Clean Meat Supply Chain Faces a Unique Set of Risks. These Two Things Must Be Considered.

The Clean Meat industry is on the verge of commercialization as products are expected to hit the market in the coming few years. In fact,  Just-company is promising to bring it’s products out already during 2018. While the Clean Meat companies are preparing their products internally, external companies in the supply chain are facing increased risk environment when operating in this new and special industry. What makes the situation very special is that we are talking about a completely new type of material that is not available today. Something very similar is happening in edible insects or IFF (Insects for Food and Feed) field where also new technology is producing a new type of raw material.

Supply chains can be visualized as a stream of supply where the goods are flowing down the river starting from the raw material producers to end product manufacturing and finally to end customers through wholesalers and supermarkets. When looking upstream towards Clean Meat producers a high level of supply risk can be identified. Supply risk, the risk that products are not been delivered, is higher than many other industries because of two reasons: Lack of horizontal integration and limited knowledge.

Lack of horizontal integration means that there is a very limited number of companies able to produce e.g. clean cow meat. There are numerous places to get slaughtered meat if your first option fails to deliver, but what will you do when your primary Clean Meat producer faces delivery issues? A serious production issue will leave downstream without promised products and no chance of buying replacing products as there simply isn’t anyone else to buy from. What makes the supply risk exposure even higher is the limited knowledge of the clean meat production the producer has. No one in the world has ever produced clean meat in industrial scale. It is very likely that during the first years of industrial-scale production unexpected operational risks will occur that will lead to some level of delivery issues simply because of the lack of experience.

What is different between the IFF and Clean Meat industries is that unlike the IFF side, it seems that most of the Clean Meat companies are not only producing the raw material but also making the end product. In supply chain terms the level of vertical integration is different. This way the supply risk is carried internally and in case of production difficulties the consequences are seen first internally, not at the end product producers’ factory. The risk of failed deliveries to supermarkets still exists, but in this case, a supermarket could fill their shelves with something similar like clean pork. This is not ideal but acceptable. Instead, an end product producer cannot do the same and for this reason, unlike supermarkets or wholesalers, they cannot accept as high supply risks.

Another way to reduce the risk exposure in the supply chain together with shifting the degree of vertical integration is increased horizontal integration. Eventually, the supply will increase when competing companies appear, but the increase of horizontal integration can happen also internally within a company by dividing production capacity to multiple locations and production units. When the whole production capacity of a company is not relying on a limited number of machines and operators an occurrence of an operational risk (that are likely due to the limited knowledge) does not jeopardize to complete production capacity of the company.

The Clean Meat industry is still working on bringing the production cost down, but the IFF companies are already in the markets and facing the supply chain challenges today. There are no simple and easy answers, but when the time comes for wide market entry for the Clean Meat companies could look at the fellow alt-protein industries for key learnings.

 

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To look deeper into the risk profile of emerging industries’ supply chain check out my thesis Supply Chain Risk Management in Entomology Farms. The thesis is available also in all major audiobook platforms like Audible.  You may also see my presentation on the topic here.

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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.

How I created and published an audiobook

About one month ago my thesis Risk Management in the Supply Chains of Entomology farms was published as an audiobook in all major platforms like iTunes, Audiobooks.com and Audible. I am still waiting for the first numbers, but at least three people have told me they have bought it!

I got the idea from hearing multiple sources that “yeah the thesis sounds really interesting, but I do not have the time to read it”… Well, now you have no excuse left!

Now when the project is happily over I thought I should share some of the experienced to help you out as well to make your own audiobook from an existing, ready written document:

  1. Edit the book to fit the new format. In the case of a thesis academic references play a big role the document, but in the audiobook format they are simply useless: No one wants their listening pleasure to be interrupted all the time for a list of names and dates. At the beginning of the audiobook, it is announced that the references have been removed, but are available accordingly in the written document. The second thing to modify is references to graphs and pictures in the written document, as obviously the listener cannot see them.
  2. Hire a professional narrator. I had access to professional recording gear, but even though I know English quite well, I am not a native speaker. I think I could have made a reasonable recording, but I think people would have lost the enjoyment of listening quite soon. One hour and 40 minutes is not a long audiobook, but it is a really long time to listen if the narrator is not really good.  I used the Fiverr- service to find the narrator. I contacted three people who all seemed very friendly and professional. In the end, I chose the person who answered me the first, and the result came out really nice. It really sounds like a real audiobook and the price was good as well.
  3. Use a publishing service. This advice is a not only an advise, but a must for all non-UK and non-USA based publishers. The main publishing platform is ACX that handles everything for iTunes, Amazon, and Audible. They do not accept private uploads if the person does not have tax-ID in either in UK or USA. To go around this obstacle I contacted some publishing houses but found only one suitable one: Author’s Republic. They are a USA based company that offers similar service as Tunecore offers for bands and musicians: They will upload your copyright- materials to all agreed platforms and they will do all your paperwork for you against a fee/portion of your royalty income. I can only say positive things about the arrangement I have with Author’s republic: Very fast and friendly service and my audiobook was published in a very short time.

You can purchase the audiobook behind the following links:

http://www.audiobooks.com/search/author/Ilkka%20Taponen

https://www.overdrive.com/creators/1120533/ilkka-taponen

http://www.audible.com/search/ref=a_hp_tseft…

https://www.hoopladigital.com/title/11615148

The audiobook also available at iTunes, just search for “Ilkka Taponen”.

I am looking forward to hearing your thoughts about the work!

Database Analysis; The Chosen Species

I published my Entomology Company Database in this website about one week ago. I already got a lot of positive feedback and also people informed me of missing companies and mistakes, thank you for that! I will keep on updating the database from now on, if you spot a line that needs updating, let me know!

There are many ways to look at the data and I believe it can be used to serve multiple purposes, but what I will do here is to paint a picture of the insect species that are reared by the industry and what can we conclude from the findings.

Database analysis; The Chosen Species

To get started I first filtered out all companies that are not active. Then I selected companies that are involved in farming.  Also, I filtered out companies whose species are unknown.  This leaves us 69 companies (Note! I am using the database file version 08, uploaded on 14th of January).

Point 1. Most companies focus only on one species

First thing we can learn from this is that vast majority of companies, 43 out of 69, are focused only on one species. Putting the company’s focus to only one species brings many positives effects: R&D resources are better used, hardware investments and inventory carrying costs are lower. Also, benefits of economies of scale can be reached easier. There are negative sides as well; Focusing only on one species means higher environmental and supply risks. What if the chosen species are not among the most popular species when the industry grows? Or even worse, what if the species are not in the list of approved species when the legislation is going through big changes?

More on this you can read from my blog 5 Questions an Investor Should Ask Before Investing into a Insect Farm. https://ilkkataponen.com/2015/06/20/5-questions-an-investor-should-ask-before-investing-to-a-insect-farm/

Four companies have chosen the path of two species that might be a way to control the risks, but in the same time keep the costs low. The companies are Ynsect, Ofbug, Big Cricket Farms and Micronutris.

When looking at the “Multiple species” companies 12 of out 23 are companies that mainly focus on biocontrol or pet food manufacturing. When working on these segments of insect farming the higher production costs and loss of the benefits of economies of scale is justifiable as the companies get better price for their product. This is because their selling unit is rather pieces than kilos.  They operate in the a high-end segment, while when producing for food or feed the companies are competing e.g with soy bean that is extremely cheap.

Point 2. The most popular species

Looking at the most popular species is not easy as many companies talk only about “crickets” instead of the actual species of crickets. All the cricket companies make total number of 19. The black soldier fly (Hermetia illucens) farming companies are 21. Maybe surprisingly only seven companies are involved mainly with mealworm or lesser mealworm. Of course some of the “Multiple species” companies are rearing these as well.

Point 3. The lone wolves

Two companies stand out with the selected species: Steak Traz Traz are the only one to choose Grasshoppers so far and Fly Farm Systems only one with Musca Domestica. Being the only raises few issues and increases supply risks. How come these companies have chosen a different answer than others? Do they know something that majority does not, and are they really the one with the better option?  Surely every company is their own individual case and they could justify their chosen species from production and business perspective today, but the in the future the case will be different. One reason is because of the environmental risk explained in Point 1. The biggest risk is not the environmental, but the supply risk that is very significant in the case of the lone wolves. Companies rearing e.g the most popular species black soldier fly will benefit from the wide vertical integration that they build together with other similar companies. This will not only bring security against the supply risk of the company but benefits in increased sales as the demand risk is reduced for the downstream of the logistic chain.

