Insect protein’s decline and future prospects: Summary
- Investor enthusiasm hinged on sustainability, scalability and protein security
- High production costs and weak demand undermined commercial viability
- Consumer disgust limited repeat purchases despite sustainability-driven interest initially
- Regulatory progress helped, but feed restrictions slowed industry growth
- Future growth may come from animal feed, pet food and aquaculture
Insect protein, particularly for humans, has faced many challenges.
Many key players in the insect protein space, including Ÿnsect and London-based restaurant Yum Bug, have folded. Persistent issues, prominent among them consumer disgust, have held the sector back.
The story of insect protein is one of the clash of flawed economics and low consumer demand with the starry-eyed optimism of investors looking to the future.
Why were investors interested in insect protein in the first place?
Insect protein was a persuasive proposition for investors, explains Nandini Roy Choudhury, senior research manager at Future Market Insights.
It utilised underused resources, used relatively little land, and had the potential to provide the world with sustainable protein, giving it a strong fundraising narrative. Furthermore, automation offered the prospect of a scalable production platform.
“Investors were initially optimistic because insect protein appeared to address several structural food-system challenges: rising protein demand, Europe’s dependence on imported protein sources, the environmental costs associated with fishmeal and soy production, and the potential to valorise food waste and by-products through circular production systems,” says Fran Proscia, public affairs senior manager at the organisation EIT Food.
The environment at the time where most investment was received was favourable to anything angled towards sustainability, he explains, with relatively easy access to capital markets and a strong venture capital model. It also closely aligned with the goals of the EU’s Farm to Fork Strategy of 2020.
Why did the sector struggle?
“The industry has struggled because expectations of rapid scale-up were not matched by commercial realities,” says Christophe Derrien, EU public affairs expert and former secretary general of the International Platform of Insects for Food and Feed (IPIFF). While production remained capital intensive, the human food market remained small and insect protein for animal feed struggled to compete with established protein sources.
The costs of running a controlled biological production system may have been overlooked, suggests Choudhury. “Feed preparation, temperature management, labour, harvesting, drying, processing and quality assurance all have to be paid for, alongside the factory and its financing.”
One issue was that the sector scaled investment before demand was firmly established, Choudhury suggests.
Factories required substantial capital and constant utilisation. At the same time, “customers were still evaluating ingredients, testing formulations and deciding whether the price premium was justified.
“That creates a damaging mismatch.” While producers needed consistent sales to support their factories, buyers wanted reliable supply and competitive pricing before they made substantial commitments.
The role of regulation
Regulation both helped and hindered the sector, suggests EIT’s Proscia. On the one hand, insect protein saw a number of regulatory wins, such as its acceptance under the EU’s stringent novel food framework.
In the EU, four insect species were approved for human consumption – the house cricket (Acheta domesticus), migratory locust (Locusta migratoria), lesser mealworm (larval form of Alphitobius diaperinus), and yellow mealworm (larval form of Tenebrio molitor).
On the other, many key regulatory authorisations took longer than investors expected to arrive. Regulations around what insects could be fed while being farmed were a major bottleneck, says Proscia, restricting producers from using the cheapest feedstocks.
Did disgust turn consumers off?
While insects are eaten in some regions of the world, for many consumers, particularly in the West, they are unfamiliar as a food product. Many react with disgust to the idea of eating insects.
“For many consumers in Western markets, insects sit outside the category of acceptable food,” says Future Market Insights’ Choudhury. “Grinding them into powder removes their appearance, but the knowledge of what the ingredient contains can still influence purchasing.”
She argues the industry itself often treated this disgust too casually, as if education or clever marketing could eventually solve it.
Even for those consumers who were willing to try insects, they did not necessarily become a habit. “Someone may try an insect snack once because it is unusual or environmentally interesting. That does not establish a reason to buy it every week.”
This, when combined with a price premium, was an even greater disadvantage.
The next step for insect protein
Despite the sector’s difficulties, Future Market Insights predicts a compound annual growth rate (CAGR) for the sector of 34% between 2026 and 2036 for the insect protein market.
This growth is likely to be driven by animal feed, rather than human food, suggests Choudhury. Despite the challenges it faces, “animal nutrition has a stronger adoption logic” compared to human food, because “purchasing can be based on measurable formulation performance”.
Other areas that may have potential for insect protein are pet food applications and aquaculture.
Yet Choudhury emphasises that Future Market Insights’ CAGR is a projection, and the industry would have to do a lot of work to meet it.
“Sustaining that growth over a decade would require substantial improvements in production reliability, economics and repeat customer purchasing. Recent failures make those assumptions especially important to scrutinise.”
Insect protein, even as animal feed, still faces strong competition from cheaper, more established protein sources. The sector has a lot to do if it is to recover.