The Next Wave in Plant-Based Alternatives

December 8, 2020

By: Andrew Schoen with support from Cynthia Schoen (Schoen Editing Services), Jess Ou (NEA), and Jordan Shapiro (NEA).

The rise of plant-based protein signifies one of the most important consumer trends in decades. Plant-based protein products are not new; the first commercially available vegan meats were developed in 1933. However, the current wave of plant-based products targets a new audience: flexitarians (flexible vegetarians). Unlike vegetarians or vegans, flexitarians prefer to reduce their consumption of meat rather than eliminate it.

Increasing public awareness of the health and environmental impacts of consuming animal protein underlies the meteoric growth of the flexitarian movement in the U.S. As a result, plant-based proteins have reached the mainstream.

According to ADM’s Protein Perception & Awareness Study, 44% of U.S. consumers now identify as flexitarian (vs. ~5% identifying as vegetarian). The Good Food Institute reports that retail U.S. sales of plant-based protein grew at an annualized rate of 38% from 2017–2019. For comparison, the food industry averaged just 4% annualized growth over the same period. Plant-based protein is winning market share at a rapid clip.

Amplified by this trend, several companies solely focused on plant-based food recently attained multi-billion-dollar enterprise valuations. Beyond Meat, whose products include plant-based burger patties and sausages, went public in May 2019 and is currently valued at >$8 billion. Impossible Foods, which competes in the same categories, recently achieved a private market valuation of $5 billion.

While plant-based alternatives have stormed the red meat market, the seafood category hasn’t yet experienced the same innovation. Modern consumers are increasingly aware of the significant health and environmental downsides of mass-market seafood (the kind you typically find in the grocery store). In our due diligence for this opportunity, we took a deep dive into the seafood industry.

In particular, the seafood supply chain for shrimp is severely broken on almost every dimension, more so than any other supply chain we’ve investigated. It abounds with severe health, social, and environmental problems. While the issues we encountered could be the subjects of multiple dedicated posts, we will do our best to summarize them here:

• High Carbon Footprint: Even more than the high carbon footprint associated with importing shrimp (which is substantial), shrimp cultivation contributes to the accumulation of atmospheric CO2 via the destruction of key carbon sinks. Shrimp farming is the single largest cause of mangrove forest destruction globally. Mangroves are vital for wildlife and coastal fisheries, provide critical habitat for multitudes of ecologically important species, filter pollutants and trap sediment runoff, and protect coastlines by serving as storm buffers. Pound for pound, mangroves can sequester four times more carbon than rainforests. Mangroves account for approximately 15% of all oceanic carbon sequestration and draw down more greenhouse gasses per hectare than any other type of forest. Approximately 40% of mangrove forests globally have been lost since 1980. Shrimp farming is the greatest single culprit of this devastation.
• Severe Ecosystem Pollution: Streams of chemicals, antibiotics, and other waste from shrimp farms pollute groundwater and coastal estuaries, damaging the foundation of wetland ecosystems. The health of these wetland ecosystems is not only critical to their local flora and fauna, but to global climate sustainability. All categories of wetland ecosystems, without exception, are carbon sinks.
• Unsustainable Depletion of Critical Marine Populations: Fish stocks used in the feed for shrimp are important ecosystem constituents as they are near the base of the marine food chain. These stocks are depleted when they are diverted to shrimp farms, harming the health of marine food chains as a whole. Shrimp farmers also catch young wild shrimp to stock their shrimp farms, further eliminating local populations of fish. Additionally, the mangroves typically cleared to make way for shrimp paddocks represents the destruction of critical breeding grounds for much of the world’s fish, shrimp, crabs, and other shellfish. Many fish species, such as barracuda, tarpon, and snook, find shelter among the mangrove roots as juveniles before moving into the open ocean as adults.
• Material Human Health Risks: The health risks of mass-market shrimp were perhaps one of the more surprising aspects of our research. Most consumers likely consider seafood categorically healthy, and some may know that shrimp has a bit more cholesterol than typical ocean fare. However, that’s not the only nor the most damning risk we uncovered: (1) The use of antibiotics in shrimp farming contributes to unintentional excess consumption of antibiotics. This carries with it associated health impacts, ranging from digestive problems by harming one’s microbiome, to importing or breeding antibiotic-resistant pathogens. (2) Bacteria that live on shrimp such as salmonella and campylobacter contribute to the 400k Americans that get sick every year from these pathogens. Furthermore, In the U.S. these problems are particularly acute. Due to the EU’s more stringent testing protocol for imported shrimp, fish rejected by the EU often ends up repackaged and imported to the U.S. as suppliers know their contaminated product is less likely to be detected. This leads to a disproportionate amount of contaminated shrimp ending up in the U.S.
• Rampant Fraud and Corruption: While the U.S. FDA rightly prohibits using antibiotics in shrimp farming and forbids the import of antibiotic-containing shrimp, fraud and non-compliance by bad actors in the shrimp supply chain often thwart these efforts to ensure safe seafood imports. The FDA tests on the order of 1% of all imported shrimp for antibiotics, drug residue, pathogens, and other contaminants. Of the stock tested, approximately 15% contain illegal antibiotics and 12% test positive for other unsafe drugs and chemicals. Furthermore, randomized tests at points of purchase (e.g., the grocery store and restaurants) reveal that approximately 50% of shrimp contain harmful substances and do not meet FDA standards.
• Severe Human Labor Violations: Worker abuse — especially of children and migrants — is prevalent within the global shrimp industry. Child labor and forced labor are often the norms on shrimp farms and shrimp-fishing ocean vessels, according to research from the Solidarity Center. Migrant workers in the shrimp trade are often sold into debt bondage and see their wages stolen.

