15 minute read 11 Apr 2023
Vendor serving vegetarian burger

How the next generation of alternative proteins can drive long-term growth

By Rob Dongoski

EY Food and Agriculture Leader

Focused on strategy, digital transformation and M&A for EY clients in the agribusiness and food sectors.

15 minute read 11 Apr 2023

Alternative protein can be an essential component of a reimagined food system. Innovations are crucial for the next generation.

Three questions to ask:

  • How are consumer preferences impacting the approach to the next generation of alternative proteins?
  • How will investments in alternative protein innovation generate much-needed product and price parity?
  • What steps can be taken to start establishing yourself as a leader in the next generation of alternative proteins?

Can the next generation of alternative proteins drive long-term growth in a reimagined food system?

By 2050, it’s estimated that we’ll have added 7.3 billion more people globally than we had a century ago. From the postwar prosperity of the 1950s through the ups and downs of the economy, one constant has remained at the American dinner table (and others around the world) — the prominence of animal-raised protein in the forms of meat, milk and eggs. But as the population grows and with global meat consumption expected to reach 661 billion pounds by the end of the decade, not to mention the magnitude of resources required for commercial livestock farming continuing to exact a toll on a suffering environment, it’s likely that alternative protein sources can play a significant role in meeting future consumer and planetary needs.

Alternative proteins have been commercially available for more than 25 years, but over the last few, the category has seen gains as startup producers and brands have found success and it has joined a broader movement in alternatives with categories like milk, sugar, flour, etc. As a result, we’ve seen increased investment: extensive product and brand proliferation by producers in the plant-based category and more innovation in fermented and cultivated alternatives. While these advances indicate value-generating potential, there’s recently been a marked slowdown in commercial growth, raising questions for investors. Are climbing inflationary pressures, shortfalls in product performance and supply chain woes leaving a bad taste with producers, consumers and potential investors? It may well be that the honeymoon period for alternative proteins has ended, where relying strictly on marketing spend and partnerships is no longer enough for success. Investments in product and supply chain innovation will be critical to meet consumer demands for healthy, sustainable alternatives with a better product experience and a price point that can sustain rather low consumer elasticity. The larger question now becomes: How, when and, even, will these much-needed breakthroughs happen to spur the market forward? We believe the answer lies in the hands of those organizations that continue to invest in innovations, capabilities and portfolios to meet consumer demand and accept the challenge of not just helping to reimagine the food system but also becoming leaders of the change.

Proteins graph v2
  • Chart Description#Hide Description

    The future of alternative proteins

    Alternative Protein Gen I – A new generation for alt. protein products will go to market amid slowing sales and mounting macroeconomic pressures.

    Alternative Protein Gen II – A substantial technical innovation or government intervention may determine the shape of the next gen’s S-curve.

    Global Sales

    • Plant-based 2021: $5.3b
    • Fermentation 2021: $329m
    • Cultivated 2021: <$1m

    Convergence across platforms may be a theme of Gen II

Six market dynamics will impact the future of alternative proteins

EY research estimates the overall protein market could be somewhere in excess of $150 billion potentially as soon as 2040, but the opportunity for generating value won’t be without challenges. Alternative protein production is entering a new era, where the criteria for success are changing. Six important market dynamics will shape both opportunities and challenges ahead and must be considered as companies, with intentions to lead in the market, begin to build innovation and investment strategies for the next generation. Those that can navigate the significant headwinds and understand tailwind opportunities will be best positioned to bring to market and scale the next generation of alternative protein products, driving breakthrough adoption beyond trail.

Drivers that could impact the future of alternative proteins


Shifting consumption


Trade policies & federal approval processes


Improved product


Global climate
action policies


Reaching scalability


Ability to meet capital

1. Consumer preferences

Consumer perception, belief and behavior remain the most significant drivers of the reimagined food system. Taste, texture and affordability are still paramount for consumers, and this doesn’t change in the alternative proteins category. Although advances have been made, the current consumer value proposition is not enough. Innovation breakthroughs are needed to address the most crucial questions regarding buying motivations: Does it taste good? Does it have an acceptable texture? Is it affordable? Is it healthy? Without significant progress on all fronts, the category will face considerable growth challenges.

However, there are opportunities that exist to become more consumer centric. Focusing on the differentiation of value propositions by consumer segment and production method could be the key to unlocking growth. For example, 25% of consumers in a recent EY Future Consumer Index study are committed to seeking healthier foods with more plants on the plate. This, on top of the proliferation of purpose-based purchasing criteria, such as sustainability motives with the Gen Z segment, will provide some tailwinds for plant-based alternatives with some permissions for premiumization. In markets where traditional meat is costly due to the lack of local resources, cultivated protein could become a popular alternative if scale can get to or below price parity. Fermentation could emerge as the dark horse of the category, with the potential to scale quickly without a ton of current market hype. As food and beverage manufacturers continue to revisit their portfolios and align with consumer preferences, protein additives could be a popular addition into many future ingredient stacks.

