercialized yet), which might create a distorted image of reality.

The Good Food Institute envisions problems related to the access to cell lines, gaps in the supply chain, and difficulties accessing the latest technology.

From a marketing perspective, the messages are sometimes contradictory. On the one hand, cultured meat is advertised as a “poor’s man food,” as the solution to end world hunger, and as a low-price option for people who can’t afford traditional meat. On the other hand, at least initially, it is intended to be sold in high-end restaurants, targeting highly educated and affluent consumers. Depending on the region and on the audience of the marketing discourse, it may prove advisable to emphasize one of these perspectives at the expense of the other. However, it may prove difficult to convince people in developed countries to pay more for a product intended for the lower classes.

The customer perception of cultured meat is a critical factor, and is closely related to the image people have of the industry in general. Are cultured meat companies part of the food industry, or are they technology companies? The latter option might deepen people’s hesitation and mistrust in the end-product, threatening its adoption.

A marketing message focused on diminishment of the traditional meat industry might increase the fear of economic destabilization, job loss, and unemployment stress, leading to further rejection of the cultured meat sector.

9.7

Scenario Planning

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Scenario Planning

Based on the “intuitive logic” methodology,[11] organizations and governments can engage in scenario planning to identify the main factors that might drive significant change in a specific situation, industry, or region.

After extensive research of the political, social, economic, technological, and legal factors that might impact the cultured meat industry, two factors have been identified that will have the highest impact on the future of the cultured meat sector. Subsequently, we draw up a matrix leading to four different end-state scenarios for how this sector might evolve if and when specific driving forces come into play.

One of the significant forces shaping the future of the cultured meat industry are technological developments (bioreactor development, scaffold technology, cell medium, etc.). The second one is customer acceptance, which includes the consumers’ reaction and interest in consuming cultured meat regularly, regulatory approval, and government support.

Potential Future Scenarios
Source: Supertrends

Perfect equilibrium

In the perfect equilibrium scenario, companies manage to develop the bioreactors necessary to scale up the production of cultured meat. Here, researchers overcome hurdles related to scaffold production, cell growth medium, and a sterile medium that obviates the need for antibiotics, and consumers are convinced that cultured meat is safe for human consumption. Producers develop ways to increase the nutritional value of cultured meat and to enhance it with nutrients that affect human health positively. Because cultured meat has so many advantages both for customers as well as for the environment, the global traditional meat production decreases significantly. Animals are bred solely to provide cell cultures. The environment is no longer burdened by the consequences of intensive animal farming, and people in developing countries have access to foods rich in animal protein.

Unfulfilled promises

In the unfulfilled promises scenario, consumers are convinced through lobbying work and marketing strategies of the utility and positive impact of the cultured meat. Consumers are ready and willing to embrace this agricultural and technological advancement. The desire to eat healthy and save the planet replaces initial feelings of disgust and revulsion. Unfortunately, the technology remains in the research phase, with no way of scaling up production. Lacking proper scaffolds, a safe culture medium, and scalable bioreactors, cultured meat can be sold only in an unstructured form, in small quantities, and with a low profit margin.

The scenario might be similar to the development of nuclear fusion as a viable source of energy. It has the support of governments, media, and the population, but the necessary technical means are not yet developed. This leads to a rising distrust in the future development of this innovation and major players withdrawing from this field.

Frankenstein meat

The Frankenstein meat scenario assumes that the technology has been successfully developed to an advanced stage. Cultured meat can perfectly mimic the structure, nutritional value, taste, and feel of traditional meat. Moreover, its nutritional value can be enhanced with healthy fats and the optimal combination of vitamins and minerals. Despite its proven added value for individual health and the environment, people refuse to consume it because they consider it unnatural, fake, and disgusting. Even in low-income countries, people prefer to consume plant-based foods rather than switching to cultured meat. People protest against governmental programs aimed at promoting this type of food and see it as a means to move the society towards an artificial, dystopian future.

The only consumers of cultured meat would be those whom Rogers[12] identifies as “innovators” and “early adopters,” which represent only 16 per cent of the population. The remaining 84 per cent (the early majority, late majority, and laggards) can’t be brought on board, and soon, the production and development efforts in this sector are applied only to specific situations such as life in space or remote areas.

Comparisons can be drawn here with the Google Glass project, which failed because of public concerns related to safety and price, as well as a lack of consumer and institutional support.

Failed innovation

The failed innovation scenario brings together the combined effects of two negative and mutually reinforcing factors: lack of consumer acceptance and lagging technological progress. Under this model, already in the research and development phase, this sector proves unable to stand up to hostile lobbying and rejection by potential consumers and the authorities. Investments in this technology decrease, leading to low morale, high personnel turnover, failing startups and a research field that is slowly abandoned and forgotten.

A similar trajectory can be identified in the case of the smokeless cigarette product Premier (developed and manufactured by the R.J. Reynolds Tobacco Company). Even though they were created as an alternative to traditional cigarettes, eliminating the health concerns but still allowing people to enjoy smoking, they were very soon taken off the market, and the improvement/development process was interrupted.

9.8

References

[1] Hyytinen, A. et al. 2015. Does innovativeness reduce startup survival rates? Journal of Business Venturing 30(4): 564-81.

[2] Hyytinen et al.

[3] Allen, M. 2019. Wild Type makes the case for cell-based meat in economic terms alone. The Good Food Institute, 21 February 2019. https://www.gfi.org/the-business-case-for-cell-based-meat (last accessed 31 August 2020).

[4] Hyytinen et al.

[5] Hansen, J. 2020. Investing in solutions for big problems (interview with Andrew Ive). Supertrends, 8 June 2020.

[6] Siegrist, M. and C. Hartmann 2020. Perceived naturalness, disgust, trust and food neophobia as predictors of cultured meat acceptance in ten countries. Appetite 155:104814.

[7] Ruzgys, S. and G.J. Pickering 2020. Perceptions of cultured meat among youth and messaging strategies. Frontiers in Sustainable Food Systems 4:122.

[8] Zukunftsinstitut 2020. Die Megatrend-Map. https://www.zukunftsinstitut.de/artikel/die-megatrend-map/ (last accessed 4 August 2020).

[9] Abo-Hamed, E. 2020. Why we turn to scientists in times of crisis. World Economic Forum, 19 May 2020. https://www.weforum.org/agenda/2020/05/in-science-we-trust-why-we-turn-to-scientists-in-times-of-crisis/ (last accessed 28 July 2020).

[10] Samuelsson, M. and P. Davidsson 2009. Does venture opportunity variation matter? Investigating systematic process differences between innovative and imitative new ventures. Small Business Economics 33(2):229-55.

[11] Cairns, G. and G. Wright 2018. Scenario thinking. Preparing your organization for the future in an unpredictable world (Glasgow: Palgrave Macmillan).

[12] Rogers, E.M. 1971. Diffusion of innovations (New York: Free Press).