Ongoing Divergence Between Manufacturers, Innovators, in Cultivated Meat Space as IP Race Heats Up
The emerging field of cellular agriculture, which involves the cultivation of animal products in labs rather than through traditional farming methods, is beginning to see a shift in the industry. As the fledgling industry begins to mature and a greater number of actors begin to fill the space, there is a notable divergence between smaller actors focusing on R&D and bigger ones attempting to leverage pre-existing slaughterhouse infrastructure in order to penetrate the new cultivated meat space. A positive sum game outcome of this emerging dynamic would be the successful development of disruptive tech by more agile, bottom-up players that can transfer this technological property and know-how to companies like Cargill, Tysons (NASDAQ: TSN) , JBS SA (NASDAQ: JBSS), and National Meat Packing that can successfully scale it.
Large established players in the meat manufacturing industry such as Big 4 meat companies cited above have a significant advantage over smaller players looking to enter the market. Notwithstanding their influential lobbying efforts that ensure the passage of favorable legislation in Washington, these massive multinationals would be able to leverage their existing infrastructure and supply chains to produce cultivated meat at a scale and level of efficiency that looks increasingly distant for smaller players. That said, huge companies like the Big 4 are notably sluggish when it comes to rapid innovation, and there’s a significant amount of skepticism that they can successfully develop cultivated meat technologies alone. Some have already announced significant investments in the cultivated meat space, like Tyson’s nearly $350M stake in Future Meat Technologies, an Israel- based tech developer. This further demonstrates how established meat companies are outsourcing innovation rather than accelerating it in-house. As the graphic below demonstrates, this is a pattern exhibitted by the other big meat players as well:
In contrast, smaller companies like Steakholder Foods (NASDAQ: STKH) are rapidly advancing the disruptive technologies needed for global adoption of cultivated meat. While these companies may not be able to unseat the big players in terms of market share or enterprise value, they are still making significant progress towards the technical solutions yet unresolved required for globally scaling cultivated meat as a replacement for animal proteins. However, in order to maintain their competitive edges it is crucial that companies like Steakholder continue to prioritize research and development efforts above all else.
In particular, securing intellectual property rights will be crucial for bottom-up actors who are transforming cellular agriculture into the hottest niche in the broader foodtech space. Steakholder Foods, originally from Israel but now listed on NASDAQ and with facilities distributed globally, is a great case in point. Moreso than perhaps any other actor in the CellAg field, they have been acquiring intellectual property rights at a dizzying pace. Patent approvals, submissions, and breakthroughs in recent months alone include:
- Patent approval in Canada for the physical manipulation of cultured muscle, key to developing high-quality complexed-structure meat.
- Observation that its cultivated muscle cells its muscle cells offer the same amino acid profile as that of the native tissue.
- Development of a process that has achieved 50 times more growth in cell production yield than previously. This breakthrough process uses a filtering system integrated with the company’s growth method and is expected to result in greater outputs.
- Development of a temperature-controlled print bed for its industrial-scale printer.
- Filing of a provisional US patent application based on a unique formation of layers of tissue to achieve the characteristic tender flakiness of cooked fish.
As this list illustrates, R&D is the core focus of STKH. A glance at their recent financials confirms this, with nearly $10M invested in ongoing R&D in 2022 alone. The agility, innovative capacity, and start-up mentality of Steakholder Foods is shared by numerous others like Upside Foods, Umami Meats, and Aleph Farms, to name a few. Ongoing acquisition of IP at this rate will give STKH and similar actors a notable degree of leverage in future negotiations around tech transfer or buyouts at the hands of the Big 4. In other words, owning valuable intellectual property, they can ensure that they have a seat at the table and are able to participate in the ongoing development of the industry.
Overall, the emerging cellular agriculture industry is poised for significant growth in the coming years. However, as the industry begins to mature, we can expect to see a greater divergence between the players developing underlying technology and those focused on mass manufacturing infrastructure. For companies like Steakholder Foods, it will be crucial to prioritize R&D and secure intellectual property rights in order to maintain their favorable position and capitalize on the growth opportunities in the market. By doing so, these companies can ensure that they are well positioned to participate in the ongoing development of this exciting new industry.
And for current and potential investors, the takeaway is that the mammoth projections for the cultivated meat industry’s value are only likely to grow over coming years. Early investors in undervalued players like STKH translates into higher risk yet greater potential upside. This isn’t financial advice, but I for one am highly bullish on both Steakholder Foods and the CellAg industry as whole.