More stories

  • in

    Sheryl Sandberg, Meta’s second-in-command, leaves the embattled firm

    “When i took this job in 2008, I hoped I would be in this role for five years,” wrote Sheryl Sandberg on her Facebook page on June 1st. With that the chief operating officer of Meta, the social network’s parent company, announced her resignation. The year she joined Facebook made $272m in revenue. Last year turnover reached $118bn. Aside from Mark Zuckerberg, Meta’s boss, no one has done more to build the tech behemoth, which boasts more than 2bn users around the world. In 2008 Facebook was in its infancy. Mr Zuckerberg, then 23 years-old, had no concrete plans to make it a viable business. Ms Sandberg had been running Google’s advertising operation, after stints at McKinsey, a consultancy, and America’s Treasury. A compulsive organiser, she was brought on to provide adult supervision. She “handles things I don’t want to”, Mr Zuckerberg once said. That included commercial strategy and staffing, as well as politics.Ms Sandberg flourished in the role. She masterminded the firm’s growth as an ad platform. By 2010 Facebook was profitable. Last year only Alphabet, Google’s parent, earned more advertising revenue. One of her books, “Lean In”, became synonymous with female empowerment in the boardroom. All this helped cement her place as Mr Zuckerberg’s second-in-command.But over the past few years speculation grew that the relationship was fraying. Mr Zuckerberg apparently blamed Ms Sandberg for a scandal which involved the sharing of Facebook users’ private More

