How We Changed the Legal Environment of Our Startups

The 20th of September 2017 big news came out: Evira, the Finnish FDA, changed its interpretation of certain EU-level regulations to allow the sale of insect products for human food and for animal feed in Finland. Before the change, all insect products sold for human consumption were banned and there were serious restrictions on insect feed for farmed animals. This change means the end of the years-long waiting period and the Finnish Insect for Food and Feed (IFF) companies have been able to start selling full speed.

The legal environment is one the risks that every company must consider carefully in their business plan regardless the industry they are operating in. In general, a hostile legal environment is seen as a big minus and something that is difficult to change, especially in short term.

No matter how unlikely and how difficult it was considered to be, the Finnish IFF- startups were able to lobby the authorities to change their viewpoint and open the markets. Similar changes are expected all over the Western world, but Finland changed it’s interpretation now sooner than others.

How exactly the Finnish startups spurred the change and how can you do the same in your home country and your industry?

Positive Relationship with Media

The hype around rearing insects for food and feed started around 2011 when FAO started to promote insects as a sustainable choice over conventional animal protein sources. The media attention reached Finland as well and since has been featured multiple times on all major media platforms. Finnish start-ups started to emerge some years after 2011 and since they have featured the articles and news regularly as well.

The IFF- industry is quite unique in many ways and this is one of the major reasons why media has covered so much of it nationally, but all the startups have been not only accepting invites for public speaking and giving interviews, but also reaching out for reporters. What has been great to notice on many occasions I have been asked to cover for other players in the industry to cover for them for e.g public speaking if there has been a double booking. This tells of shared understanding that raising public’s understanding and awareness is very important, even if the publicity points goes to the neighbor company.  For emerging industries many times the competition is not the companies doing similar things than you, but the companies you coming to steal the market from. This essential idea is widely spread in the small Finnish industry and now we all share the fruits of co-operation.

Make Regulators Work for You

Some years ago I had a discussion with Entocube, one of the Finnish startups. I criticized their approach to bring to market end-user products, even though their main business the insect farming technology had at that point many open questions. Now looking back Entocube’s vision to raise awareness about their company and industry by their clever “kitchen decoration products” (insect food was banned) was very unselfish and brave, but also the right thing to do. By pushing the limits of the regulating bodies and sparking even more discussion with their products in media gave the initiative for Evira to start looking seriously on their approach to the topic.

sirkkapurkki

Above is a picture of the “Cricket Jar”- kitchen decoration jar. Not for consumption! A great way to raise awareness and push the limits. This product forced the regulatory body to react. 

We did not have common plan or organization

What was not done is equally important with what was done. Finnish companies have not formed a registered association, but what we have shared so far is a common goal and modern perception of markets. Also, it is worth noticing that there are no Finnish members in the global association of IFF-companies IPIFF.

To me, this tells that organic communication from different entities was at least in this case the key to build up political pressure that leads to this change. Could it be that when the communication is natural and organic instead of designed and always politically correct it is something that interest media and the big audience more?

Three learning points

Every country is their own case, but I see that there are three points to learn from this case.

  • Raise public’s awareness. This is the first step for people to start accepting the idea of something new and to introduce more wide pressure for the public sector to start thinking of the current policies.
  • Force the regulating bodies to react. Especially in a field that was never been though of carefully by the lawmakers by pushing the boundaries, you force them to draw the lines for the first time. What is most important here is that the decisions must be justified. If there is clear lack of regulation, the wheels will start to move within the public sector.
  • Co-operation of the industry. It is essential that the companies operating in the field do not fall into the trap of thinking that they are each other’s enemies. Even though they are working in the same field, the growth in nascent markets is gained from the growing market, not by winning market share from the competition. When the common goals are understood by the industry players they can work together and achieve bigger targets that they could ever be done alone.

Finnish IFF-industry in 2017:

Imitators, Replacements and Clean Meat

There is no questioning that people are eating too much meat and high meat consumption leads to enormous problems globally. While there is growing interest in sustainable alternatives, it seems that the substitute products widely available in the market today are not attractive enough to quickly bring down meat consumption. Multiple new food industry branches are growing to answer the demand. One of the future branches that have gathered a lot of media attention during the past few years is insects. Even though insects are exciting and clearly better protein source than conventional meat, for me it has become clear that insect does not hold the highest market potential nor are they the best ecological solution when comparing to the other new alternatives. You can read my earlier blogs here and here for my reasoning.

