FUTURE OF FOOD: the global disruption that precision fermentation represents and a circular economy start-up that is positioned to win
Let’s explore the imminent disruption in food and agriculture and see how a start-up has deliberately put itself “in lucks way” by alining with these technology trends and cost curves.
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This newsletter is about the Three Strikes that take small and large companies down, and the Three Strokes that can make startups and trillion dollar companies win. To survive we need to identify when a strike has occurred, as if we had the benefit of hindsight. To thrive, we need to align to the future and the technology trends that disrupt and create opportunity.
From a resource perspective the global food and agriculture sector is dominated by livestock. Compared to cereals and vegetables, livestock uses most of the land, water, and energy required by the whole industry to produce milk, cheese and meat. Furthermore, the majority of grains that are grown are then used to feed livestock instead of humans. Have a look at this snapshot of American agriculture:
The coming disruption is essentially a dramatic change in the technology and economics of the plant based equivalents to milk, cheese and meat making them far cheaper compared to animal sources. Most of this is driven by precision fermentation technology.
Source: google.
When this happens a major foundational sector of our economy will be almost completely replaced and the new plant-based equivalents will be “designed’ to be healthier for us.
We are already seeing fibre added to fizzy drinks, protein added to bread, and vitamins added to all kinds of processed foods. This is just the beginning. While it means that a huge industry is being disrupted, it also means good things for people and the planet.
Source: google.
From an emission perspective this would be a real win because the livestock industry represents 18% of global emissions! Ie No more cows = way less land, water, energy and emissions globally, not to mention an end to the primary reason behind deforestation and ocean dead zones.
“There is a direct line between food production, climate, socioeconomic opportunities and equity,” said Nicki Briggs, chair of the Precision Fermentation Alliance. “How we make our food is one of the foundational ways to change the world around us.” - FoodBusiness
The really good news is that the future of food and agriculture is also the alignment of “green” (money) and “green” (sustainability) imperatives. This alignment is what will drive systemic change - fast - in the food industry with the happy consequence of dramatically helping the environment.
Three weeks ago, I wrote about the future and I introduced you all to Tony Seba and his amazing team at RethinkX. If you haven’t watched his videos on the disruption to foundational sectors of the economy, you should.
Last week I wrote about the future of transportation – using the proven cost curves, technology trend convergence and extrapolated predictions from RethinkX to contextualise the opportunity for a start up that aligns to that future.
Today I’m doing the same for the future of food. Let’s start with precision fermentation, and milk.
Tony Seba was the guy who coined the term “precision fermentation”. Precision fermentation is the genetic modification of a micro organism (say a yeast) to enable it to produce the thing you want.. like a protein. P.s. the resulting protein is not genetically modified, only the yeast that produced it has been genetically modified.
The RethinkX report: Rethinking Food & Agriculture shows that from 2000 to 2020 the cost per kilo of precision fermentation went down by 10,000x in just 20 years (from $1M to just $100 per kilo). This cost curve is continuing, and accelerating.
Milk is roughly:
89% water
5% sugar
3% fats
3% protein
We can easily get water, sugar and fats from non-cow sources, so all it takes is for that 3% protein in milk to be replaced via precision fermentation and the economics of the dairy industry no longer work.
Sound far fetched? Well, the disruption of milk has already begun.
A company called Remilk has opened the world’s largest facility to produce “real dairy, no cows” milk. This is not “Mylk” from nuts or beans.. it is milk. The same milk you get from a cow, just not from a cow. Their 750,000 square foot facility will produce the equivalent of 50,000 cows. 20 of these farms could produce the equivalent of 1,000,000 cows.
Now let’s talk about beef.
The cow is by far the most inefficient food production method on a per kilo basis the planet.. Compared to the cow, precision fermentation needs (per kilo):
5x less energy
10x less water
10-25x less feedstock
100x less land
According to Tony Seba’s cost curves, the cost per kilo of precision fermentation proteins will reach price parity with cow protein around 2025! Which means by 2040, precision fermentation - also called cellular agriculture - beef will likely be 10x cheaper than cow based beef, and cows will mostly be gone. (I'm sure you'll still be able to eat actual cow, but it will be super expensive).
