A visitor will try a vegetable protein substitute from Beyond Meat on November 11, 2020 at the Restaurant & Bar and Gourmet Asia Expo at the Hong Kong Convention and Exhibition Center in Hong Kong.

Peter Parks | AFP | Getty Images

If a China-based business owner wanted to make and sell a meatless pork dumpling for the past decade, he might have visited a three-story restaurant laboratory in a business district of Shanghai to seek the help of Dr. Dong. to look for – Fang Chen.

He received his PhD from Cambridge with a focus on molecular plant genetics, then worked at AstraZeneca and now heads a group of several dozen scientists in Shanghai as Vice President of Research and Development in the Asia-Pacific region. You are part of a global research staff of around 1000 employees at a Swiss company called Firmenich, the world’s largest private company that focuses on the development of flavors and aromas.

Chen’s team is primarily charged with helping global and Chinese food companies improve the taste and texture of their products, and now especially those made with meat and dairy alternatives. Firmenich does not disclose its list of customers, but it does include some of the world’s largest food, fabric, beauty and home care companies.

Beyond Meat is increasing its focus on China

The vegetable protein market in China is gaining increasing attention. Just this month, Beyond Meat announced that it is partnering with e-commerce platform JD.com to launch an online store for the Chinese market and plans to expand beyond its current retail partners in China, including Starbucks and Yum China Holdings Around 300 Chinese cities are expanding at a time when local consumers are more likely to buy fresh food online.

Both Beyond Meat and its main competitor Impossible Foods in the US see great opportunities in China and understand that success requires more than importing successful ideas from Western cuisine. “I’ll work very hard to make sure we don’t export American flavors,” Beyond Meat CEO Ethan Brown told CNBC last September.

At the end of last year, Nestle launched a brand called Harvest Gourmet, which offers meat-free burgers and nuggets, as well as pork belly and kung pao chicken, via the Alibaba Group’s website Tmall and its grocery chain Hema.

Both Nestle and Beyond Meat have built production facilities for artificial meat in Tianjin and Jiaxing, respectively, which compete with the local giants Zhenmeat and Starfield.

Plant-based meat dishes are on sale in a Starbucks store in Shanghai, China on April 22, 2020.

VCG | Visual China Group | Getty Images

This explosive interest in vegetable consumables is reflected across Asia. West Coast start-up Eat Just received regulatory approval in Singapore to sell its laboratory-made chicken substitute, developed from animal cells, around the same time that NR Instant Produce of Thailand went public following the success of its jackfruit-derived artificial pork went . Then, in June, Filipino food giant Monde Nissin went public, the largest IPO in the country’s history, to expand its own successful line of plant-based meat products.

Recreate a local favorite like the pork dumpling

While many of the plant-based products are based on Western cuisine, Beyond Meat has announced that it is adding new lines on JD.com to target the Chinese market, including Beyond Pork and other locally-focused cooking ingredients like lion head meatballs and pork dumplings. The latter is a very popular dish in China, but Chen at Firmenich says dumplings are a challenge to reverse engineer because the “pork flavor is very, very subtle, and very refined”.

His team has delivered a variety of customer letters that focus on meaty favorites – some local like pork dumplings, others more universal like chicken nuggets. They do this by figuring out why the original product tastes, feels, and smells this way, then replacing the building blocks derived from meat – proteins, carbohydrates, fats – with their plant-based counterparts before microscopically combining them to create the flavors and fragrances of the original.

(Vl) Chef Nicolas Maire and the flavorists Liliana Favaron and Mark Rubin taste vegetarian steaks at the headquarters of the Swiss company Firmenich, one of the world’s leading flavor manufacturers, near Geneva. Firmenich advises and supplies a large number of start-ups and food giants with technical know-how for replicating meat taste and texture.

Fabrice Coffrini | AFP | Getty Images

Sometimes the process can only take days if a standard solution has already been prepared, but sometimes it requires months of intensive research by a team of twelve with different specialist knowledge – including formulators, chemists, flavorists. “That sounds simple, but it actually takes a lot of science,” says Chen, excitedly pointing out advanced techniques like gas chromatography or mass spectrometry. “That is not trivial.”