  • in

    Corporate espionage is entering a new era

    For espionage of the cloak-and-dagger variety, it is hard to beat the pages of John le Carré or Ian Fleming. But the world of corporate spying has plenty of drama of its own. Take the alleged skulduggery in a recent court case involving two American software firms. In May a jury awarded Appian, whose headquarters are in McLean, Virginia, a whopping $2bn in damages after it had accused Massachusetts-based Pegasystems of illegally snooping on it to gain a competitive edge. The trial revealed that Pegasystems executives had referred to a contractor hired to obtain some of the ingredients of Appian’s secret sauce as “our spy” in internal documents, and had dubbed the overall spying effort “Project Crush”. Pegasystems, whose stock plummeted after the ruling, and which is set to face a barrage of class-action suits from disgruntled investors, has vowed to appeal against the “unjust” decision.The episode illustrates how interest in business espionage, and learning how to foil it, has broadened. Snooping is no longer mostly centred on a few “sensitive” industries that have long been vulnerable, such as defence and pharmaceuticals. It is increasingly used to target smaller companies in surprising sectors, including education and agriculture. It has, in short, become more of a general business risk. Just as the cold war may have been the heyday of great-power spookery, at least in the popular imagination, corporate espionage may now be entering its golden age. There are two, closely intertwined reasons for this. The first is the inexorable growth of the intangible economy; intellectual property (ip) is increasingly the currency of business. The second is the growing sophistication of online hackers. ceos should be worried when they see their firms’ secrets being hawked on the dark web: one new marketplace, Industrial Spy, flogs stolen data and documents to “legitimate” businesses. Information is sold in packets ranging from a few dollars to millions. Keeping ip safely locked in the digital vault can be devilishly difficult.When they hear about ip, most people think of patents. Securing patents can reduce the risk, but this has become more difficult, in America at least, since a pair of Supreme Court rulings in the past decade chipped away at, respectively, protection for “business methods” and “abstract ideas” (which many software-based inventions are). This has left companies more reliant on developing and safeguarding an equally valuable type of ip: trade secrets. These can be anything from algorithms and client lists to chemical processes and marketing plans. Among the most famous trade secrets are Coca-Cola’s recipe and the formulation for wd-40. Most are more mundane: recent legal battles have involved industrial-baking agents and floor-resin formulas. Patents offer stronger protections, but trade secrets last for ever—if they are well kept. Snoopers’ grand adventureChristine Streatfeild of Baker McKenzie, a law firm, talks of a “pivot” in the past five years, as more companies in more industries wake up to the need to protect their secrets. She points to stepped-up efforts in consumer goods, steel and even cannabis. Baker McKenzie has advised legal marijuana-growers in America on steps they can take to curb rivals’ access to information about their cultivation techniques, soil recipes, extract flavouring and so on. Digitisation is making the problem thornier. As more established industries, from carmaking to education, increase investment in software-related technologies, they have more bits and bytes worth stealing. Industries with lots of startups are particularly vulnerable, says Sidhardha Kamaraju of Pryor Cashman, another law firm, because they combine lots of new tech with mobile employees who hop between up-and-coming firms. In 2018 Alphabet’s Waymo self-driving unit won a $245m settlement from Uber after alleging that one of Waymo’s former engineers took trade secrets along with his office bric-a-brac when he left for the ride-hailing firm.The good news for firms is that legislative protections for trade secrets have grown stronger. A turning point in America was the Defend Trade Secrets Act, passed in 2016, which greatly expanded the type and number of secrets covered by federal law—and whose passage led to a 30% jump in cases filed, says Tim Londergan of Tangibly, an ip-management firm.The bad news is that many firms are surprisingly poor managers of such secrets. It is not enough to make reasonable efforts to keep the information confidential. The secret also has to be clearly articulated. Failure to do this has been exposed in a number of cases that have gone to trial in recent years. In one, Mallet, a baking-products firm, failed to block an upstart rival from using release agents (which allow loaves and buns to be more easily removed from pans) similar to its own, after an American appeals court ruled, in effect, that Mallet hadn’t adequately described and documented its secret formula. Such rulings have encouraged more corporate leaders to demand “ip audits” and use the results to improve their safeguarding of valuable secrets. This, in turn, has fuelled the growth of a cottage industry of trade-secrets consultants and software-solutions firms. Lawyers, too, are in demand. “There are plenty of patent lawyers, but not enough who really understand trade secrets, and they tend to focus on litigation, once the problem has already arisen,” says Mr Londergan. “Companies need help earlier.” They also need to focus more on risks emanating from corporate partners, for instance in joint ventures. This is often “an afterthought” even among multinationals, Mr Londergan suggests. He points to tsmc, a Taiwanese chipmaker, as one of the few globally active companies that come close to best practice in how they articulate and manage their trade secrets.tsmc has good reason to want to get it right. It operates in a highly sensitive industry chock-full of proprietary information that rivals would love to get hold of. On its doorstep is China, which bears Taiwan ill will and is widely acknowledged as the world leader in ip theft (having been its victim in the 18th century, when Jesuit priests were sent from Europe to nick Chinese trade secrets in porcelain-making). Taiwanese authorities say that in recent months they have uncovered several attempts by China to poach semiconductor engineers using Chinese firms that registered on the island unlawfully by obfuscating their origins. In May Taiwan’s parliament passed a law that punishes anyone who obtains or uses designated “core” technologies for the benefit of “external entities” with up to 12 years in prison. America, too, has cracked down with China in mind. According to America’s Department of Justice, roughly four-fifths of all economic-spying cases it brings “allege conduct that would benefit the Chinese state”. The best-known case of suspected espionage by China, involving Huawei, a telecoms-gear maker, is the tip of a large iceberg.As big a threat as China is, it is not alone. Ostensibly friendly states spy, too. Israel has been known to snoop on American firms for the benefit of its tech and military industries. And it is not always helpful to think of the threats posed by different kinds of actors—company insiders, corporate rivals or governments—as discrete. Sometimes several of them are at work simultaneously. Take the recent sentencing of You Xiaorong, a former chemist at Coca-Cola, to 14 years at Uncle Sam’s pleasure. Ms You was convicted of stealing trade secrets relating to coatings on the inside of beverage cans. She used the filched formula to set up her own company in China, with backing from a local partner. Their venture was backed with grants from the Chinese government. Whether or not Chinese officials were aware of the theft is unclear.The case highlights another challenge for companies trying to keep a lid on secrets. They can spend as much as they like on beefing up their it systems, but they still need to watch out for older, more analogue forms of exfiltration. Operatives for Procter & Gamble (p&g) were once caught diving in dumpsters outside a Unilever office in Chicago in search of information about its consumer-goods rival’s marketing strategy. Ms You apparently used her phone to take pictures of sensitive documents to bypass Coke’s security measures. People use smartphones in offices all the time. How to tell if it is for nefarious reasons?Moreover, much corporate spying can be—from the point of view of those being spied on—frustratingly fuzzy. Some snooping is perfectly legal. Many hedge funds specialise in watching activity in factories, using foot-soldiers or satellite imagery, to gauge output and bet accordingly on stocks. At the other extreme is stuff that no ceo in their right mind would countenance: p&g’s top brass were so appalled when they learned of their lower-downs’ trash-rummaging at Unilever that they shopped their own company, resulting in a $10m fine.Corporate BondsIn between is a large grey area in which operatives “ride the ragged edge” of morality and the law, according to Eamon Javers in his book on corporate spying, “Broker, Trader, Lawyer, Spy”. Many of these work for outfits hired by companies to do their dirty work, sometimes to give them plausible deniability. The corporate-intelligence industry came of age in the vicious takeover battles of the 1980s and has since grown at breakneck speed. Its well-known names, such as Kroll and Control Risks, are at the top of a pyramid containing thousands of mostly small firms. Most such work is legal and quite dull—for instance, performing due diligence on clients’ prospective business partners. But there are cases of firms undertaking dubious activity, from wiretapping to impersonation. In the 19th century, the grandfather of the industry, Allan Pinkerton, laid out (and largely followed) a strict code of conduct. Mr Javers worries that some of Pinkerton’s modern day counterparts routinely violate many of his gentlemanly commandments.None of this is going away. Employee mobility is at or near an all-time high. Companies, and the tactics they use, get more desperate in downturns. And the geopolitical backdrop is growing frostier, increasing incentives for underhand activity by states or their proxies. “Casino Royale” it may not be, but the spectre of surging economic espionage is real. ■ More

