By David Stevenson on Wednesday 25 August 2021
Eat Beyond CEO Patrick Morris talks through the firm's investment portfolio and future trends to watch out for in the food technology space.
In this interview, Future Food Finance speaks to Patrick Morris, the CEO of Eat Beyond, a Canadian investment fund focused on investing in firms that make food in a sustainable way.
Eat Beyond is currently traded on three exchanges and its investment portfolio includes Eat Just, the cell-based meat pioneer, and other cell and plant-based food makers from around the world.
In the Q&A, Morris talks through the makeup of the fund's top executives (including having LeBron James' chief dietician on staff), the fund’s investment portfolio, speculates on which alternative food companies might go public next, offers his views on the next hot investment areas in food tech, and talks about Eat Beyond’s plans to raise more funds.
David Stevenson: Patrick Morris, welcome to Future Food Finance. Tell us a little bit about Eat Beyond. What is it? It’s an Investment Firm listed on the Canadian market, isn’t it?
Patrick Morris: It is, yes. Thanks, David for having me. So, Eat Beyond sort of came together about a year and a half ago. We’re looking at the market, and looking at trends and seeing what people are looking to invest in. And we saw some pretty interesting food companies in the client base that were doing very good things.
And with that we thought – well, you know, it’s not easy to get participated in some of these companies at early stages, so why don’t we put together a group of industry professionals from the foods space that understand and can help us bat through some of these investments -and let’s make a public company investment issue out of it, or investment fund.
So, that’s where Eat Beyond fits in really, is we’re the first in Canada and there’s only a couple in the states as well that are publicly traded where we have a portfolio of companies that we have researched, vetted, they’re an incredible team of talent, and we’ve narrowed it down to about 10 different investments that we’ve made so far.
It’s basically a way for the retail investor – that’s what we call them in Canada – your average person that wants to dip their toe into the future of food and plant-based food technologies and all these interesting companies that are coming online, and they can do it all in one place. We’ve kind of done the legwork for them on due diligence on these companies, so they come to us to tick that box in their portfolio of investments.
DS: And what are your collective backgrounds that give you the expertise? Just run through the top lines about how much you know about the space and your key people?
PM: Sure. My background was more in capital market space – I’ve worked all the way from mining to the cannabis industry, which is a beautiful disruption of big pharma, and now we’re sort of seeing the same disruption in big food companies that are not necessarily doing great things for the public and their health.
So, that’s where the excitement of – personally, what I’m doing with this business is getting involved with something that helps the planet and people’s health. So, that’s myself. As far as our board of advisors, we have Don Robinson, who’s the former chairman, the president of Mars Canada, Mars Bar.
So, even that up into the multiple billions of dollars of revenue from a whole lot less than that. So, he’s our superstar on the board. We have Diane Jiang who’s worked in consumer products for 29 years, she was CEO of Compco and worked for a company called Aurora as well, so she’s our CPG expert.
We have Alan Linder who has 30 years United and Natural Foods in The States, a major distributor – he’s kind of our distribution component. Lloyd Lockhart, 40 years in retail grocery – he started a chain of grocery stores in Canada, sold that – he had about 1000 employees, sold it to a major group here, so he’s our retail expert on the panel.
And then we’ve got Michael Owen who’s worked with Robin Hood Multi Foods, Unilever, Nestle and Mars as well, so he’s our downstream marketing expert, he helps guide the companies that we invest in, into their sales and gets them on shelves and that kind of thing.
We also have Michael Manseass, who’s a pretty interesting character – he’s LeBron James, if you know the basketball player, he’s his chief dietician and all around fitness expert, so he’s our sports enthusiast segue a little bit into professional sports.
So, we’ve got a whole really amazing team of people, and this is something about Eat Beyond that I like to stress, is that we’re not just writing cheques into these companies, we’re helping to provide them with not only guidance to help them grow and help them build up their facilities and get their products on the shelf - that’s all part and parcel of what we do after we write the cheque, is to make sure that their investment is going to do well, and we’re going to help out the best we can.
DS: And how much did you raise to invest in the initial portfolio? How many Canadian millions of dollars did you raise?