  • Drivers

    • Taste and price will remain the top decision factors for consumers, enabling the industry to unlock growth with scale and cost efficiencies.
    • US and European diets continue to shift toward less meat and more plant-based nutrition, indicating increased demand will happen.
    • Of US consumers, 16% say they are flexitarian by choice, with growing preferences for health, sustainability, the environment and less meat. 
  • Drags

    • Despite philosophical alignment, consumer interest in Gen I plant-based products is fading, while acceptance is a current barrier to Gen II products.
    • Distrust from consumer advocacy groups threatens public backlash to high-tech production methods.
    • Alternative protein remains twice to four times as expensive as conventional protein (cultivated is even more so) in a period of inflation and added price pressure.
  • Opportunity

    • Companies that can innovate to come closer to traditional protein and price parity and meet shifting consumer diets, palettes and environmentally conscious attitudes will find a growing consumer base.
    • Producers that can create in-line efficiencies to offer reduced price points for consumers can build market share and scale opportunities.
    • Segmentation and consumer data and listening will be essential in targeting specific value propositions by production method to the appropriate consumer motivations (price, purpose, access, etc).

2. Technology and innovation

There are currently some 1,000 alternative protein startups in the United States, joining a category that has seen the establishment of high-profile consumer brands and attracted traditional animal protein producer collaborations. The pace of investment in technology from plant-based to lab-grown and fermented products far outstrips anything seen in years. According to the Good Food Institute, 2021 saw a record $5 billion invested in alternative proteins, a surge of 60% beyond 2020 — a year that attracted more investment alone than the 10 prior years from 2010.

It’s unlikely, given the cost of capital, slowdowns in capital placement and valuation challenges experienced by some well-known commercial alternative brands, that investment will continue at this pace. As market pressures, product performance and price sensitivities continue to slow consumer adoption, the next leap forward in growth will require breakthrough technology to improve production efficiencies and manage costs while also improving taste. This may take the shape of multi-platform innovations that lead to efficiencies at scale and speed adoption.

  • Drivers

    • Massive capital investments have been allocated to solve technical challenges and scale production.
    • There is potential for the engineering of source crops to produce better output traits for new end uses in alternative proteins.
    • Breakthrough innovations in processes and materials have the potential to drastically improve product quality and nutrition and lower costs.
    • Multi-platform innovations have the potential to reshape offerings.
    • Investor lenience around the category’s slowing returns will be needed to maintain growth.
  • Drags

    • R&D remains a time- and capital-intensive process, which may prove increasingly difficult in the short term for investors and innovators in the recessionary environment.
    • Opaque production processes using unfamiliar ingredients may overwhelm the market and consumers.
    • Innovation in traditional protein could potentially offset value propositions for alternatives.  
  • Opportunity

    • Larger players may find opportunities for partnership and collaboration, as well as capability- or technology-led M&A activity that may be accelerated in a time when private equity or venture capital sources may be less accessible or more expensive.
    • Current industry players or new entrants to the category that can bring technological expertise or funding for technological advances, either from collaborations, partnerships or M&A opportunities, may help advance taste and parity concerns for the consumer.
    • Traditional protein producers may seize the market share of alternative protein sales cost effectively by adapting production processes and plant allocations to hybrid model operations.

3. Supply chain and manufacturing capacity

Currently, protein production facilities are geared overwhelmingly to more traditional processing. If market dynamics shift favorably, alternative protein offers an opportunity for change, diversification and value generation for the future. At the commercial farming level, that could mean diversification to source ingredients, such as wheat, soy and peas. For production at scale, alternative protein supply chains will need to shift both crop diversification and production processes in manufacturing. The rise of cultivated and fermented proteins, which are far more reliant on processing than traditional proteins, will also require innovation in products and processes. As all of these dynamics unfold, the category will need to transition to smart, efficient processing; collaborations; and hybrid production models to capture an increased market share. 

  • Drivers

    • Increased automation of processes from new platform-based tools (e.g., biofoundries) helps automate R&D activities and expedite innovation.
    • Collaboration in colocation production will create manufacturing efficiencies and unlock by-product opportunities.
    • Upstream input suppliers may find additional commercial use cases for products and services.
  • Drags

    • Limited manufacturing capacity currently prevents scaled production across platforms, slowing commercialization efforts.
    • Complex manufacturing requirements and the lack of highly skilled labor are expected to slow the speed to market of new products.
    • Hybrid product models may further complicate manufacturing and create new bottlenecks.
    • Supply chains required for alternative protein production may not exist at scale today.
  • Opportunity

    • Opportunities will arise for organizations that are able to reimagine logistics in terms of smart, connected supply chains working toward more flexible and agile models.
    • Companies that can help the industry transition to localized production will enable more efficient production with less global supply chain disruption, while meeting consumer interests in sustainable, locally produced brands.
    • Organizations that can enable or create alternative protein supply chains can help drive the category’s infrastructure growth.

