Dao Foods
With over 20 years of experience in impact investing and social enterprise, Albert Tseng is passionate about utilising business to solve some of society’s most pressing problems. Now, Albert is the co-founder of Dao Foods, an impact-oriented investment firm focused on supporting and accelerating plant-based and alternative protein companies in China. In this week’s episode we discuss the historical, current and future market potential of China, as well as the potential global impact. We also delve deeper into some of the startups leading the way, Dao Foods’ mission and approach, the government’s attitude towards the industry plus more.
Founding story
Prior to co-founding Dao Foods, Albert was working at a global health startup called BlueDot, which was using big tech to understand the spread of infectious diseases. Backed by Horizon Ventures, BlueDot was also in the same portfolio as some of the earlier alternative protein companies such as Impossible Foods, JUST, Perfect Day and Modern Meadow.
Albert: “I learnt about these companies from the founders very early on, and as someone who was in impact investing and social enterprise, I was really quite clueless about the impact of industrial agriculture at the time, in particular industrial animal agriculture.”
Soon however, that changed.
Albert: “As I did more research myself I realised that this was a huge social issue, with multiple lenses whether it’s environmental, public health … so I got excited about it and started learning more about the alternative protein space.”
Every year he continued to learn a little bit more whilst still running his other company, until one day he began to ask “what was the situation in China?”
Albert: “Most of these companies were American or European companies, there was a lot of development in that space, but the Chinese market in particular was pretty unexplored and untapped. So that was when I got connected with Bruce Friederich”
The co-founder and executive director of The Good Food Institute encouraged Albert and his co-founder Tao Zhang to build an ecosystem in China, introducing them to other venture capital funds such as New Crop Capital who subsequently became a partner in Dao Foods.
Albert: “It’s been a journey, it’s obviously still a nascent market in China but we’re starting to see more entrepreneurial activity.”
The pair decided to set up an incubator to support these early-stage entrepreneurs; they now hold 10 companies in their portfolio, supporting ~ 5 companies every 6 months.
Albert: “What we hope to do is build an army of entrepreneurs, and a very diverse set of entrepreneurs that are using different methods, different products, different approaches and target markets within China to really build the ecosystem.”
Albert: “We don’t know how the alternative protein sector is going to grow in China … but I think it behoves us to take a diversified approach so that we can move more resources to the things that have traction at any given time.”
Historical and current market in China
Albert: “It’s been quite a different history compared to what’s happened in North America and Europe, at least recently.”
The average North American eats ~ 220 pounds of meat per year; this compares to the average Chinese citizen in 1980 who ate ~ 30 pounds of meat per year.
Albert: “There was quite a stark difference in terms of animal protein consumption”
However as China undergoes increased economic growth this figure has begun to change; in recent years it has been estimated that the average citizen eats ~ 140 pounds of meat per year. Coupled with the world’s largest population of 1.4 billion people, this increase creates a large demand curve for animal protein globally.
Albert: “The question becomes, how do we meet the demand for protein which Chinese citizens rightfully want, but by having more variety of different proteins and more sustainable proteins that can meet that need.”
Example of some startups leading the way
Starfield
Originally a plant-based restaurant, Starfield has been gaining popularity and traction amongst the younger population. Their primary focus is on launching plant-based products through different food chains across the country, using their products in various food applications.
7030 food science and tech
Contrasted with Starfield, 7030 were originally a consulting company for other startups looking to entering the Chinese market. Through their consulting practice however, they learnt a lot about how the market was reacting and saw a gap in answering the nutritional component of plant-based products. Their primary focus is to enter the ‘light food category’ portion of the market, a category which is aimed at health-conscious individuals; food packaging immediately tells you the macro-nutrients, and is created ready-to-eat to meet convenience needs.
Albert went on to mention that no matter the direct application, at Dao foods they’re focused on positioning alternative protein as a leap frog technology.
Albert: “Why does China need to follow the path of the West when there are technologies that allow us to protect the environment, whilst still getting the protein citizens need and satisfying their taste and their nutritional requirements.”
