"The global food crisis requires us to accelerate investments in foodtech"
"The global food crisis requires us to accelerate investments in foodtech"
According to Tnuva CEO Eyal Malis, it won’t be long before we encounter food products that will greatly challenge the way we perceive food today
A series of events that unfolded simultaneously around the world in the last three years, including the war between Russia and Ukraine, the aggravation of the global climate crisis that led to floods and heatwaves in various countries, global recovery from the Covid-19 pandemic, an increase in prices and transportation costs, and damage to the supply chain, converged at the beginning of 2022 into an outbreak of a global food crisis that reached Israel as well. All of these just added to the challenges that have been preoccupying the world for years, food shortages in third world countries on the one hand, or the growing demand for healthier food in the western world.
The food crisis is focused on two central problems: a lack of basic food products and raw materials in general, alongside a sweeping price increase affected by high demand and high inflation.
During these challenging times, Israel’s entrepreneurial nature, technological innovation, and the creativity of the local foodtech industry have thrived. According to IVC data, over 320 foodtech companies have been established in Israel, with an average of 42 new companies in the field established every year.
As we approach the end of the year, and just before the finals of Calcalist's and Tnuva Ventures' 2022 Foodtech Competition, Calcalist spoke with Eyal Malis, CEO of Tnuva, and with Shay Cohen, Chief Innovation Officer and manager of the company's investment arm Tnuva Ventures, about the challenges the company faces and of the future Tnuva promotes through its investment arm in the field of foodtech.
"The need to find food sources are different from those we are used to consuming," says Malis. "This has become clear in recent years and it has a significant impact on the industry. It seems that in the near future we are expected to encounter food products that will greatly challenge the way we perceive food today. There are many examples of this: starting with meat produced from laboratory cultures, through industrialized and cultured agriculture or the production of substitutes from plants and of course in printed food. These are all technologies that are in different stages of development and it is likely that not all of these technologies will be able to be integrated and survive, but this trend is clear and it is not going anywhere. In addition, the fields of molecular biology, genetic engineering, the CRISPR - all of these have led to significant development in the worlds of precise fermentation, cellular agriculture and plant molecular farming.”
How do you deal with the global changes in the food industry in your company?
Malis: "Our role as the largest food company in Israel and the leader in the field of protein substitutes, is to bridge the gaps between the current challenging reality, and the future needs of the food industry. At the same time, we do not forget our main role, which is to provide now and in the future better, more accessible, and more sustainable food for more families and consumers. This year we established the Tnuva Ventures investment arm whose role is twofold - it helps us find technological solutions to the challenges that exist in the present and also allows us to invest in tomorrow's production methods, which will create growth engines in the food market in Israel and around the world.
"The milk substitutes market, for example, is one of the fastest growing in the world and we see more and more consumers looking for milk substitute solutions, both for health, environmental or principled reasons. Tnuva has been the pioneer of protein substitutes for about 20 years, and the first to develop the field of milk substitutes in Israel. The knowledge and experience we have gained in the field has made the company a market leader, while developing Alternative as a young and innovative brand in the Israeli market. Tnuva's vision is to be the leading cultured food platform in the world, which is focused on creating groundbreaking components for the next generations of protein substitutes."
What is unique about the technologies exported from Israel? What strengths does the local industry have compared to the global one?
Cohen: "Israel is an island country, and therefore it was required to develop an independent food system, which began with the need to maintain sustainable agriculture here. Over the years, the combination of the development of agricultural technologies with leadership in the fields of biotech created a perfect breeding ground here for the development of leading technologies in the field of protein substitutes, the main one among them being the field of meat and cultured milk components.
"In recent years, there has been a transition from the field of foodtech to the field of bio-convergence, which combines the fields of biology together with engineering methods such as electronics, AI, computational biology, physics, nanotechnology, materials science and advanced genetic engineering. Bio-convergence is now considered the next technological wave of the 21st century.
"A GFI report indicates that Israel is in second place in the world in alternative protein investments after the U.S. with investments of $320 million in the field, as of the first half of 2022. This is a 160% increase compared to the first half of 2021. The potential of protein substitutes is huge because it is the future of the sphere we live on and it is the one that will define our dinner plate in about a decade. Tnuva as a company realized the potential already about 18 years ago and invested hundreds of millions of shekels in the development of the "Tnuva Alternative" brand, which focuses on the company's milk substitutes," says Cohen.
What do you look for in entrepreneurs when you consider investing in them?
