What Happened in Ag and Foodtech in 2016? Experts Reflect

Feeling reflective as we approach the holiday season and the end of 2016? In this week’s podcast,  we talk to two food and agtech experts about the innovation and investment trends they’ve noticed in ag and foodtech in 2016.

Andy Ziolkowski from Cultivian Sandbox Ventures and Josh Balk from the Humane Society are both advisors to the Rethink Ag and Food Innovation Week, which will be taking place in March in San Francisco, and they’ve both been on the ag and foodtech scene for several years now.

Cultivian Ventures was one of agtech’s first dedicated venture capital funds, and Ziolkowski was a founding partner of the firm. Balk was a cofounder of alternative proteins startup Hampton Creek and has worked with a range of startups working to benefit the lives of farm animals through his role as vice president of the Humane Society in the US.

The conversation focuses on animal health, alternative protein food technology, gene editing technologies for both crops and animals, antibiotic use in farm animals, dairy alternatives, the plant microbiome, and animal wearables. There’s an abridged, edited transcript below.

Happy listening!

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What have been your two or three main reflections from 2016 when it comes to agriculture and food technology?

Josh Balk: I think it’s the rise of these plant-based meat products that have perhaps the best taste and texture and mouth feel of any plant-based meat products ever developed. We have products that have come to the market like the Beyond Burger which is now being sold in groceries across the country, and the Impossible Burger which is being sold at restaurants in New York, San Francisco, and Los Angeles. These are companies that have a lot of venture capital funding. They’ve got a lot of buzz.

Now they’ve created products that are meeting that type of spiel that I think a lot of people have of hope that these companies are going to turn out some really good products. I think the next part has to do with Memphis Meats and the rise of these clean meat cellular agriculture companies creating products made from animal cells but without the animals.

Have you tasted the products?

Josh Balk: I have tried a lot of these products myself. I would say that I have been blown away. I never expected products to taste so similar. I remember the days of just piling a block of tofu on a piece of bread and thinking, oh man, is this what people are going to be eating who want to eat a bit healthier and more sustainable? Now we can eat a whole lot of products that are just absolutely delicious, and you don’t miss a thing. It tastes amazing while also knowing you’re making a positive impact on the world.

Andy Ziolkowski: Yes I have. I would agree with Josh that the alternative protein area has certainly taken off in 2016. We have been spending more time looking at this area. I expect that in the coming years we’ll probably be making investments in this sector for sure. I think the challenge, as we look at this area, is to understand how quickly the unit costs of these products will come down so it can become affordable for more of the mass market. I think that will be the real question to answer for us. It’s an exciting area, and definitely, as it relates to 2016 was one of the areas that has taken off.

What other reflections do you have from ag and footech in 2016, Andy?

Andy Ziolkowski: I think some of my reflections may be more on the ag side. I think that there’s been a lot of buzz on ag as it relates to CRISPR, the new gene editing technology that’s been developed both on the east coast at Harvard, as well as in Berkeley. The question is, how is this going to be applied and how is it going to be potentially regulated. There are a lot of questions. I think as you talk to the scientific community, the ability to quickly gene edit or use this CRISPR technology for gene editing will allow individuals and eventually companies to develop new novel products. That’s one.

I think the other area that has gotten a lot of buzz is related to the ag microbiome and understanding what’s going on below the ground. I think understanding the landscape in the soil and how you can affect and improve crop yields by improving and optimizing the ag microbiome. Those are the two areas beyond what Josh highlighted that I would say have been new areas in 2016 that we’ve looked at.

Going back to CRISPR, what is your sense on how that technology will be licensed out? Is Caribou Biosciences the only startup that’s looking at ag using CRISPR?

Andy Ziolkowski: There are other companies in other academic centers that I think are beginning. I think Caribou was the first for sure. I think DuPont Pioneer has gone ahead and partnered with them. There are other groups, both in the US and overseas that I believe are using applications of CRISPR in ag. I think in 2017, jumping ahead, I believe that you’ll see other companies beyond Caribou that will be using CRISPR. CRISPR-Cas9, but also other forms of CRISPR. That’s my belief for 2017.

Josh Balk: A lot of the focus for me on any type of gene editing, at least on the animal welfare side, would have to do with whether it creates less suffering for the animals. So much of the genetic manipulation going on with farm animals has to do with having animals grow much fatter and faster. That has caused a whole lot of problems, a lot of problems with their skeletal system, like being unable even to walk. A lot of problems with the heart and lungs. If there are things that we can do to improve the lives of these farm animals, I think it goes a long way.

Also, I think it reduces the risk of disease to have healthier farm animals. Diseases like swine flu or avian influenza. Diseases that have certainly killed a lot of people. I know that public health officials fear it could potentially get even worse in the future. Things that we can do to create a more humane sustainable food system is not only the ethically right thing to do for farm animals, but actually creates a healthier public health system for people too.

