Mega Factories Target Cow-Free Milk and Cheese to Plug Shortage

Agnieszka de Sousa, Bloomberg News

(Bloomberg) -- A new generation of alternative proteins promises to win over skeptical consumers by making cow-free dairy taste like the real thing. The trouble is there’s a dearth of factories needed to make them.

The shortage is being plugged by startups building facilities that cater to precision fermentation, a technology cultivating microbes to produce milk proteins found in animal products. That will mark a step shift in replacing the aging pharmaceutical sites that serve as production plants for new foods with large-scale manufacturing.

“The facilities weren’t built for that,” said Mark Warner, co-founder of Liberation Labs, which announced this week that it’s building a factory in Richmond, Indiana. “The analogy we like to use is, there’s all this new software out there but we have a bunch of old computers it’s running on.”

As investors cut back on funding and shoppers shun plant-based burgers or sausages, precision fermentation is gaining more attention as a way to revive the fortunes of alternative proteins and curb the environmental footprint of livestock. Beyond Meat Inc. — the poster company for the movement — may be struggling, but a new wave of startups is looking to take the industry to the next level.

Liberation Labs raised $20 million of funding last month to build the factory in, Indiana, which should start commercial production by the end of 2024. The firm, whose investors include Agronomics, Siddhi Capital and CPT Capital, wants to cater for companies that develop and produce new proteins but don’t have their own manufacturing capacity.

Less known than plant-based and cell-based animal protein, precision fermentation companies have a chance to address the underwhelming response to existing offerings.

“Many products simply aren’t meeting the expectations of consumers on taste, nutrition, or price,” said Rosie Wardle, partner at Synthesis Capital which invests in alternative protein companies. “New technologies are needed and precision fermentation technology has high potential.”

Precision fermentation companies include The EVERY Company and Perfect Day Inc., which makes milk proteins and has been working with food giants like Nestle SA and Starbucks Corp.

“We now have multiple B2B startups emerging across the entire value chain from start to finish,” Wardle said.