Something is happening in the feed industry. In the last six months, three feed innovator companies, Ynsect, Calysta and Protix, have raised collectively over $100 million to expand their businesses. On 20 June, Forum for the Future brought together representatives of all three, and also a wide range of stakeholders connected to feed, as part of our Feed Compass: a project to building demand for sustainable feed and develop a tool to assess the sustainability of different animal feeds. This gave us the chance to ask Lynsey Wenger, CFO and CSO of Calysta, Antoine Hubert, CEO of Ynsect and Roel Boersma, Sales Director of Protix, about their businesses, the current challenges and opportunities in the feed industry, and their thoughts on the future of animal feed.
Could you give a short overview of your business?
Lynsey Wenger, Calysta: Calysta, is based in California and developed FeedKind: a nutritious and sustainable alternative feed ingredient for fish, livestock and pets. Feedkind is a single cell protein produced via a proprietary natural fermentation of methane. Currently, we target mainly the aquaculture sector in Europe, Japan, Southeast Asia and China.
Antoine Hubert, Ynsect: Our company farms and processes mealworm larvae in a fully automated, commercial scale plant outside Paris, with larger factory facilities under development. Ynsect’s current target markets are pet food and aquaculture, with products having tremendous effects on fish growth and health. Together with Protix and other colleagues, we’re playing a leading role in the IPIFF (International Platform of Insects for Feed and Food) coalition to campaign against regulation barriers for the industry and to increase the awareness around insects as animal feed, and also as human food.
Roel Boersma, Protix: Protix was founded in 2009 by two engineers to produce feed and fertilizer products from insects fed on the local leftover streams from the food and feed industry. Protix has a fully automated and commercial production facility in the Netherlands and is constructing its second one. The company is feeding its insect protein to pets and soon other animals like fish. Its insect lipids are used in piglet diets. So far for the pigs, we are seeing better growth rates, lower mortality and a reduced need for antibiotics when insect lipids are included in the diet.
Why is innovation needed in the feed industry?
Roel Boersma, Protix: Currently, one third of fish caught is converted into fishmeal. The marine environment is constantly under pressure due to overfishing. This is unnecessary because we can produce better alternatives. Another major feed ingredient is soy. High demand leads to huge deforestation, prices are volatile, and the majority of the production takes place in three countries only. That means high dependency risks for non-producing importers, especially because large soy-production areas, such as California, are vulnerable to drought and other extreme climate events.
Lynsey Wenger, Calysta: Feed is a complex issue. In addition to considering the broad impact of climate change, it can also involve tough decisions as to how to make the most efficient use of limited land and water resources as we meet the growing demand for animal protein. Feed arguably remains the key bottleneck in creating a responsible and sustainable animal protein system given its current reliance on feed primarily derived from wild caught fish and terrestrial crops. Moreover, the market, financial, operational, regulatory, and even reputational risks in the current supply chain can be significant.
An alternative such as FeedKind, for example, is a nutritious, highly digestible protein source which can reduce land use significantly - as the only land needed is for the production plant, while it is also produced from a low cost, non-sugar based feedstock which does not compete with the human food chain. The need to augment and diversify the current portfolio of available feed choices is real, and demand is significant enough to merit a number of new, innovative alternatives.
Antoine Hubert, Ynsect: Feed is associated with significant economic, social and environmental issues. The main driver is the lack of available ingredients to supply the actual and soaring need of proteins, expected to grow beyond 50% in next 30 years. Insect proteins quality is as good as fish meal and can then complete the declining and not sufficient offer of fish meal to address in particular increasing demand of fish feed in the next decades.
What challenges have you had to overcome before starting to scale?
Lynsey Wenger, Calysta: While feed represents a large and growing market – in 2016, it is estimated that global feed production exceeded one billion tonnes for the first time -- individual market segments are nuanced, with nutritional requirements varying notably from livestock, to poultry, to fish, to pets. Regardless, cost remains the major driver for feed purchasing decisions, with premium pricing generally limited to high performing feed ingredients with a demonstrated ability to promote key features including strong growth or good health. We have initially targeted aquaculture specifically because our FeedKind protein is particularly well-suited for the dietary needs of this higher value market segment and thus can be cost competitive based upon the benefits our product offers. In addition, to achieve commercial scale in a cost-competitive manner, while also navigating complex end market dynamics, we have partnered with experienced, well-capitalized strategics such as Cargill, Mitsui and Temasek who can also help facilitate market access by virtue of their established distribution networks and customer relationships.