PM: Initially it might be considered pretty small – it was around 4 million dollars, Canadian (£2.8m). We invest anywhere from $50,000 (£36,000) up to half a million dollars in each company, and some of those investments so far have been pretty incredible. One in particular, the Very Good Butchers – I’m not sure if you’re familiar with them?
PM: We were fortunate enough to participate in their IPO at 25 cents, so they’re currently trading the $5 (£3.60) range and going strong.
So, that was a big one for us. Each investment that we’ve made so far, touch wood, has grown multiples.
DS: We’ll talk a bit about the portfolio in a second.
DS: So, it sounds like you’re much earlier – are you kind of Series A, Series B level? In that kind of ecology of fundraising for earlier stage companies, what’s your sweet spot? Seeds, Series A, Series B, Series C?
PM: It’s divided into two parts – there’s public companies that we’re investing in, in which case we’re using our pipeline network for getting in as early as possible, and so of course they have to meet all our criteria but Seed to pre IPO and IPO would be on the public side, so as early as possible on the good ones, of course.
On the private side, yes, we’re looking more at the Series A/B, and in there prior to – and we like to hope that at some point they’re going to go public as well, but if they don’t that’s fine, there’s lots of choices there to make as well.
DS: So, let’s have a look at the portfolio. By my count you’ve got 10 companies, three are publicly listed on the Stock Market, seven are private – is that right?
PM: There’s four actually now. I’ll run through them unless you -
DS: Yes, if you could give a pen portrait of them each, so that people can understand roughly what they’re in?
PM: Sure, okay. And this is what our mandate from the beginning was, to have a diverse portfolio that’s global and in different parts of the world, covering different categories in the food space.
We’ve got Good Natured products – GDNV.P is their symbol – they’re plant-based packaging. That’s one side of it. The Very Good Food Company – they make plant-based meat alternative products and they’ve done incredibly well with that. Zogworld is a new one that’s coming online – they’re a Kosher brand of product and they’ve been in business for 25 years doing great things and now they’re going public, so we’ve got on with those guys.
And then on the product side we’ve got Just Foods out of the states who have an egg replacement product that is incredible – have you heard of that?
DS: They’re quite well known, aren’t they? I think there was a book – a billion dollar burger touched on them, didn’t they?
PM: Yes, so they’re really going global and there’s rumour of them going public via...... vehicle. So, that should be interesting for 2021. They’ve sold the equivalent to 100 million egg equivalent. So, they’re disrupting the egg industry big time. And they’re also into the cell eggs side of the industry as well, in cultured meats and chicken, which they’re selling already in Singapore, which is pretty incredible.
So, we can move on to Nabati Foods, they’re a local success story out of Vancouver and they do cheeses, they’re going up against .....foods scenario – cheese and desserts, and they’re working on a couple of new products. They’re actually going public on their own as a result of our help, so that’s pretty good.
Turtle Tree is a milk cellular agriculture company out of Singapore. They’re doing incredible things, they’re government-supported, billionaire-backed – Singapore is such a leader in this case, so pretty exciting -
DS: Because I think – didn’t Just Eat’s chicken nuggets get licensed in Singapore, didn’t they?
PM: They did, just recently yes, so that’s a pretty big milestone there. So, that’s Turtle Tree on the milk side, and they’re winning awards and getting grants from the government and so we’re really excited to be involved with them.
SingCell is another Singapore company we’re invested in, they’re more on the infrastructure side of the food space and what we’re doing here, processing facilities and helping companies to produce the product. Above Food is a Canadian based company and it’s a farm-to-fork based concept.
They’ve done significant revenues in their first 12-18 months, over $127 million (£91m). They’re selling to 300 clients across 35 countries, so a really great success there.
And then one we’re all really excited about as far as the category goes in the future of food is Plant Power, which is a fast food QSR – Quick Serve Restaurant – which, you know, we want to take on MacDonald’s and save a whole lot of cows and chickens that way. They’re out of California and they’ve got some big things planned, so pretty excited to be along with those guys as well.