  • in

    Will a chipmaking giant’s $60bn bet on software pay off?

    A market downturn is a good time for buyers. Look at the tech industry. The Nasdaq, a tech-heavy index, has fallen by 30% from its peak in November and a flurry of deals are under way. Microsoft is working on the $69bn purchase of Activision Blizzard, a videogame maker. Since March, Thoma Bravo, a private-equity firm, has spent $18bn on two enterprise-software firms. Elon Musk is—perhaps—about to purchase Twitter, a social network. The latest big tie-up looks unusual. On May 22nd Bloomberg reported that Broadcom, predominantly a semiconductor maker, worth $214bn, is planning to buy vmware, an enterprise-software firm. If the deal goes through, it could be worth $60bn. A chipmaker buying a software firm may seem strange. But Broadcom has done the same thing in the past with striking success. Can it repeat the trick?Broadcom is an odd beast. It started life as Avago Technologies, a chipmaker based in Singapore. That firm bought a number of other chipmakers, including Broadcom, from which it took its name. In 2018 it tried to buy Qualcomm, a rival semiconductor firm, for $130bn. That would have been the biggest tech acquisition of all time. Donald Trump, then America’s president, eventually quashed the deal on national-security grounds because Broadcom was a foreign firm (even though it was in the process of moving its headquarters to America). After that, Broadcom changed tack. Later in 2018 it surprised the industry by buying ca Technologies, a software firm, for $19bn. The following year it snapped up Symantec, a cyber-security outfit, for $11bn. The motivation was not to link its semiconductors to its new acquisitions, but to run the software firms more profitably. Cost-cutting at both firms hurt future growth prospects but helped profits. Operating margins at Broadcom’s software units ballooned from about 30% before the takeovers to around 70% today.This private-equity-style approach has transformed Broadcom into a tech conglomerate. Today 26% of its revenue comes from software. With vmware that figure could grow to 45%. The shift into software has also boosted Broadcom’s overall operating margins, which have grown from 15% in 2016 to 32% today, among the best in the semiconductor industry. Investors seem pleased. Broadcom’s share price has nearly doubled over the past two years, compared with a 60% increase for the phlx, an index of chip manufacturers. In many ways Broadcom’s most recent target resembles its previous success stories. Like ca and Symantec, vmware sells infrastructure software and controls a large share of that market. According to Gartner, a research firm, the company holds about 72% of the server-virtualisation market, a technology that it helped to pioneer. Another similarity is that its services are “sticky”, notes Stacy Rasgon of Bernstein, a broker. It is hard for existing customers to switch away because they are reliant on vmware’s software to run their server infrastructure.But Broadcom may struggle to repeat its past successes. Antitrust regulators are ever more wary of big tech mergers. And even though the two firms do not compete directly, America’s Federal Trade Commission is already investigating whether Broadcom forced customers into exclusive agreements that make it difficult for them to shop around. Another risk is a cultural clash. Last year sas Institute, another enterprise firm, rejected Broadcom’s takeover bid. Part of the reason was that employees worried that its cost-cutting strategy would put an end to their office perks.And some worry that Broadcom’s pursuit of profits will mean that vmware misses out on a bigger prize. It is in the middle of its own pivot, planning to grow its subscription and cloud arms from 25% of sales today to around 40% by 2025. In doing so, vmware “has a shot at being the layer on which most companies use the cloud”, argues Patrick Moorhead, a chip-industry analyst. Cutting investment and marketing would stifle such efforts just as cloud computing is booming. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