The markets that serve these scientific breakthroughs are large. Chen’s group of Shanghai-based researchers and chefs has tripled in the past decade, a process that is partly due to the fact that successful start-ups in the United States such as Beyond Meat and Impossible Foods are “revolutionizing the modern world.” Science, “says Chen.

Future food for the Chinese people

For Firmenich, the growing demand for meat alternatives in China and the broader Asian market led to the establishment of an innovation center in Singapore focused on the development of new plant-based protein products. Jun Saplad, who is based in Singapore as head of the Savory Asia division, had his own revelation on the sector at a conference in Beijing in 2019.

“The government has been the main driver behind this forum,” he said, describing one panel after another where Chinese officials, academics and business leaders are promoting plant-based protein to a country that currently has more than a quarter of all meat supplies worldwide consumed, according to USDA. “They are effectively promoting the future nutrition of the Chinese people,” said Saplad.

Thanks to accelerating urbanization and a growing middle class with rising incomes and consumption, Asia is also the fastest growing region in the world for packaged food, not to mention its size. “Asia has 4.7 billion mouths to feed,” said Saplad. “That is 60% of the world population, in China and India alone it is almost 3 billion.”

The Asian portion of the meat alternatives market is only worth around $ 1 billion right now, Saplad estimates, but with the younger demographic and increasing awareness of the climate impact of their culinary choices, he predicts this could increase fivefold in the next decade.

And Saplad believes that Chinese companies have the potential to become major suppliers of plant-based meat alternatives to the rest of the world, including the US and Europe. “You are actually seeing companies, big global corporations, investing in China for China’s domestic consumption – as well as for export,” he said.

Zoom founder Eric Yuan poses in front of the Nasdaq building while the video conferencing software company Zoom logo is displayed on the screen after the opening bell on April 18, 2019 in New York City. The video conferencing software company announced its IPO at $ 36 per share, which is an estimated $ 9.2 billion.

Hit by Betancur | Getty Images

As a public company, it took Salesforce 14 years to reach a market capitalization of $ 100 billion. Getting there took three billion-dollar acquisitions and four different revenue streams.

When Zoom topped the $ 100 billion mark last year, it had been public for a little over 14 months. The company relied on a single product and had only made a tiny acquisition.

While it’s still a toddler on Nasdaq, Zoom is now forced to take on adult responsibility for investors thanks to its unexpectedly rapid ascent. The video chat company’s historic growth during the Covid-19 pandemic has boosted its market capitalization from $ 9.2 billion at the time of its IPO in 2019 to a high of $ 159 billion in October, even with it for the time being Cisco is reached.

Zoom has lost roughly a third of its value since then, despite posting 191% revenue growth in the most recent quarter as investors prepare for a post-pandemic future and competition intensifies, especially from Microsoft Teams.

Still, Zoom is among the 25 Most Valuable North American Tech Companies and is the only one in this package that has gone public in the past four years. Shopify and Snap, which went public in 2015 and 2017 respectively, are the only companies in the group trading for richer multiple of sales.

In other words, the stock market gives Zoom the tools to become a major dealmaker. And Zoom is taking advantage of the fact that earlier this week it announced the purchase of Five9, worth $ 14.7 billion, which sells cloud-based software to call centers.

“It enables them to use their currency to buy high-impact things,” said Alfred Chuang, a partner in venture capital Race Capital who previously co-founded BEA Systems and sold it to Oracle in 2008 for $ 8.5 billion. “I can’t imagine this will be the last.”

The Five9 deal is one of the 10 largest US corporate software transactions, according to FactSet, and is bigger than any takeover by Amazon, Google, Oracle, Cisco or Adobe. At roughly 23 times Five9’s expected revenue for 2022, it’s also the second-most expensive software deal on a price-to-revenue basis, behind just Salesforce’s $ 27 billion purchase of Slack earlier this month.

Chuang, who has been friends with Zoom CEO Eric Yuan since pre-Zoom at WebEx, says Yuan is now in a position familiar with Salesforce CEO Marc Benioff, who is worth $ 240 billion as of mid-2018. Dollar has more than doubled.

Both companies are focused on being cloud consolidators as automation changes the future of work and builds the enterprise software stack of the future, Chuang said. In the three years since reaching a market cap of $ 100 billion, Salesforce has closed more than $ 4 billion, including Slack and the $ 15.7 billion purchase of Tableau.

