Cell-ag leader Jim Mellon on future industry M&A and leveraging weak financial markets
Agronomics co-founder and serial investor says the UK government is very interested in the cultured meat space
Jim Mellon is leading the charge in bringing cellular agriculture to the fore and helping to adopt new and more sustainable food supply chains. Sitting down with NutritionInvestor, the Agronomics co-founder explains why now is an excellent time to buy into young technology companies (financial market downswing) and why selling-off a portfolio company to a legacy meat giant presents an ethical dilemma.
Where is Agronomics in terms of investment and growth at the moment?
We’re building a portfolio which covers the gamut of meat, dairy, fish, materials, and the tools that are used to make these things. That portfolio is coming along quite nicely. We have a lot of cash at the moment, more than £100 million after the recent fundraise. The markets are very weak at the moment, particularly for tech companies. We’re in a very strong position and we shouldn’t overpay for anything because the relative value of a lot of these companies will be lower in the next two or three months.
The cellular agriculture industry doubled in size in terms of the amount of money coming in last year and it will probably double again this year. And then I think in the next five years it will more than double every year because of the need to get money to build the factories, as opposed to just building the pilot production facilities.
What is the split in terms of where your investment capital will be spent this year? Are you leaning more towards funding the companies that are already within your portfolio or new companies?
We are primarily going to be investing in the companies we’ve already invested in because as they get bigger, there is a quantum leap in terms of the capital they require. On the other hand, we are actively engaged and looking at everything that’s new and exciting in this field. You’ll find a combination of the two.
We’ve also made it very clear that we’re interested in what are called whitespace opportunities, which are those areas where we don’t see a lot of competition. The greatest impact that we’ve had in biotech is backing early-stage companies that we have a bigger share of, rather than those you just buy into like Pfizer or Glaxo.
So we’re focused on some whitespace stuff at the moment and there’s no secret about that. This is going to be a huge industry and we’re still very small, as indeed everyone else is. But I think that we started so early relative to everyone else on the investment side, that we’ve got a very open road ahead of us. We’re off to the Middle East again this weekend as the area is very receptive to what’s going on in cellular agriculture. They import almost all of their food, and some of the countries that have a lot of money are prepared to invest to build up their own food supply based on cell-agriculture. It’s a perfect combination for us. We’re going to Dubai, Abu Dhabi, Oman and Saudi Arabia.
What interesting and lesser-discussed sub-categories within cell-ag are you looking at?
We’re very interested in the pet food industry because it’s possibly earlier to market than human food and it’s also a very fast-growing market. As dog owners we’re always trying to improve their diets because it’s a big driver of their longevity. The second space is infant formula. And then, as the price of media, technology, growth factors and bioreactors comes down, we’re very interested in investing in the areas where technology can accelerate the process of getting all this stuff to market. That’s what I call the ‘picks and shovels’ of the industry, and it’s a very interesting area for us as well.
The food and materials industries that we’re addressing are about $5 trillion dollars a year in sales, which is about twice the size of the UK economy and almost four times the size of the Spanish economy. It’s bigger than the whole car industry, which is less than $4 trillion. The cell-ag industry has so much capacity to do good on the planet, both from an environmental point of view, but also in providing developing countries with healthy food. Ultimately it will be cheaper than the current food that’s being eaten.
What’s your opinion on the early investment of legacy meat companies like JBS and Tyson in cell-ag?
I don’t think that they are being nefarious, I think they’re trying to cover their backs. There’s no doubt that intensive farming has got to come to an end because of the climate change issues if nothing else. These are very wealthy companies and it’s like a day’s change for them when they make these investments. Ultimately, we’re going to need a lot more than them to grow the space. We’ve calculated that $1.8 trillion (which is a little bit bigger than the Spanish economy) of money will need to be invested in the next 10 years in this area to produce about a third of the world’s meat. That’s a huge capital commitment, which JBS or Tyson or Cargill will never have.
I would expect that some of these companies will buy the earlier companies outright for their intellectual property. Biotech companies very often bought by Big Pharma companies because the Big Pharma company is not very innovative. However, they’re very good at marketing and distribution, and it will be the same with JBS and the other meat companies.
Would you be interested in selling off any of your portfolio companies to a big, traditional food production company?
We’re not at that stage yet, so we don’t have to make that choice. What you’re asking about is an ethical choice. If the company that was acquiring it was going to change its whole business model, moving away from killing animals to making cultured meat, how great would that be? You can’t say yes or no until you see the individual circumstances, but we’re not there yet.
Will we see significant regulatory advancements in cultivated meat and cell-ag this year?
I think we already have Perfect Day’s dairy identical products on the market and a million consumers have already tried them. I am absolutely convinced that the dairy industry as we know it will be gone within 10 years. We believe that lab-grown fish from BlueNalu will likely be approved by the end of this year. We know that lab-grown meat is within 18 months of being approved. Israel, the UAE, Singapore are making significant moves.
We’ve been approached by the Cabinet Office in the UK, they’re very interested in this. My prediction is that basically a third of the meat market within 10 years will be alternative. And that will represent a tipping point.
I’m writing a book at the moment that will be out by the end of the year. It’s a children’s book about exactly this, so the younger generation can understand the cruelty that’s involved in intensive farming, not in an alarming way, but by understanding that there are solutions to this whole terrible industry.
Does Agronomics have any upcoming fundraising plans?
We certainly won’t be doing any fundraising for a little while, partly because the share price is now below the level at which we raised the most recent bonds, although there was a warrant attached to the fundraise, which is compensatory for that.
But this industry will require a lot of money and we’re only at the dial-up phase of the internet industry at this point. By 2001 the internet bubble had burst and everyone and their dog had invested in it.
We’re trying to take investments, apply our knowledge of what the good investments or not-so-good investments are and curate that for the general public. We don’t charge a management fee at Agronomics but we want to get to scale. If in 10 years’ time Agronomics is not in the FTSE 100, I’ll be very disappointed.