The top three options to replace the modern meat industry are Plant-Based Meat Imitators, Plant-Based Meat Replacements, and Clean Meat. Plant-Based Meat Imitators are products that are 100% plant-based but aim to resemble meat as much as possible. Plant-Based Meat Replacements are products that resemble meat’s nutritional content, in particular, the high-protein level.

These three categories have a lot in common. They all aim to replace conventional meat in human diets with same sales arguments: All are more sustainable, ethical and healthier choices over meat.

To better understand the differences between the categories I made a simple Pugh-matrix. In the matrix, the weight is the multiplier that tells of the importance of that factor. The multiplier can have a value between 1 and 5. The value that each factor gets is selected between -3 and +3. The higher the total number the better. Further, I categorized the factors (the lines) into three parts:

  1. Slow Changing Factors. Marketing is the only line here.
  2. Changing Factors. Regulation and Production Cost.
  3. Unchangeable Factors. Ethics and Nutritional Factors.

The categories are rough and they could be named or categorized in many different ways, but I chose these ones the serve this quick look at the topic. The numbers in this matrix are based on my personal evaluation.

Marketing means how difficult it is to introduce this category to the markets. Conventional meat would get a high score because people are used to it and it has been accepted to be part of a weekly diet. I gave marketing clearly the biggest weight because in the end facts have little to do with our food choices, there are countless examples of this.

Regulation is the law environment that either allows or restricts operating in the markets. Production costs is self-explanatory. These two factors are given small weight because they will not be a deciding factor of the fate of the different industries. The two will either slow it down or help on the way. Also, regulations and especially the production costs can be changed for the better relatively quickly if there is significant market demand. Production cost is the part that is the most difficult to evaluate and the one that keeps on changing the most.

Nutritional facts and Ethics form the “Unchangeable Factors” line. Ethics are a nice plus, but have the least impact of all the factors on the overall score. Nutritional facts are the core of the product on which the marketing is based on. I was thinking hard between giving the nutritional facts 2 or 3, but in ended up to 3 because I wanted to give it more weight than production cost and regulation.

The Matrix

Capture25.7

 

Before analyzing this one, lets jump to the future where there are no regulatory barriers and production costs of clean meat have decreased significantly:

Capture25.7future

The differences are not very significant, especially in the case where regulatory factors are not considered and clean meat production cost has decreased significantly. It is hard to make a clear conclusion other than that the Plant Based Meat Imitators- category will flourish only until Clean Meat technology advantages enough. Yes, the Imitators will get better imitating as well but it cannot escape its fundamental issue that is visualized in the line Nutritional facts and health. No matter if Imitators would become 99% like the real thing, there are always some trade-offs when aiming for the imitation and this we will see in the raw material choices, amounts of additives, sugars, fats and salt. Also, having (unnecessarily) complex product increases the production costs.

Conclusion

When looking at the remaining top two categories we see that the total score is almost the same, but that the score is coming from different factors. The main question is what is more difficult, introducing new products to people’s regular diet or bringing down the cost of producing clean meat at scale? Answering this will tell you which of the categories holds more potential.

If we should decide what people should eat based on science, we would give them a plant based diet including Plant Based Meat Replacements. But when we are talking about food that has strong cultural connections we must consider the bigger picture. The only reason why Clean Meat and Plant Based Meat Imitators are on the same line is not the product itself, but people’s associations to them.

 

Starter Kit for Ento-Entrepreneurs

Lately, quite a few people have reached out for me for tips for starting a new Insect for Food and Feed- companies. I am very happy to see the industry growing and it is my pleasure to help out. To make your starting easier I have here collected some links and tips on how to get started and how to avoid some of the pitfalls.

I believe strongly in the Lean movement, not only in daily work but also larger projects that starting a new company is. To prevent unnecessary work and loss of resources, start by collecting data and objectively evaluating the potential of your business plan.  To learn more about Lean and modern business management check out the great Lean Startup- book by Eric Ries.

