6 minute read 10 Jul 2019
Bioengineered laboratory plantation seeds

Why your next big bet should be in food innovation

Authors

EYQ

EYQ is EY’s think tank.

By exploring “What’s after what’s next?”, EYQ helps leaders anticipate the forces shaping our future — empowering them to seize the upside of disruption and build a better working world.

John de Yonge

EY Global Markets EYQ Global Insights Director

Analyst and thought leader focused on disruption, sustainability and megatrends. Proponent of innovation for meeting global resource challenges. Skier. Fly-fisher. Tae kwon do black belt.

6 minute read 10 Jul 2019

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Demand for food is increasing. Innovators are using new technology to design sustainable and healthy food. Can you afford to miss this growth opportunity?

The intersections of agriculture, biotech, digital advances and wellness are transforming the US$5 trillion global food industry. Innovators are harnessing emerging technologies—or applying existing technologies in new ways—to design new ways to eat, responding to both to consumer trends and the imperative to improve the sustainability of the planet and human health.

The food-by-design transformation presents both large companies and start-ups with global opportunities for innovation-driven growth in new markets and product categories.

Market paradoxes drive transformation in agriculture

“A number of paradoxes are driving transformation in agriculture today,” says Rob Dongoski, leader of EY’s Global Agriculture practice.

 “Big Food” is seen as less wholesome and more ethically suspect than ‘small food’. Food consumption is increasingly distant from food production. Demand for higher quality, more carbon intensive proteins continues to accelerate even as the response to climate change becomes more urgent. The world is increasingly polarized between hunger and obesity. Even more startling, we increasingly see hunger and obesity happening side-by-side,” Dongoski observes.

From the interaction of these paradoxes comes a global scenario in which food companies deliver mass products from far flung supply chains even as consumers demand local, transparently sourced, personalized foods.

Agriculture generates 14.5% of greenhouse gases, consumes 70% of fresh water and occupies nearly 40% of the global landmass; climate change and population growth render this kind of resource consumption increasingly untenable.

The diffusion of the modern western diet contributes to a variety of global health problems, such as heart disease, cancer and diabetes. More people now suffer from obesity than from malnutrition.

A huge market opportunity lies in resolving paradoxes like these and innovators are stepping in.

 worker digital tablet underground tunnel seed tray nursery
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1

Chapter 1

Designing sustainable proteins that cater to global demand

Animals are an inefficient means of producing protein. Beef production emits 20 times more greenhouse gas per unit of edible protein than plant-based sources. If cows were a country, they would be the third-largest greenhouse-gas-emitting nation.

Animals are also alive. The industrial systems and supply chains required to deliver animal products raise issues of food safety, antibiotic resistant microorganisms and worker health. Many people have concerns about animal welfare in the food production process.

Yet people want meat. As the global population grows by 2.5 billion people through 2050 and income growth swells the global middle class, the UN’s Food and Agriculture Organization expects meat production to double. The global livestock herd could reach 40 billion animals by this date, with enormous sustainability impacts.

Food innovators are disrupting this narrative with approaches that cater to the consumer’s preference for meat rather than trying to change it.

Explore the gallery below on innovation within the meat substitution industry
beyond meat beyond beef raw

Credit: Beyond Meat

Plant-based meat and dairy

One approach to replacing animal grow proteins focuses on creating plant-based meat and dairy substitutes that have the taste and experience of the real thing—but without the caloric inefficiencies and sustainability impacts. Pea proteins, wheat and potatoes are being turned into hamburgers. Oats become yogurt. Mung beans become eggs.

The potential for plant-based food innovation is only beginning to be tapped. Of some 200,000 edible plants, just three—rice, maize and wheat—provide over half the world’s calories from plants. The tools available to work the alchemy of turning plants into meat have become incredibly powerful. Artificial intelligence (AI) allows researchers to rapidly assay plant proteins and flavors that could provide desirable food properties based on existing products.

Plants have a far more diverse genome than animals, offering a deep reservoir for genetic optimization. Fast and cheap genomic technologies have democratized gene editing, opening the door to customizing plants for various food-related objectives, such as improving taste, reducing processing, removing allergens, enhancing nutritive content and optimizing protein structure. Crispr gene-editing technology—which modifies an organism’s own genome rather than introducing a gene from another species—has already been used to produce a healthier soybean oil. More commercial releases are in the queue.

Cell-based meat

Where plant-based meat seeks to replace animal proteins, cell-based meat (also referred to as clean meat) aims to produce real meat—except without raising animals. It is an approach that draws on regenerative biotechnology to culture meat, dairy proteins and animal products such as leather. This cellular agriculture grows animal cells in a medium of amino acids, sugars, minerals and water, much more efficiently than an animal can, achieving one calorie of output for just three calories of input. Growing animal products in the controlled lab environment avoids the pollution, greenhouse gases, water consumption and sanitary problems of conventional production. Meat can also be grown much closer to demand, cutting short an extended global supply chain. 

