Animal-free dairy heats up as Change Foods collaborates with Sigma and Violife owner Upfield, raises $12m
Founder and CEO David Bucca did not go into details of the deals with Upfield (which owns plant-based cheese brand Violife and the former Unilever spreads portfolio) and Sigma (which sells cheese, yogurt, and other foods in the US, Latin America and Europe), but said the market opportunity for animal-free dairy ingredients was “pretty clear” to investors and big food companies.
“I haven't had to sell people on the opportunity,” he told FoodNavigator-USA.
“The questions they had were more around the differentiation and technical competency of the company to be able to commercialize and scale this technology [Change Foods uses synthetic biology and precision fermentation techniques to insert DNA sequences into microbes that effectively ‘program’ or ‘instruct’ them to express dairy proteins, fats and other compounds after feeding on a sugary substrate].”
A scalable process
So what reassurances was Bucca - a former aerospace engineer who moved from Australia to California last year – able to provide on this front?
“First and foremost, we have done a really great job in figuring out a scalable process,” said Bucca.
“So Junior [Junior Te’o – adjunct professor of microbial biotechnology at Queensland University of Technology and CTO at Change Foods] has done a great job developing not only an organism that can produce the compounds of interest, but also a scalable downstream process. Junior has experience with recombinant proteins at industrial scale, which has been a huge asset.”
The business model
As for the business model, Change Foods plans to launch its own, branded consumer products next year, but also plans to supply animal-free dairy proteins and fats on a b2b basis to large CPG companies interested in developing animal-free cheeses and other dairy products down the road.
“Our branded approach is important for a number of strategic reasons,” said Bucca. “We think it's a great way to educate the consumer and to introduce people to the world of animal free dairy and have a clear sort of shining brand that people can rally behind and support, especially while initially prices will be very premium as we enter the market.
“But our longer term approach is absolutely to reduce the cost as aggressively as possible. And to help work with supplying larger food companies and CPG companies in the supply of our ingredients.
“And so really, the brand is like the tip of the iceberg. We think that in the future, the bulk of the business will be key strategic partnerships with supply mechanisms in place to help us manufacture and distribute products into market globally… And so yes, ultimately as the costs come down, we want to supply b2b, but it will be branded ingredients.”
The manufacturing set up
Asked about manufacturing, he said, “Part of our business approach is to partner with the right companies to enable us to scale and to commercialize and to produce cheese and take it to market,” said Bucca. “So that's absolutely part of our strategy.
“We are also exploring either manufacturing our own ingredients ourselves or in a partnership in terms of a separate company to help produce those compounds, so there's a lot of strategic decisions to be made, but we're considering all paths effectively, working with partners in the short term, but with other options for the long term.”
“Precision fermentation has been used to produce non-animal rennet since the 1990’s, which is used in over 90% of cheeses made worldwide today.
"We are simply extending this technology to replace milk proteins and fats, and remove the cow from the cheese entirely.”
David Bucca, founder and CEO, Change Foods
Proteins will only get you so far…
While there are now several startups in the nascent animal-free dairy space using microbial platforms for recombinant protein production, Change Foods – like Perfect Day – is also working with microorganisms engineered to produce fats, flavors, and other ingredients, said Bucca, who said there is room in the market for a lot of players given the size of the opportunity.
“Proteins will only get you so far, so we made a strategic decision from the beginning to focus on proteins and other compounds which are pertinent to deliver the best type of cheese possible, so we're working on multiple platforms that enable us to move beyond protein, such as aromatic fats.”
As for the competitive set, he said, “The whole pie is growing. Dairy and cheese alone is just a huge market, so to think that we're going to be eating away at each other's demand is silly; there's just so much room for everyone to be successful and to scale and produce products and get to market with really strong brands.”
“Working alongside Change Foods, we will have the ability to drive and develop the next generation of delicious animal-free cheeses suitable for all consumers regardless of their diet.” John Verbakel, Chief R&D Officer, Upfield
“We are enthusiastic about collaborating with Change Foods to develop animal-free dairy products with sustainability benefits.” Gregorio De Haene, CTO, Sigma
What will the money be spent on?
The latest funding round – which brings Change Foods’ total seed investment to over $15.3m - was led by Route 66 Ventures and included Upfield, Orkla, Green Generation Fund, Blue Horizon Ventures, Google exec Jeff Dean, Plug and Play Ventures, Clear Current Capital, Better Bite Ventures, Sigma and English soccer player Chris Smalling, said Bucca, who said most of the money will be spend on “R&D, scale-up and product development.”
It will also be spent on building the team, which is currently 14-strong, with two more starting next month, Bucca added. “Following this, we'll be recruiting a further 5-10 people this year.”
While the infrastructure needed to scale up animal-free dairy is substantial, and bioreactors don’t come cheap, “You always have to ask yourself, compared to what?” said Bucca.
“Just because we need a lot of steel doesn’t mean that this isn’t a vastly more efficient process to develop products [that are currently produced by industrialized animal agriculture]. We can produce dairy in places where there is no dairy infrastructure right now, so you negate the need to ship products all around the globe.”
As for the term ‘animal-free, dairy’ which has been gaining traction as a means of differentiating 'real' dairy products made using microbes, not cows, from plant-based products, he said, “We're so glad that it's taken off and we think it's a good term that should be here to stay.”
What is animal-free dairy?
There is no formal definition of ‘animal-free’ dairy – a term being tested by some startups in the space – but it typically refers to products made with ‘real’ dairy ingredients (whey, casein, etc.) that are produced without cows, either via genetically engineered microbes (Perfect Day, Brave Robot, Change Foods, New Culture, Formo, Remilk, Imagindairy, Those Vegan Cowboys) or genetically engineered crops such as soybeans or peas (Nobell Foods, Moolec Science).
Using synthetic biology, firms in this space use DNA sequences like pieces of computer code to program or instruct plants or single celled organisms such as fungi and yeast to express animal proteins.
The final proteins do not contain any modified genetic material and are already familiar to the food industry (in its GRAS determination for its animal-free whey protein, which is expressed by a genetically engineered strain of the filamentous fungus Trichoderma, for example, Perfect Day notes that it is "identical to commercially available bovine-produced β-lactoglobulin”).
Making ‘real’ dairy cheese without cows, argue animal-free dairy proponents, offers the best of both worlds: more sustainable and ethical products that don’t involve industrialized animal agriculture, but still deliver the nutrition and functionality of ‘real’ dairy.
Animal-free whey proteins (from Berkeley-based Perfect Day, a pioneer in the animal-free dairy space) now feature in several ice cream brands including Brave Robot and Nick’s, the Modern Kitchen animal-free cream cheese brand launched by The Urgent Company (backed by Perfect Day), Brave Robot cake mixes, and vegan protein powders from Natreve, and California Performance Company (the third brand launched by The Urgent Company).
Starbucks has also been testing items featuring milk and ice cream products from Perfect Day in a couple of its coffee shops in the Pacific Northwest.
Animal-free casein proteins - which are more challenging to create without cows on a large scale - are still under development, although several startups say they are gearing up to launch cheeses featuring animal-free casein proteins in the next couple of years (there are four different types of casein protein, and it may not be necessary to produce all of them to get the kind of functionality formulators are looking for).