"Quality, quality, or quality."
Author: Meng Deyang
Edit: tuya
Producer: Financial Graffiti
"Everyone is in too much of a hurry." Dr. Yongjing Li, President of the Asia Pacific region of DuPont Nutrition & Biotechnology Food & Beverage (Platform), continued to emphasize in an interview with Financial Graffiti that even if a lot of capital has entered, the most critical thing for plant-based meat companies is to give good product taste and product quality.
In the past two weeks, Chinese plant meat startups including Zhou Zero and Hey Maet have announced a new round of financing, combined with the financing announced by Zhen Meat at the beginning of this year, 2020 is very lively for the plant meat category.
However, there is also something confusing behind this hilarity. First of all, the strangeness of "plant meat" at the consumer level is still there, and consumers who really understand plant meat products are very few and concentrated in first- and second-tier cities; in addition, it is worth observing whether the cooking method of Chinese food can continue to be applied to plant meat. For investors and entrepreneurs, the technology, cost and supply chain of plant meat seem to need to be constantly adjusted and iterated to adapt to the rapid changes in the Chinese market.
Even technology has different impacts on the industrial chain. Li Yongjing introduced, DuPont's partners include Jinzi ham and Meikang Food and other companies, according to tianyancha App information, the majority shareholder of Tianjin Meikang Food Co., Ltd. (holding 80% of the shares) is Tianjin Shuangxing Food Co., Ltd., a traditional food and spice production company, has launched a plant meat brand "extraordinary", online sales, and Meikang food is also an "wet far-drawn protein technology" application of the company, it is understood that this technology in the domestic plant meat field application of the company is not much, This also proves from the side that plant meat is attracting companies from different fields and backgrounds to enter.
As a 230-year-old company, dupont (DD.US) has undergone several business transformations in history, from the initial gunpowder, to chemicals, to today's food technology. In 2017, DuPont merged with Dow Chemical to form Dow DuPont, becoming the world's largest chemical industry company. But with the divestiture of Dow's DuPont agricultural sector, DuPont and Dow once again "separated" independently.
According to the company's second quarter 2020 financial report, the company's global net revenue (Net Sales) was $4.8 billion, of which the nutrition & Biosciences segment was $1.5 billion, accounting for about 31.25%, which was the largest segment of the company 's segment (electronics and imaging, transportation and industry, nutrition and biotechnology, security and construction) revenue.
The company's Nutrition & Biotechnology division is divided into three segments, namely food and beverage, health and biotechnology, and pharmaceutical solutions. Among them, the main products of the food and beverage business include raw materials such as soy protein required for the production of plant-based foods.
It is worth noting that the company mentioned in the second quarter of 2020 financial report that the revenue growth of the division was due to the growth of the scale of food and beverages, and the plant meat category was one of the reasons.
Nutrition & Biotechnology Segment Share in 2019 (Source: DuPont 2019 10-K document)
Combined with Li Yongjing's introduction, as well as the investigation and interview of a number of companies in the field of plant meat in "Financial Graffiti", basically the role of the plant meat industry chain can be simply divided into upstream raw material providers (such as DuPont, Twin Tower Foods, etc.), mainly responsible for providing soy protein and added raw materials, midstream food processing enterprises (including Qishan Food, Hongchang Biotechnology, etc.), as well as downstream brand and catering solution companies (Zhen Meat, Zhou Zero, Hey Maet, etc.) and consumer terminals (including catering, e-commerce, retail channels, etc.).
Since the beginning of this year, the enterprises that capital has actively entered are in the downstream of the industrial chain, but at the same time, capital will also have strong requirements for the industrial chain integration of downstream plant meat brands. In other words, as Li Yongjing said, this round of change is driven by consumer perception (health, environmental protection, animal protection), and growth and capital entry come from downstream that is closer to consumers and traffic changes more rapidly. But as Li Yongjing put it, the worrying thing is that "everyone rushes in" and ignores the quality of the product – the entire new generation of plant-based meat is facing the "risk of being destroyed".
At this moment, the strategy for dealing with this risk is within the industry, not only in the industry.
The following is the text of the dialogue (with abridgements)
Q: Financial Graffiti
A: Yongjing Li, President of DuPont Nutrition and Biotechnology Food & Beverage Business (Platform) Asia Pacific
Q: We recently did some interviews with investors in the plant meat sector, mentioning Beyond Meat (BYND. US) released the product around 2011, so what breakthrough changes in technology, process and products have been made in plant-based foods in the past decade compared to previous decades, which have led to the "explosion" seen today?
A: The development of plant-based food is actually not just the past ten years, the past twenty years, thirty years have been developing, the original DuPont company has a Shulai division, in the form of such a professional company to do soy protein. At that time, the main direction of (the company's) products included some products such as energy bars. Of course, another of the most important areas is plant-based foods, for example, using soy protein to make "beef", sold in Brazil, but the main consumer group of this product at that time was ordinary people who strengthened daily protein nutrition.
