Cultivated bubbles & cell-based tulips
Prime Future 151: the newsletter for innovators in livestock, meat, and dairy
No one wants to be Jack Morgan in 1910, uninterested in financing Henry Ford's new company, skeptical that cars will ever be more than a rich person's toy.
No one wants to be the US general in the early 1900's who said that airplanes were nice inventions but would never have military value.
No one wants to be Steve Ballmer in 2007 with the infamous line, “There’s no chance that the iPhone is going to get any significant market share."
No one wants to be Nobel-winning economist Paul Krugman in 1998 who said "by 2005 or so, it will become clear that the Internet's impact on the economy will be no greater than the fax machine."
No one wants to underestimate the potential impact of innovation, including me.
Last year I moved from I-dont-think-so-but-maybe to closed-minded on plant-based proteins (RIP Plant Based Meat Mania) but remained not-positive-but-open-minded-because-ya-never-know on cultivated, meat. Until now.
It seems increasingly unlikely that cell-based meat will ever hit retail shelves on any scale.
Today we dig into:
The clues that indicate cell-based meat is a pipe dream.
The challenges to scaling cultivated meat production.
A flawed assumption that led to billions of dollars of investment and an epic bubble.
The silver lining in this soy-based tulip mania.
Let's start with these comments from recent Wall Street Journal articles from April 2023 (link, link):
"Cultivated meat companies hope to eventually sell cultivated meat at the same price or below that of conventional meat, but that could be many years away.
While Upside and others have long been able to grow small amounts of meat from cells, making larger volumes at low cost is proving much harder, according to interviews with current and former Upside employees, industry officials, investors and outside scientists.
Many are skeptical that cultivated-meat companies—which rely on expensive technology to make a low-price commodity—will be able to produce meat affordable enough to make a meaningful dent soon in the more than $1 trillion global meat market.
They expect hybrid products, often made with animal cells and other ingredients such as plant-based protein, to have a quicker, less costly path to market.
“We can make it on small scales successfully,” said Josh Tetrick, chief executive officer of a rival food-technology company, Eat Just Inc., of Alameda, Calif., which in March received the second FDA nod that its cultivated chicken is safe to eat. “What is uncertain is whether we and other companies will be able to produce this at the largest of scales, at the lowest of costs within the next decade.”
For its part, Cargill believes the cultivated meat industry has shown promising progress. However, the company sees scaling up production and high costs as continuing challenges and says it expects it will be the mid-2030s before the meat is produced in significant volumes."
Now compare those comments with these, from a WSJ article in February 2016:
"Memphis Meats Inc., a San Francisco company founded by three scientists, aims in three to four years to be the first to sell meat grown from animal cells in steel tanks.
Mosa Meat aims to sell cultured ground beef to high-end restaurants and specialty stores in four to five years."
While industry hype girls & boys share memes that show how drastically the per pound costs have declined over time (which they have) with the assumption that price parity with livestock-based meat is right around the corner, cultivated meat companies continue to push the expected timeline out further and further.
It went from 3-4 years out to 5-10 years out to "decades" or "many years away".
Read between the lines....it’s unlikely to ever happen.
The technology risk has largely not been derisked.
A common saying across all of tech is that developing new products takes twice as long as you think and twice as much. In this case, it increasingly seems that in spite of the $2.8 billion raised to date, cell-based meat is just unlikely to become a real thing.
The next question is, why? What are the main challenges cultivated meat companies face and why are they so hard to overcome?
(1) Production at scale. We're talking about cells grown in a growth media in a bioreactor, or a steel tank, "fed nutrients and oxygen before being harvested and formed into meat products." If there's a contamination event, the entire batch has to be thrown out.
"Upside also wrestled with problems common to other cultivated-meat makers, including a battle against bacteria, according to former employees. Growing meat requires meticulous sterilization because small quantities of bacteria can quickly overtake a bioreactor, ruining a batch.
Today, the company is growing its marquee filet not in large bioreactors at its pilot plant but in two-liter plastic bottles akin to those used to grow cells for decades by pharmaceutical companies. Hundreds of disposable bottles, often called “roller bottles,” are required to make a few filets. Upside said the process works well for its small-scale production of chicken filet."
One way to reduce contamination events is through the liberal use of antibiotics. There's an irony here, considering that the reduced use of antibiotics was framed as a key benefit of shifting from livestock-based meat to cell-based meat. Maybe the math still works out that cell-based would be less in totality, but still....cue Alanis Morissette.
Particularly in light of this quote from the 2016 WSJ article:
"While the source cells can be collected from animals without slaughtering them, Memphis Meats and others have relied on fetal bovine serum, drawn from unborn calves’ blood, to help start the process. Mr. Valeti said Memphis Meats will be able to replace the serum with a plant-based alternative in the near future, and Mr. Post says he also expects to be able to eliminate its use. Without the serum, there will be no need for antibiotics, according to the researchers."
(2) Shift from whole muscle to ground products.