“Not everything worked out,” said Chuang, but he argues that even if business is currently in good shape, it is important to take big turns.

“When you have a very fast growing company and you are becoming very successful, most people don’t want to rock the boat,” he said. “Acquisitions are not only useful for attracting customers, they are extremely important in fulfilling any product vision you may have.”

The Cisco connection

Zoom’s first conversations with Five9 were made last year, according to people familiar with the matter. The CEOs, who both previously worked on collaboration products at Cisco, know each other well and forged product integration in 2019 when Zoom launched a phone offering.

Yuan was a senior engineer at WebEx when the company was acquired by Cisco in 2007, and Rowan Trollope, CEO of Five9, led all of Cisco’s collaboration products, including WebEx, until he joined Five9 in 2018. At Cisco they never overlapped – Yuan went to start Zoom a year before Trollope joined – but the connection is key as they both saw the challenges of retrofitting an old tech company for the cloud age.

Acquisition talks cooled off for a while and picked up again in the past three months, said people with knowledge of the transaction who did not want to be named because the talks were confidential. At this point, Goldman Sachs began advising Zoom on a deal and Five9 hired Frank Quattrone’s Qatalyst Partners.

Zoom also redistributed internal responsibilities earlier this year, entrusting CFO Kelly Steckelberg with responsibility for business development, a position previously held by operations manager Aparna Bawa, said people close to the cause. Yuan and Steckelberg pushed the Five9 deal forward, people said.

Bawa has taken on more responsibility elsewhere in the business. She oversees security, privacy, and government relations, all of which were at the fore when Zoom became a widespread service in large corporations, as well as in education, healthcare, and religious organizations.

Zoom and Five9 representatives declined to comment.

At a Morgan Stanley investor event in March, Steckelberg was asked about Zoom’s plans for the call center.

“Contact center is an absolutely important part of the telephone strategy,” said Steckelberg. “The way we do it today is partnership. We have great relationships with Five9. Eric and Rowan are very good friends.”

Zoom’s goal is not just to be a video service for meetings with colleagues and customers, but to become the center of all work communication, including for customer service representatives in call centers.

Yuan went one step further on Zoom’s quarterly earnings call in June. When an analyst asked about the expansion of the contact center, he replied to investors, “Hold on, you will see something.” He then suggested that details surrounding the company’s Zoomtopia conference could be revealed in September.

“I hope we can do more,” he said, suggesting that Zoom could go beyond integrating with call center technology providers.

Buy vs. build

A big reason a deal took so long was because both stocks were so volatile, said people familiar with the talks. Zoom and Five9 stocks moved 10% or more multiple times in a single week that year, making it difficult to come to an agreement. Ultimately, the purchase price was a modest 13% premium over Five9’s last closing price prior to the announcement.

The deal is expected to close in the first half of 2022 and Trollope will continue to lead Five9 as President of Zoom. Five9 adds projected revenue of $ 650 million next year to the $ 4.8 billion analysts anticipate from Zoom, according to StreetAccount.

In the investor call following the announcement, Yuan and Trollope said that mutual customers had told them they wanted to rely on a single provider to provide communications technology for internal purposes as well as for customer service. Zoom could invest in developing the product itself, but customers “don’t want to wait,” Yuan said.

Analysts such as BTIG’s Matt VanVliet said the decision to buy rather than build was the right one.

“Overall, we are encouraged by Zoom’s strategy to boost its platform with this acquisition rather than relying solely on its own in-house R&D costs, which would have taken years to scale,” wrote VanVliet, who has a buy recommendation for Zoom, in one Report on July 19.

Zoom has a long way to go before it can claim to have a portfolio of cloud software products like Salesforce, Adobe, and ServiceNow.

At the end of last year, the company entered the field of live events with the introduction of a self-developed product called OnZoom, expanded the video platform beyond the workplace and relied on online meetings of some kind to continue. In July, Zoom hired Abhisht Arora, a 21-year-old Microsoft veteran and team program manager, to lead corporate strategy and report directly to Yuan.

Between new product development and large-scale acquisitions in parallel markets, Yuan seeks to ensure that Zoom is more than just a pandemic stock and that its status as a corporate giant will last long after Covid-19 passed.

– CNBC’s Alex Sherman contributed to this report.

WATCH: The takeover of Five9 by Zoom is a “robbery of a deal,” says the analyst