But until recent years, BeyondMeat has shifted the consumer group of plant-based meat from nutritious, affordable food to another group – most of them young people, most of them vegetarians, but they are not only concerned with "vegetarian", they are passionate, pursuing people, one is (pursuing) to eat healthy, and second, they care about the earth - they will say that if they raise cattle, eat beef, raise chickens, eat chicken, it will cause great harm to the earth, so these young people are very emotional; It is the concern for animal protection, such as the cruel killing of cattle and chickens. To sum up, (the driving force) is vegetarian and healthy, the second is the protection of the global environment, and the third is the protection of the animals themselves. The above three drivers have formed a climate in the past few years, and when Beyond Meat's products were launched, they caused a relatively big sensation in the United States. I still remember a few years ago at an event organized by the International Union for Food Science and Technology (IUFoST) where I gave a report and I met a guy from Beyond Meat who said they were going to go public in July. But in fact, DuPont has been doing many years of work on the development of this industry, and we are the main players.
Q: What role does DuPont play as an industry player?
A: The production of plant-based foods first requires protein, the protein source is mainly soy protein, but also includes other plants, such as pea protein, etc., and then through extrusion technology, the (raw material) into fibrous protein, there is a "meaty feeling". After adding other ingredients, it is made into a meat-like product. DuPont, a company that produces soy protein and a variety of raw materials, also had extrusion technology and eventually became a player in the industry.
Q: Regarding technology, what is more discussed in China now is about "dry filament protein technology" and "high humidity filament protein technology", including cell meat technology, which is still in a very early stage of commercialization.
A: At this stage, the taste is still very important, in the food industry, if only emphasize environmental protection, nutrition, health, not a long-term solution, if you want to make a particularly promising food, the most important attribute is to be delicious. Beyond Meat in the United States is made into a plant-based meatburger patty, which is acceptable to consumers in the United States, but for Chinese consumers, (meat) is made into different foods, such as dumplings, balls, etc., which has a lot to do with technology. The "dry" and "wet" techniques mentioned seem to taste better, but there are not many companies that have mastered this technology. We have a partner called Tianjin Meikang Food ("Meikang" for short), and their technology is "wet extrusion" technology.
Q: How about the "wet" and "dry" methods and the "cost" difference caused by different technologies?
A: Cost is very important at this stage of the development of plant-based foods. Previously, I have been reminding people at conferences that plant-based products are targeted at healthy, environmentally friendly, animal-friendly young people, and that these consumers are not eating plant-based foods to save money. But in the first few years of the industry, the cost will be relatively high, the product is not necessarily very good, with the expansion of the scale of (consumption), the cost will come down. These consumers in the city should not be too sensitive to cost, but the concept and product quality are more important.
Q: Will the cost of "dry" technology on equipment and raw materials be lower than that of "wet method"?
A: I didn't compare it carefully, it was probably going to be lower. But [cost] may also be related to specific companies, such as DuPont, which may cost a little higher, because the requirements are particularly high, for example, we require all microorganisms and so on, to be particularly clean. Especially the "dry method", before entering the production (raw materials) to be particularly clean, microbial, miscellaneous bacteria content needs to be particularly low, to achieve such a standard, all the pretreatment standards will be relatively high, so the cost is naturally high, but I believe the industry will go in this direction.
Q: What are the reasons for restricting the taste of plant-based meat? How long does it take to break through?
A: The purpose of the current extrusion technology is to imitate the fibrous taste of meat, this process sounds easy, but it is difficult to do, and it requires a lot of experience. Moreover, in addition to the technology itself, your supply conditions and raw materials may have a relatively large impact on product quality and taste. We are now working on the "national standard", the purpose is not to "indiscriminately charge" - when the product reaches a certain target, it can be called "plant meat". At least in the beginning, I think the supply chain should still use the best technology, even if it is a little more costly, it should have a good start.
Regarding the key technologies, mainly including protein (raw material) technology, extrusion technology and supply chain, etc., of course, this needs to be explored for a long time, coupled with the application technology - the extruded protein should be turned into dumpling filling, lion's head and other foods. The raw material process of making meat is very important, and then the application of technology is also very important, every stage is very important, and then the joint efforts of the industry are needed to create better products.
Q: It's actually an industry as a whole going forward.
A: Yes, to slowly improve, DuPont in this field for decades, some experience we are willing to share with partners, but in the end the success of this product, both need DuPont raw materials, technology, but also need to work with partners to open up the market, guide consumers, if we guide this product to save money or economy, there may be problems in innovation, because everyone is desperately comparing price, cost, quality will not be guaranteed, our industry will have problems. So I also repeatedly proposed to the association to regulate the development of this industry at the beginning.
Q: In addition to protein (including soy protein), the previous report also mentioned that DuPont also produces additives in raw materials?
A: Originally called "additive", and later also "part of the raw material", it was extracted from natural foods. For example, glue things, it will make the "meat" better bundled together, have a better taste, such as tara gum (tara gum, thorn cloud glue) and so on, these glues are extracted from kelp.