DS: So, that’s a very interesting, diverse portfolio. So, let’s just drill a little bit deeper. Where are you on the – there is a divide between the plant-based alternatives, which are already on the market, the really big names everybody’s heard of like Beyond Meat and Impossible, and then there’s cultivated meat, which used to be called ‘lab grown’, but I think everybody doesn’t like that term any longer because it’s got probably a bit negative connotations, but cultivated meat -
PM: Which doesn’t sound that appetising, does it?
DS: No, it doesn’t, does it, no. It doesn’t sound very wholesome. But, effectively it involves a buyer reactor and you’re trying to get the taste of meat but out of effectively the somatic cells and growing. Where are you on that divide?
Because the cultivated meat is a lot further down the curve of development – as you said it’s only just that it’s brought out a product on the market, everybody’s still saying it’s quite expensive – I think I heard some figures quoted, it cost about 23 a box of chicken nuggets.
Whereas plant-based alternatives, both Impossible and Beyond are busily – the news has got stories about price cuts pretty much every month now, and they’re trying to get to what I think has been called the ‘griddle point’ – the parity point with traditional meat.
Where are you on that divide, because I know that your nearest competitor I suppose would be a firm called Agronomics in the UK – they’re very much on the cultivated meat side of the fence, because that’s where the intellectual property is, the technology is, and plant-based is a lot less IP driven – they’re less interested in that, but it sounds like you’ve bridged both. What’s your take on that divide?
PM: Well, yes, again we want to diversify the portfolio. We’re absolutely excited about the cellular side of what’s happening in cultured meats. There’s a race on now to see who can find the technology and produce the products that actually taste good and have the texture that you’re looking for and are affordable. So, as part of the evolution of this whole industry it’s one step at a time – we’re just at the beginning of the curve here.
I was talking to someone at Reuters yesterday and they were – we were talking about Beyond Meat and their product and how sometimes it’s not necessarily that healthy for you, it’s high in sodium etc. But this is a work in progress – I don’t think that’s the recipe that’s going to be going on forever.
These companies are building and evolving and getting better, their flavour profiles are getting better as they go, and I think it’s just beginning as far as these products go.
And to answer your question on cultured meat – we’re very excited about that as far as Blue Side goes and research and development type and methods for us is – I think that’s going to be a major game- changer in the next decade and in the food space and some huge disruption into factory-farmed meats and animal protein.
DS: On that – where is most of your money in at the moment? Is it more in the plant-based side or is it more in the cultivated meat and the money behind it? Where’s most of your money at the moment?
PM: Right now it’s more in plant-based, but we’ll see how it goes – there’s other ones coming up, and we plan to invest in a lot more companies, so -
DS: Just looking at that area as well, it strikes me that there’s a really interesting opportunity around a couple of other areas. Let me run through them.
DS: Oil, fats and ingredients that go into both plant and cultivated meat, but maybe actually cultivated fats and oils and ingredients, but you put them in plant-based stuff. But that speaks to the ingredients space – have you got anything in that space?
PM: We don’t currently, however it’s definitely on our radar so we’re just going through our due diligence on a few companies – our experts are looking at some of those types of companies, absolutely.
DS: The next area is there’s a lot of picks and shovels, as you well know, Canadian from the mining industry, people who’ve made plenty of money out of the picks and shovels as well as the miners. The people supplying the equipment and the technology that goes into it. Again, any investments in that space?
PM: Not at this point, but that’s an excellent point, it’s a very important part of the whole industry is getting it from point a to point b and producing it and manufacturing it – there’s a lot of equipment and manpower involved throughout so yes, that’s absolutely a focus for us.
DS: And then you already are on I suppose what I call the last..... argument, which is how do you get this food into the hands or the mouths of consumers. And it strikes me there’s two ways of doing that – either you physically deliver it, the actual last mile, or kilometre if you’re in Europe, and then there’s the restaurant-
PM: Requirement team.
DS: Yes, fair enough, yes. And then there’s the last kilometre in the restaurant – it sounds like you’re already onto the restaurant bit. Where are you on that?