4. Geopolitical and regulatory environment

While the ongoing conflict in Ukraine has closed global shipping routes and contributed to an already constrained global supply chain, many executives see future scenarios where globalization is retreating, with a trend toward localization. Alternative proteins’ potential to be less land dependent could promote more localized production. These products could play a cornerstone role in future food security strategies for countries around the world. At the same time, increased government involvement and regulations on sustainability goals, reporting and standards will continue to reshape the adaptation of alternative sources of proteins.

  • Drivers

    • Nations managing food security issues (e.g., China, Singapore’s “30 by 30”) may adopt alternative proteins into national strategies and increase industry support.
    • Fermentation methods are now receiving a generally recognized as safe (GRAS) status from the U.S. Food and Drug Administration (FDA), along with increased efforts for governmental acceptance across the globe. November 2022 saw the world’s first FDA approval for cultivated meat in the United States.
    • Governments around the world are making alternative proteins a core part of their food security and sustainability agendas, especially in countries with high import rates and low natural capital.
    • Government mandates could lead large potential markets to quickly adopt alternative proteins at scale. Examples include food security mandates in China and Singapore and policy initiatives in the European Union to expand alternative protein crop production.
  • Drags

    • Regulatory ambiguity and fragmented industry structures may slow the adoption of global standards for alternative proteins.
    • Strict censorship of alternative protein labeling and marketing will slow the adoption in some markets.
    • The potential for near-term economic losses may lead nations to protect conventional protein industries.
  • Opportunity

    • Understanding and monitoring a rapidly changing regulatory environment will be critical to successfully navigate market and product requirements.
    • Leading companies and trade organizations are likely to engage in continued shaping and influencing of public policy and the regulatory environment in ways that can support the development of this emerging industry.
    • Sovereign sources of investment capital remain active and are likely to continue to support industry development of food security strategies and may be sources of sustained investment capital to support the ongoing development of alternative proteins.

5. Environmental, social and governance (ESG) agenda

With increased interest from investors in ESG transparency and more stringent reporting requirements around carbon dioxide emissions and sustainability initiatives, organizations are looking to add credible, tangible ESG initiatives to meet their reported goals. Consumers, too, are favoring brands and producers that have stated ESG targets and are producing foods with less environmental impact and more sustainable production models. In short, organizations that can capitalize on consumer interest, the regulatory landscape and the potential for ESG-focused funding could be well positioned to build market share ahead of a post-recession economic uptick.

  • Drivers

    • According to the U.S. Department of Agriculture (USDA), livestock farming represents 14.5% of global emissions from food production and is a major target for reductions by both governments and the global food industry.
    • Conventional meat production may face increased scrutiny and compliance requirements as ESG reporting demands continuous improvement.
    • Alternative proteins require much less land, enabling new opportunities for reduced carbon footprint land management.
  • Drags

    • A lack of meaningful global coordination and enforcement of climate change mitigation policies could hamper opportunity.
    • Despite the rise of sustainability as a consumer concern, consumers remain unwilling to pay for it at the product level.
    • More complex supply chains may increase Scope 3 emissions for alternative protein companies.
    • Emerging science on methane emissions may challenge the currently held beliefs on the greenhouse gas impact of cattle farming.
    • Innovation in traditional protein could potentially offset value propositions for alternatives.
  • Opportunity

    • Consumer mindshare and brand loyalty for companies with clear ESG practices and less resource-intensive alternative protein production are growing.

6. Macroeconomics and access to capital

Despite record private sector investment and government funding for alternative proteins in recent years, the macroeconomic outlook and availability of capital look mixed. While federal funding for alternative protein startups and producers is favorable and supportive, the probability of a global recession in 2023 is slowing category optimism. Private investors may look with greater scrutiny at alternative protein investment opportunities, and the likelihood of a global recession is driving up the price of capital. However, given the recent slowdown of the category, the environment could be ripe for market consolidation and portfolio proliferation. 

