Over the past year, the consumer has learned that plant-based meat can be tasty and affordable. The next mass product from the laboratory may be milk from Perfect Day.
First, there was "meat without a cow"
In 2019, one of the main hits of the venture capital market was Beyond Meat, which supplies plant-based burgers to McDonald's and restaurants around the world, including Russia. Beyond Meat held an IPO in May 2019 and is currently capitalizing at $ 4.5 billion, roughly 3x the offering price. The second high-profile startup Impossible Foods has become a Burger King supplier and has raised a giant $ 300 million round of business scaling, while the public offering has been delayed.
Impossible Foods openly talks about its key advantage - it is a technology for synthesizing the protein legoglobin (a close analogue of blood hemoglobin) by fermenting genetically modified yeast in a bioreactor: soybean genes responsible for protein synthesis are added to the yeast DNA. It is hemoglobin that gives meat a characteristic taste and smell, from which it is so difficult for meat-eaters to be, and all other proteins, fats and carbohydrates can be replaced with plant analogues such as soy, coconut and sunflower without losing taste.
Startups claim that the animal in the food chain is essentially a mediator: a natural bioreactor that “converts” plants into animal protein and other nutrients in meat. But this “bioreactor” is very ineffective: to produce a kilogram of beef, on average, it takes about 25 kilograms of feed, which means a lot of land and water. A modern bioreactor made of metal and plastic is much more efficient.
With the advent of the alternative burger on store shelves and in restaurants, the product goes mainstream. According to Agfunder forecasts, by 2025 the share of alternative meat products in the trillionth meat market may reach 10%.
Even Netflix has already directed The Future of Meat for the popular science series Explained. While many interesting challenges remain in alternative meat, such as laboratory beef steak (so far only “minced” has been made), technology for other meats, entrepreneurs and venture capitalists are looking at other popular animal products.
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Milk without a cow - the next big thing?
If the meat is made without a cow, then how to get milk? This logical question has been asked by several startups, most of which are in California. Plant-based milk substitutes have been on the market for years - soy, almond, coconut and oat milk can be easily found on the shelves of many stores. But it doesn't taste like cow's milk at all, at least not today.
Despite the fact that startups have been creating alternative dairy products in the laboratory using biotechnology for several years, their successes have not been covered by the press until recently. But in August 2019, California-based company Perfect Day released a batch of lab-milk-based ice cream that sold out online in a matter of days. The event drew attention to the New York Times, CNBC, Forbes and a number of other major publications. The company used ice cream as a marketing ploy to attract partners and investors. In fact, the company was originally built on a B2B basis with the goal of supplying ingredients for food brands and this year began a partnership with ADM, the largest American agricultural trader and agricultural producer.
Last week, on December 11, the startup announced a record investment deal: as part of the next round, Singapore-based Temasek and Hong Kong-based Horizons Ventures are investing a record $ 130 million to scale production, develop partnerships with large companies and grow the California team from 75 to 150 people. Perfect Day was founded in 2014 by two young biotechnologists: Indian American Ryan Pandia, CEO, and Indian expatriate Perumal Gandhi, CTO.
What is the secret of their biotechnology?
The founders explain that they essentially applied the basic technology idea of Impossible Foods to milk. They also use GMO yeast and fermentation to make proteins - not blood, but milk (casein and whey). It was not so easy to copy the idea - it took almost 5 years from the moment Perfect was founded in 2014 to the creation of a scalable technology and a commercial product. In comparison, Impossible Foods took about 8 years to develop.
With only working technology, one large contract and almost zero revenue, the company was nevertheless able to raise a huge $ 130 million, which could mean an approximate estimate of $ 400 to 650 million (pre-money). Investors attribute such a high value to the huge size of the target market - the global dairy market is valued at $ 600 billion. The next Perfect Day products will most likely be cheeses, yoghurts, cottage cheese, and the company will not deal with milk (due to its low marginality).
Special attention should be paid to the fact that funds from Asia became the investors of Perfect Day. The founders confirm that Asian markets will be important for a startup. In Asia, traditionally, consumption of dairy products is at a low level, but is growing rapidly: for example, in the largest Chinese market, per capita consumption has grown from 6 to 36 kg per person per year over the past 20 years. Market growth is traditionally constrained by the problem of lactose and A1 beta-casein intolerance, which is the most acute among the Asian population. I believe that Perfect Day technology can be more effective in solving these problems in comparison with traditional methods (lactose-free milk and A2 milk). Consequently, by offering a product for the growing Asian market and with the support of the largest funds,a company can create billions of dollars in value for investors and founders.
The goal of Perfect Day and similar startups is to disrupt the traditional industry and eliminate the cow from milk production, completely redefining the balance of power.
But this will not happen soon. Even according to optimistic forecasts, by 2025 the penetration of laboratory dairy products can only grow to 6%, although in the future 15-20 years the traditional dairy industry may be under serious pressure from young startups.
The list of alternative foods is not limited to meat and milk. The next “victims” of technologies will be fish and seafood, eggs, as well as another animal product - animal skin.
Author: PAVEL DANILOV