More on the supply risk briefly from my presentation here: https://ilkkataponen.com/2015/10/29/presentation-in-insect-business-and-research-meeting-in-seinajoki-finland/

Or with detail from my thesis here: https://ilkkataponen.com/2015/05/20/thesis-supply-chain-risk-management-in-entomology-farms/

 

Sending Unannounced Live Insect Shipments Is a Really Bad Idea

A vast majority of logistics companies do not accept live insects on board. The reason is that even though insects have very different requirements than e.g mammals during transportation, they fall under the same category of “live animals”. Live animals mean extra work, extra cost and especially extra risk and for these reasons the logistics companies have chosen this policy.

In Europe live animals are declined by at least the following major companies: TNT, FedEx, UPS, DHL, Schenker. Some companies have exceptions if the transportation happens within a country or if airplanes are not used. For example Matkahuolto company in Finland allows ground transportation, but only within the country. What is interesting is that FedEx is doing live insect transportation within different states in USA, but not in the EU.

So if the policies are so strict, how come companies are able to send live insects internationally?

First of all the large global companies do not have consistent approach to the relatively new demand. This we can see from the example of FedEx and their differences in EU and USA. When the logistics companies do not have clear answer, it is possible for some departments or local offices to go around the official policies.

The second reason and the most common way to send live insects is to send them unannounced meaning that the insects are packed and sent without telling what is actually inside the box. The Finnish national post office Posti has told that they know that their network is used for live insect transportation this way. Using this method is a really bad idea in the long run and will lead to big problems sooner or later. In some cases sending unannounced might be the only option to be able to send at all, but the following points should make you consider the option of not sending at all seriously:

When sending purposely against the regulations you might be eligible to cover damages. This is the case if the logistics company notices your violation of the rules and must carry out quarantine actions to isolate the risky shipment from other packages.  The second and a lot more serious and expensive case is the breaking of a live insect box during the transportation. Depending on the case it might be that the logistics company has to decontaminate multiple shelves, or even complete airport hangar, dispose other packages that are affected by the escaped insects and so on. And if this happens you can be sure that they are not willing to pay the bill themselves.

There is no legal or regulatory cover. This goes to both receiver and sender! When something goes wrong with a shipment, and eventually something will go wrong, the logistics company will not cover anything to you once it is clear what was inside the package. If you are using the method of unannounced shipments, is it clear what will you do with you if a shipment doesn’t arrive because of the third party?

So what to do? If you are a supplier you should cover yourself by selling your live insect with the Incoterm Ex Works. This means that you are selling them “free from the warehouse” so that products are available from a given location where the customer or a third party assigned by the customer can pick them up. At the moment of picking up the responsibility of the supplier ends and all possible issues are now in the hands of the customer.

The best options is obviously using a logistics service provider that officially transports live insects. There are now a few options available also in EU. If you are interested to get connected I am happy to help you out!

e-mail me ilkka (at) iffautomation.com or call +358 40 762 9601

What the Latest Avian Flu Epidemic Teaches to Insect Farmers?

In the first half of 2015 the egg production industry in USA has been hit hard with avian flu epidemic causing the staggering loss of 11 percent of the hen population all across the country. In actual number of egg-laying hens reduced just between April and June by 33 million individuals. Read these articles for more details:

(http://america.aljazeera.com/opinions/2015/7/the-end-of-chicken.html?utm_content=buffer14455&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer)

http://thefern.org/blog_posts/11-percent-of-egg-laying-hens-dead-in-two-months-from-bird-flu/

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So what can the insect farming industry conclude from this example of significant pathogen issues this established and large industry is struggling with? When such a large industry with long history of scientific research and large funding (compared to insect farming) behind it cannot control its pathogen risks, it is clear that insect farming is exposed to even higher probability of risk pathogen risk realization.

