Milk without the cow – what’s the outlook for animal-free dairy?

M

att Gibson is on a mission. The CEO of New Culture Food hopes one day his company and others like it can “eventually replace the entire global dairy market”.
What he hopes to replace the global dairy market with are so-called animal-free dairy products.

It’s going to be a challenge to say the least but the US-based company is one of a number looking to disrupt one of the most traditional and long-established food supply chains.
Animal-free dairy – as distinct from plant-based dairy and the cell-based niche using animal cells – is a nascent sector. Several start-ups have been launched and an increasing amount of investment is being ploughed into the niche. However, to date, few products have hit the market.

Nevertheless, some industry observers believe animal-free dairy could be set to enjoy turbo-charged growth over the next few years in the same way sales of oat milk exploded.

Animal-free dairy is created through a fermentation process like brewing beer. The yeast in the fermentation tanks has been engineered to produce dairy proteins, which are later extracted and then turned into dairy products like ice cream and cheese.

According to Jack Bobo, the CEO of food foresight company Futurity, there are two main drivers behind the production of animal-free dairy products – the environment and animal welfare. “Many of the founders of these companies are motivated by moral or ethical considerations related to animal welfare, as well as a desire to reduce the environmental footprint.”

However, Bobo adds a note of caution. He points out “the final environmental picture for these products won’t come into focus until the products are produced at scale and a full life-cycle analysis is completed”.

There aren’t enough examples of animal-free dairy products in circulation to provide an accurate insight into their environmental footprint. That said, despite the current lack of evidence, proponents argue animal-free dairy products are better for the environment as they don’t rely on industrialised animal farming.

In addition to the purported environmental benefits, Bobo says animal-free dairy products are a closer approximation to the taste of traditional dairy than other alternatives because they contain real milk proteins, albeit not the full range of proteins in conventional milk products.

It’s a view shared by Gibson, whose company’s first product is an animal-free mozzarella cheese developed specifically for pizza. “Current plant-based cheeses don’t come anywhere close to the product experience a general consumer wants from their cheese,” he argues.

“If we think about plant-based mozzarella, it doesn’t melt, stretch, feel and taste like cheese. Plant-based cheeses lack the dairy proteins that provide all the cheese characteristics we love. Animal-free dairy allows us to make cheeses that are indistinguishable from current animal-derived cheeses in the experience of consuming them, while also having all the upside of plant-based cheeses – lactose-free, sustainable, cholesterol-free and animal-free.”

Germany-based Formo, formerly known as LegenDairy Foods, spied a similar gap in the market for its range of animal-free dairy cheese having identified cheese alternatives as the “most pressing consumer pain-point” in the plant-based sector, according to a company spokesperson.

“Consumer research shows that plant-based cheeses significantly underperform in comparison to plant-based milk or yogurt in the overall plant-based dairy category,” says the spokesperson. “Because plant-based proteins do not have the same functionality as milk proteins, we see our biggest potential for positive impact in creating real, delicious cheese without using animals.”

The Formo spokesperson argues the number one reason consumers eat plant-based food is for health – but the principal reason people shy away from the products is taste. “The current market offerings show that plant-based cheeses cannot compete with their animal-based counterparts in terms of nutritional profile, texture, and taste. Our cheeses can finally satisfy these consumer needs, while using substantially less resources, creating less emissions and being 100% animal-free.”

Another company that believes it can rise to the challenge of creating animal-free dairy foods that look, feel, smell and taste as good as traditional products is Israel-based start-up Imagindairy.

Eyal Afergan, co-founder and CEO of Imagindairy, says the company was co-founded by a team of “prominent experts” in microbiology, computational systems and biotechnology with the support of Israel-based The Kitchen FoodTech Hub, set up by local food major Strauss Group.

“Imagindairy combines multidisciplinary expertise to address the industry’s bottleneck to develop commercially-viable, animal-free dairy, protein-based products from microflora by integrating proprietary machine-learning technology with system and synthetic biology to maximise milk’s protein production,” he explains.

Afergan says Imagindairy’s approach enables it to produce milk proteins identical to the ones in cow’s milk and the company can therefore produce a variety of dairy foods, including new products he claims it’s not currently possible to create with the “traditional production methodologies” of conventional dairy. Imagindairy expects to launch its first product by the last quarter of 2023, although the company says it cannot confirm at this stage what the food would be.

