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Why lab-created milk is a threat to dairy farmers

Alternatives to dairy-based milk are popping up everywhere these days, which is clearly not good news for dairy farmers. They’ve been suffering from declining sales since 2014, plus an oversupply of milk continues to drive down prices. Recent export tariffs have created additional grief, resulting in more dairy farms closing down each year.

Dive Brief:

  • The dairy industry, already dealing with a milk oversupply, falling prices and competition from plant-based beverages, is facing yet another challenge in the form of synthetic milk alternatives, according to CNBC.
  • Perfect Day Foods has developed an animal-free milk alternative, which is made in a lab from genetically modified yeast. Using biotechnology, the California-based company uses microflora to ferment sugar and create dairy protein, which it described as lactose-free, cholesterol-free and vegan — and also tasting more like dairy milk than plant-based beverages.
  • According to Perfect Day, its production process is cleaner and saves resources compared to traditional animal-based agriculture. CEO Ryan Pandya wrote in a LinkedIn post his company plans to sell its lab-created dairy protein to other companies to make foods and beverages rather than manufacturing its own products.

The popularity of plant-based alternatives is also causing trouble for the dairy industry, as beverages made from soy, rice, almonds, oats and nuts appeal to consumers wanting more flavor and less cholesterol and fat in their diets. According to Mintel, U.S. non-dairy milk sales jumped 61% during the past five years, while dairy milk sales fell 15% from 2012 to 2017.

The situation would be grim without the debut of synthetic milk alternatives, so once Perfect Day’s ingredients and others start showing up in the marketplace, it could mean an even more serious and lasting blow to dairy milk sales.

Still, traditional dairy isn’t giving up without a fight. The industry has been waging battle on numerous fronts. It’s legally challenging the term “milk” when used by plant-based beverages and claiming that almond milk is nothing but “nut water” since there’s no cow involved. Whether it wins that argument will depend on whether the Food and Drug Administration decides to restrict use of the term “milk” on product labeling to animal-based products only.

Meanwhile, some dairy producers are more worried about synthetic alternatives because they may look and taste more like cow’s milk than other non-dairy beverage products already out there. Mike Eby, a dairy farmer and chairman of the National Dairy Producers Organization, told CNBC he had to sell his 60-cow herd in 2017 due to dropping prices and competition from corporate agriculture.

“If [processors] are successful in considering Perfect Day as milk, they [could] use Perfect Day to make ice cream or yogurt or cheese,” he told the network. “And the worst part about it would be that it wouldn’t be labeled as such. No one would know the difference and they would actually claim there is no scientific difference.”

Labeling changes might not make any difference to consumers at the retail end, plus it’s difficult to imagine products made with lab-made dairy proteins from Perfect Day or another company being called anything other than “milk.” However, this seems to be a new world where previous practices may no longer apply — particularly when new products never previously developed or imagined are hitting store shelves and dairy cases.

In some ways, the milk situation reflects the debate going on between the cattle industry and biotechnology firms regarding lab-grown meat. The U.S. Cattlemen’s Association has asked the U.S. Department of Agriculture to restrict the definitions of “beef” and “meat” to products made “from cattle born, raised and harvested in the traditional manner.” The National Cattlemen’s Beef Association is focused on making sure consumers aren’t exposed to “fake meat and misleading labels on products that do not contain real beef.”

The respective arguments aren’t really parallel, however, since synthetic milk alternatives don’t contain ingredients sourced from animals. Lab-grown meat production requires cells taken from live animals.

Millions in investment — and potential sales — are riding on how these policy debates play out. Perfect Day recently announced it received $34.75 million in new funding, making a total of $74.7 million to date. Lab-grown meat firms have also been drawing significant funds from major investors and big food companies.

One other aspect could prove particularly influential with consumers. High-tech protein startups have some significant sustainability factors on their side. They use less water and land, have fewer or no animal welfare concerns and can exercise more control over production and food safety issues. The dairy and cattle industries might find this difficult to counter.


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