  • in

    Is this the end of Davos man?

    The annual meeting of the World Economic Forum (wef) is a study in contrasts: business and politics, East and West, north and south, a few insiders cloistered in wintry Davos and the billions of outsiders on whose fate they pontificate. This time around, as thousands of the world’s movers and shakers belatedly descended on the Swiss ski resort between May 22nd and 26th, the big disparity was between the gloom about the state of the world and the joy of shoulder-rubbing in person (minus the snow) after a two-year pandemic hiatus. The macro mood was sombre for good reason. High inflation doesn’t feature in the Bible but other than that the list of ceos’ top concerns currently reads like the Book of Revelation: war (in Ukraine), pestilence (particularly China’s destructive effort to stamp out covid-19 at home), famine (everywhere, if war and pestilence aren’t staved off). On top of that, one Western boss after another got an earful from their emerging-market counterparts about the global knock-on effects of the American-led sanctions against Russia on food and fuel prices.This apocalyptic backdrop helps explain why companies reined in the pizzazz. JPMorgan Chase, an American bank, cancelled its hot-ticket party. The one thrown by Salesforce, a business-software giant, was as raucous as ever but some other corporate dos looked virtually empty. The boss of one giant firm noted the lack of “vibrancy”. Attendance seemed down on previous years—by half or so, chief executives reckoned. Several American regulars were kept away by prior engagements (Amazon, BlackRock, ExxonMobil and Meta all hosted their annual shareholder meetings this week). Russians were uninvited; Russia House became Russia War Crimes House, displaying images of atrocities committed by Vladimir Putin’s troops. The absence of China, whose representation fell from hundreds to a handful owing to President Xi Jinping’s zero-covid policy, made the talking shop less global—and less useful—than usual. But not useless. This year’s worthy panel discussions will not fix globalisation, avert climate catastrophe or foster inclusive growth. At the same time, in no small part because things were less hectic, attendees reported enjoying the frank back-room chats that are the wef’s main draw more than ever. Individually, these are about corporate self-interest. Collectively, they can add up to something meaningful. Davos needs the world more than the world needs Davos. That isn’t to say there are no mutual benefits.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

