Case study: Alternative proteins -- A leading company's implementation and lessons learned

The hidden trade-offs and how to manage them. Focus on a leading company's implementation and lessons learned.

Why It Matters

Alternative proteins are shifting from a category thesis to an execution thesis. For investors, the diligence question is no longer only "Is demand growing?" but "Can a company scale profitably while staying credible on sustainability, nutrition, and EU compliance?" The winners are increasingly the operators that can run a manufacturing, procurement, and claims system -- not just a brand story.

The sustainability case is real but not automatic. Animal-source foods are typically among the highest-impact foods per unit of edible protein, so shifting consumption toward plant-based and fermentation-derived products can reduce land pressure and emissions. But benefits are not guaranteed. Formulation choices (oils, binders, and additives), ingredient sourcing (land-use change risk), manufacturing energy, cold chain, and packaging can all swing the footprint. A portfolio can also create unintended outcomes: a "lower CO2" product that drives higher food waste, or a "clean label" reformulation that increases ingredient risk and price.

This matters financially. Many alternative protein products face a price-parity constraint (especially in private label and foodservice), while also carrying higher input costs (specialty proteins, fats, flavors) and potential capex needs (dedicated lines, allergen segregation, fermentation utilities). Unit economics can improve with scale, but only if operations, packaging, and data controls are designed for the EU reality.

In the EU, the bar is rising on three fronts:

• Evidence: Claims are harder to make and easier to challenge. That increases the value of decision-grade LCA, good internal controls, and documentation.
• Circularity costs: Packaging choices affect EPR fees and retailer acceptance, which flow directly into unit economics.
• Traceability: Even if a formal digital product passport is not (yet) required for food, product-level data is becoming a commercial and regulatory expectation.

This case study highlights what worked, what did not, and what investors should look for when underwriting an alternative proteins transition at scale.

Key Concepts

Alternative proteins

"Alternative proteins" covers three distinct technology stacks:

• Plant-based: proteins from crops (pea, soy, fava, wheat), combined with fats, fibers, flavors, and often processed via extrusion to create meat-like textures.
• Fermentation-based: biomass fermentation (e.g., mycoprotein) and precision fermentation (microbes producing functional proteins such as whey or egg proteins).
• Cultivated: animal cells grown in bioreactors and structured into meat-like formats. This stack is generally earlier-stage and more regulatory- and capex-intensive.

Investor takeaway: do not underwrite these stacks as interchangeable. Their cost curves, energy profiles, and regulatory pathways differ.

LCA that supports decisions

Life cycle assessment (LCA) measures environmental impacts across a product's life cycle. In practice, most weak LCAs fail on comparability, not arithmetic. "Decision-grade" LCA typically includes:

• A clear functional unit (per serving and per gram of protein are common in food).
• A transparent boundary (cradle-to-gate vs cradle-to-grave) and treatment of co-products.
• A short list of dominant drivers (usually electricity/heat, ingredient sourcing, yield loss, refrigeration, and packaging).
• A view beyond climate only (e.g., land use, eutrophication, acidification proxies), even if carbon is the headline.
• Alignment to standards (ISO 14040/14044) and, where relevant, EU Product Environmental Footprint concepts.

Investor takeaway: a company should be able to explain its top drivers and show sensitivities that change with grid mix, suppliers, and shelf-life assumptions.

Circularity in practice

For alternative proteins, circularity is not only packaging:

• Ingredients: improving yield, reducing waste, and finding productive outlets for side streams.
• Packaging: design-for-recyclability and material reduction without increasing spoilage.
• Energy: recovering waste heat, optimizing cleaning-in-place cycles, and moving to renewable electricity for energy-intensive steps.

Investor takeaway: circularity levers often improve both footprint and margin, but only if shelf-life and food waste are managed.

EPR as a margin lever

Extended Producer Responsibility (EPR) programs make producers financially responsible for packaging waste. This creates:

• Reporting requirements by member state and packaging format.
• Fee modulation that rewards recyclable designs and penalizes hard-to-recycle materials.
• Constraints from food-contact rules and recycled content availability.

Investor takeaway: packaging is a controllable cost line. The right design can reduce EPR exposure, but the wrong design can increase food waste and reverse LCA gains.

Standards and the digital product passport signal

"Standards" are risk control and scalability infrastructure. Relevant areas include LCA standards, food safety management systems, and traceability data standards (often GS1 identifiers). For climate accounting, many companies also map product work to corporate frameworks (e.g., GHG inventories and target-setting), which increases the need for consistent methods and internal controls.

The EU digital product passport (DPP) is product-category specific and not mainly designed for food today. But the capability stack matters: structured product data (ingredients, origin, packaging composition, footprint inputs) improves compliance readiness, speeds retailer onboarding, and reduces recall risk.

Investor takeaway: ask whether product data is a spreadsheet problem or a system capability.

What's Working and What Isn't

What's Working

Across the program, five practices consistently improved outcomes.

1. A two-horizon investment model.

   • Horizon 1: leverage existing plants and distribution with plant-based SKUs and hybrid products.
   • Horizon 2: build defensible capabilities (supplier integration, fermentation partnerships, or dedicated lines). This reduced the temptation to fund long-horizon capex with short-horizon marketing assumptions.

2. Split "decision LCA" from "claims LCA." The company used a fast internal LCA to guide sourcing and formulation, and a higher-documentation LCA for external claims. This kept teams moving while avoiding weak public claims.

3. Make energy a design variable. For extrusion and fermentation, electricity and heat can dominate. New lines were required to model footprint under current grid mix and under a renewable electricity scenario, plus a plan for heat recovery or low-carbon steam options. The same analysis improved cost predictability in volatile energy markets.