Cohen: "We are looking for entrepreneurs with infinite development capacity who know how to balance determination, professionalism and assembling a quality team, who know how to complement them in different content worlds. In addition, it is important for us to identify realistic entrepreneurs, as we place a significant emphasis on techno-economic analysis for future uses of technologies. Also, it is important for us to see the developer's future recruiting ability and his conduct during negotiations."
How does identifying the companies work? Is it according to the needs of Tnuva or do entrepreneurs and scientists turn to you and "reveal" to Tnuva Ventures new worlds and possibilities that they had not thought of before?
Cohen: "Tnuva's innovation system, the central business divisions and our R&D center receive hundreds of inquiries from startups in the foodtech field every year, and at the same time we make proactive inquiries to every company in the field. The advantages of the cooperation are very simple - Tnuva is a beta site and a force multiplier in the development of the product and its commercialization in the Israeli market (a small market with a small advantage) for companies. Also, Tnuva's investment has become a standard for other financial investors.
"In addition, in recent years Tnuva has deepened its grip on the worlds of foodtech, both through direct activity and through investment with partners in the Fresh Start incubator in Kiryat Shmona where startups operate in the foodtech fields. Tnuva invests in the incubator together with Tempo, the investment platform OurCrowd and the investment fund Finistere Ventures and the startups benefit from the company's rich experience in research and development and innovation in the foodtech fields and access to global markets, with the aim of promoting the food industry and making Kiryat Shmona the foodtech capital of Israel."
Can you give examples of how new technologies create a growth engine for the company?
Malis: "The best example is our collaboration with the company Pluristem, with whom we established a joint company last year that will work for the production of cultured food. Pluristem is a groundbreaking biotech company that offers a technological platform for growing cultured cells with over 100 protected patents in the field, and over $500 million were invested in the company in the last decade. The joint company of Tnuva and Pluristem will produce components for the food industry that will be breakthrough components for the next generation of protein substitutes, and Tnuva will develop the final products for the consumer. What will come out of Pluristem's machines will be cultured protein components, meat and chicken that will go from their factory to the food industry, and at the end, the consumer will enjoy, among other things, a next generation hamburger.
"In addition, Tnuva invested in the company Remilk, which develops cultured milk components, according to a company value of $30 million. In January 2022, Remilk raised $120 million according to a value of $325 million. It is important to note that next to the alternative protein components there are many challenges for the industry in which Tnuva collaborates with foodtech companies, such as sugar reduction, which has been an important and requested issue recently."
How does the integration of new technology occur? How complicated and complex is it? What conceptual, managerial and operational changes are required from the company once a decision has been made to implement the technology and enter a new field?
Cohen: "There is no one orderly process, because each technology requires its own unique application process. Each process is complex and challenging, especially in a corporation, but the staff has been trained in this for many years, so almost every technology is successfully integrated. The dedicated R&D center that Tanuva established this year under the leadership of Pnina Sverdlov, director of Tnuva's R&D and projects department, is a good example of integrating new technological innovation in the company. The center was established with an investment of NIS 5 million, along with the establishment of a dedicated laboratory of 100 square meters that allows for defining new production processes, testing technologies, components and developing various applications for the final products.
"The main challenge in the establishment of the R&D is the attempt to test and simulate by small-scale production (most of the components come in small laboratory portions) the industrial production and to give fast and effective feedback to the developing companies. The purpose of the R&D center is to leverage Tnuva's expertise in developing scale processes, understanding consumers and marketing in order to produce tasty, nutritious and accessible products.
"In addition, in the process of working with the startups over the years, we have learned to speak their language and have become more flexible, especially in the speed of feedback we give them, with the close accompaniment and mentoring of our professionals vis-a-vis theirs. Industrial production is complex and even tough - and we are here to combine forces and help them go through the processes efficiently, professionally and with ease."
What added value does the company give to startups even if it did not use their technology?
Cohen: "The entrepreneurs are not intimately familiar with the production process, so the very meeting between the entrepreneurs and the producers leads to new ideas and the solving of existing challenges. Later on, there is even a brainstorming meeting with a variety of experts from different fields in the food industry. In addition to this, at the investment level - Tnuva's name is a symbol, a standard in Israel and the world, therefore the company's investment is an expression of confidence in the technology, the team, and their way. Also, Tnuva's many years of experience allows it to identify processes that can be improved, changed or optimized at an early stage. Tnuva gave feedback to many companies in the early stages, so they saved a lot of time on laboratory developments and knew very quickly if any changes were required and what was required."