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BGP Expert Talk
In our second BGP Expert Talk, Floor Buitelaar, Managing Partner at Bright Green Partners, engaged in a detailed conversation with Thomas Nagy, a renowned strategic and technical biotechnology expert. With over 30 years of senior leadership experience in biotech companies such as Novozymes, BioInnovation Institute, and Astanor Ventures, Thomas merges his extensive expertise with a passion for sustainable food solutions. The discussion focused on the current state and future potential of alternative proteins and their implications for traditional industries.
Thomas: Alternative proteins are essentially substitutes for traditional animal-based proteins. The term "alternative" signifies that these proteins are developed to provide alternatives to those derived from animal farming or husbandry. The primary advantages of alternative proteins include their potential for more sustainable production and the ability to offer unique functionalities that are not present in current market proteins. Biotech can leverage various sources for alternative proteins, such as plants, cell cultures, and fermentation processes. The most commonly discussed applications for these proteins are in feed and food products.
Floor: At Bright Green Partners, we work across various elements, and a noticeable trend is the growing recognition of the term "alternative proteins." We are now focusing on "complementary proteins" or, as we at BGP describe it, "sustainable food alternatives." This approach highlights that it is not just about proteins but also about considering the supporting ingredients required to create a new protein diet.
Thomas: I hope so, and I hope we won't have to wait much longer to see this transformation. Traditional animal farming practices are incredibly resource-intensive and contribute significantly to greenhouse gas emissions, which drive climate change. Therefore, a swift shift towards more sustainable alternatives is crucial.
The technologies for alternative proteins are advancing rapidly and are ready for industrial scaling. However, many of these alternatives are currently more expensive compared to cheap animal-based proteins. Luckily, I would say that the technologies that I just spoke about and that you added to as well, there's a lot of opportunities for this to happen and to scale this industrially. Unfortunately, many of these alternatives are more expensive than the cheap animal-based proteins that we have today. One of the significant issues is that traditional proteins are priced too low when we consider their environmental and societal impacts.
The introduction of carbon taxes in Europe, including Denmark, is a positive step towards addressing this issue. Such policies help level the playing field by accounting for the true cost of traditional protein production. I anticipate a gradual transformation where alternative proteins become more competitive as we scale up production, improve technologies, and achieve economies of scale.
Initially, alternative proteins may find success in niche markets where their benefits—such as better functionality or unique taste profiles—can be highlighted. For instance, competing with whey protein, which is a byproduct of cheese manufacturing and thus very inexpensive, is challenging. Nevertheless, I see a gradual change and introduction as we scale and as we get to the economy of scale and that learning curve and pricing gets more and more comparable to what we have today.
Thomas: The categories where I expect to see the most significant disruption are dairy, meat, and functional foods. I also have a dream of hybrid products, which combine plant-based proteins with functional additives. These hybrid solutions can offer improved taste and texture, potentially making them more attractive to consumers.
It is not a revolution, but we need to get in and grow the industry. I think this is happening as we speak, because many of the technologies are available. There is political pressure for change, as we discussed earlier, but there's also a growing willingness within the agricultural and food manufacturing sectors to acknowledge that our current practices are unsustainable in the long term. We need to change, and I believe the conditions are aligning for a market-driven approach to this transition.
The goal is to move beyond just offering something novel or trendy that consumers try once and then return to their usual choices. Instead, we aim to create products that are healthy, tasty, sustainable, and in harmony with society as a whole. Whether it's food, meat, or dairy, our focus is on developing solutions that meet these criteria.
Thomas: For companies traditionally focused on meat and dairy, I would recommend exploring partnerships to reassess and redefine your product portfolio for the future. Consider whether you want to continue relying solely on traditional products, or if you also want to innovate by capturing new markets and attracting younger consumers. If your company lacks in-house technological capabilities, it's essential to reach out and map out the possibilities. Look for innovations, technology companies, startups, or even larger established protein companies that could be potential partners in developing new alternative products and shaping the future together.
