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    21 min read

    [S2:Ep #1] Startling upcoming next gen proteins

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    In a dynamic and insightful discussion hosted by Tommaso Di Bartolo, founding partner of Awesm Ventures, panelists Ron Shigeta, PhD, an expert, early investor in alt-proteins, Walt Duflock, SVG venture executive innovation leader, and Joshua Nixon, co-founder and CTO of Prime Roots, highlight a broad range of next gen proteins as well as opportunities and challenges ahead for entrepreneurs in the industry.

    Virtual Coffee: A Curated panel of industry fellows to discuss how to future-proof traditional markets

     

    In Season 2, recognized world-class Researchers, Scientists, Faculty Members, Senior Executives, Experts, Chefs, Investors and Entrepreneurs from around the globe, engage in strategic exchange of views and share startling intel on viable transformative innovation in Agriculture, Food and Beverage, zooming in the next gen proteins space. 
     

    [Industry Fellows] Virtual Coffee: S2:E1 

    avatar-1 

    WALT 

    Joshua 

    ERon Shigeta, PhD
    Walt Duflock
    Joshua Nixon
    Investor, Alix Venture Capital - Innovative Healthcare, SynBio and Sequencing Platforms
    Vice President of Innovation at Western
    Growers
    Co-Founder and CTO at Prime Roots
     

     

    Host

    TOMMASO-AVATAR
     
    Serial entrepreneur w/ 2 exits, author, advisor, faculty, investor.
     
    http:///tommasodibartolo.com 
    Tommaso Di Bartolo
     
     

     

     

    Key points: 

    • The relation of the traditional and the alternative protein
    • How the pandemic impacted the alternative protein market
    • The future of alternative protein consumption
    • How to provide the plant base food to everyone
    • 3D printing: a tool that can make manufacturing faster

     

     

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    Episode's 🔖 Transcription

    Tommaso: Good morning everybody, good morning from San Francisco. Let’s start this Virtual Coffee with a topic on alternative protein.

     

    The relationship between the tradition producers and alternative protein producers  

    Tommaso: Walt, at 25 years of experience in high tech plus, fifth generation of family farmer so a lot has changed in alternative protein. Every day, we see more acceptance. How should traditional protein producers view alternative protein producers? It's more friendly or more adverse or both?

     

    Walt: I think the traditional protein people are currently viewing alternative producers as both, and the answer is it depends, right? The friend view is if you think about the protein producers that have a quality brand, and have access to additional distribution partners that allow them to leverage the alternative protein brands and already get to market efficiently, you can add alternative proteins as a plus one to that relationship, that can be a win for both sides. So that new product just creates a revenue opportunity for an existing channel and a partner. 


    The other view is when the protein producer doesn't have a quality brand. So they see alternative proteins fighting for that same dollar, and in that case, it's more of a foe relationship. And I think they're more concerned about what alternative proteins can do. Because if you see it as a zero sum game, either you win or alternative protein wins. And you don't have much of a distribution channel or leverage, it's naturally going to fall into that category.

    And it's going to be interesting, because I think it's the ones that see it as friendly, are going to probably tend to do more partnerships, more testing and more trialing and probably have more success because they have that brand. The ones without brands may just be a foe relationship for the foreseeable future. 


    The future beyond the common alternative protein  

     

    Tommaso: Ron, You have been involved with early stage startups as an alternative protein, what do you think is going to happen? Right now we talk about meat, eggs and fish. Right? How do you see the future, beyond that? 

     

    Ron: I think the alternative protein movement in terms of just creating protein, as an alternative to meat for food has been, is doing very well. But I think that one of the things that people don't understand is that there's been a long term promise of food that, you know, food and health are in, very much intertwined. It's been, for the past 30 years, very intensely, a promise to have better health from the food. And the customers are starting to hear all of these and certainly I've seen that the food is actually delivering that.

    And as biology becomes much more, all of the knowledge that we've gained from all these hundreds of years of academic research, is now starting to be something that we can actually incorporate into the food, and the new alternative proteins and the technology will allow us to integrate that knowledge into how we make the food, then that promise will continue to be actually starting to be realized. And I think that's the real opportunity in the next maybe 30-50 years.

