Dairy Grocery Aisle

The search for sustainable, healthy alternatives to meat currently has two paths: the meat-mimicking veggie burger and lab-grown proteins. But in the land of dairy, there’s only plant-based alternatives like cashew “butter” and almond milk.

The refrigerator aisle has been full of plant-based dairy for some time, but now there are a few startups who, like the purveyors of cultured meat, want to take dairy one step further.

Already under siege by falling milk sales, dairy lobbyists have been lashing out at makers of plant-based rivals as they grow market-share. But their next enemy may be coming from the laboratory, in the form of synthetic whey, and investors are already lining up.

While fewer people are drinking cow’s milk, they’re still eating yogurt and cheese, and a crucial protein that comes from making those products is whey. It’s relatively flavorless and incorporates well into a range of food formulations for everyone from infants to adults. There’s already a huge market for it, as demand for whey protein and whey-based products is on the rise thanks to consumer demand for protein in everything, from bars to shakes.

The U.S. is the single largest exporter of whey products, with estimated sales of $10 billion last year. BCC Research said the category will grow by 6% annually through 2023. But for all its popularity, all that whey still comes from cows.

Vegan leaders

Ryan Pandya saw an opportunity in this consumer conundrum. He wants to be the first to market a non-animal whey protein through his San Francisco area-based company, Perfect Day. Like other food startup founders, Pandya and partner Perumal Gandhi are both vegan. Rather than forego the taste of real cheese and dairy for poor vegan substitutes, the pair decided to invent their own version of the real thing. The startup focused on the well-worn food path of microbial fermentation — harnessing custom yeast and bacteria to grow the proteins that make milk taste like milk.

But first, the company and others like it face some big hurdles: consumer squeamishness and regulatory reviews that may end up focusing more on the genetically modified organisms (GMO) used to make lab-grown whey.

Five years ago, Perfect Day joined the synthetic biology accelerator IndieBio as it searched for microbes that could be engineered to make functional milk proteins. Today, it has more than 60 employees, $60 million in funding and says that it’s produced one metric ton of lab-grown whey (for scale, the U.S. uses more than 200,000 metric tons of all types of whey annually).

Late last year, agriculture giant Archer Daniels Midland agreed to invest in Perfect Day as the startup seeks to lower the cost of making whey.

“When you’re creating something that already exists, there is already an established price point,” said Victoria de la Huerga, vice president of ADM Ventures. “The goal for companies that are leveraging new technology to make new food is you have to make it affordable.”

Though it’s still early days, Perfect Day contends its proteins require 98% less water and 65% less energy than that required to produce whey from cows. The company said it hopes to one day license its ingredients so they can be used by food manufacturers in a range of products — but those involved concede that scaling the effort won’t be easy.

Still, Perfect Day Chief Technical Officer Tim Geistlinger said the process is “fully adaptive — you can do it anywhere in the world and it doesn’t matter how hot it is.” Having come over from plant-based burger maker Beyond Meat, Geistlinger argued that “if you want to raise your flag on sustainability or tolerance to climate change, this one solves a lot of things.”

While Perfect Day wants to be an ingredient supplier, food startup New Culture wants to make the end product: cheese from its own lab-grown casein, another protein derived from dairy. In the lab, New Culture has crafted a super stretchy, believable version of mozzarella — the most consumed cheese in the U.S.

A third startup, Motif Ingredients — a spinoff of Gingko Bioworks — is using $90 million in funding to focus on lab-grown dairy proteins as flavor and texture ingredients.

Matt Gibson, the New Zealand-born founder of New Culture and a self-described committed vegan, said he didn’t like the non-dairy options on the market.

“I just don’t think you can make cheese with any of the plant-based proteins,” he said.

GMO hurdle

Non-animal whey protein is new, and may require scrutiny by the U.S. Food and Drug Administration. But Nigel Barrella, a food industry lawyer who is of counsel to the Good Food Institute, said lab-made whey will be viewed by regulators as simply another GMO food product. Last month, Perfect Day filed a General Recognized as Safe petition (GRAS) with the FDA, a voluntary request for government review.

“In terms of the FDA’s attitude, it will be near the GMO product: functionally these are the same,” Barrella said, using corn as an example. “There is no scientifically known difference between corn and GMO corn.”

But there’s still branding to worry about. Few people like to eat something with “lab-grown” on the label, and vegans will likely steer clear of something labeled “milk protein.” As a result, Perfect Day wants to rebrand microbes used in food — yeast, fungi, bacteria — as flora, a more consumer-friendly term.

“We are trying to explore how we can get a term for this industry that’s outside of plant-based,” said Pandya. “Something someone with a plant-based diet can eat, but it’s not from plants. It’s an animal protein, but not from animals.”

Still, Nate Donnay, a Minnesota-based director of dairy insight for INTL FCStone, doesn’t see non-animal whey grabbing huge market share soon. “Sitting here in the heartland, no one is caring where the protein came from. They want it cheap and they want a lot of it,” he said. Donnay added, however, that “if you can get cost down and the functionality there, the big companies will take it.”

Barrella, the food industry lawyer, said lab-made whey makers should play to their strong suit.

“I think it will be sold as a benefit of the product — lower environmental footprint,” Barrella said. “It will be incumbent on the producers of these products to market the benefits of these products: milk proteins that don’t come from an animal.”