Precision fermentation can take control of the largest export dairy product, research
The dairy industry’s greatest export success may also be the cause of its greatest future concern, as whole milk powder can now be copied and replaced by precision fermentation methods, research shows.
Anna Benny, technical account manager at the Kellogg Rural Leadership Scheme, said in a recent article that the dairy industry was ripe for disruption because it was too dependent on whole milk powder exports.
Whole milk powder could be replaced by proteins produced from precision fermentation, which in the future would be cheaper and more climate-friendly.
In the article, Benny showed that in 2020 whole milk powder exports contributed nearly $7.57 billion to the economy, with this figure steadily increasing. New Zealand supplied 60% of the world’s whole milk powder exports, with most going to China for use as ingredients in a range of products.
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Powdered whole milk
Whole milk powder was sold as a commodity and was used as an ingredient in everything from Kit Kats, yogurt drinks, sports drinks, whey sold at the gym, and was also an ingredient in many pharmaceutical products, a said Benny.
Shoppers around the world only saw it as an ingredient, she said.
Benny, who said she loved the industry as she lived on a dairy farm in South Otago with her dairy farmer husband, thought the New Zealand dairy story, which was seen as a selling point, did not travel with local products.
“Fonterra’s biggest customer is Nestlé. When was the last time you saw a Nestlé product that talked about New Zealand’s low-carbon milk or the fact that our cows are raised on pasture? Or our pure green milk?
“I think many farmers are disconnected from what happens inside the processing plant. We make a beautiful natural product, but in a factory it is carefully controlled to make mostly powders. There’s no romance in that,” Benny says.
In a process similar to brewing beer, precision fermentation used microbial cells as factories to produce proteins, fats, enzymes or vitamins. To produce nature-identical molecules, the process only needed energy, water, microbes, a raw material such as sugar, and a controlled environment, she said.
This was unlike milking cows.
“It’s an intensive process to produce a ton of powdered milk. You have to raise a cow. You cannot milk her for the first two years until she has had a calf. Once in the milking herd, she needs enough food and water to stay alive, go to the milking barn twice a day, and produce milk.
“If there is enough grass in the paddock this will make up the majority of his feed, this will normally be supplemented with additional feed such as hay or palm kernel expeller (PKE). The milk will be collected, taken to another location where the water (87% of the milk) will be removed by spray drying, leaving only the 13% solids available for sale,” Benny said.
Precision fermentation technology has bypassed this process. If evaluated under a microscope, proteins grown by fermentation would be indistinguishable from those produced by a cow. It’s also the same nutritionally, she said.
“If manufacturers can buy the same product, or an even more consistent, safer product at a lower price, that serves the same purpose in the foods they make, why would they buy it from neo-dairy products? zealander?
“It’s a real bulk product that ends up in warehouses and looks exactly like the products from anywhere else in the world, and looks like the alternative proteins that are coming for us,” she said.
Milk was made up of two proteins, caseins and whey. The whey was already made commercially with an American casein company, she said.
The feedstock for the microbes used in precision fermentation can come from almost any product.
“These microbes can digest everything into simple sugars and express them as proteins. At the moment, sugar is used because it is the easiest thing to train microbes to consume. Eventually, any form of carbs, such as certain vegetables, could be used, Benny said.
In New Zealand, research projects have investigated the use of leftovers from the timber industry and their digestion into simple sugars for use as feedstock.
The milk powder retail market was small compared to the demand for drinking yogurt, long-life milk and flavored milk drinks, which were most likely what Chinese food manufacturers were producing with milk powder qu they were buying from New Zealand, she said.
“When dairy products become ingredients in processed food products, they are treated as commodities, comparable to the same specification of product produced anywhere in the world and competed only on price.”
Benny said she feels this challenge is much bigger than the industry realizes and more people than she should be taking the possible future scenario seriously.
“This tipping point will happen so quickly and affect the livelihoods of so many people,” she said.
When is the tipping point
To pose a threat to New Zealand dairy, alternatives would need to be of high quality, available in bulk, and consumers would need to approve of its taste and the way it was grown, Benny said.
Nestlé was aiming to increase its range of plant-based products and was already reformulating recipes for products like Kit Kat, Milo and Nescafé coffee, to create dairy-free versions. Large food companies committed to adding plant-based portfolios to their portfolios would increase demand, she said.
“There will be very few people needed to make these changes. It will be the CEOs of large food companies who are driven by corporate sustainability, profits and the need to make sure their food appeals to as many people as possible. It will tip the books in favor of something that can do the job of dairy, for a lot less and with a lot less greenhouse gases,” says Benny.
There was still speculation around when price parity between precision fermentation products and whole milk powder would be achieved. Forecasts ranged between one and 10 years, she said.
However, the road to meaningful market change was still bumpy.
The cost of producing insulin by precision fermentation was about $110,000 per kilogram, compared to the milk price of $9.90/kg. But the multinationals were trying to expand, with breweries like AB InBev increasing fermentation capacity for food-grade precision fermentation. It would cut costs, Benny said.
“Most milk does not cross international borders and will be consumed in the country of origin. But only 4% of local milk is consumed locally.
“This puts us in a difficult position because ingredients at the lower end of the market will be the first to be disrupted by new technologies, particularly if the ingredient is expensive and it is easier to achieve price parity. “, she said.
“Once price parity is achieved, food manufacturers who currently value New Zealand dairy ingredients for their high quality, consistent and cost effective attributes will have another option.
“In applications where dairy products are used anonymously as a functional ingredient, it is highly likely that these will switch to the lower cost option which will have the added benefit of helping to achieve sustainability goals and ‘attract a wider variety of consumers,’ Benny said.