You only need to look at Bloomberg, Fortune, the LA Times and even TED talks to see how this emerging market is gaining momentum. Yet very little capital has found its way into circulation.
It is hard to judge how well the insect market is doing due to limited sales data and wildly differing market surveys. But we have some information here that might shed some light.
The edible insect market occupies three categories: insect farming, food processing and insect retail. Research firm Global Market Insight (GMI) states that while insect farms will have strong leverage as the market matures, it is more likely that processing plants and end-product sales will have a stronger position.
Akiva Katz, managing director of Leopard Ventures, a venture capitalist, says that farming and processing plants will have weight in the distribution channel. Indeed, both of these will have recovered their costs and be earning decent profits by the time retail sees any corresponding success.
Most farms tend to be small, independent and not automated, though the biggest edible insect farm in the world, the Canadian Entomo farm, along with some Chinese factory farms, are trying to industrialise their processes.
Some investors, like Katz, believe that insect-based powder will be more attractive because it is versatile and can be sold to other companies, giving more opportunities for bug flours on the market. Farms and wholesale buyers should also work more closely, he says, because such a combination should offset high prices.
Bugs are now sold mostly through e-commerce. For now, without sales data and proof that bug products can sell quickly, retailers do not seem willing to take the risk of fill valuable shelf space with edible insects.
But I wonder if online shops provide the right format for selling insects as food. Consumers may need the right context and the comfort of a place they trust and consider safe, like a bricks-and-mortar environment, to buy something as novel as bugs.
Analysts predict a wide spread of growth over coming years. According to GMI, the bug market will see 40% annualised growth expected in coming years, with global revenues exceeding US$520m by 2023.
Arcluster, on the other hand, concludes that the global bug market will reach a value of US$1.5bn by 2021. Persistence Market Research weighs in in between, forecasting global revenues of US$723m.
Despite the spread, these predictions look promising, so is the time really ripe for investors to sink their money into edible insects?
For now, only a few insect startups have raised significant amounts of money. Some have tried the crowdfunding approach—Six Foods, for example, raised US$70,000 in this way, and Chapul, which manufactures energy bars, received US$16,000 (and a further US$50,000 from TV show Shark Tank).
Some got the support of venture capitalists, as in the case California’s Tiny Farms, which is known to have received funding from different sources, including Investors Circle, Drew Fink and Arielle Zuckerberg, sister of the Facebook founder, for an undisclosed amount.
Exo Protein, of course, is the richest in the insect field thanks to the US$4m it received in a Series investment round.
But for some VCs it might be too early. “New edible insect businesses are a bit ahead of their time” is the common sentiment, says Justas Rinkevicius, co-founder of the British food accelerator, Cinnamon Bridge, though he recognises that entomophagy is a "radical approach" in response to the predicted animal-protein shortage.
"The 'fear factor' feeling puts edible insect start-ups in highly niche category and 'niche' is not the word that investors want to hear,” says Justas, who has seen the number of edible insect start-ups that apply for his acceleration programme double over the last year.
“It gives an indication that the consumers are trying to fill in the gap in the market themselves and all it takes now is for one of the rock star businesses, such as Exo or Tiny Farms, to reach the right scale to accelerate investors’ trust in funding edible insect suppliers globally.”
Katz advises that a better strategy for entering this market would be to start with insects as pet-food or animal feed before moving to humans. There is less “yuck factor” involved, and the benefits are equally nutritional, he says.
Arcluster's research conveys that the key market in the insect category may be powder or flour, such as cricket flour, which is expected to grow by a factor of 30 over the next five years.
As the future of food meets food tech, the bug market will develop increasingly more efficient sources of protein with impressive nutritional profiles for humans and pets alike.
Scholars and the UN’s Food and Agriculture Organisation agree that the human population cannot be supported by traditional protein sources. Many studies show that edible insects are not just another alternative way of eating or fad.
"The growth of alternative proteins in undeniable, however there's still a hesitation around insects as food in the US," says Douglas Raggio, managing director of Gastronome Ventures, another venture capitalist.
"Perhaps a branding effort is in order with a focus on the benefits and not simply that it's derived from insects would benefit the entire category. Take a page from the wine and seafood playbook."
Consumers are slowly becoming aware of bugs as food, thanks to the social media buzz and the large amount of press articles on the subject. "I looked at the alternative protein space, especially the insect based, and there is a clear argument for it,” says Erich Sieber, partner at Inventages|Bluefields Partners.
“The key question is who can break through the consumer mental barrier. I think it will happen, but it will take time and resources.”
Though some countries are not following that resolution, like the UK, The Netherlands and Belgium, the European Union decision to allow edible insects from January 2018 is slowing down the development of the market.
Still, "there is an observable rise in the importance of alternative protein that drives improved and sustainable nutrition and edible insects punches above its weight in this category,” says Arun Nirmal, research director at Arcluster.
Lux Research forecasts follow the same direction. They predicted the alternative protein sources potentially claiming up to a third of the protein market by 2054. The edible insect industry development might be slow, but it will be big.