  • Drivers

    • Capital sources tend to be more patient investors, allowing for longer time horizons on returns.
    • Federal funding of alternative protein initiatives may bridge the fundraising gap with venture capital and private equity.
    • Investor fatigue and decreased valuations for alternative protein companies, brands and technologies may create more attractive M&A opportunities.
  • Drags

    • Global recession concerns and higher capital costs may temper the record pace of investment and limit fundraising and exit opportunities.
    • Inflation will continue to put pressure on consumer purchasing for the foreseeable future.
    • Investors are recalibrating value with an emphasis on a path to profitability, increasing scrutiny on the pre-commercial sectors. 
  • Opportunity

    • Market share and leadership opportunities exist for those that have established funding to expand innovation pipelines and their portfolio investments to capture new markets and consumers.
    • The ability to screen and target specific capabilities or intellectual property that may face challenges in raising capital for development may create opportunities to bolster internal innovation.

How can your company be a catalyst for the next generation of alternative proteins?

Four areas that we believe will guide market leadership

It is now clear that forward momentum at scale will require a noticeably different set of operational capabilities and forward-thinking investment priorities. If we are going to realize a major market and product shift, industry catalysts will need to take some calculated risks and innovate to speed the production, support and broadscale adoption necessary to drive the next generation. We have identified four areas where you can focus your strategic priorities if your company is looking to take a leadership position in both the near- and long-term growth of the category.

Industry consolidation and convergence – through production model collaborations and synergies and capability-led M&A

  • As the alternative protein industry matures, we expect the three pillars of production methods (plant based, cultivated, fermentation) to converge as the industry moves to blended technology solution development and smart collaborations in traditional and alternative protein production models.
  • Look to a “portfolio” approach to production by placing calculated bets across the three production platforms as a tactic for future growth.
  • Additionally, the industry may begin to consolidate around key elements of production capabilities, commercial channels and value chain nodes with a wave of M&A activity. We expect this activity to stem from existing industry players and new entrants alike.

Scaled production – to achieve unit cost reduction and economies of scale

  • The industry focus will increasingly shift toward manufacturing capacity and the ability to achieve unit cost reduction through economies of scale while preserving the highest possible quality standards. This may drive much of the fundraising activity in the coming years.

Core technology innovations – addressing consumer demands and product/price parity

  • Perhaps the most significant area to monitor will lie in the impactful innovations to come in the forms of upstream materials, manufacturing processes and end products.
  • Innovations in materials and processes may be the two largest drivers of both industry consolidation and the ability to scale production as certain ingredients and methodologies become established as industry gold standards.
  • The next generation of plant-based protein will certainly require new ingredients and production process innovation to address consumers’ taste and product preferences.
  • Future technologies in fermentation and cultivated proteins may create breakthrough potential in new ingredients, increasing product functionality and lowering cost, and possibly enabling new platforms to leapfrog current ones.

Scenario planning and agility – operational capabilities to respond quickly to market dynamics

  • Multiple dynamics will shape the market, including governments and regulation, technology developments, consumer behaviors and actions by competitors. Companies wanting to drive growth and success must monitor, understand and respond strategically to these shifting dynamics.

As dynamics play out in 2023 and beyond, assess the role that your organization could play in advancing alternative protein innovation, as well as how your portfolio can help shape the reimagination of the food system. Opportunities exist across R&D, production, supply chain, technology, commercial and marketing organizations to bring capabilities, specialties or capital to the table.

Is your innovation agenda focused on helping evolve the food system for future needs? Do you have the right ecosystem of partners across your value chain to meet consumer, financial, governmental and sustainability requirements? Can you organize, negotiate or manage better channel penetration and commercial collaborations for protein producers? Are you able to realize scale within your portfolio to drive new demand or improve operational efficiencies to increase profits? Ask yourself these questions and more as you decide whether it will be you or your competitors that seize leadership positions in the next generation of alternative proteins.

  • Show article references#Hide article references

    1 “World population projected to reach 9.8 billion in 2050, and 11.2 billion in 2100,” United Nations website,, accessed March 2023.

    2 Dongoski, Rob, “Protein reimagined: challenges and opportunities in the alternative meat industry,” EY website, https://www.ey.com/en_us/food-system-reimagined/protein-reimagined-challenges-and-opportunities-in-the-alternative-meat-industry, accessed March 2023.

    3 Alternative Protein Market Assessment, EY-Parthenon, April 2022.

    4 “Record $5 billion invested in alt proteins in 2021, surging 60 percent since 2020,” Good Food Institute website, accessed March 2023.

Nathan Ramsey and Lauren Chupp have contributed to this article.


Opportunities exist for leaders of a reimagined food system to propel the alternative proteins market forward again. The key lies in consumer-led innovation to capture demand beyond trial. Companies must focus on delivering product and price parity by improving operational capabilities and scale, focusing on smart collaborations and navigating investment priorities. 

About this article

By Rob Dongoski

EY Food and Agriculture Leader

Focused on strategy, digital transformation and M&A for EY clients in the agribusiness and food sectors.