To date, many of the animal-free dairy products launched or in development are cheese. That’s partly because animal-free dairy can “fill the gap between plant-based and animal-derived cheese”, Gibson at New Culture argues.

In 2019, US firm The Urgent Company launched an animal-free ice cream under the Brave Robot brand.  According to the Brave Robot website, current stockists include Harris Teeter, Safeway and Sprouts Farmers Market.

“While the proteins can be used for other products, it is more expensive at the moment to produce products in this manner, so it makes sense to focus on premium branded products [like cheese and ice cream] rather than fluid milk, which tends to be sold as a commodity and is a shrinking market,” Bobo asserts.

He says animal-free dairy has become much more crowded over the last couple of years and anticipates it becoming busier as more start-ups attract funding, scale-up and bring their products to market.

There has been a flurry of investment into animal-free dairy companies in recent quarters. At the start of this year, Israeli-based animal-free start-up Remilk announced a Series B funding round worth US$120m.  The fresh investment followed a Series A round in December 2020 backed by investors including German cheese producer Hochland and Israel’s largest food group, Tnuva.

In September, Formo secured funding of $50m. A month later, US firm Perfect Day, which is seen as a leader in this field, pocketed $350m in funds with Walt Disney chairman Bob Iger joining the funding round.

Perfect Day has secured $750m in funding since its creation in 2014. Its co-founders, Ryan Pandya and Perumal Gandhi, are also two of the men behind The Urgent Company. In December, The Urgent Company acquired US ice-cream maker Coolhaus.  The Urgent Company plans to team its Brave Robot brand with Coolhaus to launch a joint animal-free ice cream with a “key national retail partner” this year.

Imagindairy’s Afergan lists tests for businesses in the field as “scale-up, downstream process, formulation, and consumer acceptance” but says “the biggest challenge of using precision fermentation to produce milk proteins is the high production cost”. He adds: “Nobody would buy a bottle of milk for $50 or even for $15. Therefore, cost-effective production costs are the key to a real change in the way we consume dairy products.”

For Gibson, scaling up is the biggest challenge facing creators of animal-free dairy products and says companies like his own “need to collectively scale to magnitudes we haven’t yet seen”.

It’s still very early days for animal-free dairy so it is difficult to predict what’s going to happen in terms of product development and whether consumers will ultimately embrace the products.

Bobo believes animal-free dairy has the potential to grow significantly but underlines “the market size may ultimately depend on the ability of the industry to scale at an affordable price”. He says the focus of companies in the sector is to compete with traditional dairy products but adds: “It’s worth keeping in mind that the rapid growth of oat milk has generally come at the expense of other plant-based dairy alternatives. Early adopters of these products are likely to be consumers who are already avoiding traditional dairy. To gain mainstream acceptance, they will need to appeal to a broader swathe of consumers”.

There are more companies queuing up to test consumer demand. Formo is aiming to launch its first products by 2023. New Culture is still at the pre-commercial stage and anticipates soft-launching a product later this year into a few select restaurants and then expanding into more operators from 2023 onwards. “We are targeting foodservice as our first market and will be a co-branded product on many pizzeria menus,” says Gibson.

New Culture received financial backing from Kraft Heinz three years ago and, in November last year, attracted investment from two other major industry players. US agri-food heavyweight ADM and Germany-based packaged-food manufacturer Dr. Oetker took part in a Series A funding round worth $25m.

Another packaged-food major has made a different kind of move. In November, General Mills announced the test launch of a cream-cheese alternative made using precision fermentation. The product, sold under the brand Bold Cultr, uses a protein from Perfect Day and, General Mills said, are “aimed at consumers looking for cheese alternatives that have the same satisfying taste and texture of dairy, but without the animal”. The products are being sold at selected Hy-Vee stores in General Mills’ home state of Minnesota.

Replacing the entire global dairy market with animal-free dairy is not going to happen overnight. Change will happen gradually but Gibson and Afergan are confident that change is coming. Afergan says: “In 50 years, our grandchildren won’t believe that we consumed milk from cows.”