    Just to mention something about what Walt said, is that even in the early days, when we were talking about Clara Foods, which was six years ago, both of them were friends immediately. And I think that's partly because the people, whom see alternative protein as a foe, see the problems coming from outside, but people who is easy to see that the consumers are being driven to this from problems that are internal the food system already, I think they are much more open to working with these companies, because they feel that they have to resolve their issues.

     

    The perspective of the next generation

     

    Tommaso: Josh, in the perspective of a successful founder and scientist entrepreneurs, what is essential in your point of view regarding alternative protein, if we think of the future backward, what's the outlook like, what's important there?

     

    Josh: I have a hypothesis that there will be a generational shift, as someone who grew up with both alternative protein and meat, I think it's created a certain level of openness. And then you have to ask the question: “What does a child who was raised on mostly alternative protein and maybe some exposure to meat and seafood at a young age, where do they grow up? Where do their perceptions lie? And what do they end up craving?” and another question is “How do you look at the food you were raised with, which you interpret as comforting food, affect your final tastes when you become the oldest purchasing decision maker in life?”. 

     

    I think when we look past the 30 year mark, we should be looking towards how people who are new mothers and new fathers are considering raising their children today, how are they going to feed their children? And then what ripple effect is that going to have down the line of their tastes? 

     

    I think that as things are on the market and available, and you are able to be exposed to them at a young age, I think it completely changes how you perceive them when you become older. I think that right now we're seeing an increased openness to the alternatives and it's for precisely that reason is a large portion of it.

    The millennials and Generation Z have a very different exposure to these products of a young age on top of the environmental motivation and social concerns that are very shared amongst that generation. These young people are going to grow up one day, and I think at that point, we may start to see a shift away from meat and seafood. Even as a flavor palette that people are interested in, maybe not entirely, but at least that possibility starts to become open where it might seem foreign today.

    The impact of the pandemic in the supplies’ chains

    Tommaso: Walt, about the double down on supply chain challenges, how is it changing terms of supply chain with alternative protein? What's impacting traditional protein producers? And what will especially, most probably change, following this situation in this pandemic, what are your thoughts?

     

    Walt: We've found out in the last few weeks that we had two very separate food supply chains, there's a supply chain that goes from the farm and to the grocery store. And another one that goes from the farm to the restaurant and food service business. And, it turns out that, the farming friends that I have, they generally optimize for one or the other, they get really good at doing food service, or they get really good at doing the grocery stores, so when we had to shut down all the restaurants, as part of this pandemic lockdown, we had a massive impact on that second set of food supply chain activity. 

     

    And so, all of a sudden, you see situations where you've got food that is going to go to waste because it's perishable or it's livestock, and it's got a shelf life and its supply chain stuff, so how do you fix that, when thrust upon you overnight?. What we found out is that the supply chain that is optimized for fresh, just in time delivery of food and livestock is under massive pressure when something unexpected at scale shows up.

    So what comes out of this is the notion that a lot of chains are agriculturally social distancing, they don't know a lot of farmers, and they tend to have simplified solutions like: “well, why can't they just pivot and go direct to the consumer?” The reality is the packaging the requirements around disclosure, the size going from pallets to small boxes, it's super hard. 

     

    And you know that to go direct to consumers takes to build a Google search engine presence or a social media presence, the notion that farming operations could just turn that on on a dime. That's a big ask, and it's quite honestly not going to happen. I think the entrepreneurs, the innovators, they're going to come up with some more resilient supply chain options. We've seen USDA enable $3 billion in food buys to get food from food waste into food banks, California doing the same type of stuff and the individual entrepreneurs build sites that can take this food waste. 

     

    And so I think that's what you hope comes out of this, a more resilient supply chain, that if this happens again, we're ready and adaptable because a lot of a lot of weaknesses got exposed the last couple of weeks.

