Jim Mellon is one of Britain’s most successful private investors. He believes that within the next few years, world agriculture will be radically transformed by the rise of cultivated meat technology. Indeed, he views the alternative protein trend as a “money fountain” which will rapidly revolutionise global consumption habits.
He co-founded Agronomics (LSE: ANIC), a former penny stock that hopes to ride this theme.
What is cultivated meat?
Cultivated meat — or cellular agriculture, as it’s also known — is the growing of real meat directly from animal cells. That is, lab-grown meat produced by cultivating cells as opposed to farming animals. Unlike plant-based alternatives, this is actual meat, just without the rearing and slaughtering of animals.
The benefits of this are numerous. Ruminant livestock is the most emissions-intensive food we consume, due to the potent methane gas produced in the process. Cellular agriculture products have far fewer environmental impacts.
Plus, this new technology has the ability to make meat with fewer saturated fats or any antibiotic residues. And to make milk without lactose, or eggs without cholesterol. The potential health benefits could be enormous.
Agronomics is projecting that cultivated meat could reach 35% of the global meat market by 2040. Meanwhile, consulting firm McKinsey estimates that this market could reach $25bn by the end of this decade.
Upside Foods recently became the first lab-grown meat company to have its product approved for human consumption by the US Food and Drug Administration (FDA). Jim Mellon called this FDA approval “a landmark event for the field of cellular agriculture”.
The company
Agronomics is a venture capital firm with a portfolio of over 20 promising investments in this space. As well as Jim Mellon, it has other strong backers.
One is Richard Reed, the non-executive chairman. As the co-founder of Innocent Drinks, he has experience scaling up and selling a start-up. The environmentally-sustainable smoothie brand was sold to Coca-Cola in 2013 for $600m.
Agronomics stock was as low as 5p just a couple of years ago, which made it a penny stock. However at 13p per share today, Agronomics now has a market cap of £131m. This small size leaves it with plenty of room to grow if some of its investments prove successful.
The portfolio
Top portfolio holdings include BlueNalu, a cell-cultivated seafood firm backed by Jeff Bezos, Leonardo DiCaprio, and Robert Downey Jr. Also, there’s pork manufacturer Meatable and Vitro Labs, a startup developing lab-grown leather.
Agronomics has also recently formed its own first two companies. These are cultivated pet food company Good Dog Food, and a contract manufacturer in precision fermentation called Liberation Labs.
The company expects to start seeing regulatory approvals across its portfolio in major protein categories next year.
Risks
While the potential upside is huge, there is noticeable risk here. The main one being that there’s no guarantee people will instantly take to lab-grown meat. This could slow down its commercialisation.
Another issue is that this is a small-cap stock, so there can be wild swings in the share price. Volatility can be expected moving forward.
Overall, I think the cellular agriculture industry is set for explosive growth in the next few years. At 13p, I recently added a few more shares to my portfolio.