Do you believe that this entire global industry will change before our eyes in the next 10-15 years? As a comparison, let’s see how the very first precision fermentation was used to disrupt the global insulin industry.
Insulin used to be extracted from the pancreas of animals. You needed 23,000 animals to get 10,000 pounds of pancreas to make 1 pound of in insulin. It took 13 years to disrupt 80% of the animal insulin market, and 16 years until it was gone completely, all because precision fermentation enabled the modification of yeast to produce insulin.
Tony Seba notes that this will be a business-to-business ingredient disruption. No consumer behaviour change is required (as long as we believe that plant based beef will eventually have the same taste, texture and appearance as cow based beef - the “I cant believe it’s not cow” burger I ate yesterday backs this up).
Emphasis on the “ingredient” that enables the disruption. In the case of milk and beef, the key ingredients are proteins which can come from precision fermentation techniques. But when we “design” the new foods that replace what we get from livestock, we will definitely add things to them healthier.. things like fibre.
Imagine eating a “steak” that has the same “complete” protein as a steak that comes from a cow, just minus the cow, which is also high in dietary fibre? Fibre brings me to an amazing company called Extracta who is positioned to win in the future of food.
“An Australian company with proprietary processes to convert agricultural waste into high demand ingredients for global food industries.” Says the CEO, Rod Lewis.
They take agricultural waste product like orange peels after making orange juice, or grape marc after making wine, and turn it into a range of soluble and insoluble fibres and binding agents. All of these ingredients are used today in the food manufacturing industry but just imagine the monumental increase in demand for these ingredients when livestock is replaced by foods that are “designed” with fibre added precision fermentation based milk, cheese and meat?
Talk about a start-up that is positioning self to win in the future as these technology trends and cost curves play out. But was this luck or strategy?
The circular economy is centred around the concept of infinite reuse of resources. (Technically this is possible with plastic bottles, tin cans etc, though not currently achieved in practice due to “inefficiencies” in collection and recycling). But the circular economy is also about reusing waste.
Extracta does exactly this. They take the waste product from others – usually something a company has to pay to get rid of – and instead they buy it from them turning a cost into a profit for the producers of this agricultural waste. They then process this waste into a valuable ingredient for food manufacturing. Amazingly, I am told that they do this at huge profit margins which rival software businesses.
“The UN Sustainable Development Goals, particularly the goal of Responsible Consumption and Production, are closely aligned with the principles of the circular economy which our technology and processes power.
Food and Agricultural businesses all over the world have waste streams that cost money to dispose of. Instead, we pay for that waste, turning their waste stream costs into new revenue for them and unlocking, in effect, an unlimited supply of raw materials for us.
We then transform those raw materials into the ingredients that food manufacturers all over the world need a lot of today, and will need much more of in the future as things like fibre are increasingly added to foods from bread to protein shakes to plant based meats.” - Rod Lewis, CEO, Extracta
This is an innovative, effective, profitable circular economy solution which align to the transformation that is going on in one of the foundational sectors of the global economy – food and agriculture - driven by the new economics of precision fermentation which will disrupt the livestock industry, which will mean fibre will be designed into most if not all future foods. Love it.
What are the Three Strokes for Extracta to hit the big time?
I think it’s similar to the Three Strokes that made Aldi Mobile into a $400M company: Great strategy, a supply-side deal, and path-to-market successfully executed on.
For Extracta I think their Three Strokes are:
Stroke one: An inspired strategy
A circular economy model that turns someone else’s waste into someone else’s treasure.
Stroke two: turning waste into unlimited supply
They developed an innovation that enabled them to turn a cost into a profit to power their supply, sell their product into high demand industries that are about to grow exponentially, all while maintaining a huge profit margin.
Stroke three: TBC
In my view they need a third and final stroke of good luck to take off - perhaps a strategic investor which comes with a scaled path to market, or an acquisition from a company who already has the waste supply and the path to market for the ingredients that are produced.
Extracta is so well positioned to benefit from the rise of precision fermentation, the cost curves of animal free milk, cheese and meat, and the fact that fibre will be designed into foods. This is a direct result of their good strategy, so I wish them good luck as well ;-)
Like what you read or think I’m smoking something? Let me know..