As people around the world live longer and climate change poses more risks for agriculture, fermentation may hold the key to meeting the world's growing nutrition needs, as well as creating a growth opportunity for the food industry.
Food manufacturers and biotech companies are developing products using fermentation technology, via the same process used to make items such as yogurt, sauerkraut and kimchi. New products range from dairy and meat substitutes to animal feed and aquafeed. Patent applications in the area have increased about 50% since 2011.
“Fermentation can support healthy longevity, providing access to a reliable and affordable supply of highly nutritious food with limited resources,” says Morgan Stanley Equity Strategist Arushi Agarwal. “This technology has proved to use less land, less water and to produce a yield greater than soy and meat products.”
Morgan Stanley Research estimates fermented foods could become a market of at least $30 billion by 2030.
The Appeal of Fermentation Vs. Agriculture
Fermentation technology supports the growth of large amounts of microorganisms – such as fungi, yeast and bacteria – in tanks. These can then be harvested and used as a source of protein or other nutrients.
It’s a unique way to supply food that not only contains fiber, but also offers a high degree of concentrated protein. Fermented products can be engineered to include B vitamins and iron, components that are commonly missing in plant-based foods.
This could be a crucial development at a time when traditional agriculture’s ability to meet the rising demand for nutrition is in question.
“The produce that we have today has on average 40% less nutrition than it did over 80 years ago, due to elevated use of chemicals and decline in soil fertility,” Agarwal says. “Studies estimate that (agriculture’s) average yields could decline by 30% to 46% before the end of the century, under the slowest global warming scenarios.”
Compared with traditional agriculture, fermentation uses about 95% less land and almost no water, with negligible emissions. It is location agnostic and less vulnerable to weather patterns and diseases, guaranteeing a more reliable supply of products.
Next Phases for the Fermentation Market
Fermentation technology and the market for its products saw major breakthroughs in 2024. The industry achieved regulatory approvals in global markets, including in the U.S. and Singapore. Manufacturing started moving from laboratories to pilot facilities, with extensive product testing.
Those steps represent progress in achieving the safety of these products for consumer use in certain markets and allowing developers to explore commercial collaborations. By 2028, Agarwal expects commercial facilities targeting millions of tons in volume to come on board and allow for penetration into mainstream food and beverage applications, including animal and dairy replacements.
Morgan Stanley Research sees two main phases for fermented food development:
- Phase 1 (2025-27): Whey protein and animal nutrition
Fermentation companies will continue moving from labs to pilot stage, entering markets like health and performance foods with the production of whey protein and animal nutrition, particularly salmon feed. These markets have lower regulatory barriers and offer more opportunities to price products at a competitive rate. This phase will require an initial investment of up to $22 billion. - Phase 2 (2028-30): Egg, meat and dairy replacements
The industry will expand its facilities to a commercial scale, allowing fermented products to be used for broader food applications in the form of egg, dairy and meat replacements. This will require regulatory support, technological advancement and consumer acceptance for fermented foods, besides an estimated investment of $78 billion.
In Morgan Stanley Research’s most bullish estimates, the total addressable market for fermented food could reach $120 billion in 2030, or four times the baseline scenario. The more-than-expected growth assumes more opportunities in pet nutrition and animal nutrition, such as poultry and pig feed, in Phase 1, and achieve greater penetration into the broader protein market in Phase 2.
According to Agarwal, the optimistic growth scenario could be triggered by an acceleration in government and corporate support and a higher level of consumer acceptance due to better taste and quality of fermented products.
For deeper insights and analysis, ask your Morgan Stanley Representative or Financial Advisor for the full report, “Future of Food: Fermentation Unlocked,” (March 10, 2025).