Growing market uptake

Rather than pursuing niche vegan markets, the companies developing meat substitutes and cell-based meat aim squarely for the mainstream market where their products must compete on taste, cost and convenience. Success depends on achieving scale to lower costs and continuing innovation in the product experience.

Large meat suppliers appear ready to help these innovations scale. Unilever recently acquired The Vegetarian Butcher, an innovative plant-based meat producer in the Netherlands. JBS, the world’s largest meat producer, is launching a plant-based burger. Tyson Foods is entering the alterative protein market with a new brand featuring plant-based and blended (plant/animal) protein products. Both Tyson Foods and Cargill have invested in the cell-based meat startup Memphis Meats.

SuperMeat Ido Savir CEO Co-founder lab
We’re growing meat directly from chicken cells without having to use animals, drastically lowering the resources required to produce meat.
Ido Savir
Co-founder and CEO of SuperMeat
  • Ido Savir, co-founder and CEO of the Israeli start-up SuperMeat, is seeking to make the world better.

    A software engineer he co-founded SuperMeat to produce meat products in a different way, starting with chicken. “Meat is very successful as a product, and global consumption is expected to double by 2050. What we’re doing is simply growing meat directly from chicken cells without having to use animals in the process. This type of production method has the potential to drastically lower the amount of resources required to produce meat,” says Savir.

    SuperMeat’s development builds on avian stem cell technology used for large-scale production in the pharmaceutical industry. Starting with a highly optimized process SuperMeat can confidently project the yields and cost of its end-products at commercial scale. Coupled with the  source biopharma process is highly regulated promoting confidence in the safety of the resulting food products.should help SuperMeat’s path to market.

    “We have the opportunity to leverage an immense biopharma technology platform with billions of dollars of investment to create the better food and make the world more sustainable,” Savir notes.

    SuperMeat recently secured PHW Group, Germany’s largest poultry producer, as a strategic partner.  Savir says that PHW brings “deep experience with the protein we’re creating along with valuable research tools and product insights.”

    In return, SuperMeat offers the potential to create better and different types of poultry products using new methods but not new materials. “The system becomes highly technological, offering the best of both worlds: the unique properties of animal protein and the ability to customize the product for dietary needs and product requirements,” says Savir.

    For example, SuperMeat will be able to create chicken meat with a specific fat content or fat melting temperature. Cultured meat also avoids the main source of food contamination—slaughter—improving food safety and shelf life.

    Savir characterizes SuperMeat as a “biotech company becoming a food company.” Looking ahead, he aims to draw on the company’s research and development capabilities to develop and license a platform food technology. “We want to become the Android of cellular meat production,” he concludes.

These products become part of an overall protein portfolio that can scale with demand. They also come without the sustainability and health tensions that characterize conventional meat supply chains. While the large food companies are invested in processing and distributing meat, they don’t own herds or farms and can adjust nimbly to the consumer’s shifting preferences.

China, one of the main drivers of global meat demand, also recently gave a boost to the scaling cell-based meat industry. It signed a US$300 million trade agreement with Israel for cell-based meat from the Israeli start-ups SuperMeat, Future Meat Technologies and Meat the Future. Cell-based meat addresses the Chinese imperatives of lowering greenhouse gas emissions, improving food safety and increasing food security.

  • Elaine Siu Managing Director Asia Pacific The Good Food Institute

    Interview with Elaine Siu, Managing Director, Asia Pacific, The Good Food Institute

    What are the main market drivers for plant-based and cell-based meat in China? How do the drivers in China compare to those in Western markets?

    The increasing health awareness of Chinese consumers is leading to increasing demand for healthier foods and greater interest in adopting a more plant-based diet. Relatedly, food safety and food security are two market drivers that are much more prominent in China than in Western markets.

    China, of course, has a very different food culture from Western markets. And China’s food industry is extremely diverse—from province to province if not city to city—and fragmented. In the West, tofu is viewed as a meat substitute. In China, however, tofu is a staple food that has existed for thousands of years. Soy and tofu products are also much more diverse in the East than in the West.

    It is hard to speculate whether the development of plant-based and cell-based meat in China will follow a path like the West’s. It requires quite a shift in mindset to discover the China market for what it really is.

    What is the potential for China to quickly scale up production of plant-based and cell-based meat foods, as it has done with other products?

    China has produced plant-based “alternatives” much longer than the West, but that probably also means that it has more baggage to get over.

    I always say that while meat alternatives have to take ethics off the table to go mainstream in the West, in the East they have to take religion off the table. The 1.0 version of plant-based meat in China and Asia primarily catered to the Buddhists community.

    Just as the original plant-based meat substitutes in the West targeting niche vegetarian and vegan markets had to develop into the 2.0 version we see nowadays, and be positioned and marketed very differently, the same will have to happen in China.