The aspiration was to grow ribeyes in a bioreactor, but in the absence of being able to do so, companies downshifted to the less complex and lower hanging fruit of ground meat:
"According to former employees, Upside has struggled to produce large quantities of meat. They said the company often scrambled to make enough for lab analysis and tastings. Upside for years worked to grow whole cuts of meat, which proved difficult in its bioreactors. It battled contamination in its labs.
“It turned out that tissue, or creating this whole-cut texture, was really challenging,” said Amy Chen, Upside’s chief operating officer, who added that the company has long sought to create a variety of products.
More recently, Upside has expanded its own focus on such techniques to make a slurry of cells and ground meat-like items that are cheaper and easier to produce. Last week the company said it intends—pending regulatory review—to offer new items including chicken sausages, sandwiches and dumplings that will be a mixture of animal cells and other ingredients such as vegetables and plant-based proteins."
And when they realized 100% ground meat was still too much of a technical challenge, they downshifted to a product of ground cultivated meat with plant protein….
(3) The use of plant proteins for structure as well as flavor profile and nutrition profile.
The last line of the quote above indicates that the cell-based or cultivated category is turning into a gooier version of the plant-based category.
But how much of the cultivated goo will be mixed with plant-based goo?
And what’s the purpose / benefit of the cultivated goo in that hybrid product anyway?
Stepping back, the investment thesis for the $2.8 billion of venture capital invested to date was largely this:
Livestock are destroying the planet
We must find an alternative to livestock
Let's fund this because it could be big, like $1+ trillion big
But here's the thing, that first bullet point? That statement is predicated on a GWP100 calculation, whose flaws and uncertain future we looked at last week.
So in a world where we recognize that methane is a flow gas, not a stock gas like carbon, and that enteric methane from ruminants is part of the biogenic cycle and NOT like carbon emissions from burning fossil fuels, and that methane breaks down naturally in the environment in a short period of time as captured in GWP* calculation.....then the environmental thesis here breaks down.
Except for animal welfare and the idea that meat without needing to slaughter an animal is appealing to some, although that has always seemed like an add-on benefit for players in this space rather than a driving force.
I think we're going to look back at this mania as an embarrassing time for the entire venture capital asset class, as fund managers boldly followed one another into the herd think and right off the cultivated cliff. Not because they made the bet in the first place, hey that’s just taking big swings.
But because they continued to fund these companies despite the massive technical risk that remained, assuming that technical risk would inevitably be overcome and/or had already been overcome.
But, these investments were a reasonable hedge for packers like Cargill and Tyson.
I fully acknowledge that it’s easy to be critical with the benefit of hindsight. If it had worked, they (founders, investors) would have looked like geniuses. And that's the venture game. I get it.
And yet, even if cell-based meat production was economically viable at scale, shouldn't smart investors have been cautious about how cell-based and plant-based meat fly in the face of almost every consumer trend?
Show me one rigorous, large, consumer study that shows any meaningful segment of consumers are looking for more soy in their diets.
Or more hyper-processed foods in their diets.
Or more unpronounceable ingredients in their diets.
I guess I'm saying that even if the tech would have worked, this entire alt-protein thing was a silly soiree:
Plant-based will have its corner of the retail meat case, albeit a bigger piece than would have been pre-2019. But it will be a small, private label, price game.
Cell-based meat will not be a thing, IMO. We will look back at this phase as a modern Tulip Mania kinda thing.
The unknown, and potential silver lining, is IF there are scientific learnings from this boondoggle that will end up being useful in other ways. Maybe asking when cell-based meat will be commercially available is the wrong question.
Maybe the better question is, when these cell-based meat companies close up shop, how will their scientific learnings be captured and applied elsewhere?
So, anyway....I'm bullish on the future of animal protein.
I think like there's two big questions lab grown meat has not answered:
1) I've heard people say that it would eventually undercut the price of conventional meat. However, once the technical challenges were overcome, the game would become whether these manufacturers could create the glucose the cell's need to grow cheaper than the animal could. I don't see how this happens for ruminant derived meat as with few economic alternative uses, pasture rents would eventually drop as downward demand pressure was applied to the beef and lamb supply chains. So lab grown meat could lower cattle and sheep prices, but the predictions of total displacement seem overstated.
2) If you're trying to grow a whole muscle, why target meat? It's not an exaggeration to say that the biomedical uses of growing a muscle, particularly if you could take someone's own cells to create a rejection free transplant, would have a value hundreds or thousands of times the equivalent animal muscle. It seems like if grown meat ever comes into commercial viability it would make sense to be piggybacking off of advancements in biomedical research.
Apparently there were enough years between the pink slime debacle and lab based meat articles, that a generation forgot where we are going in the future with protein!
I can still remember the Jetson’s and the protein pills of that era. Flying cars are a thing for only a few as well, most of those folks are on the left coast also!
Sorry for the bias, but I really like your mind stimulating articles!
Thanks again,
Jim