Deep dive: Supply and demand

Could supply chain collaboration be the key to accelerating the commercialization of cultivated meat products and getting them in front of consumers faster as well as in the volumes the food sector requires?

It’s not that easy to accurately assess the current market value or predict the future net worth of most products within the alt proteins sector. Wild valuations of companies, enormous flurries of initial investment coupled with ‘world-saving’ media headlines can all skew the true figures – often in terms of over-valuing products that turn out not to live up to their initial hype in either consumer demand or market share. This is especially true of products in the cultivated meat realm, where the fact that very few are currently on sale (or even allowed to be on sale) makes it even tougher to assess market potential.

Aditi Basu at Future Market Insights says that her market research firm estimates the cultivated meat sector as being worth US$4.1 billion today, “But the potential is probably several times that,” she states. As Basu explains further, though, reaching that potential will mean overcoming some serious challenges along the way. “Just a few of them include big issues such as accessibility, visibility, pricing, and scaling up.”

Exploring synergies

Similar to several experts in this burgeoning field, Basu believes that many of these challenges can be overcome via supply chain synergies. “For example, how to cut down upfront capital costs and OpEx, how to have more localization, more diversity in ingredients, how to achieve better taste and texture,” she explains. “We need to address how to get those synergies: how to move from monolithic supply chains to (likely) micro supply chains, which are well synergized and vertically and horizontally integrated. Supply chain will be the key differentiator for this industry.”

When it comes to integration, Nicolas Morin-Forest, Co-Founder & CEO of French cultivated meat firm, Gourmey, says that, “Most of the cultivated meat companies are still extremely vertically integrated, simply because the whole technology is so new.

“It’s like the very beginning of the car industry, where you couldn’t outsource or buy in any parts – you had to build the whole car yourself.”

‍Upstream wins

For the cultivated meat sector, Morin-Forest says there are two separate phases to product development: the upstream stage is from the cell line up until the cell harvesting. That covers the growth medium, cell development, and process development. And the downstream stage is after the harvesting, once the cells as an ingredient become a food product. “Where we are seeing the highest level of collaboration is on the upstream side – the production aspects,” Morin-Forest says. “The big question is how plug-and-play are these parts of the technology between companies – between pharma companies and cultivated meat companies, between large food companies, fermentation companies, and cultivated meat companies?”

I would encourage all the funded companies that are first to get their factory up and running to consider sub-renting part of the production lines to other cultivated meat companies so we can simply see more biomass being produced

He says the answer is that it’s not really plug and play at all. “Take the bioreactors for instance – that’s an area where you could be plug-and-play and buy an off-the-shelf bioreactor. But then if you’re using a very specific scaffolding technology (the matrix upon which the cells grow), you might not find what you like on the shelves and will need to build your own equipment, your own technology and then try to scale it into manufacturing – you could even create an offshoot company.”

Morin-Forest does note the industry has seen more plug-and-play solutions on the growth medium side, and here there are two players: startups trying to supply ingredients that could be part of standard formulations for the growth medium, and the large corporates that investing in these solutions. He believes these could be “amazing players” if they look at the space with more interest/investment or start creating production lines specifically for the growth medium. “They could essentially co-develop the formulation and also manufacture the growth medium,” he believes. “Obviously, as a cultivated meat company, you want to have a bioreactor facility, but you might not want to also have another facility for manufacturing the growth medium, so you’d be happy to outsource that and just buy the feed directly from other players.”

Downstream gains

On the downstream side, Morin-Forest says that he is observing early collaboration along the supply chain in terms of cultivated meat companies partnering with traditional food companies to develop the food product. “Cultivating the cells is one thing but cells are ingredients,” he continues. “Particularly if you’re taking a hybrid approach, where you would mix plant-based ingredients and cells. This is knowledge you might not have in-house. Overall, we need a much more robust and active supply chain specifically on the infrastructure, whether it’s under growth medium and manufacturing or on the cell manufacturing, so we need to see more bioreactor supply capacities.

