PI: Devrim Ikizler (Intelligent Analytics & Modeling)

Date Awarded: 2022

Executive Summary:

In this research project, we have conducted a comprehensive economic analysis to predict how the costs of manufacturing plant-based meat alternatives would change if the customer demand increased significantly to a point where the industry scales significantly. From an economic theory perspective, this study aims to find out the average costs of production at the minimum efficient scale point, keeping innovation constant (since we cannot reliably predict what the production function will be in the case of innovation).

Our main findings are as follows:

• We find that we would expect significant cost savings due to ingredient scaling and specialization alone. We estimate the effects of such savings on consumer prices to be around 25-30%, assuming no significant supply constraints and incentives for farmer’s crop conversion,

• We find that manufacturing-related scaling is very likely to bring process optimization efficiencies as the industry matures and companies optimize their production methods. Based on our data analysis, these savings are capped at 25% (of current plant, property, and equipment costs),

• Based on our expert interviews, a sufficient future supply of non-soy plant-based protein sources is a major bottleneck to the scalability of the industry. We understand that regulations (from agencies such as USDA etc.) are primary sources of incentives to overcome such constraints.
  

Further Information: Full report can be downloaded here.