    How the bigger companies deal with alternative protein

    Tommaso: Ron, beyond your startups investment, tell us what has been successful or unsuccessful, and for those larger companies when they handle alternative protein.

     

    Ron: There's two sides of that, one of them is just going back and alternative proteins aren't new, soy is a meat substitute that has been out there since the 80s. But a lot of new things, it's also old. One of my favorites is Kentucky Fried Chicken, KFC, a few years ago, because chicken prices were rising, they were trying to figure out how to fill in the low end of their meal and they produced this thing called a ‘bowl’. And so they just started mixing in the starch mashed potatoes of the corn with the chicken, with that, they could afford to make a $4 bowl.

     

    But now the bowl is relegated to the lower right hand corner and small type in the driving menu. And those are the kind of challenges everybody's facing, because the price of the meat is rising faster, but food is promised to get cheaper over most of our lives, especially if you're over 30 years, you expect to get cheaper every year. And so KFC is fighting that, they didn't come up with a solution to that problem, but they started putting out basically plant based chicken nuggets, and they're selling very well. 

     

    I'll give you one more example, last year, Quaker Oats, the number one brand in North America maybe even in the Western Hemisphere, made an oak beverage. Then they had to pull back because it was not a successful rollout. In the next few years, a lot of big companies will have problems making that fit work, they just can't seem to connect to the right message.


    The biggest challenge of becoming a entrepreneur in alternative protein 

    Tommaso: Josh, as an entrepreneur in alternative protein, what is the biggest barrier of entry that you guys are facing? What's the biggest challenges? 

     

    Josh: I think the fundamental choice you're faced with is how innovative do you want to be right? You can use the technology of the 80s, like soy and textured vegetable proteins, so you can get a product out very quickly. You can get a product out pretty simply that way, but haven't done much new. 

     

    And so when you start to try to do something new and innovative, there's going to be manufacturing challenges, because you're going to need to do things a little bit differently. So you can work around so you can find creative solutions. But I think there's a balance for startups to have innovation and speed to market. 

     

    So people are white labeling and rebranding existing products, they are trying to genetically modify and create new protein, animal proteins inside of yeast cells, you have this large spectrum of innovation and costs. If you're going to try and do something pretty complicated, it's going to take a lot to get there and there's some risk inherent in that. 

     

    In terms of quality of the food you're able to offer. And I think that's a choice that you find yourself faced with quite often.

     

    As a scientist, I can have fun doing R&D and I can apply to create new things. But at the end of the day, it has to provide value to the customer. And I think there's always a challenge, you know, in a startup, you have limited resources somewhere.


    Personalization influences the alternative protein 

     

    Tommaso: Josh, how personalization could affect the alternative protein state in the future such as individual nutrition needsor protein origin preference vegetarian or non? 

     

    Josh: I think the biggest barrier to personalization in terms of food personalized is through mixing different foods in your diet, you can create quite a bit of personalization that way. But in terms of something that comes packaged to you in a personalized fashion, I think the biggest barrier there has been cost, because in traditional manufacturing methods, the way that we make costs go down is that we mechanize the process in ways that tend to produce a consistent output. 

     

    Also, you want to have a consistent quality of food, so if you're going to play with a lot of different variables, you need to know that all possible combinations that are valid, come out with something that's delicious and has good shelf life. I think that the opportunities for food personalization, I would expect to see them first in drinks, where the bottling line is a place that you could much more easily create a mixture of ingredients that would retain stability, rather than in more solid foods, where I think that'd be much more difficult. And so I think there exists some opportunity to start creating a personalized flavor and nutrition. But I don't think the cost would necessarily be achieved well, in a packaged product, unless it's a fluid product, at least given current methods that I'm aware of.

     

    Walt: Not directly to personalization, but just to make them carry on Josh's point on the fluids. It's interesting, for example the milk industry, core milk has gone down in demand for decades and it's a growth category for the new milks and is a fading category for the old milks. And I think that's you know, that's some of the opportunity for the alternative proteins is to get that better messaging better packaging. 