  • in

    BASF’s plan to wean itself off cheap Russian gas comes with pitfalls

    There is no better place to experience German efficiency than at Ludwigshafen, a site operated by basf, the world’s largest chemicals company, an hour’s drive south of Frankfurt. Everything is joined together in this city-sized cluster of dozens of plants connected by 2,850km of twisting pipes, from two steam crackers, industrial cathedrals where a hydrocarbon mixture called naphtha is split into its components, to an immense incineration facility, where residues are put to rest. Despite the vast scale of Ludwigshafen everything is accounted for. Reuse and recycling ensure that barely a molecule is wasted. According to basf’s proud tour guide, 94% of the chemicals that enter this system make it into one of the firm’s 45,000 products. Yet basf’s success is not entirely home-baked. Another essential ingredient is cheap Russian gas, reliably delivered via pipeline. The complex in Ludwigshafen is Germany’s biggest industrial consumer of the stuff, piping in about 4% of the country’s total annual gas consumption, enough to heat millions of households through the coldest of winters. basf uses about half to produce steam, the other half as feedstock. “There is no question that low-priced energy has brought wealth to Germany,” says Martin Brudermüller, basf’s chief executive. “If prices had been higher, maybe parts of our production would already be gone.”Now this energy dividend is set to be curtailed, even if the war in Ukraine ends soon. For a generation at least, Germany’s leaders will look to end their country’s dependence on Russian gas and oil. As a result, Europe’s largest economy not only faces a rethink about how much it needs to invest in defence, but an equally difficult economic reckoning. Its industrial titans have started to reconsider their finely tuned business models. basf offers a revealing case study of this shift.How severe a blow Germany’s economy takes will depend on how quickly it can adapt to doing without Russian gas. A group of economists led by Rüdiger Bachmann of the University of Notre Dame recently estimated that the hit from a sudden halt of Russian energy imports would be “substantial but manageable”, causing a decline in gdp of between 0.5% and 3%. That is less severe than the damage done by the coronavirus. But in some locales, such as Ludwigshafen, the shock of shunning Russian gas could be far more dramatic. If pressure in the pipeline that feeds the giant complex drops below 50% of its normal flow, the whole place will have to shut down. That in turn will cause chaos further down the chemical-industry supply chain. “When Ludwigshafen stops,” warns Mr Brudermüller, “there will be no more cars, no more pharmaceuticals and no more many other things.”basf’s boss says that he will try to keep the chemicals flowing by doubling down on the firm’s existing plans to do away with hydrocarbons, hoping that he has time before a European gas embargo takes hold or Russia elects to cut off supply. The firm already aims to achieve net-zero carbon-dioxide emissions by 2050. As part of that process, last year it bought part of the world’s biggest offshore wind farm, off the Dutch coast. It plans to acquire stakes in other such projects. That electricity will replace the gas that powers its steam crackers. Green hydrogen and heat pumps will be added to the mix in Ludwigshafen and at five similar sites that basf operates around the world. As for the gas it needs as a feedstock, much will arrive in ships as pricey liquefied natural gas.The second part of Mr Brudermüller’s strategy is more surprising. The economic repercussions of the war in Ukraine are pushing his firm eastwards. Higher energy costs and stricter environmental regulations in Europe make China look ever more attractive, he says. Having lived in Hong Kong for a decade, he has long admired what he describes as the country’s pragmatic authorities and dedicated workers. The firm’s future looks less firmly planted in Ludwigshafen than in Zhanjiang in southern China, where it is investing $10bn in a state-of-the-art site. The German titan has no alternative to continuing to expand in China if it wants to remain the world’s biggest chemicals-maker. Greater China already represents about half the world market for chemicals and will account for more than three-quarters of its global growth in the next few years, he reckons. “Everything we know about how to make things with less CO2 will be applied there,” says Mr Brudermüller, adding that “the money we will make in China will be needed to pay for the green transformation in Ludwigshafen.”Chemistry lessonsThe risks of such a strategy are clear. Although basf has, in Mr Brudermüller’s words, “never seen a theft of technology” since it started production in China in the late 1960s, few would be surprised to see the firm’s know-how trickle into the Chinese chemicals industry. More importantly, the economic decoupling between China and the West may yet go beyond some elements of high tech, such as semiconductors, and reach areas in which basf specialises. The danger is that, in trying to wean itself off one kind of dependency—on Russian energy—basf may simply strengthen another. Relying on China might not pose such an obvious danger as a Russian finger on a gas pipeline’s off switch, but banking on it for a big chunk of profits still leaves the firm vulnerable.Mr Brudermüller looks like the most energetic of Germany’s big bosses in his drive towards China. But many others are said to be tempted to turn more decisively towards the east. They should think twice before embracing a greater reliance on China and instead try to rekindle the spirit of Teutonic thrift and inventiveness that made possible the industrial wonder that is Ludwigshafen. basf has done it before, albeit for a more dubious purpose. When the British navy blockaded Germany during the first world war, the firm built a new plant to make nitric acid without imported ammonia, thus ensuring the resupply of explosives. Necessity, after all, is the mother of invention.■Read more from Schumpeter, our columnist on global business:Why America’s clean-energy industry is stuck (May 21st)Activist investors are becoming tamer (May 14th)Facebook’s retirement plan (May 7th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

