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Confronted with global food challenges, alternative proteins such as plant-based and cultured meat are receiving well-deserved attention. Our analysts see scope for insects to be added to the menu as an alternative for both animal feed and human food.

With the global population estimated to increase to 10 billion by 2050, and food production needing to increase by as much as 70% to meet growing demand, society will be confronted with serious challenges around the sustainability of our food production systems, particularly with regards to meat.

Source: Adapted from the World Resources Institute, 70% from FAO

Consumers turn a new leaf

Consumers, the media and investors are becoming more aware of the environmental effects of producing traditional animal protein, which is driving a rising interest in alternative proteins. In the UK, while protein consumption has increased over the past two years, the proportion coming from pork, bacon and sausages is falling as consumers seek more sustainable food options. In the US, consumers are increasingly considering sustainability when buying produce.

Consumers care about sustainability in their food-purchasing decisions (US)

Source: International Food Information Council 2018, Barclays Research

Plant-based alternatives are very much in fashion, as small-scale disruptors become established in the consumer psyche. In the longer term, cultured meat could become an option, but the question remains around when it would be economically viable and whether it will provide a more sustainable solution. Then there is a third alternative protein source to consider: insects.

Insects offer a high quality source of protein, vitamins and minerals for consumers who are conscious of making their diets more sustainable, but don’t want to shift to entirely plant-based. There are also opportunities for insects to be used as a credible feed alternative for animal agriculture, within the context of increasing sustainability concerns.

Globally, around 2 billion people in over 130 countries already regularly eat insects as a source of protein. The UN’s Food and Agriculture Organisation (FAO) has been advocating for edible insects since 2003 due to their nutritional qualities and sustainability credentials.

Plagued by obstacles?

There are a number of challenges that need to be overcome before insect protein can take a foothold. Can developed economies, which are still wrangling with their appetite for real meat, overcome the squeamishness associated with eating insects? 

Beyond the cultural stigma, price is one of the biggest restrictions for insects to break into the mainstream. Prices remain relatively high; for example, an 18g bag of Jimini’s garlic and herb mealworms costs €6.90, Eat Grub’s 12g packet of crunchy roasted crickets costs £1 and Bugfoundation’s insect burgers cost €5.99 for a pack of two.

This is beginning to erode however, as the price of cricket powder has fallen significantly over the past two years, depending on the source. In Finland it has halved from €100/kg in 2017 to €50/kg in 2019, and in Thailand it has reduced from c€30/kg to c€20/kg across the same period.

The reducing cost of cricket powder

Source: Entis Finland, Barclays Research

Feed for our food

Over recent years, as livestock and farmed fish production have expanded, the sustainability of common animal feed sources has come into question. Soybeans have become the foundation of livestock feed, with animal feed making use of c. 97% of global soymeal production. However, many agree that soybean production can lead to deforestation and the overuse of harsh farm chemicals.

Farmed fish or aquaculture production has increased by over 50 times since 1960. Fishmeal – feed made from wild-caught fish and fish by-products, is made up of about 25% oily fish and 75% grains or soybean, which further adds to the demand for soy. As prices rise, the demand for alternatives will increase.

65% of the global fish supply in 2030 is estimated to come from farmed fish, creating even more opportunity for insect products as feed.

Source: FAO

Early evidence suggests insects are comparable sources and particular focus has been on the Black Soldier fly larvae. Insect producers Enterra and Protix told Reuters in April 2018 that their insect feed prices were already similar to or slightly above competing feeds like fishmeal.

Ready for the buzz?

The insect market is still niche; however, this space could soon be swarming with small brands disrupting the landscape and acting as catalysts for change within the food industry. We estimate that the insect protein market could be worth up to US$8bn by 2030 (+24% CAGR)*. If supply and demand factors continue to develop favourably, similar to what has been seen in the plant-based space, this forecast could be conservative.

This trend towards healthier and more sustainable eating could drive demand for insect-based products in Western society, alongside producers and retailers wanting to capitalise on new eating trends such as paleo and ketogenic diets.

*Source: Meticulous Research.

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About the analysts

Emily Morrison is a member of the Sustainable & Thematic Investing team within Equity Research at Barclays. Emily joined the team in June 2018 following two years covering the European Food Retail space and one year covering the European Telecoms sector. Emily graduated with a degree in Economics from Cambridge University.

Hiral Patel is the Head of Sustainable & Thematic Investing, Equity Research. Hiral joined the team in June 2018 following five years covering the European Technology, Payments and FinTech sector. Prior to that, Hiral qualified as a Chartered Accountant with KPMG where she worked in Audit covering Financial Services. Hiral graduated from the University of Warwick with a degree in Economics, Politics and International Studies.

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