Shrimp is the #1 most consumed seafood in the U.S. at 1.5 billion pounds annually. A vast majority of shrimp consumed in the U.S. originates from farms in other countries — 92%, according to the National Oceanic and Atmospheric Administration (NOAA). Most shrimp aquaculture occurs in China, followed by Thailand, Indonesia, India, Vietnam, Brazil, Ecuador, and Bangladesh. While importing farmed shrimp led to more accessible pricing for U.S. consumers, the impact to the health of the consumer, deleterious environmental impacts, and the poor working conditions for those in the trade outweigh the benefits of cheaper shrimp pricing by many orders of magnitude.

Our research pointed us to a firm conclusion: modern consumers deserve a responsible, humane, healthy, sustainable, and tasty shrimp alternative. Enter New Wave Foods.

New Wave Foods’ thesis is that shrimp is the best initial alternative seafood product to launch. New Wave Foods aims to provide consumers with an uncompromising alternative: a delicious product that is healthy for consumers, good for the environment, and is a 1:1 swap for shrimp in any recipe! Their plant-based seafood platform — starting with shrimp and shellfish — embodies the key tenets of plant-based products: :

• Sustainable: Responsibly sourced with complete traceability
• Protein-rich: Aiming to reach protein-parity vs. animal shrimp
• Cholesterol-free: A typical serving of shrimp (100 grams which conveniently also equates to 100 calories) has 189mg of cholesterol, which is ~2/3rd of the daily recommended max cholesterol intake. New Wave Shrimp, by contrast, has none
• Non-allergenic, Kosher: The 7 million Americans who have shellfish allergies and those who eat kosher can enjoy New Wave shrimp

We were first introduced to New Wave Foods via the Cornell Venture Capital Club (an organization I founded while an undergrad), as part of a 70-page report I commissioned on key innovations towards addressing the climate crisis. When we first met the team at New Wave Foods, we were extremely impressed with their thoughtfully developed intellectual property, drive, and sense of mission, paired with decades of experience in the food industry. Mary McGovern, New Wave Foods’ CEO, has 25 years of leadership experience in the food industry. She built large brands such as Kraft Foods’ Maxwell House coffee, Ocean Spray cranberry juice drinks, and Kraft’s Post cereals line. In recent years, Mary chose to devote herself to the plant-based food industry. As Managing Director of PlantBased Solutions, a brand consultancy, Mary established the business plans and branding for a number of successful plant-based companies. Now, as CEO of New Wave Foods, Mary is well-equipped to lead the charge in growing the plant-based seafood industry. Mary’s background and experience perfectly complement her partner and co-founder, Michelle Wolf (recently named to Forbes 30 Under 30 for her efforts at New Wave). Michelle earned her engineering degree at Carnegie Mellon and set to work almost immediately on solving the challenge of creating an environmentally responsible and commercially viable alternative plant-based solution.

We couldn’t be more thrilled to announce NEA’s partnership with the team at New Wave Foods! We’re honored to lead the Company’s recently announced $18M Series A round!

We want to thank Mary McGovern, Michelle Wolf and the whole New Wave Foods team for their hard work towards this important mission. We want to thank the Cornell Venture Capital Club, which initially brought this opportunity to our attention. Finally, we look forward to enjoying New Wave Shrimp™ in restaurants soon!