  • in

    The power of small gestures

    When labour markets are tight, the perks tend to get better. Spotify is rolling out a new corporate-subscription package, enabling firms to offer the streaming service to their employees. If you are sufficiently high up at Goldman Sachs, you are now entitled to take as much holiday as you want (this is a nominal perk; no one who cherishes work-life balance gets to climb the ladder at Goldman in the first place). Salesforce has a ranch in California to which it can send workers for in-person get-togethers. If you work long enough for Blue Origin, you might get blasted into space. For firms that don’t own rockets or ranches, it can seem hard to compete. The good news is that small gestures of appreciation can have an outsized effect on employee satisfaction and loyalty. The bad news is that they are not meant to be scaled up. Several pieces of research look at the effect that acts of thoughtfulness can have on staff. In one recent study by academics at King’s College London and Harvard Business School, a group of social workers was randomly divided in two: members of one group got a letter of thanks for their work from their line manager, and members of the other got nothing. A month later, recipients of the letter reported feeling much more valued than their counterparts. In similar vein, a study in 2010 found that university fundraisers who were personally thanked for their work by a senior member of staff made many more calls to ask alumni for donations in the week following this small act of recognition than they had in the week before. There was no statistically significant change for an unthanked control group. Another study involved workers at a Coca-Cola facility in Madrid, some of whom had secretly been told to perform acts of kindness to a subset of their colleagues (bringing someone a drink, say, or emailing them a note of thanks). Both givers and receivers of these acts reported feeling higher levels of job satisfaction; and the receivers ended up doing other colleagues more favours, too. Such studies carry two lessons for employers. One is that recognition can have a meaningful impact on workers. The other is that this impact is amplified if shows of appreciation are personal and unexpected. In their haste to act on the first lesson, plenty of companies completely forget the second. Many firms now run formal employee-recognition initiatives, from rewards programmes to award schemes. Vendors offer clients a variety of services, including internal noticeboards on which colleagues can publicly thank each other for their work and bestow points that can be redeemed for gifts and experiences. The website of one vendor offers managers advice on what to say to employees to make them feel recognised, because absolutely nothing says “authenticity” like a script. (Sample quote: “Congratulations on your great victory! Only you could have pulled it off!”, which sounds like a Hallmark card for Napoleon.) Industrialising appreciation misses the point completely. Automated birthday and work-anniversary congratulations are about as personal as an invoice. Platforms on which peers publicly recognise the hard work of others are liable to encourage performative displays of praise. That is especially likely if every compliment shows up on an analytics dashboard for the boss; one employee-engagement firm tracks shows of gratitude and breaks these “recognition occasions” into a series of ghastly categories like “Owning the Results” and “Building Trust Like a Family”. Award schemes also require careful handling. They are great if you win and somewhat less motivating if you don’t stand a chance. In one study from 2014, academics looked at the effect of an award programme on Zambian health-care trainees; they found that comparison with others worsened performance, especially for less able workers. The secret to showing appreciation is that scarcity matters. It should involve effort: a handwritten note is better than an email, which is better than an algorithm. It should feel personal, not part of a scheme cooked up by the human-resources department. And it should be sufficiently rare to register as meaningful; thanking everyone for everything turns gratitude into a commodity. In other words, appreciation is not a big-data project. Individual managers can harness the power of small gestures to make a real difference to their teams. The best thing firms can do is to hire the sort of people who recognise as much.Read more from Bartleby, our columnist on management and work:Making brainstorming better (May 21st)The woolliest words in business (May 14th)Why working from anywhere isn’t realistic (May 7th) More

