Why it’ll take time for nascent US seafood alternatives to be a big fish

Environmental issues, price and taste are all in play determining the course of the US seafood alternatives market.

US alternative-seafood manufacturers say demand is on the rise but the category remains niche with potentially years to unfold before it makes a significant hole in the conventional fish market.

Nevertheless, the winds appear to be changing in the category’s favour as the world’s oceans become depleted from overfishing and pollution, with some species at risk of extinction, and global warming playing a part with the devastation to coral reefs.

What might make a difference in the growth trajectory of alt-seafood vis a vis meat- and dairy-free, is cows, pigs and sheep are not facing the same drastic fate as their aquatic cousins. Of course, the overwhelming demand driver in all these categories is the environment, particularly around emissions from rearing land-based animals for food.

However, people who like to eat seafood will eat seafood wherever they are in the world and the same no doubt for meat lovers. So it might be safe to assume protein alternatives will swim side-by-side with conventional proteins unless consumers can be convinced otherwise.

The US market for seafood alternatives grew 23% last year but was only valued at US$12m, while conventional seafood was worth “tens of billions of dollars”, according to non-profit organisation and alternative protein advocate The Good Food Institute. And it accounted for less than 1% of the $7bn generated from sales of plant-based meat and seafood combined.

Consumer appetite for seafood alternatives rests on four key principles: price, awareness, convenience and taste, says Chris Kerr, a founding partner at New Crop Capital owned by investment firm Unovis in Washington.

Kerr, a vegan who also co-founded Ohio alternative-seafood business Gathered Foods, the Good Catch brand owner, says conventional seafood will “go away because the fish disappear not because plant-based seafood became so good”.

“If taste is your only driver, then you should probably eat fish. The question is: are these other drivers coming in – a religious reason, a health reason, an environmental reason. Those drivers have to rise up in order to create the demand for these products.

“The reason we invested in this space is because that’s a really big world to be creative in. And you can take a tiny sliver of that and say ‘I’m going to make a market for $10m of selling plant-based tuna.’ From an investment standpoint, will it change the world on its own? Not now. It’s going take a lot of companies to change this.”

There are a lot of companies entering the category, many of which have products on the market and those close to casting off.

However, one has to question what impact the increasing demand for plant-based foods will have on natural resources and the planet, issues these alternatives are trying to resolve. Soy and pea are the most commonly used protein ingredients but others like chickpeas, fava beans and lentils are emerging, with the Good Catch brand incorporating them.

Kerr says there is a risk we could “overplay our hand in one ingredient”, using an example he describes as the “palm oil disaster”.

Fermentation solutions

Fermentation could be an answer, with one such company developing natural protein from scratch using fungi – Aqua Cultured Foods in Chicago. Cell-cultured seafood could also provide a fillip once approved for sale in the US from businesses such as New Crop Capital-backed BlueNalu. The use of 3D technology is also emerging to develop prototypes from plant ingredients or animal cells to mimic the structure, appearance and flavour.

Aqua Cultured Foods will launch its first products in the next six months – fermented sushi “grade cuts” of white fish and ahi tuna – and is working on calamari and shrimp.

Indicative of the interest in its fermented technology and seafood, co-founder and CEO Anne Palermo says “we have probably had every multinational corporation reach out to us, to talk with us and see how we can all work together”.

She adds: “Our technology is different, which is part of the reason why ours is getting so much excitement surrounding it and because of the fact our alternatives are so similar to seafood, both appearance-wise and textually speaking and the nutritional content is very similar to other fin-fish such as cod.

“We’re creating a really nutrient-rich broth, we inoculate it with pure spores of our proprietary strain of fungi, we give it the right kind of temperature environment, right acidity and the nutrients that it needs in order to grow and thrive. Basically, it’s a very new and different way of producing mushrooms. Rather than growing them on a solid substrate such as coconut husks or sawdust, we are growing protein in a liquid broth.”

Palermo says another advantage of the fungi technology is it gets around the “beany” taste often experienced in plant-based seafoods and free-from alternatives employing protein isolates such as pea, whey or soy. Manufacturers then often have to incorporate chemical masking agents and sodium to add flavour.

Price is a barrier but a potential benefit further down the line. Palermo believes Aqua Cultured Foods’ products will reach parity in less than five years but, right now, she admits “we are going to be a bit of a price premium to other traditional seafood analogues”.

She says: “When we eventually reach scale, we will be able to hit price parity and maybe even beat it. We want to be a truly sustainable protein that is available everywhere to everyone at any budget.”

Changing attitudes

While it’s still a niche market, Palermo sees attitudes changing amid greater environmental awareness, especially among the younger generation but also into the 40-plus age bracket. And the trend of avoiding ‘meat’ for perhaps a day or two a week is gaining traction.