Study the literature. Unfortunately, there are only very few publications on the business side of IFF- business, biological knowledge can be found much easier. My thesis that I wrote in 2015 is still one of few publications looking at the production and supply chain side of this specific industry. The thesis comes with full list of references that can you use to dig deeper into all the discussed topics. Here below are some links I recommend you to read. Other than the links listed here you might want to check also the Directory from the menu bar, from there you can find all my blog posts e.g about how to choose the best species to farm.

Get connected with insect entrepreneurs. The largest database online with contact information can be found from this website, just click the “Entomology Company Database” from the menu bar. I also recommend that you will contact your local association of IFF companies, here are some links:

By getting connected you will get essential tips from more experienced people and you can team up to work on topics that you the concerns about (health of genetic pool, fighting horizontal integration issues etc).

Contact your local Food Safety Authority. In the USA it is the FDA, in EU- level its EFSA. In other words, the one that interprets the national laws regarding food and feed. They are there to serve you and they will tell you the status of insect food and feed in your environment. A nice collection of the legal status’ can be found here.

Stay up to date. The following links are for news sites and social media channels that keep you up to date with the latest news in the field.

  • 4ento is a news center for everything around the topic.
  • Robert Nathan Allen is the founder Little Herds- association. Follow him on Twitter for the latest especially in North America.
  • Food Navigator is news center for Food & Beverage industry, follows closely also IFF- industry.
  • All About Feed is similar to Food Navigator, just with the feed aspect.
  • Facebook-group Food Insect Newsletter.

Collective Consciousness in High Scale Insect Farming

In the Finnish national broadcast company’s radio channel Yle Puhe there was a great program by a man called Jari Sarasvuo.  His latest talk show encouraged me to write this post. What he was talking about among many other things was Collective and Social Consciousness. These are not theories of his own, but his way of telling really struck me and made me notice many aspects of these theories exactly in this industry of high scale insect farming. For all the Finnish speakers here is the link for the show: http://areena.yle.fi/1-3092290

Earlier in this blog I have discussed the issues related to the conservative approach to co-operation by many in the entomology business. Companies are not willing to discuss even the very general approaches for example to the business strategy. I claim that this is a wrong approach that is wrongly justified. It is a way to kill your own business but its also hurting all the other operators in the field. Now in the current situation the restricted communication is forcing all the companies to do the same failures in e.g their trials related to scale up and the start of production. The situation in this specific industry is underlined by the lack of public studies.

I have understood that the companies do not want to share their knowledge because they feel they have used resources to collect it and they justify their approach not to co-operate by saying “because we have suffered for this, you should suffer too”. Behind this thinking is a wrong assumption that other insect farms or for example other insect product processors would be competitors for each other, but it is not true. While there is still so few operators in the field and the market demand of insect products is not even closely satisfied, the competitors are found from the replacing products that are the traditional protein sources.

It is a fact that the lack of operators in the industry is hurting all the companies, but still we do not want to help each other, we rather build barriers around ourselves. I think is fair to say a company’s competitive advantage is not in knowledge that can be achieved by six months of learn and fail experiences, but the same missing knowledge from the starting companies creates a barrier of entry and increases the risks of failure. Every failed company in the field is a loss from the whole industry as it narrows the horizontal integration. More on this in my seminar presentation that you can find here: https://www.youtube.com/watch?v=In_ONp_PoY0

The Collective Consciousness is a way of thinking where individuals are thinking “us and them” over the Social Consciousness way of “us”. The Collective is a part of conservative management were people were reflecting their lives and getting their motivations mostly through their own eyes. The Social way sees that the individual benefits the most when we think of the benefit of everyone over the battle between the two groups “us” and “them”.

Now you have struggled through the set-up and we get to the cricket-steak:

For many insect industry entrepreneurs the desire to find the company is coming from Social Consciousness- motivation. We want to build something sustainable and ethical for the good of the planet, right? For the good of not only us, but of you as well. By doing this we believe that us and you will all enjoy a healthier future.  So how is it so that the similar thinking is not transferring to the actual work the companies are doing? Is it the wrongly identified competitors, lack of business understanding or can it be that motivations of the entrepreneurs are after all more Collective or the Social?

The future belongs to Social Consciousness and the co-operation will always be more beneficial than isolation. There is always more to win from co-operation than there is to lose. It is choice of all companies to make the decision whether they will anchor themselves to core of development by co-operating or are they hurting themselves by building walls around themselves.