Because one of the things that struck me is I’ve always wanted to try this stuff and yet when I go to my local supermarket there’s only in the UK really Quorn and Linda McCartney sausages – not very much is out there, it’s very difficult to actually get it online, you know, you go to your online stores and they don’t really stock much.
So, it strikes me that there’s a real challenge, and that’s true certainly for the plant-based stuff, about getting it into people’s houses and then there’s a fast-food model as well. What’s your take on the last kilometre to get to the consumer?
PM: Here in Canada it’s not actually as challenging as it sounds like you’re describing there because there are a lot of products on the shelves that people can look through and there’s another trend that’s popping up here is a vegetarian or plant-based grocery store where you can walk in and you don’t have to read every label, you know you’re getting something that’s plant-based or fits your mould.
And those companies are starting to flourish as well in their delivery system as well within Covid, and so it’s less about people walking down endless aisles in a grocery store than being able to just order it online, so I really like that as a part of that last mile.
And as far as the restaurants go, yes, that fast-food idea is a comfort zone for people to try these plant-based products because they’re not walking into a vegan restaurant with a menu they don’t understand or is intimidating – they can go into a comfortable setting where they recognise the menu items, the only difference is they’re made from plants.
And we’re seeing out of California and a little bit here locally, in Canada, that it’s just going like gangbusters – people want to make a change from regular fast-food, so -
DS: Yes. And then just moving further along the spectrum – and I suspect the answer to this is no – there’s a lot of interesting stuff happening in Agtech with cereal-based farmers, and there’s interesting stuff in plant biotech as well beginning – some of the synthetic biology stuff. Is that on your radar or is that a bit further along, a bit out of your area at the moment?
PM: It’s definitely on our radar, it’s – again, there are so many things for us to sift through and for our investment committee to look through, and we’ve got a meeting actually coming up in a couple of days to see what’s up front and centre.
Yes, that’s definitely on our radar – anything to do with the future of food and the efficiency of delivery and environmental efficiencies and people’s health, that’s what we’re all about.
DS: And how are you going to take the investment vehicle? What’s the next step for the fund itself? Presumably you must be looking to raise extra money to invest more money – it’s the nature of the beast really.
PM: Yes, exactly.
DS: Tell me what your ambitions are for the actual business itself?
PM: Right, so in 2021 we’ll definitely be putting an offering out to the public for shares to raise a larger pool of capital to of course invest in more portfolio companies.
The other thought is to bring in an operating company as well that we can help nurture and build – so it’s sort of a two-tier effect where we’re investing in companies but we’re also helping them to grow and potentially spin them out into their own public vehicle as well, like we’ve done with Nabati.
So, yes, there’s lots of interesting ideas coming up and there are so many incredibly disruptive small, medium and large companies coming out that we want to be a part of.
DS: And are you going to stay purely on the Canadian exchange? I mean, your big brother down south is a big pool of capital, and it’s big in this area, I mean they’re interested in this. Are you going to stay purely primary and secondary Canadian listed or are you looking at other secondary listings?
PM: Well, we already have. So, our primary listing is on the CSE in Canada – their symbol is EATS. We’re also trading on the Frankfurt exchange in Germany – we’ve been there for about four months now. So, we do have quite a broad audience in parts of Europe.
And we are listed on pink sheets in the US which is their lowest speculative exchange, so we’ll be moving up in to the next level of that which is the QX.
DS: Oh, okay, fine. So, you are slowly trying to work your way up in the exchange ladder in the states as well then?
PM: Exactly. And..... isn’t a bad place to be either. I mean -
DS: I was going to say, Aiden -
PM: Yes, or – we’ve considered that as well, especially if there’s not too many others like us - that’s not a smart move.
DS: And what’s the market cap at the moment for the share prices and where do you think realistically you can get them in the next four, five years?
PM: Sure, so our market caps are on 25 million at the moment. We’ve had a lot of extreme excitement at the beginning – the shares traded at $4.80 (£3.46). We’re currently down around $1.35 (97p) or so, which is a nice entryway considering we’ve only been public for six months.