4. Integrate packaging, EPR, and shelf-life early. Packaging decisions were made with procurement, regulatory, and sustainability together. The rule was simple: do not trade a small packaging reduction for a shelf-life loss that increases food waste. Teams also tracked EPR exposure as part of pack choice, not after launch.

5. Claims governance with audit trails. Every claim had a clear owner, data sources, assumptions, and version control. This reduced relabeling risk and protected retailer relationships, while making future assurance (and CSRD-style controls) easier.

What Isn't Working

These failure modes created delays, cost overruns, or credibility risks.

1. Optimizing for one number. Carbon-only optimization missed trade-offs in water, biodiversity proxies, and food waste. Investors should ask for a multi-impact view even if carbon is the headline metric.

2. Treating ingredient substitutions as "minor." Switching proteins or oils can change allergens, taste, cost, and footprint drivers. The fix is to re-run key sensitivities whenever the bill of materials changes materially.

3. Underestimating EU regulatory friction. Novel food pathways for certain fermentation-derived ingredients, country-by-country labeling interpretations, and naming disputes can derail launch timing. Winning teams involve regulatory early and design labels conservatively.

4. Assuming cold chain is fixed. Refrigerated formats can carry a footprint and cost penalty. Logistics redesign and demand forecasting mattered as much as formulation.

5. Orphaned ownership. When alternative proteins stayed in a separate innovation team, manufacturing and procurement did not own execution. Scaling improved when core P&L owners had targets and incentives.

Examples

1. Unilever (The Vegetarian Butcher) -- scaling a plant-based brand inside a multinational

   • Context: acquisition plus rapid expansion across EU retail and foodservice.
   • Implementation lesson: integration work (recipes, suppliers, packaging specs) changes sustainability outcomes as much as marketing does.
   • Investor signal: look for governance that ties portfolio growth to LCA refresh cycles and packaging/EPR decisions.

2. Danone (Alpro) -- treating plant-based dairy as a core category

   • Context: plant-based moved from specialty to mainstream, demanding consistent nutrition and supply security.
   • Implementation lesson: upstream agriculture (fertilizer, land use, water) can be the biggest lever; LCA must connect to procurement programs.
   • Investor signal: check whether supplier incentives and traceability systems exist for key crops.

3. Quorn Foods -- fermentation at scale and the energy trade-off

   • Context: mycoprotein can be land efficient, but production is energy intensive.
   • Implementation lesson: operational excellence (yield, reliability, utilities) drives both margin and footprint.
   • Investor signal: underwrite energy strategy and waste handling like a manufacturing business, not only like a food brand.

Action Checklist

• Require decision-grade LCA with sensitivity analysis on energy mix, yield loss, refrigeration, and ingredient sourcing.
• Build an EU packaging and EPR playbook that links packaging specs to reporting and fee exposure by member state.
• Map ingredient concentration and land-use risk, and fund dual sourcing for high-risk inputs before scale creates brittleness.
• Treat traceability as infrastructure: structured product data that could support DPP-like requirements and faster retailer onboarding.
• Implement claims governance with version control and audit trails aligned to internal controls and assurance needs.

FAQ

Q: How should an investor sanity-check climate claims for alternative proteins? A: Start with comparability. Ask for the functional unit (per serving and per gram of protein), the boundary (cradle-to-gate or cradle-to-grave), and the top drivers. Then request two simple sensitivities: change the electricity mix (grid average vs renewable procurement) and change yield loss/waste (best case vs realistic operations). If the advantage disappears, the claim is fragile.

Also check governance. A credible company can reproduce results as products change. That means version-controlled models, clear data provenance, and a process to update LCAs when suppliers, recipes, or packaging change.

Q: What are the main EU regulatory risks that can derail timelines? A: The big risks are: (1) novel food and ingredient authorization pathways for some fermentation-derived ingredients, (2) country-by-country labeling interpretations including naming conventions and allergen declarations, and (3) packaging compliance plus EPR reporting obligations. These risks usually show up as delay, rework, or relabeling cost.

Mitigation is operational, not rhetorical: involve regulatory and packaging teams at concept stage, build a documented roadmap per market, and design labels and claims conservatively until substantiation and approvals are clear.

Q: How do EPR and circularity decisions show up in financial performance? A: In cost, complexity, and resilience. EPR fees and packaging material costs hit COGS directly. Design-for-recyclability can reduce fee exposure, but must be tested against shelf-life so that food waste does not increase.

Complexity appears when each country needs a different packaging format. That drives SKU proliferation, working capital, and slower scale. Resilience improves when packaging and sourcing choices are robust to regulatory change and material availability shocks.

Sources

• Poore, J., & Nemecek, T. (2018). Reducing food's environmental impacts through producers and consumers. Science, 360(6392), 987-992. doi:10.1126/science.aaq0216
• IPCC. (2022). Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge University Press.
• FAO. (2013). Tackling climate change through livestock: A global assessment of emissions and mitigation opportunities. Food and Agriculture Organization of the United Nations.
• ISO. (2006). ISO 14040:2006 and ISO 14044:2006 -- Environmental management -- Life cycle assessment -- Principles and framework; Requirements and guidelines.
• European Commission. (2013). Commission Recommendation 2013/179/EU on the use of common methods to measure and communicate the life cycle environmental performance of products and organisations (Product Environmental Footprint and Organisation Environmental Footprint).
• European Parliament and Council. (2008). Directive 2008/98/EC on waste (Waste Framework Directive), as amended by Directive (EU) 2018/851 (includes general EPR requirements).
• European Parliament and Council. (1994). Directive 94/62/EC on packaging and packaging waste.