“Today, the lead time when you order a bioreactor can range from eight to 12 months, sometimes even more,” Morin-Forest reports. “We need to see existing bioreactor companies building new production lines so they can supply cultivated meat companies in a faster fashion, and obviously more bioreactor capacities overall.”

And he firmly believes that bioreactors are not something a cultivated meat company needs to be attempting to make itself. “I think the core of what we’re developing is package of the cell lines plus the growth medium. And if you want to be fast to market, you’d better find a biotechnology that is already commercially available. At Gourmey, we don’t plan to go to market with unique custom bioreactor technology. I think there’s plenty of great functioning bioreactors out there, but they’re not necessarily able to reach the scale that the whole industry will require. There is a huge need for innovation on this front.”

Morin-Forest believes the early pioneers in the cultivated meat sector can also help foster progress among new startups. “As one of the most funded European cultivated meat companies, we consider that as part of our business model. And I would encourage all the funded companies that are first to get their factory up and running to consider sub-renting part of the production lines to other cultivated meat companies so we can simply see more biomass being produced. The more biomass that we produce, the more [product] we can supply the consumers.”

However, he does acknowledge this sort of collaboration, involving new supply chains, is not without its own hurdles. “It’s difficult for the sector to collaborate very openly, simply because it’s a very nascent field. All the companies have filed patents to secure IP, but not many patents have actually been granted. As the space matures, we’ll see more and more patents granted and more collaboration across the industry. It just takes time to reach that point.”

Smashing bottlenecks

Matt Anderson-Baron, Founder & CEO of Canadian biotech firm, Future Fields, says that when it comes to bottlenecks in the supply chain, such as bioreactor supply, he’s witnessed a notable change in what’s causing holdups. “We’re a recombinant protein production company that uses a software-based expression system to solve the big cost and scale problem with regards to recombinant protein production in cultivated meat and cellular agriculture,” he begins. “The whole discourse around cultivated meat production, and specifically the growth factor side, used to be about cost. That was the big challenge that everyone always talked about. And that was both for the cultivators and the meat products themselves. I think that problem is getting solved and now the discourse is more becoming about scale. How do we hit the scale of production that’s meaningful, that can have an impact by capturing a larger part of the market? And importantly, the supply chain must scale with it.

“Recombinant proteins and growth factors are a big part of that,” Anderson-Baron adds. “The production of those inputs really needs to scale as well. And we’re starting to see some evidence around how big that scale needs to be. A recent Good Food Institute report on recombinant proteins was really eye opening. It suggested for cultivated meat to hit just 1% of the of the meat supply, we’re going to need an extraordinary amount of recombinant proteins, the big problems being albumin, transferrin, and insulin, which are more or less biological requirements for growing cells.”

Anderson-Baron says that he knows many companies are looking at ways of reducing or replacing those components. “Even if they do, they’ve got to purchase from both sides, they’re still going to need a lot! The GFI report calculated that we would need millions of kilograms of these proteins, which drastically exceeds even industrial enzyme production. This is orders of magnitude more than what we’re producing now at a global scale, and this is a really big challenge.”

Anderson-Baron feels attacking the challenge from both sides is key to closing this huge gap. “We need systems that can increase supply dramatically, and we also need
the cultivation companies to reduce how much they need and meet somewhere in the middle. What makes it more challenging is that existing systems for production of these recombinant proteins require the same infrastructure – i.e. bioreactors. And that’s something cultivated meat companies need. So, they’ll be competing for the same infrastructure.

“And this reiterates the approach that we’ve taken, i.e. a software-based expression system to solve this massive supply chain gap. This will create a production system that we believe is infinitely more scalable, and ultimately doesn’t require a stainless steel tank.”

Navigating the challenges together

Israel’s Aleph Farms has already had to tackle many of these challenges, so is well placed to offer advice on how startups can overcome the difficulties. “Cultivated meat is the first leg of what we’re doing,” reveals Kevin Benmoussa, EVP & CFO. “And we’re the first to grow a cultivated steak from isolated non-modified cells. What we have learned on that journey is that startups cannot do it all by themselves.

