Lab-Grown Milk will wipe out Dairy Farming, says investor

Agriculture Jim Mellon is predicting a rapid transformation.

High-fashion handbags. Inflationary pressure. Early morning starts. Secretive Middle Eastern funds. Nuclear fusion. UK dog show Crufts. Longevity and, of course, cellular agriculture. You can cover a lot of ground in 45 minutes with Jim Mellon, the UK investor best known for backing successful biotechs and big, big ideas.

Most of all, he wants to talk about that last one – cellular agriculture – the science of, to put it very simply, growing meat and dairy products from animal cells and single-celled organisms.

It’s a science Mellon predicts will completely upend the $US800 billion ($1161 billion) global dairy industry within the decade, as he hopes consumers turn to ‘‘ animal-free milk’’ , bioidentical but made in a lab.

‘‘ It’s my honest opinion. I know it’s not very popular. The dairy industry will be completely gone. The big herd industry will be completely gone within 10 years,’’ he says, explaining that the product is already approved in the US and consumers are already comfortable with alternative milks, whether oat, almond or dairy.

And he says that’s just the beginning.

Animal-loving Mellon, he and his partner have seven dogs, including an Ibizan Podenco sight hound called Juno who is soon to star in Mellon’s first children’s book, is in Australia this week testing interest in a possible ASX-listed investment company, an adjunct to his UK-listed Agronomics fund.

All going well, broker Bell Potter will list the LIC by the year’s end, with an expected $200 million to invest, based on early market soundings despite a weak market for new initial public offerings. Then again, a private vehicle is also under consideration.

Ask if the fledgling sector is being hit by lower valuations, along with other high-growth assets, and Mellon says there is still plenty of capital for the high-risk , high-return sector, especially now big food firms want in.

He also points out that all the companies in the rapidly growing space will either go bust or be bought out, much like early-stage biotech, but very few will go on to create their own brands. While here, Mellon is also meeting with one of Agronomics’ latest investments : Australia’s All G Foods, for which Agronomics led the $25 million capital raising in August.

All G does plant-based products but Agronomics was attracted by the group’s synthetic milk product.

At its core, the team will build a large bioreactor into which water, sugar and microbes programmed with the genetic code for dairy proteins are poured, to create cellular-grown dairy products. Woolworths’ venture capital division W23 is also invested in the group.

It’s one of 24 investments the listed Agronomics has made, and gives a hint of where this vehicle is hunting. Simply: it’s done with plant-based , which is light on science and intellectual property.

Mellon estimates it is his 200th visit to Australia, though it’s his first since travel restrictions lifted and he says the jet lag is hard to ignore. He’s had investments here before, though he struggles to recall the names: Pilbara iron ore producer BC Iron was one.

Agronomics, which is listed on the London Stock Exchange and has some £148 million ($252 million) assets under management, is one piece of Mellon’s sprawling business interests. (That’s where the secretive Middle Eastern funds come in, because Mellon has an unlisted fund with a seven-year life which some investors use to avoid the listed vehicle.)

Other Mellon investments include Juvanesense, a company which invests in start-ups helping people lengthen and improve their life. The former fund manager also has a website with investment tips, writes books and private mining, property and hotel interests. He’s a prolific reader – right now he’s got Dervla Murphy’s Eight Feet in the Andes and Richard Dinan’s The Fusion Age on the go.

How does he fit it all in? He goes to bed early, wakes up by 4.30am and is a believer in using a small whiteboard to list each day’s goals – and doesn’t go to bed until they are ticked off. But back to cellular agriculture and precision fermentation . Why does Mellon think it’s a big opportunity?

By his reckoning, he and his partner Australian Anthony Chow, have in the past three years become among the largest institutional investors in this industry. Partly because it’s small, partly because other investors are often philanthropists.

‘‘ We just ended up being the only place in town where people could get money from. So they all come to us. And there’s about 200 companies around the world that do this now up from about 100 a year ago. So it’s an exploding industry. A lot of them are chancers,’’ he says.

Like the philanthropists, Mellon does want to eliminate animal cruelty, but says it’s his investments in biotech, specifically its experience in intellectual property, that gives his investment vehicle the commercial edge in this space. (He mentions he backed migraine drug biotech Biohaven Pharmaceutical with his two partners Greg Bailey and Declan Doogan. That business was sold in May for $11.6 billion to big pharma giant Pfizer .) But unlike the pharmaceutical industry, one key hurdle (and that’s ignoring regulatory approvals) for the lab-produced food is the cost of production and consumer price point. He likes to call it ‘‘ griddle parity’’ .

For many products, most meat, eggs, dairy, even collagen, that’s still some way off. But leather, he says, is close.

In May, lab-grown leather start-up VitroLabs banked a a $US46 million Series A that included participation from French-based luxury fashion corporation Kering, Agronomics and actor Leonardo DiCaprio.

‘‘ It can now produce the highest quality leather and producing to the highest quality ... like the best calves’ leather from Austria,’’ he says.

By starting off at the ultra-premium end of the market, production cost isn’t such a significant hurdle.

For Mellon, these are all pieces – and he rushes over others including carbon credits, patent protection and licensing – in a far, far bigger picture. And one, he admits, that doesn’t have a clear path yet.

‘‘ I don’t know how we’re going to get there because presumably it will be a road fraught with some peril,’’ he says.

‘‘ But in the future, we will have food that is cheaper than is currently produced , as the input ratios are so much lower, that doesn’t have any emissions... and there will be no animal cruelty.’’

Jemima White, Copyright © 2022 Australian Financial Review