    What needs to happen to unlock China’s market potential for plant-based and cell-based meat?

    The market potential is obviously there. If I had to choose one factor that would accelerate this new category like no other, it would be favorable policies and funding from the Chinese government, especially in cell-based meat. The Government of Singapore is very outspoken about its interest in developing the alternative protein space, including cell-based, and is putting its money where its mouth is. Japan is also getting in the game. It will be interesting to see how and when the Chinese government starts investing in this space.

    We work with closely with many of the plant-based and cell-based startups in Greater China and Singapore. A few “poster boy” startups need to emerge from this region to define this new category. We have seen a lot of startup and investor activity in the past year, and expect to see more newcomers in 2019.

Key questions to consider

  • What is the opportunity to create new product categories using food-by-design capabilities?
  • Where do plant-based or cell-based meat products fit into your product portfolio?
  • How will plant-based and cell-based meat help to solve existing food industry problems?
  • What are the land use implications—and opportunities—of shifting protein production to more space-efficient methods and away from traditional areas?
 indoor farm hydroponics vertical farming
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Chapter 2

Smart vertical farming: produce by design

Consumer preferences, urbanization and the decentralizing force of technology open the door to bringing farming to cities at significant scale. Digitally enabled vertical farms decouple production from climate, enabling food to be grown close to the source of demand.

While it is difficult to compete against the cost structure of traditional farming, vertical agriculture offers countering advantages:

  • More yield per square meter, with reduced waste and significant carbon and water savings
  • Production close to demand, cutting out transportation and middlemen expenses
  • Consistent supply at predictable prices for local retailers, regardless of global weather
  • Plants custom-grown to meet local tastes
  • Consumers willing to pay a premium for super-fresh, traceable and sustainable food
  • Ability to tie production to individual consumer demand through digital applications and supermarket data

Vertical farms are being integrated into different urban environments around the world. Japan’s Spread Co. recently began shipping from the world’s largest vertical farm, based in Keihanna Science City, a highly-automated facility which can produce 30,000 heads of lettuce per day. Fresh Direct Nigeria is a start-up bringing stackable container farms to the cities of Abuja and Lagos, helping to address food supply gaps and create a new generation of city farmers.

Explore the gallery below on innovators in vertical agriculture

Spread Co techno farm Keihanna building

Credit: Spread Co.

Key questions to consider

  • What new business models can be built around bringing farming close to consumers?
  • Is digital urban agriculture now a key ingredient for making cities smart and resilient?
  • How can vertical urban agriculture improve the economic and social dynamics of cities?
 Couple choosing vegetables using phone supermarket
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Chapter 3

Human biome: Diet by design

Biotech and food converge again as understanding of the human gut biome grows. We used to know only what foods were generically good, through analysis of the biome it is now possible to determine which foods are optimal for the individual.

DayTwo, an Israeli company, has commercialized a diagnostic that analyzes the DNA of your gut biome and uses an algorithm based on extensive clinical research to predict your glycemic (blood sugar) response to different foods, which varies significantly among individuals. Glycemic spikes are associated with disorders such as obesity and diabetes. DayTwo currently offers individual wellness diet recommendations but is collaborating with pharma partners to develop nutrition-based health solutions and biome-based treatments for metabolic disorders.

This development flips our perspective from viewing food as a source of illness to food as a source of wellness, with new opportunities to reduce health costs, improve outcomes and maintain wellness.

Key questions:

  • How will food producers, retailers, insurers, pharma companies and healthcare systems work together for the best wellness outcomes based on personalized diets?
  • What new digital partnerships will be required for food producers and retailers to serve billions of personalized diets daily?
  • If personalized diets become the key to wellness, what industry is the food business in?

Summary

Food-by-design will reshape what and how we eat, affecting global supply chains, economies and human health. Our eating will be personalized, local and increasingly sustainable for human health and the planet. Now is the time for companies to assess the role they can play in this transformation and the potential upsides.

Key questions for CEOs and boards:

  • How well-prepared is your company to respond to changing market dynamics in agriculture and food?
  • What are the growth opportunities in addressing global food challenges?
  • What is the opportunity for your technology to participate in food-by-design solutions?
  • As food supply chains become shorter and resource efficient, what are the implications for energy, logistics and retail companies?
  • Is your company ready for a world of radical transparency?

About this article

Authors

EYQ

EYQ is EY’s think tank.

By exploring “What’s after what’s next?”, EYQ helps leaders anticipate the forces shaping our future — empowering them to seize the upside of disruption and build a better working world.

John de Yonge

EY Global Markets EYQ Global Insights Director

Analyst and thought leader focused on disruption, sustainability and megatrends. Proponent of innovation for meeting global resource challenges. Skier. Fly-fisher. Tae kwon do black belt.