Price parity with traditional foods is one of the main challenges for alternative protein startups. However, the avian flu, a shortage of cage-free eggs and a subsequent rise in prices in late 2022 seems to provide an “in” for alternative egg companies to show they can compete.
Egg prices rose from a couple of dollars, depending on geographic location, to over $5 a dozen in December as the avian flu spread across all 50 states, killing millions of chickens and turkeys, and causing shoppers to rethink purchasing the pantry staple and future meal plans. New data from the Bureau of Labor Statistics shows that egg prices rose 8.5% between December and January, while the year-over-year pricing jumped 70%.
There is some good news: Cases of avian flu fell in January with fewer than 500,000 in total poultry deaths compared with more than 5 million in December, according to U.S. Department of Agriculture data. However, Rosemary Sifford, the USDA’s chief veterinary officer, told The Wall Street Journal that this could be short-lived. She said that when wild birds migrate in the spring, the virus is likely to surge again.
While this might seem like an opportunity, I spoke with some startups in this sector and investors to see if alternative egg companies can and should take advantage and race to get their product to market or expand their consumer base.
Now is the time to invest
Johnny Ream, a partner at Stray Dog Capital, which invested in both Yo Egg and Perfeggt, told TechCrunch that this was an opportunity for emerging brands in the egg space to get their products in front of more people.
A tailwind for alternative protein was always that it was a healthier way to consume eggs. The higher cost of said alternatives, however, was a barrier, he said. Now that the cost of traditional eggs is higher, it’s a chance for alternative egg companies to renew their messaging to entice consumers to give their products a try.
“It’s important to highlight that until they get tremendous scale it will be a little bit more premium-priced,” Ream said. “Ultimately we will see the dramatic change once those companies can actually scale up to even greater levels, which I think will pull down the cost even more. Long term, we’re going to a place where a lot of these plant-based alternatives will actually just be cheaper than the counterpart.”
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Ream said he thinks that the U.S. government will put together new policies in the coming months and years to address problems like the avian flu and agriculture practices as a whole. That could prove beneficial for alternative eggs and alternative protein in general. “It’s going to be a good time to be investing in and backing entrepreneurs for some time,” he added.
Po Bronson, general partner at SOSV and managing partner at IndieBio, has tried most of the alternative egg products out there and told TechCrunch that with a third of eggs being used strictly for baking, there could be an opportunity for a startup to swoop in and take market share as not many of the egg alternatives out there work well for baking.
Bakeries are seeing their margins being stretched, and that is causing them to raise prices. And that, in turn, is causing consumers to shop around, Bronson said.
However, this type of environment “definitely excites investors” because the previous price point mismatch is gone now that traditional egg prices are higher, he said.
“There’s now an easier target to match or beat,” Bronson said. “And it does mean investors are more willing to deploy. However, for early-stage companies, it still means the basic fundamental questions are answered like if the product is selling and being reordered. Meanwhile, that and the willingness to get on the phone with that company, are all being impacted by what makes this market a higher priority.”
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It’s an industry “eggflation”
For Yo Egg, this year was the perfect time to announce the launch of its poached egg, complete with running yolk. This comes about a year after the company raised $5 million in seed funding.
The company had expanded its outreach into the food service industry and got feedback from actual chefs who said they were having trouble finding egg alternatives, especially those that had a distinctive egg white and yolk. CEO Eran Groner told TechCrunch via email that “Yo Egg is doubling down on the opportunity.”
Tony Martens, co-founder of Plantible Foods, is also seeing “a drastic increase in demand,” he said via email. But he’ll be keeping an eye on whether that demand will change once egg prices come down. “Companies are looking for something that enables them to move away from eggs entirely,” Martens said. “In the end these companies are food companies and not commodity price risk managers.”
The EVERY Co., which raised $175 million in 2021 for its animal-free proteins, including eggs, has also been monitoring the avian flu crisis. CEO Arturo Elizondo said in an email interview that you can call this an “eggflation,” but also said that it’s “predictable,” especially given the state of the food system in the U.S. and the fragility of animal agriculture, availability, consistency and cost . All of that is driving demand for alternative eggs as higher costs drive consumers to look for substitutions, he added.
“Looking beyond cost and the current crisis, our goals at EVERY are unchanged, but I’d be lying if I said we weren’t driving hard given elevated visibility,” Elizondo said. “We’re ramping up production, hitting scale-up milestones and onboarding global manufacturing partners.”
Elizondo said he thinks that “food businesses with skyrocketing cost of goods sold face difficult decisions around absorbing those prices or passing them on to consumers.” Alternative protein companies should also be prepared to communicate “how their offerings solve problems that exist today” and show they can be resilient, he said.
Eat Just, which makes the JUST Egg plant-based product from mung beans, has been spending “a considerable amount of time and energy making sure consumers and retail partners know our delicious and sustainable products are more available than ever.”
It has also been using this time to invest in building capacity and increasing quality. In 2022 alone, Eat Just added over 10,000 square feet of new production space.
“For Eat Just, this is simply a reinforcement of our purpose and mission,” Eat Just Chief Revenue Officer Matt Riley told TechCrunch via email. “We knew that the food system was flawed and subject to these challenges prior to the latest avian flu outbreak and that is why we launched JUST Egg in the first place. We will continue to bring tasty, sustainable and affordable plant-based egg products to the market to ensure consumers have options now and in the future.”
“Avian flu is here to stay”
Meanwhile, Yo Egg’s Groner says the avian flu has been a problem for years, which means it “is here to stay.” He noted that in 2015, the USDA at the time defined it as “arguably the most significant animal health event in U.S. history,” but that continued manufacturing of eggs by keeping chickens in close confinement will not solve the problem.
“I want to say this is a once-in-a-lifetime opportunity for us, but honestly we need to wake up to the new reality,” he said. “The avian flu that resulted in today’s egg prices didn’t start last month but actually last year and has been going on for over a year. We need to move beyond using chickens in the manufacturing process, and that is exactly what we are doing at Yo Egg.”
Plantible’s Martens doesn’t think that the avian flu will be the only thing that will drive up the price of real eggs in the future.
“Countries around the world are introducing regulations that force companies to only use or source cage-free eggs,” he said. “Unfortunately, the infrastructure is not in place [in the U.S.] to keep up with these demands, and apparently it’s not that easy for egg producers to adapt their infrastructure.”
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