A new report released today by the Good Food Institute adds a third pillar to the alternative protein sector alongside cultured meat and plant-based proteins: fermentation.
In the last five years there’s been a “Cambrian explosion” of companies in this segment, Nate Crosser, start-up growth specialist at GFI and author of the report, told me in an interview this week. By mid-2020 there were 44 fermentation companies globally working on alternative proteins, up from 23 companies in 2018.
“I was surprised to see how much traction was behind this segment, in terms of investment in particular,” Crosser said. Cultured meat gets all the press, but in 2019 fermentation-based protein companies raised 3.5 times more capital than cultivated meat companies, and in 2020 they’ve already raised $435 million of the total $1.5 billion invested in alternative proteins.
Fermentation uses microbes to produce proteins and functional ingredients used in animal-free meat, egg and dairy products. Part of the allure to investors is that the technology is “commercializable today,” Mark Warner, a consultant on alternative proteins who specializes in scaling up fermentation commercialization told me in an interview on Tuesday. There are already companies and facilities using similar methods to mass produce enzymes. “The tech is generally proven. It’s the organisms that are being newly introduced.”
Because there are a myriad of organisms and approaches that can be used in fermentation, GFI breaks down fermentation companies into 3 categories in their report: traditional, biomass, and precision fermentation.
Traditional, as its name would suggest, refers to a long-established use of microbes to alter flavor, nutrition or texture—like the lactic acid bacteria used to make cheese or MycoTechnology’s plant protein with improved taste and functionality.
Biomass fermentation is all about mass producing protein. It relies on fast-growing, protein-dense microorganisms like algae and fungi. Meati uses this approach to make its mycelium-based steak. And last but not least, there’s precision fermentation, the process used to make Impossible Foods’ heme protein or Perfect Day’s whey protein. This approach, which can often rely on genetic modification, is used to produce highly functional proteins or ingredients that must be very precise but are needed in lower quantities.
The report is intended to give potential or existing investors an idea of the different approaches and state of the industry, Crosser said. Several major tech and agriculture players are already backing fermentation companies, including ADM Capital, Louis Dreyfus Co., Kellogg, Danone and Bill Gates-backed Breakthrough Energy Venture. Meanwhile major food and lifestyle companies like DSM, JBS, Novozymes and DuPont are working on in-house fermentation-derived alternative protein products.
But it may eventually take more than private funding if alternative proteins are really going to disrupt the meat and dairy industries, Warner said. Like with biofuels, alternative proteins may eventually require government funding to really take off. “From my perspective, [this report] is going to be vital in framing the need for fermentation for investors,” Warren said, “but also public policy and any discussion around government funding.”
While the entirety of alternative proteins industry is in a race to market, fermentation companies are expected to do more than join the contest. A high percentage of the fermentation segment is B2B, according to Crosser. They’ll be developing the components needed for cell culture and the ingredients needed for plant-based products. “Their success is going to fuel the rest of the industry,” he said. “Fermentation serves as a force multiplier for the entire alternative protein sector.”