     

    Tommaso: When you deal with innovation, you have always said the big challenge is finding a product market fit right. And then changing the behavior if you talk bits and bytes, but they are not turn ative on the genitive protein side, you really hear a lot more about the positioning and the packaging as really the marketing activities, because the product looks the same or should also have a similar similar aspects as the non alternative protein. But marketing has a major role to play. 

     

    How 3D printing will help the market

    Tommaso: Ron, some companies are turning to 3D printing. This technology is still in our in the R&D phase, forward, it could open positive possibilities for neat customization. Do you see companies and individuals creating their own custom alternative meet in the future. What are your thoughts on it?

     

    Ron: I think that customization or product is a very deep question, there are people who are trying to customize meals that actually have a lower glycemic response, for instance, but it turns out that you can't just buy that in the package. If it had, it would already be on the market. 

     

    My prediction is that 3D printing will be used for R&D and prototyping. But when you start manufacturing meat, you're going to find a more efficient way to utilize that, using what you've learned from that. I can think of several ways to manufacture 3D printing templates, and like manufacturing meat, like maybe 50 times faster. 


    The best solution for the new proteins to arrive at the base of the food pyramid

    Tommaso: Josh, there are a billion people globally who are at the base of the pyramid and protein density. How do we all use our innovation to provide them with affordable proteins?

     

    Josh: From a technical perspective, animals aren't a very efficient way to get protein. They can't synthesize their own amino acids, there's always a conversion efficiency, there's a lot of waste in terms of parts of the animal that are grown that we can't eat. And so when we look at it that way, there's some clear benefits that should result in cost and the plant based world relative to analog culture. 

     

    But why is it that plant based meats have been so expensive today? I think there's two big reasons. One, because you can. People are excited about these products, they're willing to buy them and getting a higher profit margin left, these companies grow more quickly. 

    And then, the other answer is because the vast majority of the market is in animal protein, you know, plant based is a small part of the total picture today. And we're talking about an industry here where economies of scale are everything, you know, right now with Coronavirus, we're seeing that come back to bite some of the big meat producers because they centralized into so few meat packing facilities. Any one of those meatpacking facilities is at a bigger scale than the entire alternative protein industry in America today. 

     

    And really, the first step is going to be getting plant based protein up to that competitive scale. And when we get there, I'm thoroughly convinced that from a technical perspective, the cost will continue to go down. And we'll be able to provide protein at a much more scalable and a better cost. We just need to be doing this with bigger equipment, bigger facilities, and bigger supply chains.

     

    Ron: I think over time, the alternative proteins do have some economic advantages when they get to scale. Now, I don't think that's a trivial exercise to get to scale. We hear so much about the world challenge and continue to grow enough food, but we've learned how to build food at scale. The problem is not growing more food, the problem is distributing the food effectively.

     

    Feeding the world is not a farm problem, it is a distribution problem. You can use alternative or conventional proteins but if you don't have a good way to get it to the people that are not adequately protein, it doesn't matter how much you make. It's got to be a supply chain improvement over time that really solves this problem. 


    Tommaso:
    Awesome. Well, thank you so much Walt, Josh and Ron we could chat for hours about that. But the real purpose here was to create and provoke, share some information and provoke some thoughts for our audience. I would like to thank you and end on my preferred quote: “Don't forget where you come from your cooperation, but where you come from, cannot limit you where you want to go.”Once again, thank you to our panelists. Stay tuned. Next week.

     

    Disclaimer: The views and opinions expressed in this Podcast as well as in its transcript are those of the participant guest speakers and do not necessarily reflect the official policy or position of proteinX or its partners and sponsors. In the same way, the participant speakers do not endorse any products, services, brands, practices, professionals or views other than what they specifically and directly expressed by verbalizing at the time the episode was recorded. In addition, transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio file (podcast) before ever quoting in print.

     

    And this series is brought you by:

    Awesm Ventures: A VC that unlike others, invests exclusively with and on behalf of corporations in fragmented industries. http://www.awesm.ventures  

    SiliconVal.ly: The Innovation institute focused on helping future-proof corporations in traditional industries. http://www.siliconval.ly .

     

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