For food companies and dairies in particular, consider whether you have byproducts that could be upcycled through fermentation processes or used as feedstock for other ingredients in these new products. It’s important to take a step back and adopt a holistic perspective: What do you want to create within your company? Where do you want to take it? And how can you re-engineer your current processes with external support? While some might argue that this approach is too complex, I believe it's a necessary step to stay competitive and forward-thinking.
It's also important to recognize the risk of doing nothing simply because you don't fully understand the changes happening around you. As you've pointed out, there’s now a carbon tax in Denmark, which is just one example of the regulatory pressures increasing globally. On a personal note, as someone nearing retirement age with grown children who have moved out, I’ve noticed that when I visit them, their refrigerators look very different from what mine did at their age. Consumer preferences are evolving rapidly, and the regulatory landscape is shifting as well.
For those entrenched in the traditional food value chain, change is essential. While I’m not suggesting that these companies are being overtaken, I strongly advocate for collaboration—especially innovative collaborations—focused on bringing new, sustainable, healthy, and tasty solutions to the market. This approach will be crucial in serving a growing consumer base not just in Europe and North America, but around the world.
Thomas: The primary challenges include achieving price parity with traditional proteins and scaling production. To become a truly bankable industry, it's crucial to move beyond the technical and commercial risks, reaching a stage where replication and rapid growth are feasible. These would be the three key steps.
Achieving this involves various factors, including technological and commercial development, as well as leveling the playing field against traditional protein sources. We've discussed these issues before, and there are certainly parallels to other industries.
Thomas: To achieve bankability, maturity, and the point of replication in the industry, I believe setting clear and ambitious targets is crucial. While I may be overly optimistic about the role of politicians, there have been positive steps, such as Denmark's introduction of a carbon tax on agriculture, which is a move in the right direction. However, more decisive action is needed.
What could truly drive this transformation is if we establish clear targets for what we aim to achieve, similar to the EU's targets for greenhouse gas reductions, renewable energy adoption, and electric vehicle deployment. Why not set similar targets for the inclusion of alternative proteins or the decarbonization of the food value chain? Such targets would spur innovation and reduce commercial risks, making new, sustainable technologies more commercially viable for both suppliers and consumers.
Let me provide a couple of examples where political targets have successfully driven industry development. One is the offshore wind and solar farm sectors. The mandated inclusion of renewables in the energy mix has led to significant innovation and engineering advancements. With off-take agreements in place, these industries have matured to the point where there is no longer any significant commercial or technological risk.
Today, pension funds invest in these sectors with the same risk-return profile as any other infrastructure investment.
Another example is the electric car industry in Europe. Not long ago, many major car manufacturers were slow to recognize the growing consumer demand for alternatives to fossil fuel vehicles. However, with supportive measures like bans on fossil fuel cars in certain cities and countries, and tax exemptions for electric vehicles, the industry has shifted dramatically. Today, every major car manufacturer offers a line of electric cars, and this trend is only accelerating.
If we could apply similar strategies to the food and protein sectors, setting targets and providing the right incentives, we could see rapid changes in the value chain and the range of products available to consumers. This would lead to the development of healthier, more sustainable options, benefiting everyone.
Thomas: No one is forcing you to act immediately. However, based on everything we have discussed, it is clear that significant changes and trends are emerging in society, and it is essential to invest in them.
If you currently lack capabilities in areas like cell culture or fermentation, now is the time to reach out, form partnerships, and engage with the ecosystem of alternative proteins. This will allow you to understand the available offerings and assess how they align with your own capabilities.
While waiting might seem like an option, in the long term, it is a losing proposition. The real opportunity lies in stepping into this space, investing time in understanding it, and then deciding where to focus your development efforts. By doing so, you can shape the markets and products that will define the future, and that is a winning proposition.
Are you prepared to position your business at the forefront of the sustainable food industry? Connect with Floor Buitelaar, Managing Partner at Bright Green Partners, to explore how we can craft a tailored strategy that aligns with your company’s objectives. Don’t wait for the market to evolve—take proactive steps now to lead in innovation and sustainability.
