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July 10, 2020

BlueNalu confident about cell-based cost conundrum

The founder and CEO of the US cell-based seafood supplier has an eye on creating a "very profitable business in the cell-based category".

By Dean Best

BlueNalu, the US start-up developing cell-based seafood, has expressed confidence in its ability to drive down costs and for its products to be competitive on price with conventional items.

The San Diego-based firm, set up two years ago, is expanding its administrative and R&D site to include a pilot-scale production plant to start commercial production, ahead of a test launch into foodservice outlets in the second half of next year.

The emerging sectors of cell-based meat, seafood and dairy face questions about their ability to reduce costs and charge prices for their products that are close to their traditional protein counterparts.

“You asked what are our current costs are – it doesn’t really matter. What matters is what are the costs when we actually achieve economies of scale,” Lou Cooperhouse, BlueNalu’s CEO and co-founder, told just-food. “We know what our numbers are but we also know where we’re going. We actually find it very attainable to be at price parity with conventional seafood – wild-caught and farm-raised products – by the time we get to between factory one in factory three.”

Cooperhouse, a food-industry veteran of 35 years, said the investment in BlueNalu’s current admin and R&D site would add a “mini factory” to the operation. In 2024, “or thereabouts”, the company anticipates “breaking ground at a minimum” on its first factory proper.

“We’re not doing this next pilot production to be profitable,” Cooperhouse said. “We’re doing this production to demonstrate a pathway to regulatory clearance, to demonstrate the level of hygiene, sanitation, methodology and procedures required to be in this category. We’re also doing this to launch our products and commerce to get some feedback.”

BlueNalu is preparing to launch its cell-based seafood on a test basis at foodservice outlets in the US in the back half of 2021. The opening item will be mahi-mahi and BlueNalu intends to work with chefs to decide which format suits the product best.

Asked for an estimate of what a diner could pay for a dish using BlueNalu’s cell-based seafood, Cooperhouse said: “We don’t know the answer yet. It’s a year away. We’ve begun doing research with foodservice operators. We’re doing more research this year. There’s a lot more price sensitivity in foodservice at the appetiser point, because they expect everything to be at a certain range, and entrées, there’s quite a range.”

He added: “Granted we will be losing money, obviously, but that’s not the point. This is what companies do.”

Setting out how BlueNalu is working on its cost base, Cooperhouse said the firm’s focus “from day one” has been on how to achieve scale production. “Everything we’re doing is holistic, a holistic look to even cost of goods – and not just things that drive out cost but things that enable batch-to-batch uniformity and, very importantly, the ability to have continuous, large-scale production.”

Cooperhouse insisted BlueNalu has already been able to “eliminate unnecessary ingredient components”, while developing “stable, robust, cell lines that ensure our future productivity”.

BlueNalu, he added, had “created a library of species” of more than 100 cell lines through a process of cryopreservation to give the company the ability to “manufacture on demand”.

“We develop that with our own proprietary medium. We freeze them, put them in storage and our whole model is to literally have this library of species,” he said. “It’s a total paradigm shift, unlike the land animal category or other people doing seafood, this whole wide array species platform technology approach really allows us to to really follow where the demand is.”

Cooperhouse also underlined the cost benefits that can be derived from economies of scale, a factor he believes “gets very little attention”. He added: “Frankly, some investors, certainly some of the media, have made comments that this is so expensive. Of course it is – so is everything when you’re doing it at the bench-top level. Volume-based procurement has never been applied to this sector.”

To assist BlueNalu’s quest to achieve economies of scale, the company has teamed up with US ingredients major Griffith Foods and Netherlands-based animal nutrition giant Nutreco, both of which have also invested in the business.

Griffith will help BlueNalu on “sensory optimisation”, Cooperhouse said, including in areas like texture and mouthfeel. Nutreco is working with the cell-based seafood firm on the feed it is giving to its cells.

“In accomplishing economies of scale at BlueNalu, from day one, our whole focus as a company will be on partnerships. Because partnerships in this space are really going to enable us to get to this kind of scale,” Cooperhouse said.

Privately-owned US food giant Rich Products, Japan-based Sumitomo – the owner of global fresh-produce supplier Fyffes – and South Korean tofu maker Pulmuone Co. are also among the early investors in BlueNalu. This week, BlueNalu and Pulmuone announced a memorandum of understanding that aims to market the US firm’s products in South Korea.

“The fact that we just announced building a factory means that our investors have full confidence in our ability to drive our costs down,” Cooperhouse said, pointing also to the segment of the market in which BlueNalu aims to do business.

“We’re creating value because we’re focusing on on the finn-fish category which commands a premium price point. It’s not so much about cost. We can’t be compared to the cost of a company doing cell-based meats. It’s about margin potential profitability.

“We’re always about the fillet, in that higher-value, premium-position product that is growing and that is fraught with supply chain challenges and concerns. Then, our approach on how we’re dealing this very holistically, in a continuous process, with scale production and partners would make anybody doing cell-based meats successful to a point – but the fact we’re actually dealing with a species, and an animal protein product, that has far more challenges, we feel creates an enormous synergy in our ability to perhaps uniquely develop a very profitable business in the cell-based category.”

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