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A roadmap to a cell-ag era

How would recent surge of public interest in cell-based meat play out for the industry? Hype cycle? Price parity? Disruption? What will we see when cell-based meat enters mainstream? Monopoly mega-corporation? Home meat breweries? And when?

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A roadmap to a cell-ag era

  1. 1. A roadmap to the era of cell-ag
  2. 2. World after cell-ag entering mainstream? What will happen to farm animals and farmscape? Large factory by monopoly corporation? Who sells cell-based meat and how? What would happen until then?
  3. 3. “Disruptive technology” in general Conventional technology Price Parity(PP) Disruptive technology ・Performance of disruptive technology increases with time. ・Conventional technology is outperformed at the PP. ・Fundamentally inferior technology never reach the PP. Performance Time Now↓ Reference Disruptive_innovation [Perceived value] [price]
  4. 4. In case of cell-based meat…. Conventional meat Price Parity(PP) Cell-based meat ・Performance of cell-based meat increases with time. ・Conventional meat is outperformed at the PP. ・Conventional meat stays, if cell-based meat is inferior. Performance Time Now↓ ※This slides assume fundamental superiority of cell-based meat. [Perceived value] [price] Includes everything, from taste, texture, instagrammability, ethical feel-good factor etc.
  5. 5. Scenarios of cell-based meat entering mainstream Time Performance Conven- tionalPrice Parity PPNow Centralized Distributed Cell-based ・What might happen until the price parity is reached? ・What might happen after the price parity? ・What should we do in the world after meat price parity? ?
  6. 6. Before PP ・The cell-based meat hype may peak 2021〜2022 ・Initial products would be limited to nuggets, foie gras etc., and generally fail (overblown) expectations. ・Would get through the worst in 2030s, but the share would be 0.1% ・But the PP will eventually be met as technologies advance. ・Companies need strategies to go over the trough of disillusionment “Hype cycle” https://en.wikipedia. org/wiki/Hype_cycle PP Met
  7. 7. When the PP nears in (late 2020’s) Animal welfare organizations would serve as the “canary” - Increased frequency of posts like “Let’s everybody eat XXX (specific cell-based product brands)” on socials networks hint the PP closing in. Meat industry lobbying is already resisting - The main arena would be in marketing, categorization, labeling and food safety regulations. (Possibility of smear campaign) - Bold forward moves will be found in regions with little meat industry lobbies like Singapore. Pro and anti lobbies fight across “The Chasm” by sending messages that target “Early Adopters”.
  8. 8. PP Reached = Disruption Photography: Fujifilm and Kodak ・The cost-benefit of cell-based meat will gradually increase to the PP. ・Once PP is reached, the market share of cell-based meat increases exponentially. ・New markets that never existed under conventional meat emerges ・Surrounding industries like processing, packaging etc. moves to adapt. ・Unexpected entrants - i.e. Nvidia (computer parts) entering automotive industry with autonomous vehicle. (Reference) “The Innovator’s Dilemma” by Clayton Christensen
  9. 9. Disruption sequence and entry barrier from the start Foie gras $55/kg Tuna $28/kg Seashells $23/kg Crab (edible part) $40/kg Pork, chicken $2/kg Beef $4/kg Japan $22/kg Price parity reached by unit prices, “disruption” occurs accordingly (As all products would be based on the same technology, entry from the middle i.e. tuna may prove difficult.) Hong Kong $17/kg Singapore $12/kg Germany $11/kg USA $11/kg Beef consumer prices (2019)
  10. 10. Possibilities after price parity Time Performance Conven- tionalPrice Parity PPNow Required capital is big Required capital is small Cell- based ? Q. How much capital is needed for new market entrants?
  11. 11. How much do you need to launch a business? “It is customary to to consider the cost of the plant as varying by about the 0.6th power” (New Scientist vol.17, No.326 p355) CA = The construction cost of Plant A CB = The construction cost of comparable Plant B at different capacity SA = The capacity of Plant A SB = The capacity of Plant B CB=CA×(SB/SA)^0.6 The upfront investment appears relatively large, hinting a community- scale facility. Scale Cost Cost per kg meat 100kg/mon. $0.3M $33 1t/mon. $1.2M $13 10t/mon. $4.8M $5 100t/mon. $19M $2 1000t/mon. $75M $0.8 Q: “What is the minimum efficient scale (MES) of cell-based meat?” (Estimated by IntegriCulture Inc. / 2017) 0.6th power rule & 7-year depreciation assumed
  12. 12. “Required capital is big” high-MES scenario ・2 to 3 cell-ag companies per country (like automotive industries) ・High minimum efficient scale (MES) - economy of scale is everything ・Foxconn-style “cell culture foundries” is possible ↑Transport of amino acids to cell-ag plant with big tankers ←Littoral petrochemical plants are replaced by cell-ag plants
  13. 13. ・Economy of scale is not everything - room for other competitive edges ・Equipments and ingredients are commodities, like restaurant industry ・Open source cultured meat, nonproprietary recipe, DIY cell culture vats “Required capital is small” low-MES scenario
  14. 14. Scenario in between(i.e. Beer industry) Ohwaki Engineering CO.From hp of Sapporo Beer ・Local and private brewery brands alongside big brands ・Big brands leverage on the economies of scale ・Small brands target local and niche markets ・The required capital for market entry generally decreases with advancing technology (i.e. AI & automotive), and the scene eventually shift to Scenario 3? PicoBrew : Beer brewing machine for home-use Mass brand companies Local brewery Home brewery
  15. 15. ・The minimum efficient scale at the price parity determines the outcome. ・Actions of animal welfare organizations and regions like Singapore would hint the nearing price parity. ・Other cell-ag (fur, timber, seafood etc.) products may follow the same path. time PP not reached Capital intensive Not capital intensive Cell culture & cooking not distinguished Democratization Likely scenario from 2030s How would cell-ag enter mainstream? Minimum efficient scale (Required size of capital for market entry) Reach PP High-MES scenario Reach PP Low-MES scenario
  16. 16. ・“DIY meat” allows room for competition other than scale and price, pushing the balance to the right. ・Continued development in DIY meat acts as a tidal force pushing industry decisions to the right. time PP not reached Capital intensive Not capital intensive Cell culture & cooking not distinguished Democratization “DIY meat” may shift the balance Minimum efficient scale
  17. 17. Farmers launching brands in democratized cell-ag ・Local farmers and town butchers can develop their own cell-based meat recipe. ・Hobbyists can come up with unique meat recipe and brands. ・Bioreactors in backyard, fewer cows that are better looked after More info↓ 2co/the-cellular-agriculture- farmscape
  18. 18. Farmers sell meat ($70/kg), not cow ($15/kg) Farmers may sell or license cells Fewer cows Bioreactors in the backyard Many cows Cows are the product Cell or meat is the product Traditional farmscape Cell-ag farmscape The Cell-Ag Farmscape