Singapore has taken bold steps in accelerating innovation in the agrifood landscape in the recent years. For instance, while global regulators grappled with how to regulate cell-based foods, Singapore Food Agency (SFA) broke the impasse by becoming the first to grant regulatory approval for cell-based meat in 2021. This regulatory milestone aligns with Singapore’s 30-by-30 vision— aiming to produce 30% of the country’s nutritional needs domestically by 2030, compared to less than 10% currently, in some areas.

This also sent a powerful message, attracting global agrifood tech entrepreneurs particularly those from the deep tech space, to establish their R&D and production in Singapore. Consequently, Singapore has emerged as a key player in Southeast Asia, fostering a thriving ecosystem that supports alternative protein innovation and production.

Despite the challenging and volatile global financial markets impacting various industries, global investment in this sector reached $2.8 billion in 2022, as reported in Good Food Institute (GFI)’s recent ‘State of the Industry Report’. Earlier in March this year, investments in Singapore for alternative proteins multiplied to US$169.8 million by 2022, from just US$5.9 million in 2019. The local agrifood tech ecosystem maintains its vibrancy and is home to a diverse mix of startups. Some of these companies are even considering expanding their operations overseas.

However, beyond Singapore, the ecosystem for breakthrough innovations and science-based deep technologies within the alternative protein sector is relatively nascent in Southeast Asia. In addition to the need to navigate regulatory frameworks, the alternative protein industry faces several challenges:

• Cost and scalability – In reality, the cost of producing certain types of alternative proteins still exceeds the cost of producing traditional meat products. The holy grail in any industry is to achieve price parity with incumbents and conventional alternatives means, and this remains a crucial piece of the puzzle for companies in sectors such as cultivated meat. Companies must demonstrate economic viability as they scale up their operations.

• Customer adoption – Mainstream acceptance will take time, as food is deeply embedded in culture and consumer perception. From a consumer’s point of view, alternative proteins still have much room for improvement to deliver the right flavour, mouthfeel, texture and nutritional standards, at an affordable price point. Moreover, consumers have noted the presence of a lengthy ingredient list for some alternative protein offerings, which comprise various flavorings and additives. The industry must push the boundaries of deep tech innovation to address this. For instance, our portfolio company Next Gen Foods leverages high moisture extrusion (HME) and other advanced food technologies to reduce its ingredient list while replicating the appearance and fibrous texture of conventional meat.

The alternative proteins sector is still in its early stages and requires more time for R&D, technology development and customer adoption. From our perspective, investing in the agrifood sector requires patient capital, as genuine category leaders are expected to emerge as companies develop alternative proteins that achieve favourable taste, texture, mouthfeel, and nutritional qualities at price parity with traditional meat, delivering viable unit economics that lay the foundation for robust financial performance amidst market volatility.

While the alternative protein industry has experienced rapid growth, fueled by high-profile fundraises in recent years, the current landscape is undergoing a phase of rationalisation. Investors are reassessing their strategies based on fundamental principles, preferring to invest in companies with strong, replicable cashflows, and in their absence, with at least a clear line of sight towards achieving favourable unit economics and proof points around market adoption.

As a result, many alternative protein startups have faced challenges fundraising in a capital constrained funding environment. We anticipate that continued advancements in technology and scalability will be required to catalyse consumer adoption and propel alternative proteins to the mainstream.

At EDBI, we recognise the potential of the agrifood sector, which includes alternative proteins, in building economic resilience. This is also aligned with Singapore’s 30-by-30 vision. We are actively exploring investment opportunities guided by our investment thesis for companies with high growth potential and the ability to enhance Singapore’s domestic capabilities – such as knowledge or technology transfer, commercialization of emerging technologies, setting up regional headquarters as well as jobs creation. Within the alternative protein sphere, we are interested to partner with innovative startups that are best positioned to leverage the Singapore ecosystem to commercialise differentiated products with the potential to achieve widespread consumer adoption at scale, while delivering viable unit economics.

In addition to Next Gen Foods, other alternative proteins companies in from EDBI’s portfolio include Nature’s Fynd and Upside Foods. In support of our portfolio companies, EDBI will facilitate engagement with both local and global stakeholders such as investors, channel partners and Singapore government agencies such as A*STAR, and SFA to foster a supportive ecosystem for development. Again, building an ecosystem takes time.