State of the Industry Business to Business Marketing Model Could Strengthen Cellular Agriculture: Scalability & Investing in Ingredients
Introduction
The market for alternative proteins is one of the fastest up and coming markets today. According to the Good Food Institute, fermentation technology companies alone have garnered a $435 million investment in 2020 despite the coronavirus pandemic, and before the end of the calendar year. This is a 58% jump from 2019, which saw a $274 million investment in the field. This number expands to a $1.5 billion investment in alternative proteins more broadly, in 2020. According to Forbes magazine, the alternative protein market is projected to be worth $85 billion in 10 years, with a 28% compounded annual growth rate. The cultured meat industry is projected to be valued at $20 million by 2027. The products that result will not only be healthier and more sustainable, they will be produced more efficiently than traditional industrial meat and dairy products. Therefore, they will also be cheaper as the industry continues to make its way onto grocery store shelves and restaurant tables. As the industry continues to innovate, move forward, and expand, investment in B2B companies has the potential to strengthen the industry as it scales up. Without specific focus on each part of a product, the supply chain will likely fail to be able to keep up with desired production levels.
Consumer tendencies are not equal around the world when it comes to consuming meat. There is a powerful correlation between a country’s wealth and how much meat they consume; for instance, while the average American exceeded 200 pounds of meat consumed in 2019, India remained at the lowest average consumption rate at around 4 kilograms, or 8.8 pounds, per person. As reported by the United Nations, industrial agriculture uses upwards of 80 percent of the globe’s agricultural land, but accounts for around 18 percent of global calorie intake. This means that the meat industry, just by virtue of how it has to operate to fulfill consumer demands, takes a significant amount of land for only a portion of the global population. Now imagine that global meat consumption goes up 70 to 100 percent by 2050, as estimated by the Good Food Institute. What land will there be left to accommodate this drastic increase? Meat products sourced from plants or meat cultured from cells will be a necessary mode of production — and this isn’t considering compounding factors such as antibiotic resistance, greenhouse gas emissions, and ocean acidification from waste runoff, which all present their own compelling reasons for the reform of our agricultural system. A drastic shift in our agricultural practices is imperative to feed a population growing by the billions in the next 30 years, as well as to avoid a shortage of land and the destruction of our planet. In short, it is both a lucrative and a necessary investment.
The goal of this report is to explore the idea of how business to business marketing could drastically decrease the challenges of scalability.
Overview of the Global Meat Market
An overview of FAO’s Meat Market Review for 2020
McKinsey has estimated that the cultured meat market has the potential to be a $25 million market by 2030. The industry has garnered $250 million in investments in the first half of 2021, including those from Tyson and Nutreco. On average, global meat production was 337.2 million tonnes in 2020. Although prices fell throughout the pandemic, in August they began to rise — especially with demands for import by China and the Middle East. According to the FAO, global exports soared to 38.7 million tons, which was a 5.7% increase since 2019. Asia remains the country with the largest increase in imports, at a 15.8% increase and now accounting for 63% of meat imports. The FAO states that despite the pandemic, the globe’s top exporters, including the European Union, the United States, Brazil, Canada, Russia, and Mexico all exported more meat that the year before in 2019. Bovine meat, which includes beef, has fallen in the last year, mainly due to decreased prices and difficulties accessing stock. Although some countries were largely affected by the pandemic, Australia and Brazil exemplify a common trend in declining meat exports: past high volumes of slaughter of livestock was a factor in their low export ability in the last year. This indicates that there is a strain on the market due to overuse of livestock; while cellular agriculture is far from being an industry that “replaces” traditional farming, it’s capability to function as an “and/and” type of market would replenish traditional sources of meat and add sources of new meat with a no-kill version.
According to a June 2021 report on cultivated meat from McKinsey, production cost of cultivated proteins has gone down 99% in a decade. While achieving price parity is a challenge, the rates at which the industry has tackled that challenge create a bright outlook for the future. These current exorbitant prices are due to laboratory costs and expensive R&D trials. By scaling the industry, it is thought that we can achieve a pound at below $5 US dollars. According to McKinsey, 75% of these costs could be eliminated by scaling the industry and 25% by “fine tuning” R&D. The challenge is not seeing that we can get there, but how we will manage to scale and fine tune. Investing in ingredients and "one step" companies that hold expertise in single steps of the chain, is one way of refining the industry and of creating jobs.
