Matt Gibson is on a mission. The CEO of New Culture Food hopes one day his company and others like it can “eventually replace the entire global dairy market”. What he hopes to replace the global dairy market with are so-called animal-free dairy products.

It’s going to be a long journey but the US-based company is one of a number at the vanguard of disrupting one of the most traditional and long-established food supply chains.

Animal-free dairy – as distinct from plant-based dairy and the cell-based niche using animal cells – is a nascent sector. Several start-ups have been launched and lots of venture capitalists, big food groups and other funders have ploughed money into the niche. However, to date, few products have hit the market.

Nevertheless, many industry observers believe animal-free dairy could be set to enjoy turbo-charged growth over the next few years in the same way sales of oat milk exploded.

So how is animal-free dairy made, which companies are leading the charge and how big could the market ultimately become?

Animal-free dairy is created through a fermentation process like brewing beer. The yeast in the fermentation tanks has been engineered to produce dairy proteins, which are later extracted and then turned into dairy products like ice cream and cheese.

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By GlobalData

There are two main drivers behind the production of animal-free dairy products that use this technique: – the environment and animal welfare – according to Jack Bobo CEO of food foresight company Futurity. “Many of the founders of these companies are motivated by moral or ethical considerations related to animal welfare, as well as a desire to reduce the environmental footprint.”

Bobo adds a note of caution. He points out “the final environmental picture for these products won’t come into focus until the products are produced at scale and a full life-cycle analysis is completed”.

There aren’t enough examples of animal-free dairy products in circulation to provide an accurate insight into their environmental footprint.

Despite the current lack of evidence, many proponents argue animal-free dairy products are better for the environment as they don’t rely on industrialised animal farming. In addition to the purported environmental benefits, Bobo says animal-free dairy products are a closer approximation to traditional dairy products taste-wise than other alternative products because they contain real milk proteins, albeit not the full range of proteins in traditional milk products.

It’s a view shared by Gibson, whose company’s first product is an animal-free mozzarella cheese developed specifically for pizza. “Current plant-based cheeses don’t come anywhere close to the product experience a general consumer wants from their cheese,” he argues. “If we think about plant-based mozzarella, it doesn’t melt, stretch, feel and taste like cheese. Plant-based cheeses lack the dairy proteins that provide all the cheese characteristics we love. Animal-free dairy allows us to make cheeses that are indistinguishable from current animal-derived cheeses in the experience of consuming them, while also having all the upside of plant-based cheeses – lactose-free, sustainable, cholesterol-free and animal-free.”

Germany-based Formo, formerly known as LegenDairy Foods, spied a similar gap in the market for its range of animal-free dairy cheese having identified cheese alternatives as the “most pressing consumer pain-point” in the plant-based sector, according to a company spokesperson.

“Consumer research shows that plant-based cheeses significantly underperform in comparison to plant-based milk or yogurt in the overall plant-based dairy category,” says the spokesperson. “Because plant-based proteins do not have the same functionality as milk proteins, we see our biggest potential for positive impact in creating real, delicious cheese without using animals.”

The Formo spokesperson argues the number one reason consumers eat plant-based food is for health – but the principal reason people shy away from the products is taste. “The current market offerings show that plant-based cheeses cannot compete with their animal-based counterparts in terms of nutritional profile, texture, and taste. Our cheeses can finally satisfy these consumer needs, while using substantially less resources, creating less emissions and being 100% animal-free.”

Another company that believes it can rise to the challenge of creating animal-free dairy products that look, feel, smell and taste as good as traditional dairy products is Israel-based start-up Imagindairy.

Eyal Afergan, co-founder and CEO of Imagindairy, says the company was co-founded by a team of “prominent experts” in microbiology, computational systems and biotechnology with the support of Israel-based The Kitchen FoodTech hub.