Andy Ziolkowski: Animal health for us is a big area of interest. For example, we’ve seen certain unintended consequences of reducing the antibiotics that are now being used by a lot of the poultry houses. Clearly, there’s been a movement, rightfully so, to do away with antibiotics. The problem is that there are a lot of foodborne diseases that, unfortunately, do impact both the chicken and eventually humans. For example, Campylobacter.

There’s been a rise in the incidence of Campylobacter in chickens, and that’s impacted the economics for the farmer, impacted the chickens and impacted the food supply in general. There are some clever approaches to using these monoclonal antibodies to flush out Campylobacter in the guts of chickens so that they can grow normally and gain weight regularly and not suffer. I think it’s creating new opportunities for investment for the venture capital industry.

Josh Balk: Yeah, and I also just wanted to add that I agree with Andy that there are perhaps unintended consequences regarding moving away from antibiotics. He’s absolutely right. The industry is, rightfully so, moving away from using as many antibiotics as it once had. Mostly because consumers demanded it. Big players within the poultry-buying world are mandating it within their supply chain. What’s happening? Antibiotics being removed, the mortality is now going up. What do we do about that? We realize that antibiotics perhaps has been a crutch for a lot of other things that have been hidden.

Now we realize it’s been hidden; we’ve got to address it. Such as, going back to genetics, working with the breeding companies — and there are about four major breeding companies in the poultry industry globally — to produce birds that are just dramatically healthier. Who perhaps are growing a bit slower, but they are stronger. Their heart is healthier, the lungs are healthier, and they actually can survive in a much better way without the use of all these drugs.

Another reflection of 2016 has been an investor coalition worth about 1.25 trillion, which has been led by the Coller Capital, a UK secondaries private equity firm. They put pressure on several food companies that some of them are invested in including Nestle, General Mills, Kraft, Heinz, to remove antibiotics from their supply chains. They’ve had two big actions this year. I imagine that pressure is not going to be easing into 2017. Do you both expect to see some more startups looking at this issue and looking at ways to mitigate or reduce the need for antibiotics with other remedies?

Andy Ziolkowski: Yeah. I do certainly. We’ve seen companies … We’ve invested in one, as I said, to deal with the Campylobacter issue in chickens. As antibiotic use has dropped, I think you’re starting to see what the results are and where the needs are for other forms of treatment whether it be genetic-based or using other forms of therapy. I think there’s a lot to learn now that there’s been, I would say, in some respects wholesale changes in poultry, in swine, and in other food animals. I think, as an investor, we get excited because those innovative companies will spring up and, I think, address the needs as antibiotic use is dropped and as the producers begin to understand what the ramifications of that are in the food supply.

Josh Balk: Coller Capital is not only doing exactly what you all have just talked about. They’re also investing in companies to help revolutionize our food system even beyond the animal proteins. They invested in a company called Perfect Day, formerly Muufri, which is producing actual milk but without the cows. It’s growing fast, and we’re hopeful that they’re going to have some products on the market next year. I just had some of their yogurt the other day, and I thought it was delicious.

Coller Capital is hitting on both sides, both trying to make the animal supply chain better by having more humane, sustainable, healthier systems while also helping move the population to find more options out there that are utilizing plant proteins. I think that they’re on the right track.

Looking forward to 2017, any trends you expect to see or any subsectors within the food and agtech sphere that you think might drop off in VC funding and general hype?

Andy Ziolkowski: Let me take that one first. I think, and you’ve started to see this already. This goes back a year ago, early 2016. There were a growing number of companies in the drone space. I think many of those companies have dropped off. I think there’s been, and I think will continue to be, consolidation in the software area within the ag space. I think there were a number of companies that sprung up. I think, over time, consolidation and many of those companies may not even be around. I think that’ll be one of the things we expect next year in 2017.

Josh Balk: On my end, what I thought was very exciting in 2016, which I think is going to increase in 2017 and the years to come, has to do with big meat companies start diversifying their investment into plant-based and cellular agriculture companies. As an example, Tyson made international headlines when they invested in Beyond Meat. We’re seeing Tyson, one of the largest meat companies on the planet, say, “You know what? We think it’s best for our future if we start investing in these plant-based technology companies.” The fact that Tyson did it, I think, paved the way for other meat companies to follow.

As an example, the largest meat company in Germany has a completely vegetarian line of products now that they advertise even in their meat products. When you buy the meat products, there’s a coupon in it to buy the plant-based products. It’s coming over now to Tyson which is obviously based in Arkansas. We’re starting to see other companies look at that space as well. I think diversification with the big meat companies is what we’re going to see in 2017.

Listen to the podcast for the full, unabridged version of this interview.

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