Faux beef. Cashew milk. Cream cheese made from almonds. A growing variety of plant-based alternatives to traditional food and beverage products are finding their way to grocery aisles and restaurants in the U.S., driven by rising consumer interest in healthy eating and sustainable food supply chains.

A stronger emphasis on health during the pandemic has further accelerated growth in the industry over the past year, with retail sales reaching $7 billion in 2020, up 27% from $5.5 billion in 2019, according to the Good Food Institute, or GFI. The institute also notes that plant-based food sales grew 2.5 times faster than total food sales between 2018 and 2020.

“People are becoming much more attuned to what they’re putting in their bodies, and that is the No. 1 reason why folks are shifting their diets toward plant-based items, followed by the impact on climate,” said Jared Stein, co-founder and managing partner at private equity firm Monogram Capital Partners LLC, an investor in Swedish oat milk maker Oatly AB.

This demand has spurred record investments in the industry, with the plant-based meat, eggs and dairy sector clocking $2.2 billion in funding in 2020, GFI data shows.

Last year saw several notable funding rounds, including for plant-based meat company Impossible Foods Inc., which raised $700 million in two back-to-back rounds in March and August from investors Coatue Management LLC, Mirae Asset Global Investments and Khosla Ventures, among others. Plant-based dairy company Califia Farms LP raised $225 million in Series D financing led by Qatar Investment Authority in January 2020.

Though venture capital makes up the lion’s share of the investments, large consumer and packaged goods, or CPG, companies are increasingly investing in plant-based alternatives in a bid to align their portfolios with consumer demand and compete with the likes of Beyond Meat Inc. (BYND) and Impossible Foods.

“It’s an exciting time because the food industry is like a giant that woke up to the promise of tech — that applying these technologies can help the business drive sustainability and profitability,” said Greg Horn, a managing director and head of the ingredients practice at consumer-focused investment bank William Hood & Co.

One of the largest meat producers in the world, Brazil-based JBS SA, acquired the third-largest European plant-based meat company, Vivera BV, for $410 million in April to boost the former’s meat alternatives platform. Unilever plc (UL) snapped up plant-based meat brand Vegetarian Butcher in 2018. Nestlé SA, meanwhile, acquired plant-based foods brand Sweet Earth Foods in 2017, which the buyer said at the time gave it immediate access to the fast-growing industry.

“Some of the large CPG companies that have realized they don’t have the credibility with their legacy brand or are not able to create a plant-based brand internally to compete in the industry are making these acquisitions at really strong valuations,” said Andrew Dickow, a managing director at investment bank Greenwich Capital Group LLC.

While big food and consumer companies have certainly made outright acquisitions, many are choosing to acquire small stakes or invest in plant-based startups through their in-house venture arms and accelerators.

It’s a way for the buyers to “make smaller bets on plant-based companies with the opportunity to acquire the targets at a predetermined price later on,” Dickow said.

U.S.-based meat producer Tyson Foods Inc. (TSN), for instance, acquired a 5% stake in Beyond Meat in 2016 through its venture arm Tyson Ventures and increased its position to 6.5% by 2019, exiting right before the plant-based meat behemoth went public that year. Tyson also backs venture capital firm Big Idea Ventures, which invests in plant-based and cell-based food alternatives.

General Mills Inc. (GIS) also invested in Beyond Meat in 2013, then plant-based dairy company Lyrical Foods Inc., or Kite Hill, in 2018 and plant-based seafood brand SeaCo Foods International Inc. in 2020 through its incubator 301 Inc., while Kellogg Co.’s (K) venture capital fund Eighteen94 Capital LLC backed plant-based smoothie company Bright Greens Inc. and plant-based nutrition bar maker Kuli Kuli Inc. in 2017.

More recently, Post Holdings Inc. (POST) led a $25 million funding round in plant-based meat company Hungry Root Inc. in mid-April, with participation from Singapore-based renewable energy and clean tech investor Trirec Venture Capital Pte. Ltd.

A number of funds created specifically to capture this niche, such as at Big Idea Ventures, Lever VC Advisers LLC, Stray Dog Capital LLC, Clear Current Capital and Blue Horizon Ventures, are leading the charge to invest in up-and-coming brands.

Lever VC, for instance, has invested in companies such as plant-based meat producer Better Meat Co. and plant-based cheese company Good Planet Foods, while Stray Dog Capital backs plant-based barbecue brand Barvecue Inc. and plant-based bacon maker Hooray Foods Inc. Clear Current Capital’s portfolio includes plant-based meat producers Alpha Foods Inc. and No Evil Foods LLC. Blue Horizon Ventures, meanwhile, counts Livekindly Co., which owns a collection of plant-based brands, and Heartbest Foods, a plant-based dairy company, among its investments.

Singapore and New York-based Big Idea Ventures, for its part, has invested in 44 companies so far, including plant-based shrimp maker New Wave Foods and plant-based seafood brand Hooked.

The firm is focused on companies that have the potential to impact global food systems, said Andrew Ive, founder and managing partner at Big Idea Ventures. The investor, through its $50 million New Protein Fund I closed in March 2020, is backing brands producing alternatives to foods local to different parts of the world as well as companies that are looking to improve the texture of plant-based foods or support the production of cell-based alternatives with plant-based ingredients.

“The ideal is that we take the foods that people love in different countries, and we don’t force them to do something different,” Ive said. “What we do is we give them what they love already in a new way, in a far more sustainable way.”

Editor’s note: The original version of this article was published earlier on The Deal’s premium subscription website. For access, log in to TheDeal.com or use the form below to request a free trial.