  • in

    Plant-based proteins are no longer a side dish in diets

    A good vegan milk needs to look like milk and taste like milk, whether its a fatty version, preferred by bakers, or a skimmed one, favoured by the health-conscious. And, for coffee-drinkers, it should ideally foam like the stuff from a cow. For years manufacturers have had trouble hacking this delicate imitation game. Rapidly rising revenues suggest that they are getting much better at it. In America alone, $2.6bn of plant-based milk was sold in 2021, up from $2bn in 2018. Pseudo-milks are only one category in the growing assortment of passable plant-based alternatives to animal products. There are now convincing versions not just of meat but of cheese, eggs and even prawns. Burger King and McDonald’s sell vegan patties; Chipotle has made a plant-based chorizo. Last year the world’s largest producer of canned tuna, Thai Union, launched a plant-based line. Growing sales show the growing taste for this type of foodstuff (see chart). bcg, a consultancy, reckons that global revenues from alternative proteins could reach $290bn by 2035—and that is a cautious estimate.Eager investors have poured into the business like oatmilk into a latte. Alternative-protein companies lapped up $5bn in investments in 2021, 60% more than in 2020. Oatly, a Swedish firm that makes plant-based milk, raised $1.4bn on its Nasdaq debut last year. Impossible Foods, which makes meatless burgers, raised $500m in November, valuing the firm at $7bn. In February Nestlé, a packaged-goods giant, acquired Orgain, which makes plant-based protein powder, for an undisclosed sum rumoured to be around $2bn. Can the feast last?One reason to be hopeful is that alternative proteins have come a long way since the 1980s, when Quorn, a fungus-based meat alternative, first hit supermarket shelves. Silk, an early soya milk, followed in the 1990s. Unlike those early products, which were neither terribly tasty nor particularly nutritious, the latest crop are often both. Clever processing improves texture, additives boost taste and a pinch of specially engineered peas and beans adds nutrients. Firms are experimenting with ever more novel ingredients in search of meat- and dairy-like properties that will attract ever more shoppers. Terviva, an American startup, is using the oil of pongamia, an Asian tree, to mimic butter. . ChickP, an Israeli firm, is using chickpea extracts to mimic the texture and nutritional value of eggs in mayonnaise. Firms are also getting better at turning such bounty into consumer products. There are now ways of using corn protein to make plant-based cheese alternatives melt and stretch. Better products and lower prices—the result of both improved manufacturing techniques and scale—have coincided with the rise of “flexitarians”, who forgo meat but not always. Some are trying to cut saturated fat for health reasons—a trend fuelled by the pandemic. Fitness fanatics on faddish diets want to develop bulging muscles without building up cholesterol. Concerns about animal welfare and greenhouse-gas emissions from rearing livestock are driving the climate-conscious to limit their animal-derived intake; producing a gram of beef generates 25 times as much carbon as producing a gram of tofu. For all these advantages, making a plant not taste like a plant requires work, and ultra-processed substitutes seldom match animal proteins in nutritional value. Plant-based junk food is still junk. Soya is a common allergen and can have a disruptive effect on hormones. Green-minded consumers are realising that plant-based does not necessarily mean sustainable. Farming almonds to make a milk-like drink, for example, uses huge quantities of water. As inflation rises, even diehard flexitarians may turn into plain old omnivores, and pick either the real deal (which is cheaper than faux animal proteins) or veg (which is cheaper still). Plant-based proteins are also a tough sell in giant markets like India, where diets are already plant-rich, or Nigeria, where meat eating is a sign of wealth. That limits their global appeal. And animal products, including milk, are better for children’s bone development and nurturing gut bacteria, though lab-grown versions of meat and dairy are becoming more nutritious.All this suggests that alternative proteins have far to go to replace the animal kind. The limitations may be weighing on the firms involved. Oatly’s market value has fallen by over 80% since its listing, partly because of production difficulties. That of Beyond Meat, whose burgers feature in McDonald’s McPlant sandwich, is down by a similar amount from its peak in 2019. Sales growth slowed in 2021 and losses widened to $100m in the first quarter of 2022, compared with $27m a year earlier. Plant-based foods may no longer a side dish in diets, but their makers remain one in the food business. ■ More