Scalability is one of the largest challenges the cellular agriculture industry faces. As the industry grows, it will be important for companies to adapt in order to meet the demand to scale up. There are broad and unwieldy questions, such as how to produce cultivated meat on a global scale. Then there are the more nuanced questions, such as those of heat and energy costs dependent on location of bioprocessing facilities. For instance, what does heat and energy use look like if your bioprocess facility is in rural, hot Mexico, compared to urban, cold Canada?
The UN Environment Programme classifies food systems into three categories: traditional, modern, and intermediate. Most food systems are a hybrid of traditional and modern, hence the category intermediate. Traditional food systems involve farmers who use traditional agricultural or fishing practices — this type of market holds a local reach and does not use large scale production. Modern food systems are multi-step systems that rely on technology and various steps in a chain, and produce large quantities of packaged or processed foods for mass consumption. The UN states that a modern food system “typically consolidates the processing and food retail segments of the supply chain...and activities are increasingly of a transnational nature.” The globalization of our food systems took place in the 20th century, chiefly in industrialized continents such as Europe and North America.
These conventional, globalized systems have developed over decades in industrialized countries, whereas the cellular agriculture industry is in its infancy, comparatively. While the market for plant-based meat has grown from a national to a global market, cultivated meat is still on par with the UN’s “traditional” food system definition in terms of scope. Its reach consists of top chefs and a handful of selected subjects, who test its sales on the tables of their Michelin star restaurants (such as Just Eat’s cultivated chicken on the table of Singapore’s 1880). As Eric Schulze, VP of product and regulation at Memphis Meats, which according to the Good Food Institute raised a Series B round of \$186 M in 2020, is quoted in Nature saying: “Many companies have had the capacity to supply a single restaurant for a while. The goal is to get beyond that in terms of scale.” How will this sub-industry make its way into the national market, let alone a global market? How will it integrate itself into systems that have been operating for decades? These, among others, are the questions of tomorrow that many professionals and investors in the field are asking today.
Upward Trends in Cultivated Meat
Investing in Ingredients
Ingredients for alternative protein products can be perfected when specialized in. The regenerative medicine field has been operating this way for some time, with companies that specialize in tools for cell and gene therapy, collagen scaffolds, and custom grafts for regenerating skin color. Perfecting components of cultured meat products, such as fat, scaffolding, and protein will mean products reach taste, texture, and nutritional values with higher rates of consumer satisfaction. Companies such as Hoxton Farms, which raised 2.7 million pounds in their seed round in February 2021, specialize in slaughter free fat. The company Mission Barns raised another $24 million for their lab grown fat in April 2021. According to the Kaplan Lab at Tufts University, there has been much more research done in muscle cells and tissue, rather than stand alone components such as fat. Fat as a stand alone ingredient is a vital part of the taste, texture, and now novel nutrition (replacing unhealthy saturated fat with Omega-3’s) of cultured meat. Creating fat in a lab requires scalable cell proliferation, stable adipogenic (fat) cell lines, cheaper growth media, and high density bioreactors to achieve industrial scale production.
The challenge is creating a market of companies that understand and have the resources to combine branding and marketing food, as well as specialized knowledge and research in the technology behind the foods. For instance, Impossible Foods was started by a Stanford University scientist who holds a PhD in biotechnology — not a combination of skills that is easily acquired or readily found. Therefore, companies such as the Boston based startup Motif, will be ones to watch. These are companies that are currently lower profile than Impossible Foods or Beyond Meat, but that will become vitally important for the industry in terms of specializing and streamlining it. Motif creates and provides ingredients made from fermentation and recombinant protein technologies, rather than tackle the complete process by creating a whole product from start to finish. Their slogan reads, “changing the ingredients changes everything,” and they bill themselves as “focusing on important sensory experiences that drive consumer enjoyment.” In this way, the industry is becoming specialized. If a startup like Motif can act as a vital step in the chain to a finished product, the cellular agriculture industry can modernize its reach, according to the food system definition from the UN. It will be important to consider access to these products — aspects such as who can access them, how they’ll access them, if those consumers have the financial stability to feel like they can choose this diet change, how educated consumers are on this switch, and which companies have consumer interests in mind.
A well known and long standing example of a B2B company is Perfect Day, who creates their own milk proteins, and partners with brands to create products like ice cream. On top of presenting a solution to scalability, partnerships have implications for collaboration between the alternative protein field and the traditional meat and dairy industries. This industry will not be successful in distributing its products without the market power that the traditional agriculture industry holds. Consumer acceptance will also struggle without the support of the traditional agriculture market, as people trust the brands they know far more readily.