“We need to be thinking about the overall ecosystem, and how can we be more nimble in deploying capital in the near term before unleashing the big dollars for larger scales. For us, that’s a more asset-light model, leveraging existing local manufacturing partners so we can focus on developing and operating our own core technology, but also using the knowhow and capacity of our partners to provide the infrastructure that is needed for the traditional production facility.”

Benmoussa says startups should be focusing on these potential ways to reduce the higher infrastructure cost in the near term, before embarking on a higher, larger-scale model, but says it’s not only lower costs achieved via the partnership-based approach. “It has also allowed us to test and learn as we expand capacity over time, and develop proof-points before accelerating to a larger scale up in the longer run. So, we’re implementing this approach as a form of growth strategy – to redirect some of that CapEx in the near term toward existing infrastructure. It’s about how can you leverage what’s already out there to help develop the industry while it grows more of the muscle needed to address the required infrastructure.”

In terms of how this can be achieved, Benmoussa explains that Aleph has partnerships along the supply chain that reflect its view that partnering with a larger traditional player – whether in the F&B space or a specialty pharma firm – will help accelerate the path to scalability and price parity, both in terms of infrastructure, but also when it comes to procurement of key ingredients. “From a CapEx point of view, the goal is to explore and set up creative manufacturing models with larger players, where we can leverage their strengths and knowhow in operating the production facility,” he comments. “That means potentially looking at ways where we could co-invest in a facility at the local market level. And that could also involve IP licensing. Bigger players can really lean in and support the development of the sector as a whole.”

The green scene

All commercial growth needs to be balanced with the pressure that almost every industry is facing to develop a sustainable and green supply chain. “It’s a big motivation,” notes Anderson-Baron. “The impetus for this industry is creating a more sustainable food supply chain. It’s imperative cultivated meat companies build a production system that is truly sustainable. And that includes the inputs – it’s vital the things going into making a product are being produced sustainably as well. The challenges – coming back to legacy systems for recombinant protein production – is they require a lot of energy, and they produce a lot of biohazardous waste. Around 300 million liters of cell culture waste is produced every year, due to these production systems.”

Bioreactor to table

‘Farm to table’ has been a buzz across the industry in the past decade, and Benmoussa feels that this is one angle that could have a positive effect on the alt proteins supply chain. “This is part of the scaling-up mission too,” he emphasizes. “Retailers, especially those in the USA, could become a partner of choice for this aim. Just look at what happened during Covid with the empty shelves for an example of why they would want a more sustainable and secure food supply chain. If we are built to create a localized manufacturing entity that is closer to the consumer, partnering with retailers to do that, that’s a sort of ‘farm to table’ set up via a more agile supply chain. For cultivated meat firms, certainly for Aleph, we think that this could be a really interesting way to partner to not only accelerate scalability, but also to get to the consumer faster.”

Gourmey’s Morin-Forest believes a smart supply chain holds the key to being able to deliver on these farm to table type concepts. “For many countries across the world, ‘farm to table’ would mean far more distance than ‘bioreactor to table,’ he notes. “So ‘bioreactor to table’ is one of the models that we should explore. It’s also part of the reason why we’re seeing countries with limited local manufacturing capacities at the forefront of the cultivated meat sector.”

Benmoussa predicts things may well get even closer to the consumer. “One future vision is where you can actually create your steak in a much closer way than you’re used to,” he says. “Compared with what could be many years to raise a cow and send it to production, it may be possible to grow a steak in days or even hours.” And that’s not even mentioning the much-touted notion of 3D printing your evening meal.

Morin-Forest is optimistic that, with the right support, the supply chain can be developed to make such visions become a reality. “In one example from our region [Europe], the Netherlands has put €60 million on the table to build an entire supply chain for cultivated media. That’s one of the greatest examples of public-private collaboration and political support to push for real national champions and it’s a very good step in the right direction. We’ve also seen the Japanese government pushing officially for cultivated meat as a sector.

“Many governments around the world are getting to a point where they understand the promises and the benefits of cultivated meat,” says Morin-Forest. “And we need that, because at some point the startup companies will stop being pure R&D and design and will become established, commercial organizations. We need platforms in place for new researchers to come through and keep fueling the whole space with innovative ideas and technologies.”

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