Key takeaways
- Alternative proteins have underperformed early investor expectations, with taste, texture and price remaining the biggest barriers to mainstream consumer adoption.
- Venture capital investment in the wider category is declining, but fermentation technologies, particularly precision fermentation, are attracting renewed investor interest and larger funding rounds.
- Companies developing precision-fermented dairy proteins are making regulatory and technical progress, although scale-up, affordability and consumer acceptance challenges remain.
Almost $20 billion of global investment has been poured into alternative protein development, yet the category, which comprises products such as vegan cheese and cultivated meat, hasn’t lived up to investor expectations.
According to Bain & Company’s Green Technology Performance Index, which tracks how technologies and solutions have fared against 2015 expectations, alternative proteins are among the categories that have critically underperformed.
The global management consultancy firm suggested in its findings that alt-protein products “haven’t found a taste, texture, and price attractive to a sufficient number of consumers” to scale up and ultimately justify the level of investment seen over the last decade.
“Our conclusion is that alternative proteins have underperformed expectations set a decade ago because the consumer proposition, particularly taste, texture and price, has not been strong enough to drive adoption at scale,” said Jean-Charles van den Branden, Head of Bain’s Global Sustainability practice. “After a strong hype phase, that realisation caused the market caps of many high-profile companies to fall sharply.”
Two cases in point are Beyond Meat, which pivoted to new formats and adopted a new brand identity in a bid to reinvigorate growth; and Oatly, which has seen its market capitalisation fall by more than 96% in the last five years after expanding its manufacturing footprint too quickly and struggling to resolve supply challenges in North America.
According to The Good Food Institute (GFI), a non-profit that lobbies governments and regulators to secure funding for the alternative proteins sector, global venture capital investment in alternative proteins has decreased, falling from €341 million to €306 million in the first half of 2026.
A bright spot in a struggling sector
But despite attracting less funding overall, investors appear highly interested in one realm of the alt-protein space: fermentation, including precision-fermented dairy proteins.
GFI reports that precision fermentation companies raised €100 million, exceeding 2025 funding levels for the entire category during the same period last year. Meanwhile, biomass fermentation companies raised €99 million, compared to €60 million last year, often through fewer but larger deals.
GFI’s findings on the current investor landscape suggest that fermentation is rapidly gaining investor trust - but they do not disprove the wider argument that the category has underdelivered.
“The renewed investment reported by the Good Food Institute could represent investors backing technologies they believe can improve that proposition,” said Bain & Company’s Van den Branden. “It remains to be seen whether new capital translates into products consumers prefer at competitive prices.
“That illustrates the divergence we describe: a category can disappoint overall while particular technologies still attract fresh investment.”
Can precision fermentation deliver where plant-based fell short?
Precision-fermented dairy has long been touted as a solution to plant-based dairy’s texture and flavour woes, but regulatory hurdles, production scale, affordability concerns and consumer perceptions have all hampered the sector’s commercial proposition. As a result, companies in this space have shifted towards B2B ingredient solutions.
Several companies specialising in precision-fermented dairy proteins, colloquially known as animal-free proteins because they do not involve animal-derived ingredients, have made R&D and regulatory strides in recent months.
German start-up Formo expects to receive an FDA no-questions letter within weeks as it prepares to make its US debut, including by scaling up production with co-manufacturers. Formo uses E. coli to produce casein through precision fermentation, unlike other industry players that rely on mushrooms or yeasts. The ingredient is highly-soluble and could unlock opportunities for clear, high-protein beverage formulations that currently rely on whey.
Belgian start-up Those Vegan Cowboys is also preparing for a commercial launch in the US and recently expanded its portfolio with several bovine caseins that can suit a range of applications, from functional cheese to proteins optimised for nutritional products.
US-based New Culture, which specialises in precision-fermented mozzarella, recently secured a second patent for its animal-free casein and is preparing to launch cow-free mozzarella in the foodservice sector.
Once regulatory clearance is secured, the sector’s next hurdle will be scaling up production while demonstrating sufficient commercial demand to support a viable business model.
