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
Local families snap up popular Scenic Rim dairy and 4Real Milk brand
Local Beaudesert farmer Brad Teese and Brisbane real estate agent Doug Wyatt, and their families have bought the Tamrookum Dairy as well as the popular 4Real Milk brand from the Dennis family.
The 149ha robotic dairy at 9023 Mt Lindesay Highway in Scenic Rim, just over an hour’s drive west of Surfers Paradise, was put up for sale in July last year with an asking price of $10 million.
Led by Greg Dennis, the Dennis family established the 4Real Milk brand in 2013. It supplies a range of dairy products to supermarkets, cafés, restaurants and milk bars across Queensland, while also offering dairy tours.
The dairy, which can process 10,000 litres of milk a day, the 4Real business and brand as well as all livestock, farming infrastructure, plant and equipment was put up for sale last year as part of retirement plans for Mr Dennis’s parents Brenda and Darrell and his uncle and aunt, Ray and Rose Dennis.
They are the most recent custodians of the property, which has been owned by the Dennis family since the 1930s.
“It’s eight years now since we launched 4Real milk, I think it’s a really exciting opportunity for the continuation of what I started,” Greg Dennis told Queensland Country Life last year.
New co-owner Brad Teese and his family own stock feeding company Teese Feeds based at Beaudesert. Mr Wyatt is the principal of Brisbane real estate firm New Image Real Estate.
“The new owners want to produce local quality products from a family business for family consumption,” said Danny Bukowski from C1 Realty, who negotiated the sale.
Mr Bukowski said the new owners had already increased the number of robots used to feed and milk cows from four to six, improved the irrigation on the farm and introduced a new breeding program.
Tamrookum Dairy will only supply the Queensland market, which requires more than half of its dairy needs – about 330 million litres a year – to be trucked in due to the shutdown of more than 80 per cent of its dairies over the last two decades.
More broadly, the acquisition of Tamrookum comes amid heightened investor interest in the dairy sector, which has returned to profitability since the milk price crisis five years ago that sent many dairy farmers broke.
This financial year, the Department of Agriculture, Water and the Environment (ABARES) is projecting incomes for dairy farms to increase by around 35 per cent to average $338,000 per farm.
“Higher milk prices, favourable seasonal conditions, increased milk production and lower feeding costs have contributed to the increase in incomes from the drought affected lows of recent years,” said ABARES.
In October last year, Aurora Dairies, one of the largest milk producers in the country and backed by Canada’s Public Sector Pension Investment Board, acquired the Clydebank Aggregation in Victoria’s Gippsland for around $20 million.
Also last year, agricultural funds specialist Duxton Asset Management contracted buyers for six of the farms in its Victoria-based Ace Dairy Holdings.