We’ve got a public offering planned, we have other companies going public, we’ve got a lot of things in the hopper to have the next big wave for Eat Beyond, so yes, I think the charts had a bit of a dip here, but it’s poised to make up and move.
DS: Do you think getting back to five bucks is realistic over the next couple of years?
PM: Oh yes, I would think so, absolutely.
DS: And again, your share price will probably move with IPO action I suppose – if you do well with IPOs that will obviously hit your NAV or benefit your NAV?
DS: You’ve got – I was aware of three, but I think the..... is making it four which are public companies, is that right? How many other do you think – do you think there might be another one or two in the next couple of years? What would be your guestimate?
DS: Listing, another listing, sorry.
PM: Out of our portfolio or?
DS: Out of your portfolio?
PM: Yes, I would say maybe one or two. I can’t really say. Perhaps one or two.
DS: And are you tempted to get in on the SPAC action? Because the SPACs have been quite active in this space. There’s App Harvest in the US market, Aero Farms, Vertical Farmers announced it’s going – there’s quite a few businesses in this space. Is the SPAC market of interest to you?
PM: It definitely is. There’s quite a bit of hype around it lately which is good in a lot of ways, especially when it comes to deals being done in the future of food. We look at every deal individually and if there was a SPAC that comes along and looks like it would work, then absolutely we would do that.
Here in Canada, we have a Capital Pool company, which is a similar model. So, it just depends on availability and timing, but absolutely, SPACS are very topical these days and we’re happy to work with that type of vehicle.
DS: If you had to identify, lastly, one particular bit – because it’s a broad spectrum when we went everything from..... mentioned Agtech all the way through to plant-based alternatives, through to restaurants, to grocery stores. What’s the one bit of the spectrum that you think will motor the most over the next one or two years?
PM: I’d like to think – because just for spreading the word to the general public on trying plant-based products and reducing the amount of animal protein just by 10 per cent, 25 per cent, if everyone just reduces a little bit – but I think that message can get out in a good way to people that have bad health habits – like fast-food.
And eating cheeseburgers every day. For those people to go and try out an alternative in a fast-food setting, I think that’s pretty exciting.
DS: No, I agree, I agree. And one very last question. Are you a vegetarian or vegan? How many of these foods have you tried?
PM: I try as many as I can. I’m a – I consider myself a flexitarian. That’s the message here as well from Eat Beyond – we’re not preaching, we’re not saying you should be vegan or vegetarian for that matter, we just want everyone to reduce by a certain amount, everyone on the planet to reduce their intake. Eight billion chickens a year in the US alone is kind of outrageous – how much chicken to we need to eat?
DS: What was your favourite thing you’ve tasted so far, because you must have tried them all now, I imagine. What was the one - as you’re like I am, a flexitarian – what was the one where you went ‘That was really good!’
PM: I have two. I’ve got to give you two. One is Nabati’s mozzarella cheese – it melts like mozza, a beautiful product, and the Just Egg – it’s egg made from a mung bean and it scrambles like eggs and you can mix in whatever you need to mix in, and it’s an incredible product. Those are probably my top two.
DS: Okay, I must try both of them. And I did say that was the last one, but I have got one last question. When should you decide the griddle point, the point at which a plant-based alternative is as competitive as conventional meat – and I imagine that’s probably going to happen in something like mincemeat or chicken, something like that.
When do you think you’re going to see one of the companies in this space – you don’t have to name them – is basically going to undercut conventional meat? Do you think that’s going to happen this year, next year, two years, three years – what would be your guestimate?
PM: I’d say it’s a sliding scale of percentages of disruption towards – ground beef is a category – billions of dollars – here’s a good example, the milk industry, dairy products being replaced with plant-based milk.
In the US, or North America anyway, we’re looking at about 35 per cent disruption in milk, so that’s where we’d like to see chicken, beef and pork – I think it’s going to take longer, there’s a lot of politics involved, but the good news is that people, the general public are really starting to take notice and they’re trying it out and they’re starting to reduce, so that’s what we hope for.
DS: Lovely, thank you very much Patrick.
PM: Thank you so much David.
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