Doug Hines, the founder and chairman of Nashville-based Atlantic Natural Foods, the owner of the Tuno alternative brand, agrees the market will remain niche “for a while” but offers some perspective on the flow of the market.

“The vegan consumer content over here is about 2% to 3% – your dedicated hardcore consumers. However, we’re starting to see some gravitation towards more people who are looking for sustainable options. But no-one is jumping in totally, feet-first dedicated in America,” Hines says.

Nevertheless, as a former seafood industry worker, he has seen first-hand the pollution in the oceans, particularly from plastic, which is finding its way into the aquatic food chain and ending up in human stomachs.

“Sustainability is what drives alternatives to seafood, it’s not so much the health content but people are becoming aware of what’s going on in the ocean. I think if they don’t do something, it’s going to be on the terms of an ocean collapse and I don’t think people understand the severity of no-one doing anything.

“I was invested in a bunch of boats and our boats would have to stream around 20 to 25 miles of trash in the ocean and these are 300-foot boats. Every fish that you eat [from the] high seas has a component of plastic.”

Atlantic Natural Foods is gearing up to commercialise plant-based scallops in anticipation of a “good percentage of consumers gravitating towards” plant-based products, including seafood, in the next three to five years.

Subsidy barrier

Subsidies for the global fishing industry don’t help the alternative-seafood cause – especially on price – despite efforts by the World Trade Organization over the past 20 years to prohibit support in areas that contribute to overcapacity and overfishing.

A 2019 report from peer-reviewed research platform ScienceDirect noted global subsidies amounted to $35.4bn in 2018, with the US accounting for 10% as one of the countries and regions giving the most support to fishing industries, along with China, the European Union, South Korea and Japan.

Alternative-seafood manufacturers say there needs to be a shift and governments must get involved to create some kind of level playing field.

“Price parity is going to happen as the subsidy shifts. It’s not that they’re more expensive it’s that they’re less subsidised,” says Dr. Miles Woodruff, the co-founder and CEO of California-based Sophie’s Kitchen, which produces plant-based seafood including the Toona brand.

He says prices in the alternative segment will also come down if more natural resources are better utilised and rechannelled through the human consumption chain rather than fed to animals.

“There’s no way that feeding humans the plants that the animals had to eat eight times of is more expensive than feeding humans those animals. When you cut out three-quarters of the supply chain to eat ingredients the animal would have consumed, it’s much cheaper and it’s also much better for the environment,” Woodruff says.

Christine Mei, the CEO of Gathered Foods, adds: “Products such as Good Catch lend the experience of seafood without harming the environment but we still need more concrete action from organisations to see positive change.

“In order to mitigate the hazards caused by overfishing and overconsumption, international governments and environmental organisations should work together to regulate overfishing and overconsumption of fish.”

Kerr at New Crop Capital believes conversion to alternative foodstuffs like seafood will have to be accelerated if we are going to stand any chance of protecting and preserving natural fish stocks.

“That’s going to take government policy changes. It’ll certainly take investment dollars. We’re not going to solve all of this in a single cycle of a venture-capital fund – seven-to-eight years – it’s going to be way longer,” Kerr says.

Health credentials

The environment is a key driver behind the alternative-seafood market but Americans are big eaters of seafood, so taste is likely to be the defining point and, to a lesser extent, the nutrition profile.

“Omegas you can get from algae, so you can include microalgae that are grown for food that require much less space, much less energy and they don’t have any bycatch. Eliminate the toxins and the microplastics and the other things that cause damage, and then have the nutrient profile of the seafood,” Woodruff at Sophie’s Kitchen asserts.

“The texture is just structural and any good chef who comes out with a food item makes it taste very differently than it did when it came out of the ground. Then you land on something that’s truly unique and tastes like the food that people grew up on.”

It’s a view amplified by Shelly Van Cleve, co-founder of Virginia-based The Plant Based Seafood Company, around the importance of replicating the real thing if people are going to consume alternative seafood on a more permanent basis.

The all-female company had its roots in traditional seafood dating back 20 years before switching to plant-based a year ago and has seen demand for its gluten- and allergen-free shrimp, scallops and crab cakes surge over the past year, Van Cleve says.

“We can’t catch or harvest enough seafood to feed our country – the demand far outweighs the supply. People are going to have to manufacture a product using clean ingredients that performs like the real deal. And that is the only reason people are going to make a switch or incorporate more of it into their diet.

“When you couldn’t tell me that’s not from the water, what is your reasoning for continuing to rake the oceans of the resource that we can’t even produce enough of?”

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