Roel Boersma, Protix: The biggest challenge some years ago, was to develop the technology and process parameters that ensured stable volumes of insects at a set high quality. In parallel, while introducing continuous improvements, our production cost went down to make us competitive in the markets that we serve. Recently, we started a joint venture with Buhler. Buhler is a technology company that will enable us to scale fast; not only with new production facilities for Protix but also for third parties. Buhler will manage the engineering and project execution while Protix brings in the insect-specific insights and IP. Jointly we plan to convert food waste into insect biomass all over the world.
Antoine Hubert, Ynsect: For the insect industry, EU regulations were initially an obstacle. They forbad the use of animal parts, including insects, as feed for other animals. Collaboratively with other insect businesses, Protix and Ynsect founded the IPIFF. This is an association that lobbies for the adaptation of the regulations and educates stakeholders on the opportunities for insects. This year we won a significant battle: from July 2017, insects can now be used in aquaculture. It is also possible already to feed alive insects to chickens and piglets, but we still aim to liberalize the regulations, as only a limited part of the potential European market can be targeted now.
How do you ensure no animal welfare issues, especially with the insect products?
Roel Boersma, Protix: Our main insect species, the Hermetia Illucens or ‘Black Soldier Fly’ in nature prefers to live together with many, because it provides them a micro-climate and optimal conditions for food consumption. So intensive farming in itself is not that strange for insects. However, within our production environment, Protix adheres to its animal welfare statement which includes set procedures for all our processes, including killing the insects (eg. first bringing them into hibernation and then ultra-fast grinding).
Antoine Hubert, Ynsect: We try to work openly and transparently, engaging other NGOs for feedback on our processes. We have selected mealworm which is a gregarious species: they feel more comfortable when close to each other. Other animals need space or start fighting otherwise, but for some insects like mealworm being close together is their protection mechanism and reduces their stress.
How do you get potential customers engaged with your product and create market acceptance?
Lynsey Wenger, Calysta: We plan to work closely with our customers and partners as we enter the market. The gold standard in the industry is currently fishmeal, and through intensive R&D activities and trials, we have shown that our product has similar qualities. The initial results are very positive and suggest FeedKind may offer added benefits relative to fishmeal on important metrics such as feed conversion ratio, for example, which translate directly to the customers’ bottom-line.
Antoine Hubert, Ynsect: For insects it is important to engage with all the food value chain, until the retailers. These often have even stricter specifications for animal feed than national or EU regulations. Now that the EU regulations allow insects to be used in aquaculture feed, IPIFF members are working to engage retailers to accept this as well.
Roel Boersma, Protix: In Protix we try to show the benefits of our insects by practical use. Recently we developed ‘Primeval Eggs’. These eggs are produced by chickens that are only fed with local grains and GMP+ certified live insects: all the soy is removed from the feed. The studies show that the chickens are healthier, live longer and experience less stress. Instead of picking at each other, they spend more time looking for the insects.
What is needed to create a sustainable future of animal feed?
Lynsey Wenger, Calysta: Business as usual is not sustainable, so we need change, we need to push the industry to take the long-term view. A strong focus on innovation is essential to meet the dramatic expected growth in market demand as the world’s population grows to nearly 10 billion by mid-century.
Antoine Hubert, Ynsect: More awareness around the topic and market acceptance for alternatives is essential to scale more sustainable options. Industry associations can help us to lobby for the new solutions and make companies and governments aware of the possibilities.
Roel Boersma, Protix: Aquaculture and pet food will show that changes in the industry are possible and will draw attention to the issues related to feed. This will enforce new standards in other livestock sectors. We need to share the results of trials, inform the industry about the benefits, and collaborate with other organisations to develop new products.
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