As companies turn to precision fermentation to produce ingredients traditionally derived from animals, such as pepsin, whey, chondroitin sulphate, and human milk oligosaccharides (HMOs), the meat and dairy industries slowly lose value. ‘Just how much value destruction can the meat and dairy industries absorb?’, asks Tony Hunter, food futurist.
When we think of the meat and dairy industries, we may be thinking only of products such as meat and milk. However, this is not the whole story. The industries are a complex web of interconnected products, each contributing value to optimize costs and make the wider food industries viable. So, what happens when you cut threads connecting this complex web? How many cut threads can the web absorb before it collapses? The effect is similar to the death of a thousand cuts, not one of which is fatal.
There has been an exponential growth of new technologies challenging the meat and dairy industries, and more and more value is being cut from the animal agriculture product web. The effect of each cut may be small, but the cumulative effect is more than significant.
For example, we have the well-known whey protein from Perfect Day Foods made by precision fermentation using genetically modified yeast. This product is already being used in ice cream from Nick’s and Graeter’s as well as Perfect Day’s spin off brand Brave Robot. With Perfect Day’s cost reductions in mid-2020 exceeding their targets for 2022, it probably won’t be long before they reach price parity with conventional whey protein. They recently raised $350 million in Series D funding and have a joint development agreement with $64-billion ingredients company ADM, so they’ve clearly escaped the scale up ‘valley of death’.
A more recent signal of the future is Clara Foods’ commercial release of their pepsin enzyme. Pepsin is a $1.2-billion-market and it’s commonly made from pig stomachs and used as a processing aid in numerous food products. Made via precision fermentation, the product will be distributed by Ingredion, an ingredients company worth $6 billion.
Another animal-derived product is chondroitin sulphate, which is used in many supplements. Currently made from such sources as cattle trachea, it has very recently been shown that production via precision fermentation is possible. Next on the list is the anticoagulant, heparin. The $7.5-billion heparin market is supplied by processing pig and cattle intestines, and with population and wealth set to rise, so is heparin usage.
Plant molecular farming (PMF) is another technology threatening to cut more threads. This technology involves inserting genes for making specific proteins into plants and then extracting the desired protein during processing.
It’s highly likely that dairy inputs for infant formulas will have some stiff competition from human milk ingredients made using cell agriculture within the next five to 10 years. High-tech companies like TurtleTree Labs plan to manufacture human milk products, including lactoferrin, that replace the bovine version being used in infant nutrition, supplements and cosmetics. Another company, 108Labs, is releasing Colostrupedics, a ‘whole-human’ infant formula. This is made using human mammary cell agriculture and is aimed directly at the dairy infant formula market.
Other companies like Biomilq are also in the cell-cultured human milk space and they plan to release products by 2024. Infant formula manufacturers are always trying to make their dairy-based formulas closer to human milk, adding ingredients like human milk oligosaccharides. What happens when they can buy and process human milk for their formulas?
These are just a few examples of the companies and products chopping value from the web of animal agriculture products. As the non-meat and non-milk value-adding products are increasingly chopped from the value web, meat and milk have to carry all of the costs of production.
Simultaneously, the core milk and meat products are being challenged by alternative products. What premium will consumers be prepared to pay for conventional products as alternative products inevitably become cheaper and/or superior to their animal counterparts? In the end, it’s the economics of production of animal alternative products that will have the greatest effect on the future of the dairy industry.
It could be argued that because some of these products are genetically modified (GM) or GM-derived that consumers will reject them. But two examples of common GM-organism derived products are worth pointing out. Insulin is currently used by 150 to 200 million people worldwide and it has been made via GM organisms since 1982. Humans have been injecting the product of a genetically modified organism into their bodies for nearly 40 years.
A food example is rennet, used to make cheese, which has had its major component, chymosin, produced by GM organisms since 1992. This chymosin is currently used to make over 90% of hard cheeses in industrialised food countries.
These and many other products on the market clearly demonstrate that GM technology has a long history of safe use, even though few people realise that fact.
However, most of the commercial GM derived products are used by B2B, not B2C, industries, so the consumer is never directly ‘asked’ to accept the product. A major exception to this is Impossible Foods’ plant-based meat alternative. Impossible Foods is quite transparent about using GM soy, as well as using GM yeast to produce its trademark soy leghemoglobin, which allows its products to ‘bleed’.
With these strikes against it, you would think the product would be rejected by consumers. However, consumers are multi-factorial in their choices and have obviously decided that, on balance, they’re happy with the product. This is evidenced by the continuing strong retail sales and fast-food sales through Burger King. Another signal of acceptance is that many younger consumers accept technology being used to make their foods. It’s possible that the future could be bright for genetically engineered products.
To return to the question we asked at the start of this article, how much value destruction can the meat and dairy industries absorb? There is no simple answer, with many variables from government subsidies to powerful industry lobbies exerting their influence. We obviously also need to take into account the consumer. Will they or will they not accept the need for genetic modification of food and ingredients to sustainably feed the world in the coming decades?
Tony Hunter is a strategic consultant specialised in the future of food at Australia-based Future Cubed, helping food, beverage and agriculture companies gain competitive advantage by tracking emerging food technologies and predicting the impact on their businesses.
