Nourish Ingredients, a company with backers including superannuation fund Hostplus and Hong Kong billionaire Li Ka-shing, is preparing for a capital raising next year as it rolls out a breakthrough product it says makes plant-based “meat” taste so much better.

Chief executive and founder James Petrie said Nourish had spent three years developing the product made using a fermentation process with lipids found in nature, which replicates the taste and smell of animal fats. But the Tastilux product, when added to plant-based “meat” does not alter its meat-free status. “The fat is where the flavour is,” Mr Petrie said.

Mr Petrie said the plant-based “meat” category had largely won over vegans and vegetarians but mainstream consumers who may have tried plant-based “meat” needed to be converted to regular buyers through better taste. The sector’s slowing growth rates needed to accelerate.

“It is not growing as fast as we need it to be growing,” Mr Petrie said. “Now it’s time for the industry to deliver.”

The industry, which is being heavily backed by venture capital, is going through the early stages of a shakeout, where scale is becoming more important at a time when overall sales are slowing.

Sydney-based All G Foods, which produces the Love Buds brand, on Tuesday merged that brand with the vEEF brand made by Fenn Foods from Queensland. The new entity is known as The Aussie Plant Based Co. The chairman of the merged group, Jan Pacas, said size is increasingly important in the plant-based “meat” sector. Mr Pacas is chief executive of All G Foods, a company in which supermarkets group Woolworths is an investor through its venture capital arm.

“The best companies will survive and become very strong winners,” Mr Pacas said.

He said All G Foods was predominantly selling to the food service industry, while Fenn Foods was selling to the retail sector. “There’s no cannibalisation,” he said. The merged entity will have annual sales of close to $10 million.

Analysts closely watch the fortunes of Beyond Meat, listed on the Nasdaq exchange in the United States as a signpost to the future. Beyond Meat had a boom listing in 2019 where its market capitalisation soared to $US11 billion, but has sunk to $US540 million as sales slowed.

Mr Pacas said the fortunes of Beyond Meat were not a good proxy for the broader plant-based foods industry because publicly listed groups had to pursue different strategies.

“It’s misleading,” he said. Beyond Meats had grown too fast into 60 countries, he said.

Supermarket giant Woolworths said demand was steady for plant-based alternatives to meat, having grown from a low base.

“With the rise of ‘flexitarian’ customers looking to add variety to their diets, many shoppers are buying both meat and plant-based alternatives, so demand is steady,” a Woolworths spokesman said. A spokeswoman for Coles said the supermarket chain currently stocked six brands of plant-based “meat”. Growth expectations for the category have moderated.

Nourish’s chief executive Mr Petrie said an improvement in the taste of plant-based “meat” would result in more repeat purchases by shoppers.

“Vegans and vegetarians are already captured.”

Nourish has a workforce of 55 people in Canberra, Sydney and Singapore. It has a pilot production plant in Singapore.

Mr Petrie said the company would seek to raise capital in 2024. He said it was too early to indicate the size of the raising. “We know we need to scale up,” Mr Petrie said.

Nourish in October 2022 raised $US29 million, adding the CSIRO’s Main Sequence Ventures and Hostplus to its register, as well as the private investment arm of Hong Kong billionaire Li Ka-shing, Horizon Ventures.

Mr Petrie said Nourish had “unashamedly focused on the most potent fats” in its product development, to make the biggest impact.