Q: Do you feel that the current cooperation of DuPont is mainly with the midstream and upper reaches of the foundry, rather than with the brand?
A: Yes, from a traditional point of view, DuPont is a B2B company, that is, a raw material supplier, in the field of raw materials in the field of plant meat, on the one hand, we provide soy protein, on the other hand, we will also give tissue protein, fibrin - that is, the extruded protein product - to Qishan Food (Editor's Note: Qishan Food is a food foundry company cooperated by the plant meat brand Zhen Meat), and they will make products. However, our positioning is clear, it is upstream, we will not go downstream, but we will help downstream customers to build their brands, and may provide a lot of market technical help.
Q: I see that there are also some in China, such as Jinzi Ham, which he actively disclosed that he cooperated with DuPont, how did they cooperate with this piece, is it also like you said?
A: Yes, this is our early partner, and then we give them the raw material technology, the application technology, and then let him make this product.
Q: Recently, many Chinese plant meat startups have announced financing, including Zhou Zero, Hey Maet, etc., is it a short-term outbreak or long-term stable growth for the future trend of China's plant meat market?
A: I think plant-based meat food is an emerging industry, and with reference to Beyond Meat's good burger meat flat products in the United States, the stock price has risen from $70 at the time of listing to more than $200, and now it is back to the level of $120 (as of press time: the stock price is $135.85), back to rationality.
But for the market, I think it should be "long-term stable" and will not break out in the short term. Although there is a lot of financing now, many people are paying attention to this industry, but the most important thing is consumer acceptance, and what determines consumer acceptance is the quality of the product, if everyone just says "plant-based meat is a good thing", and then chews two bites and spits it out, this thing can't be long.
So I have always stressed in the industry that we must work quality. At this time, do not steal the limelight, although there are many companies investing in this industry, but it does not necessarily mean success, because money and taste (taste) are two different things after all. Invested a lot of money, if the company's technology is not home, the quality of the product is not home, resulting in the taste, the taste is not so good, the development of this industry will be greatly restricted.
From now on, we may still have a period of time to reach the (good quality) stage, there will be no outbreak in the short term, consumers still need to be guided, the industry itself must be fully prepared, only at this time, the industry will usher in explosive development. We Chinese consumers have the highest requirements for the taste and taste of food in the world, the mouth is very "sharp", no matter how publicized, the taste of food will definitely beat nutrition and health. We have been doing this thing for a lifetime, and we know how important taste is, and DuPont hopes that everyone will join hands to create products suitable for the Chinese market and slowly cultivate the plant meat market. Don't be in a hurry, if you are in a hurry, you may ruin the industry.
Q: What is the biggest risk in the industry at the moment?
A: The risk is that people are too anxious to bring uneven (quality) products to the market, causing consumers to dislike [plant meat] – consumers will say"What is this?" This stuff is not very edible. "-Boom! The market was destroyed at once. Now there are some good projects it is easy to raise a lot of money, but it is really not easy to do product quality, so I have always stressed that the association should be good, and the quality of products cannot be "good and uneven", so you say "risk", everyone rushes in impatiently, which is the biggest risk.
Q: Combined with the overall situation of DuPont, in fact, we see that the proportion of DuPont's operating income in the agricultural and food sectors is very objective, considering plant protein, what will be its impact on the traditional grain or animal protein industry as a whole?
A: That's a pretty good question. Imagine what the world will look like in 50 years, and I think there will be more plant-based (food) in this world. From a nutritional point of view, plant protein can fully guarantee the needs of the human body, especially soy protein, which has a high nutritional value. The second is the carrying capacity of our planet. First plant soybeans, harvest to make feed, and then feed cattle and pigs, the conversion rate of this (protein) is relatively low - from plant protein directly to people to eat, but to convert into animal protein and then give people to eat.
Decades from now, the share of plant-based meat may be large, and many people will make such a choice; of course, many people will also choose traditional animal meat. But plant-based meat gives more people more options. At the same time, people will care more and more about our earth, these animals, and their own health.
DuPont invests a lot in this regard because it takes into account the future development of the world. Because DuPont has been established for 230 years, every time it has been adjusted, it has just started making gunpowder, then chemical products, and now making food. Each phase of the adjustment is due to seeing the industry develop over the next 50 to 100 years and then catching up with this allocation.
Q: Is it actually based on a longer-term trend perspective?
A: For example, like this epidemic, the epidemic has an impact on the food industry, but the impact on the car is much greater than the food industry, and the food industry still has growth, especially high-value foods , such as protein foods , because it will increase your immunity.
Q: Finally, will DuPont consider investing in or acquiring companies in this space in the future? For example, proteins or companies that have barriers to production technology.
A: It's possible. On the one hand, about the protein company, because we are a more important member of this industry, there is a chance to go and see. On the other hand, it is a company with strong technology, because DuPont is a technology company, so we may pay more attention to a company with strong technology, if we look back in the past, the company acquired by DuPont is basically a technology company, which is also DuPont's own strength, if you put several technologies together, it is possible to produce synergies, this can be considered.