To meet future demand for protein and ensure food systems are inclusive, efficient and sustainable, we must invest in alternative and plant-based proteins.
Fermentation presents an opportunity to fundamentally change the way the world eats and improve global human and environmental health and the economy.
Investment in fermentation-derived proteins should focus on achieving the necessary scale and technology.
Our global food system is not fit for purpose. Current food production methods and consumption patterns endanger the health of the public and of the planet.
But demand for food and protein is only going to grow. By 2050, projected demand for protein is set to nearly double globally as incomes rise and the population reaches an estimated 10 billion.
According to the World Economic Forum, using today’s production systems, we will not be able to match the future demand for protein and meet the targets of the Sustainable Development Goals and Paris Accord. To create a global food system that is inclusive, efficient, and sustainable, we must transform protein production methods.
Industrial animal agriculture is inherently resource-intensive, exacerbating some of the world’s most serious problems including land-use conversion, environmental degradation and climate change. The UN’s Food and Agricultural Organization (FAO) determined that total emissions from global livestock today represent 14.5% of all anthropogenic greenhouse gas emissions. Industrial animal agriculture also poses significant public health concerns with the potential to drive antibiotic resistance and foster conditions ripe for the spread of zoonotic diseases like COVID-19.
Enter alternative proteins – which not only have the ability to vastly improve our food system, mitigate the impact of food production on climate change and greatly improve public health, but also hold tremendous opportunities for innovation, investment and economic growth.
What is alternative protein?
The alternative protein field has three main pillars: plant-based protein, cultivated meat and fermentation.
Cultivated meat (“clean meat” or cell-based meat) is the darling of futurists – and quickly becoming a reality. By successfully growing cells outside of an animal, multiple companies have offered proof-of-concept tastings ranging from steak to shrimp. Together, two of the leading startups in the field –Memphis Meats and Mosa Meats – raised over $240 million this year in Series B financing, revealing investors’ confidence in cultivated meat’s potential to capture a meaningful share of the $1 trillion-plus global meat market.
Until recently, the third pillar hasn’t received much attention. However, fermentation– an ancient production method now transforming our modern food system –is starting to receive the attention it deserves.
Why fermentation is the next frontier of alternative protein
Within fermentation, there are three primary production methods of alternative proteins:
Microbial fermentation has been used for many years to produce ingredients such as enzymes where microorganisms transform one type of food to another (think beer or yogurt) and in the biopharma industry to produce vaccines and drugs. The same technology is now being applied to produce a new generation of proteins, fats and other functional ingredients that enable the creation of animal-free meat, eggs and dairy.
Many may recognize whole-biomass fermentation from Quorn’s meat-free mycoprotein nuggets, patties and fillets. There are also innovative startups working to produce whole-muscle products using whole-biomass fermentation such as Atlast Food Co. and Meati.
The third method, precision fermentation, uses customized microbes to produce vast quantities of specific proteins normally found in animal products but without having to breed, feed and slaughter an animal. The most well-known example is rennet, a protein found in nearly all cheese. Rennet traditionally comes from the stomachs of slaughtered calves, but now can be produced by a special strain of yeast. Perfect Day Foods is making whey and casein proteins using precision fermentation and recently launched spinoff brand Brave Robot to sell animal-free dairy-based ice cream. Clara Foods is also creating egg proteins with this technology.
Each fermentation method has the power to make protein production more efficient. More broadly, the pillars of alternative protein industry – plant-based, cultivated and fermentation – can complement each other, allowing companies to create more environmentally sustainable and less resource-intensive products than those that currently come from industrial animal agriculture.
For example, Impossible Foods’ “heme,” the ingredient that gives their burger its “meaty” taste, uses a microbial fermentation process similar to rennet production. Such products can be used along the entire alternative protein spectrum, making them a critical component of the industry.
Another benefit of fermented products is that like plant-based proteins and cultivated meat, they can be produced efficiently, sustainably and without the use of antibiotics. By taking the animal out of the system, the constant threat of contamination is removed, and the need for antibiotics in our food system is eliminated. This would also eliminate the threat of cross-species disease transfers. All of this is a tremendous boon to public health and the security of our food (and thus economic) system.
An investment opportunity
Venture capital investment across the alternative protein industry has grown rapidly over the past decade, with significant acceleration over the past few years. In the first half of 2020 alone, alternative protein funding substantially surpassed the amount that the industry raised in the entirety of 2019, eclipsing $1 billion dollars for the first time. And fermentation is claiming an increasingly large share of that amount. The momentum is incredible, with 85% of all VC investments in alternative protein fermentation companies having occurred in just the last 18 months.
Seeing the opportunity, several of the largest food and life science companies in the world – including DSM, DuPont and Novozymes – are developing fermentation-based product lines and solutions tailored to the alternative protein industry. JBS, the world’s largest meat company, isleveraging fermentation for alternative proteins in its Ozo plant-based products.
Despite this growth, much more investment is needed.
Fermentation presents an opportunity to fundamentally change the way the world eats. Companies have developed promising fermentation technology, but they are nascent, under-resourced, typically western-based and few. While fermentation itself is a relatively mature platform, significant opportunities for innovation and investment exist at every step of the process: from ingredients, to feedstock, to production facilities, to flavor and texture improvements.
For example, the feedstock – or nutrient source – used for fermentation has enormous implications for both cost and sustainability, as well as affecting the growth, composition and flavor of the microbes themselves. While fermentation processes have historically relied primarily on purified sugars as feedstocks, there is huge potential to leverage lower-cost inputs and simultaneously process sidestreams from other industries to eliminate waste.
Additionally, the largest fermentation facilities in the world were built for other industries rather than for alternative protein applications. And the largest facilities for alternative protein fermentation are orders of magnitude smaller than animal meat processing facilities. Thus, there is immense room for capital influx to scale-up manufacturing capacity and infrastructure.
Two billion people in the world currently suffer from malnutrition and according to some estimates, we need 60% more food to feed the global population by 2050. Yet the agricultural sector is ill-equipped to meet this demand: 700 million of its workers currently live in poverty, and it is already responsible for 70% of the world’s water consumption and 30% of global greenhouse gas emissions.
New technologies could help our food systems become more sustainable and efficient, but unfortunately the agricultural sector has fallen behind other sectors in terms of technology adoption.
Launched in 2018, the Forum’s Innovation with a Purpose Platform is a large-scale partnership that facilitates the adoption of new technologies and other innovations to transform the way we produce, distribute and consume our food.
With research, increasing investments in new agriculture technologies and the integration of local and regional initiatives aimed at enhancing food security, the platform is working with over 50 partner institutions and 1,000 leaders around the world to leverage emerging technologies to make our food systems more sustainable, inclusive and efficient.
In 2019, economic think tank RethinkX released a report predicting the potential disruption and collapse of the industrial livestock sector. However, this prediction depends heavily on diminishing costs and increasing quality of precision fermentation.
For fermentation-derived products to reach price parity with animal-derived versions, it’s critical to drive innovation and investment towards achieving the necessary scale and technology.In doing so, fermentation presents a clear opportunity for investors to both revolutionize modern protein production and help build a healthier, more efficient, sustainable global food system.
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