Subject: Spotlight : Are Cosmetics the future of Cultivated Meat?

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No, we are not talking about adding extensions to cows’ eyelashes! But there may be real merit in pausing a bit on this apparently crazy idea.

 

STRONG MOMENTUM ON THE HEELS OF REGULATORY APPROVALS

In the wake of the recent FDA approval of cell cultured chicken from Upside Foods – a premiere in the US – it’s evident that there is increasing excitement in the sector. This announcement is sending a strong signal of encouragement to founders and investors who have taken the bold bet of investing time and capital in companies and technologies without much certainty as to when and whether these products would be deemed fit for consumption in sizeable markets beyond Singapore and Qatar.


And whilst more than 25 countries are now actively engaged in ‘cracking’ cultured meat, through a web of 130+ start-ups, it is still the US that is taking the lead. It’s not just a matter of number of start-ups there – if the US are #1, Europe is closely following suit. The sheer size of the North American market makes the US the preferred destination for commercialisation.

But as many of you would have heard at the Future Food Asia conference this June, there are still significant hurdles to overcome to bring these technologies to scale. Starting with engineering challenges, coupled with a big question mark on consumer acceptance in the end. No doubt that some inventive people will eventually figure a few things out, yet others are flagging that there is no getting away from biological limitations, notably how densely cells can be grown - a key parameter for economic viability of cell culture for meat.

THE PRICE PRESSURE IS REAL

Admittedly, to have a material effect on the meat value chain, cell cultured meat will need to reach price parity not just with the scrumptious grass-fed, carbon neutral beef from Australia or New Zealand, but also with cheaper meats, and notably ground meat that is often processed as a by-product from whole cuts. This price pressure is real. Displacing players who have optimized operations to the last digit, in an industry where externalities such as carbon emissions are not priced in the product (yet), is going to be no small feat.

 

But true entrepreneurs need more to be discouraged. And with the economic outlook cooling, reflected in a 47% year-on-year drop in investment flows to APAC foodtech and agtech startups, reaching just $5.3 billion in the first half of 2022, business common sense is driving many entrepreneurs from the first generation of cultured meat start-ups to look for go-to-market strategies within a narrower time horizon.

EMERGING OPPORTUNITY IN COSMETICS

This is where opportunities in cosmetics ingredients and personal care at-large kick in. Seen sometimes as the Goldilocks of target markets, more accessible than pharmaceutical ingredients from a regulatory standpoint, and commanding a much higher price than meat, it may not be the end destination for these start-ups, but a much welcome milestone for startups whose investors are now demanding focus on ‘sustainable growth’.


Cosmetics is no easy market to penetrate, but volumes required can accompany the startup in its scale-up journey, and prices in the low to high hundreds of dollars/ kg offer much more leeway for sub-scale operations than edible proteins where we are talking about a few dollars / kg. While some start-ups are pondering over it, some enterprising ones are already dedicating R&D and commercial resources to it.


One of the first to make a foray is Avant Meats, based in Hong Kong and Singapore, with Zellulin, the world’s first cell-based functional protein ingredient for skincare.  Offering anti-aging qualities that cosmetic and skincare firms desire from collagen, it is produced directly from fish cells in a traceable controlled environment.


Likewise, Japanese cultured meat start up IntegriCulture has developed cell based egg protein CELLAMENT™ for skincare applications. And there will be more that follow.

BIOLOGY GALORE

Interestingly, in doing so, some will compete with fellow entrepreneurs who have opted for synthetic biology and precision fermentation to produce such compounds. We are seeing many players that are accelerating the beauty industry’s transition from industrial chemistry to a more regenerative era - driven by biology to create sustainable, previously inaccessible ingredients for the industry at large as well as new brands and products.

 

For example, Arcaea, a company launched on the Ginkgo Bioworks platform is one of them. Its Expressive Biology platform, and has managed to attract funding from leaders from the cosmetics and the food industry, such as Chanel and Givaudan.

DISTRACTION OR DIRECTION?

If you judge a startup by its agility to pivot then this is undoubtedly a smart move. The cosmetics industry deserves as much attention as the others when it comes to the toll it takes on the environment. It has been called out for the excessive packaging produced every year which is tough to recycle and ends up in landfills and oceans, for their use of ingredients sourced in ways that are harmful to humans, animals, and the planet.

 

But is it a distraction when it comes to fixing the food system? Or a realistic attempt to let underlying technologies mature to eventually be repurposed for a much more margin-tight industry?

 

We have heard both opinions voiced by investors. Some would favour laser-sharp strategies, other value start-ups that are able to hedge their bets. In the end, another challenge awaits: that of human resources. As different skill sets are required to develop these 2 streams of business, entrepreneurs are faced with the task of allocating resources wisely and hiring new talents.

WHAT DO YOU THINK?

We are already working passionately on the 7th edition of Future Food Asia to be held 17-18 May 2023.

If you have liked this topic, and want to voice your opinion, please drop us a line at ffaa@idcapital.com.sg. Controversial opinions most welcome!


More on this coming your way soon!

ID Capital, Shaw Centre, #24-05, 228208, Singapore, Singapore

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