There’s something fishy about the plant-based seafood market.
While consumers in the U.S. latched on to early plant-based meat alternatives, enthralled with Impossible Foods’ vegan burger that released the same blood-like substance as meat, vegan seafood didn’t see the same rise in popularity.
This was despite having relatively similar funding patterns. From 2014 to 2019, there was only a 20% difference in venture funding between the two categories, according to Crunchbase data. By 2020, investors began abandoning the plant-based seafood category. In 2021, while nearly every industry saw some growth, imitation seafood declined.
But the tides are turning for sales of plant-based seafood. Between 2019 and 2022, the number of grocery offerings jumped from 19 to 33, and the category experienced a 53% growth in unit sales, according to the Good Food Institute. And after recent — and jarring — setbacks faced by the plant-based meat industry, seafood startups and the venture firms that fund them are charting a new course — one that means more funding is going to fewer startups.
“I think there’s a lot more enthusiasm for seafood because there haven’t been as many products on the market that have failed,” said Lisa Feria, CEO of food-focused venture firm Stray Dog Capital. “I think part of that, to be completely honest, is because there haven’t been any products on the market, period.”
In 2022, only 12 startups in the plant-based seafood space saw total funding to the tune of $54 million. Current Foods, which makes plant-based tuna and salmon bites, raised $18 million in June. Finless Foods raised $34 million in March to make plant-based and cell-grown cuts of fish.
Fighting an upstream battle
Plant-based meat’s reputation, meanwhile, seemingly has only gotten worse. After the initial novelty and sustainability conversation around Impossible Foods and Beyond Meat wore off, there were three facts left to deal with: Their products were 2x to 4x more expensive than meat, they arguably aren’t particularly nutritious or healthy, and they didn’t quite taste like the real deal.
That quickly turned previously interested flexitarians — consumers who eat meat and imitation meat — into a dwindling crowd. Sales of all plant-based meat products dropped 14% in 2022,and Beyond Meat, a first mover in this space, saw its stock price drop a staggering 77% as the company conducted two mass layoffs that affected around 20% of its workforce.
Early entrants into plant-based seafood had it worse — it’s not enough for these products to be inherently better for the environment or vegan, they actually have to taste good, be nutritious and relatively cheap. More flexitarians wanted to find replacements for red meat, while fish is already considered a fairly healthy food by many. That immediately put the onus on new products to be better than existing ones.
At one time, investors were interested in finding a first-to-market plant-based seafood product that could quickly become a household name like Beyond. Now, they expect food to be cheaper, taste as good and be healthier than current seafood offerings.
As it turns out, it’s a lot easier to make plant-based seafood healthy. Aqua Cultured Foods, which received $5.5 million in seed funding in April, recently unveiled its products for a taste test at the Future Food-Tech conference in San Francisco. The startup served spicy tuna rolls, salmon crudo and shrimp dumplings.
The visually convincing, fat streaked cuts of sashimi are made with fungi that undergoes a fermentation process and, arguably, is actually better for you than current seafood offerings. They can be eaten by people with shellfish, gluten or soy allergies, have fewer calories than real fish, and have added omega-3 benefits. And, the company says, it tastes like raw fish.
“Because of the fact that we are targeting flexitarians, we know we’re held to a stricter standard because these consumers are already eating traditional meat, traditional seafood so they know what it tastes like,” CEO Anne Palermo said.
The restaurant endorsement
To win over new customers, many of the companies are turning to restaurants and colleges before reaching for the grocery shelves.
“Investors are being much more selective. The due diligence process is more thorough and it’s taking significantly longer,” Palermo said. “Consistent cash flows and revenue streams coming from a B2B play is now much more interesting. Whereas before, keeping a branded product was more interesting.”
The Ish Food Company, known for its plant-based salmon burgers and deveined shrimp, began selling its products at restaurants and on college campuses before planning its retail launch.
“Most seafood is consumed away from home, primarily because American consumers struggle with preparing and cooking seafood,” said Christie Flemming, COO of Ish. “It can be a high-cost item.”
Indeed, around 65% of seafood consumption in the U.S. happens in restaurants, not the home. That gives plant-based seafood an advantage over plant-based meat — a foreign product prepared by skilled workers at a restaurant can make a product far more familiar to the average consumer.
“If you really nail a good food-service customer, you’re also building, in an ideal world, your brand,” Stray Dog’s Feria said. “And then when [customers] go to the store, they already have that brand [in mind]. You don’t have to wait for people to find you on the shelf.”
Illustration: Dom Guzman
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