“Imagindairy combines multidisciplinary expertise to address the industry’s bottleneck to develop commercially-viable, animal-free dairy, protein-based products from microflora by integrating proprietary machine-learning technology with system and synthetic biology to maximise milk’s protein production,” he explains.

Afergan says Imagindairy’s approach enables it to produce milk proteins identical to the ones in cow’s milk and the company can therefore produce a variety of dairy products, including new dairy products he, notably, claims it is not currently possible to create with the “traditional production methodologies” of conventional dairy. Imagindairy expects to launch its first product within two years, although the company says it cannot confirm at this stage what the food would be.

To date, many of the animal-free dairy products launched or in development are cheeses. That’s partly because animal-free dairy can “fill the gap between plant-based and animal-derived cheese”, Gibson at New Culture Food argues. US-based Brave Robot has also produced animal-free dairy ice cream using whey proteins produced by Perfect Day, which is seen as the market leader in this field.

“While the proteins can be used for other products, it is more expensive at the moment to produce products in this manner, so it makes sense to focus on premium branded products [like cheese and ice cream] rather than fluid milk, which tends to be sold as a commodity and is a shrinking market,” Bobo asserts.

He says animal-free dairy has become much more crowded over the last couple of years and anticipates it becoming busier still over the next few years as more start-ups attract funding, scale-up and bring their products to market.

In the last 12 months, there has been a flurry of investment into animal-free dairy companies. In December last year, London-based animal-free start-up Better Dairy secured GBP1.6m of seed funding.

The same month, Israeli-based animal-free start-up Remilk secured $11.3m from a group of investors, including German cheese producer Hochland and local dairy business Tnuva.

In September, Formo secured funding of $50m. Then, last month, Perfect Day pocketed $350m in funds with Walt Disney chairman Bob Iger joining the funding round. The company has secured $750m in funding since its creation in 2014 and is rumoured to be eyeing up an IPO.

While Perfect Day might be ahead of the field in terms of the amount of funding it’s managed to attract to date, the company faces the same issues as smaller rivals operating in the same domain. Imagindairy’s Afergan lists tests for businesses in the field as “scale-up, downstream process, formulation, and consumer acceptance” but says “the biggest challenge of using precision fermentation to produce milk proteins is the high production cost”. He adds: “Nobody would buy a bottle of milk for $50 or even for $15. Therefore, cost-effective production costs are the key to a real change in the way we consume dairy products.”

For Gibson, scaling up is the biggest challenge facing creators of animal-free dairy products and says companies like his own “need to collectively scale to magnitudes we haven’t yet seen”.

It’s still very early days for animal-free dairy so it is difficult to predict what’s going to happen in terms of product development and whether consumers will ultimately embrace the products.

Bobo believes animal-free dairy has the potential to grow significantly but underlines “the market size may ultimately depend on the ability of the industry to scale at an affordable price”. He says the focus of companies in the sector is to compete with traditional dairy products but adds: “It’s worth keeping in mind that the rapid growth of oat milk has generally come at the expense of other plant-based dairy alternatives. Early adopters of these products are likely to be consumers who are already avoiding traditional dairy. To gain mainstream acceptance, they will need to appeal to a broader swathe of consumers”.

There are a host of companies queuing up to test consumer demand. Formo is aiming to launch its first products by 2023 and is about to hold a product demonstration in collaboration with plant-based Michelin-starred chef Ricky Saward. New Culture Food is still at the pre-commercial stage and anticipates soft-launching a product in late 2022 into a few select restaurants and then expanding into more operators from 2023 onwards. “We are targeting foodservice as our first market and will be a co-branded product on many pizzeria menus,” says Gibson.

Big Food appears to be watching closely. In August, it emerged US food major General Mills was exploring animal-free dairy through a development brand called Renegade Creamery.

Replacing the entire global dairy market with animal-free dairy is not going to happen overnight. Change will happen gradually but Gibson and Afergan are confident that change is coming. Afergan says: “In 50 years, our grandchildren won’t believe that we consumed milk from cows.”