Another example of a stand alone ingredient important to product success is scaffolding. Matrix Meats specializes in creating nanofiber scaffolding for cultured meat products. In January 2021, Matrix Meats was in a partnership with 14 different cultured meat startups from seven countries. The company claims their scaffolding is customizable, and scaffolding is essential; without scaffolding, cultured meat loses its structure, which affects aspects like texture, consistency, and most importantly, shape. It’s what gives meat its soft but chewy bite, and fish its tenderness. It is a make or break component of cultivated meat products. Often, companies spend a substantial amount of time and testing different scaffolds, from mycelium to soy and collagen. This is a time consuming and costly process. More companies that specialize in essential elements like scaffolding, that can partner with cell cultured startups in a business to business marketing model, would increase efficiency, production, and consumer satisfaction. It would increase product value, if the resulting product is better than something a company could achieve on its own.
Israeli company Phyloton produces natural colors using fermentation that can be used in plant-based products such as the Impossible Burger. Color is another factor that plays into consumer acceptance. Fumi Ingredients specializes in egg ingredients. These are all examples of lesser known companies that will be imperative to scalability, as they each provide expertise in one, specific part of a product that they are working at perfecting and producing at large scale.
Investing in these companies is just as important as investing in those that create whole products, especially going forward with scalability in mind.
Conscientious Consumerism & Ethical Investment
Conscientious consumerism is on the rise. It is the idea that consumers choose products based on moral values such as climate friendly, nutritious food, biodegradable packaging, slaughter-free choices, and so on.
Ethically sourced products have increasing purchasing power. A recent study from May 2021 proposes that 89% of Gen Z would try cultured meat, and 84-85% of millenials, with 80% overall acceptance. According to EY Parthenon, half of consumers studied, at 50%, said that climate and environment are important factors in their daily purchases. A 2020 study from Accenture, which was quoted in a BBC article about the pandemic’s power to transform consumer behavior, said that 60% of consumers were purchasing sustainably and ethically, with an estimated 9 out of
10 likely to continue doing so after the Covid 19 pandemic. In terms of what this means for the alternative proteins market, EY predicts an increase in the total market from between $5 and 10 billion, to an impressive $77 to $153 billion in 2030.
Investing in the New Definition of Value, and Business to Business Marketing
The definition of value in the food space has shifted from quantity to quality. There are new ideas when it comes to purchasing a food product: climate positive purchasing, healthy lifestyles, and ethical consumption. In terms of purchasing a product that is seen as an alternative, whether that be plant-based meat or cultured meat, it is imperative to this product’s success that it tastes good, feels good, and is nutritious. In the dawning age of ethical consumption on a mass scale, it is also important that the product be sustainable and ethically sourced. However, in the cellular agriculture space, these products are still inaccessible to many. Oftentimes, cell cultured products debut on the table of high end restaurants. While this method is currently the only mainstream manageable method for the scale of the industry, the definition of “high-value” is changing to en- compass the food we buy in the store down the street, as well as the expensive food we get on the table of a Michelin star. However, many companies rely on private funding. The cellular agricul- ture industry is in need of public funding to back research into components such as scaffolding and vascularization (producing cuts of meat with veins, an important part of nutritional value that the industry has not achieved yet).
Recent B2B Interactions and Partnerships
As Executive Director of New Harvest, Isha Datar, has commented in an article for Food Navi- gator, the Covid-19 pandemic has shown us how tenuous our food supply chain is. The cure she recommends is diversifying your business and exploring options to expand and continue your work. In the space of cellular agriculture, during a time when materials such as cell lines are in short supply, it is imperative that businesses find ways to lower costs and share resources through establishing B2B offshoots or partnerships. Partnerships and consortiums allow companies to sidestep buying pricey media from outside sources, creating their own scaffolding (which takes time and money), and tackling regulatory hurdles on their own.