Starting from the first posts I have been writing about the seriousness of the pathogen breakout risk. It is also my main conclusion of my thesis that this risk is the most serious one for all insect farming companies. Here are a few selected sections from my thesis about the topic. If you read the thesis already, you can jump ahead until the cricket drawing! If you are reading this for the first time and you are interested to learn more, find the link to my complete thesis in the end of this post .

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“The lack of knowledge increases all risks in every department and function of an IFF- farm, not only in the supply chain. As mentioned in chapter two by the time of writing this study there are no functional large-scale facilities operating yet, only plans exists. Even though the companies will do their best to predict upcoming challenges, it is likely that there will be surprises that the companies are not able to predict. There is not much scientific research on the industry so a lot of the data and knowledge companies have is gathered through their own research and development projects and based on the experiences of the individuals. As the data is private and essential for the company`s success the knowledge is carefully protected and out of reach of the public. As mentioned already in the opening chapter other than IFF- insect farming has related history, however the knowledge from the field of for example farming of entomophagous insects cannot be directly used to help the risk control in IFF- farming .This is be-cause the insect species feed on different nutrition and the scale is significantly bigger.”

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“Pathogens and parasites are the biggest concern for all entomology farms; they can wipe out entire facilities endangering the production output for a very long time. What makes the risk even more serious and the mitigation more difficult is that there is a very limited amount of knowledge available on the subject on commercial level farming. The insect pathogens include viruses, bacteria, fungi, protists and nematodes (Eilenberg et al.). An example of a problematic pathogen is densovirus that can cause serious dam-age to cricket farms that can wipe out entire colonies (Szelei et al., 2011). For control-ling the risk of contaminations by pathogens and parasites high hygienic conditions are required, similar to other food production (Klunder et al., 2012).”
“Pathogens and parasites cannot be controlled completely as they are in some cases originated from the insects themselves (Eilenberg, 2015). At times the pathogens will outbreak and cause problems for the production. An example of a minor case could be a loss of a few percentages of insects, or maybe only a slowed down growth rate. In the worst case scenario the whole colony dies. Losing a colony can be a catastrophe for an insect farm because risk residence resilience level is low due to the lack of egg supply in the market (chapter 4.3). “

“Pathogen and parasite outbreak can be considered as a hazard risk because of the lack of knowledge and low control level caused by it. The lack of knowledge leads to a situation where the companies do not have complete understanding of the dangers. What are the pathogens and parasites, where they can come into the process and what are the circumstances that favor the unwanted visitors? When the risks or their cause are not known, they cannot be mitigated. Other hazard risks are for example natural disasters as discussed in chapter 3.2.2. These risks cannot be controlled completely, but a company can be prepared for them.”

So what can the insect farms do that they could be better prepared and handle their risk than the struggling traditional farming? What is positive for insect farming is that unlike the traditional animal farming, the insect- industry is not tied to old fashioned infrastructure that does not support the modern risk management thinking and the growing insect industry can be build according to the latest knowledge.

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For long time the traditional farming has ignored the unethical and hazardous (and money making) living environments of the animals as they have been able to counter the downsides by heavy use of medication on the animals. As it has now been seen again with the latest case of the avian flu, it just might be so that this is not the right way to go. Fortunately, the insect farming industry does not even have this option simply because such thing as insect medication does not exists. For this reason the best option for insect farmers is to first of all provide the insect the best possible environment to lower the risk exposure of pathogen breakout. Secondly, use Risk Pooling meaning that the insect colonies are divided in the multiple separate locations so that in case the risk does occur, it does not affect the whole colony right away.

Further reading:
About risk management click here: https://ilkkataponen.com/2015/05/20/thesis-supply-chain-risk-management-in-entomology-farms/
About ethical insect farming click here: https://ilkkataponen.com/2015/01/04/the-animal-welfare-in-insect-farming/

Thesis: Supply Chain Risk Management in Entomology Farms

My thesis “Supply Chain Risk Management in Entomology Farms Case: High scale production of human food and animal feed” was published in May 2015. The link for the downloadable PDF- file is in the end of the text. The thesis is world’s first scientific study connecting business management and high-scale insect farming for human food and animal feed.  
pirkkoClick here for the downloadable file: Ilkka Taponen Thesis

My presentation about the thesis can be found here

Audiobook version of the thesis is available for purchase in all major stores e.g here