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Jim Mellon is one of the UK’s most successful private investors. He believes that in the next few years, world agriculture will be radically transformed thanks to processed meat technology. Indeed, he sees the alternative protein trend as “source of money” that will soon revolutionize global consumption habits.
He established it Agronomy (LSE: ANIC), a former penny stock that hopes to ride this theme.
What is processed meat?
Cultured meat – or cellular agriculture, as it is also known – is the growth of real meat directly from animal cells. That is, lab-grown meat produced by cell culture as opposed to farmed animals. Unlike plant-based alternatives, this is real meat, just without raising and slaughtering animals.
The benefits of this are many. Ruminant animals are the food with the most emissions consumed, due to the powerful methane gas produced in the process. Mobile agricultural products have less environmental impact.
In addition, this new technology has the ability to make meat with less saturated fat or antibiotic residues. And to make milk without lactose, or eggs without cholesterol. The potential health benefits can be enormous.
Agronomy predicts that processed 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 products 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 mobile agriculture”.
Company
Agronomy is a venture capital firm with a portfolio of more than 20 promising investments in this space. Also Jim Mellon, has other strong backers.
One of them is Richard Reed, the non-executive chairman. As co-founder of Innocent Drinks, he has experience scaling up and selling start-ups. Eco-friendly smoothie brands sold to Coca Cola in 2013 for $600m.
Agronomy stock was less than 5p just a few years ago, making it a penny stock. But at 13p per share today, Agronomy now has a market capitalization of £131m. This small size gives us plenty of room to grow if some of these investments are successful.
Portfolio
His top portfolio holdings include BlueNalu, a cell-cultured seafood company backed by Jeff Bezos, Leonardo DiCaprio, and Robert Downey Jr. Also, there is pork producer Meatable and Vitro Labs, a startup developing lab-grown skin.
Agronomy has also recently created its first two companies. It’s a pet food company that cultivates Good Dog Food, and a contract manufacturer in precision fermentation called Liberation Labs.
The company expects to begin seeing regulatory approvals across its portfolio in key protein categories next year.
Risk
While the potential is very high, there are risks that are evident here. The main thing is that there is no guarantee that people will immediately take meat grown in a laboratory. This can reduce commercialization.
Another problem is that this is a small stock, so there can be wild swings in the share price. Volatility can be expected going forward.
Overall, I think the mobile agriculture industry is set for explosive growth in the next few years. At 13p, I recently added a few more stocks to my portfolio.
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