Albert: “I think that’s the way it has to be positioned, and the story has to be told in the right way by Chinese voices; that there is a pathway to protect the environment, to protect China’s future and the world’s future by using the newest technology.”
We also touched on whether there’s a space for international companies to enter the Chinese market, or if we can expect it to be dominated primarily by local entrepreneurs.
Albert: “We don’t re-create the wheel; if there is global innovation, global knowledge that allows China to leap forward by licensing or by acquiring IPs from companies abroad … we want to see that happen.”
Albert: “I hope there’s room for international collaboration and international players to be involved … at the same time Chinese entrepreneurs need to grow as well.”
Albert: “We’re really happy just to see the entire sector grow, and multiple players multiple perspectives trying different things in the market.”
Future market in China
Given China currently consumes 28% of the world’s meat, including 50% of the world’s pork, and stands as world’s largest consumer of seafood, we can expect the acceleration of alternative protein in China to have a large global impact.
Albert: “I think it’s going to be an exciting coming years, coming decades for the growth of this sector; I don’t see how it would be any different from any other market in the world, and just because of the sheer size it’s going to be a big market.”
Dao foods and their approach
For the first few years of Dao Foods, Albert and his co-founder Tao spent most of their time working with stakeholders and trying to understand where exactly the Chinese market was at.
Albert: “What we realised was that there were no larger companies … that were far enough along to have that scaling potential. So what we said was, we need to go upstream to very early-stage companies, and almost to venture creation.”
That sparked the idea to begin hosting entrepreneurial bootcamps; places of activity and opportunity where entrepreneurs could learn more about alternative protein, as well as connect with others who may share similar passions.
Albert: “Quite a few of the entrepreneurial teams that we are supporting in fact met and formed teams at our bootcamps, and people got inspired to create ventures by participating in these kinds of ecosystem building events.”
That then led to the development of the incubator, where Dao Foods joins an early-stage startup for a 6 month period.
Albert: “We have a team of 8 people in mostly Beijing and Shanghai to support these companies with a variety of whatever those companies need.”
This could be anything from understanding where co-manufacturers are located, to branding, marketing, or finance pathways that are best suited for the venture.
Albert: “Our goal in these three years is to support 30 companies, and if we have 30 companies, a portion of those will be very successful … that will draw even more entrepreneurs into the sector, because frankly we need hundreds if not thousands of these kinds of companies for the Chinese market.”
The selection of companies to enter the incubator program also vary greatly in their approaches; Dao Foods’ first cohort was focused more on direct-to-consumer companies, whilst the second seems to be more centred around protein ingredient companies.
Albert: “There needs to be demand-side solutions; there need to be companies, entrepreneurs and startups that are communicating directly with consumers … but on the other hand we also need to build the supply for the eventual demand.”
Albert: “Because we see what the future looks like in China, we want to support supply-side solutions that are more protein-ingredient oriented, but we also need to continue to support demand-side solutions, ones that are very talented at communication with consumers and showing them that there’s a new way to eat.”
This ties in to Albert’s main point about the diversification of startups; wanting to make sure that the fund covers supply and demand, as well as different target markets, technological approaches and regions within the country.
Government response
But how has the government reacted to the development of the sector?
Albert: “Alternative protein offers governments … a solution to many many problems; whether it’s water scarcity, whether it’s climate change, whether it’s wastewater … if you can displace high amounts of animal protein these are all things that I think are very much aligned with policy objectives.”
Albert went on to mention a news article that began circulating a couple of years ago about how the Chinese government is mandating a 50% reduction in meat consumption by the year 2030.
Albert: “I think that got much more coverage outside of China than it did within China; talk to people in China and they’ve never heard of this before.”
If entrepreneurs can show a path forward about how the alternative protein market is viable, however, then we may see increasing awareness develop around the sector.
Albert: “Until that happens I think the government has difficulty fully supporting these types of initiatives; but once there is a pathway, and they see the alignment with the mandates and objectives of government, we think there will be a lot of support.”
To learn more about Dao Foods and their mission, as well as the startups they’re supporting, you can head to their website or follow them on social media.