Danone invests in animal-free dairy startup Imagindairy

Danone’s corporate venture arm Danone Manifesto Ventures has taken a minority stake in Imagindairy, an Israeli startup making ‘animal-free’ dairy proteins via precision fermentation (using microbes instead of cows).

While Danone is heavily invested in plant-based dairy through brands such as Silk, Alpro and So Delicious, this is its first move into the animal-free dairy space, whereby firms engineer fungi or yeast to make dairy proteins such as whey and casein.

A spokesperson at Danone Manifesto Ventures told AFN: “We are thrilled to partner with Imagindairy as a minority investor to help accelerate the company’s growth… Given its strong research-driven approach, we believe Imagindairy has the power to be a successful company in this emerging space. We look forward to developing strategic collaboration projects with Imagindairy to learn more about this pioneering space.”

Imagindairy said Danone would bring “strategic and operational support to accelerate our growth” adding that the partnership would “pave the way to future collaborations with Danone, as we explore potential business applications together.”

‘Strategic and operational support’

Founded in 2020 by Dr Arie Abo (CTO) and Dr. Eyal Afergan (CEO), Imagindairy has raised $28 million to date. It first plans to bring beta-lactoglobulin (whey protein) to the US market but is also working on a range of other milk proteins including casein proteins and alpha lactalbumin, Dr. Afergan told AFN.

The plan is to scale up with contract manufacturing organizations (CMOs) before building his own facility, he said: “We are working today with CMOs to manufacture our beta-lactoglobulin and we will build our own facility when the timing is right. Since our processes are very efficient, we can reach cost-effectiveness with CMOs as well, but having our own facility will have multiple benefits, including more flexibility and control over the entire supply chain.”

The aim: ‘To reach cost parity and even beyond that’

Asked about the commercial viability of precision fermentation for dairy proteins such as whey and casein, he said: “From the get-go, Imagindairy has identified unit economics as the main hurdle for the commercialization of proteins such as whey and caseins. This is why we turned to technology: our proprietary AI model allows us to develop high-yielding microorganisms, just like cattle have been bred to reach high yields of milk.

“When the fermentation process is much more efficient, it has a very positive impact on the unit economics, and this will allow us to reach cost parity and even beyond that.”

Microbes, not cows: Animal-free dairy

But why make animal-free dairy proteins in the first place?

According to advocates, making dairy products without cows offers the best of both worlds: more sustainable and ethical products that don’t involve industrialized animal agriculture but still deliver the nutrition and functionality of ‘real’ dairy such as melty, stretchy cheese, which is hard to make with plant proteins.

California-based Perfect Day is the most advanced player in the field, producing animal-free whey from multiple sites. Products containing animal-free casein have yet to hit the market.

Other animal-free dairy startups include Remilk in Israel; Change Foods and New Culture in the US;  All G Foods in Australia; Formo in Germany; Those Vegan Cowboys in Belgium; Daisy Lab in New Zealand and so-called ‘molecular farming’ players such as Nobell Foods, Pigmentum, Forte Protein, Kyomei, IngredientWerks, Mozza, and Miruku. [Disclosure: AgFunder, AFN‘s parent company, is an investor in Nobell Foods.)

Test and learn​

As for the market opportunity for animal-free dairy, it’s early days, and key stakeholders are still exploring how best to communicate the concept to consumers and how to navigate the regulatory pathway in some markets.

Most brands in the space are also fairly small, with limited distribution. However, several big players have been testing the waters in recent months, including General Mills (which tested—and later dropped—animal-free cream cheese Bold Cultr), Starbucks (which has been testing animal-free milk in the Bay area), and Mars (which has been testing an animal-free milk chocolate bar called CO2COA​​).

Nestlé is also testing animal-free milk brand Cowabunga, Bel Brands is testing animal-free cream cheese under its Nurissh brand, and Unilever is planning a move into the space.

Feedback so far has been mixed, with Bel Brands’ animal-free Nurishh cream cheese performing extremely well in Kroger, while General Mills’ Bold Cultr cream cheese was quietly dropped in February.

Asked what prompted the decision, General Mills said it “regularly reviews its innovation portfolio and evaluates investment decisions,” but has not provided further insight.

Mars, meanwhile, has also acknowledged that the name given to its animal-free chocolate bar (CO2COA) had confused shoppers, who didn’t know how to pronounce it, and weren’t clear how it connected to the messaging on the front of the pack (‘designed with sustainability in mind’).

Perfect Day told AFN at the Future Food Tech conference that it is talking to a range of potential customers from tiny startups to multinationals:  “We are having different kinds of conversation now with established traditional brands either talking about starting a new product line or including our ingredients into their existing products.”

Animal-free dairy: ‘It takes time to build a new category’

According to Dr Afergan at Imagindairy: “It takes time to build a new category and what we’ve seen so far are early market tests. There’s great interest among dairy companies to explore this space and a lot of excitement on the consumer side too, so it may take more time to finetune the right products and consumer messages, but we’re very confident in the immense potential of this market.”

He added: “Danone is a powerhouse in the dairy space so naturally, we can work together under various modes of collaboration. We see their investment as a positive indication of their support and interest in this space. We, of course, continue to also work with additional partners within the dairy industry.”