On June 17, 2021, IntegriCulture announced their consortium CulNet, which launched April 1, 2021, where the cellular agriculture company is partnering with 12 companies so far. These com- panies range in expertise from growth media, scaffolds, and bioreactors. The goal is to create a supply chain and solve challenges such as scalability through open access innovation. IntegriCul- ture claims that this system can create cell types of any kind, create products that pass regulatory approval in many countries, and grow lines in serum that is less expensive than current growth media options. This type of small scale supply chain is an example of multiple partnerships that could help the industry scale. IntegriCulture has been pursuing this track for some time. In 2020, Shiok Meats and IntegriCulture partnered to tackle growth media. The partnership allows them to culture seafood, for less. IntegriCulture will provide “SpaceSalt,” the growth media made in the partnership, and will allow Shiok to leverage the technology that IntegriCulture has.
In another June 2021 development, Geltor partnered with Lonza Specialty Ingredients to create a food product called PrimaColl. It will be a collagen product that initiates the production of more collagen in the body. This is a fitting first food product for Geltor, as they have worked with collagen in the cosmetic industry before. In January of this year in 2021, Turtle Tree Labs started a B2B offshoot of their cellular agriculture company, which will be specializing in growth factors for the industry. The goal of this offshoot will be to lower costs of growth factors for the industry as a whole, making cultured protein products more accessible across the board, rather than internally. This discourages a monopoly on the market, and has implications for lowering costs which are currently expensive enough that it is putting a block on product development. Peace of Meat, who makes fat for cultivated meat, joined with MeaTech.
All of these examples are important pioneers of the cellular agriculture supply chain. They are foundational for the next stage in the cellular agriculture industry, which will likely need to reflect IntegriCulture’s consortium, or Geltor’s assistance from Lonza to branch into the food space.
A Challenge to the Market
A persistent challenge to the current market is the funding gap. The funding gap in cellular agriculture refers to the gap between public and private funding, where private funding far exceeds public funding. This means that while a pipeline from investors to private companies is being established, research at the university level can get left behind. This often means that the research in academic papers is older than the science that continues to develop each day “in house,” or within companies. The more research into specific components that can be used for B2B interactions, the better the outcome for product and consumer acceptance.
Funding could:
Make cell lines publicly available. Researchers often have to either substitute bovine, poultry, or swine cells with mouse cells, or get cell lines from a slaughterhouse. This is inefficient for a lot of companies as they scale up.
Back fundamental research: the first cultured hamburger, developed by Mark Post in 2013, ultimately came out of government funding that the “father” of cellular agriculture, Willem Van Eelen, convinced the Dutch government to give.
Ease regulatory debates as more research into products’ nutritional components and ingredient lists becomes available
Research into specific B2B components such as scaffolds, cultivated fat, vascularization (making sure the meat has veins so nutrient circulation can happen)
Thank you to CellAgri’s database for helping us start this comprehensive list.
References
Dolgin, Elie. "Sizzling interest in lab-grown meat belies lack of basic research." Nature, February 3, 2019.
"Cellular Agriculture Companies." CellAgri. https://www.cell.ag/companies.
Rob Dongoski, EY Food and Agriculture Leader, Mark Holland, Principal, EY-Parthenon, Ernst & Young LLP, Brian Bourquard, Senior Director, EY-Parthenon, Ernst & Young LLP, Paul Ritch, Senior Consultant, Ernst & Young LLP. EY Parthenon. April 1, 2021. https://www.ey.com/en_us/food-system-reimagined/protein-reimagined-challenges-and-opportunities-in-the-alternative-meat-industry.
Forbes. Last modified March 3, 2020. 3 Trends to Watch in Alternative Protein. https://www.forbes.com/sites/tommytobin/2020/03/03/3-trends-to-watch-in-alternative-proteins-for-2020/?sh=3c89a0123503.
"Uni-CulNet." IntegriCulture. https://integriculture.jp/product/?locale=en.
“$1.5 Billion Invested in Alternative Proteins in 2020, Including a Record $435 Million in the next Pillar—Fermentation.” The Good Food Institute, https://www.gfi.org/alternative-protein-fermentation-investments-2020-media-release#:~:text=GFI%27s%20report%20analyzes%20investment%20activity,as%20Covid%2D19%20disrupted%20global. Accessed 25 Nov. 2020.
‘It’s Our Job to Evolve with Consumers’: Tyson Foods on Alternative Protein | McKinsey. https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/its-our-job-to-evolve-with-consumers-tyson-foods-on-alternative-protein. Accessed 25 Nov. 2020.
Watson, Elaine. "Nanofiber scaffolding startup Matrix Meats in 'active development relationships
with 14 cultivated meat producers.'" Food Navigator, January 12, 2021.
Written by Thea Burke, Outward Facing Content & Communications Strategist for Helikon Consulting
