Move Over, Fake Meat—Cow-Less Milk and Cheese Are On the Way

Cow-less dairy startup Perfect Day put 1,000 pints of its cell-based ice cream up for sale on its website at $60 for three pints, and sold out in hours.

But consumers who missed the “soft launch” might have to wait awhile for a new batch—the start-up will likely face a labeling fight with the dairy industry that could slow its products’ journey to grocery store shelves.

Perfect Day, based in Berkeley, Calif., takes its name from the Lou Reed song that, when played for dairy cows, supposedly increased their output of milk. But the latest products don’t need any cows at all.

The cultured dairy product is created by taking cow’s milk DNA and adding it,like adding yeast, to a micro-organism to create dairy proteins, whey and casein, through fermentation. Those dairy proteins are then combined with water and plant-based ingredients, forming a dairy substitute that can be used to make ice cream, cheese, yogurt and other dairy products. The start of the process uses genetic modification to create the dairy genes, which are added to the micro-flora and the modified flora is filtered out in the final product.

Perfect Day is working with the Food and Drug Administration to develop labeling language for its product. The dairy industry is clear, however, that any dairy product not produced from a cow shouldn’t be called “milk.”

“You don’t need people buying products called ‘milk’ that aren’t milk being disappointed with those products and now they’re turned off to everything called milk,” said Alan Bjerga, senior vice president of communications at the National Milk Producers Federation, a group representing dairy farmers.

Ready to Go

The dairy industry has already been playing defense with plant-based companies that use the term “milk” in their labeling, such as Silk, which uses soy milk and Blue Diamond, which uses almond milk. States across the country have been introducing legislation making it illegal to call plant-based drinks “milk,” a tactic that has also been employed by cattle producers in their fight with cell-based meat.

“The dairy industry is confident in its product. We feel we have something people will want on its merit and the main thing an established sector is asking for is simply transparency in what things are and aren’t,” said Bjerga.

The market for plant-based products is on the rise. Sales of plant-based meat alternatives rose 30 percent in the 12 months ending in mid-2018, according to Nielsen Holdings PLC, a retail data company. But fluid milk prices in the U.S. have declined since the beginning of the year. Texas A&M AgriLife Extension Service projects U.S. dairy producers will lose $3.4 billion annually and nearly 16,000 jobs over the next five years, as a result of the ongoing trade war with China.

Perfect Day co-founders Ryan Pandya and Perumal Gandhi, who started the company in 2014, said they were eager to produce a product that could make a “sizable impact” on factory farming, unlike the pace of plant-based companies.

“We were really the only people we had ever met and even that we could find online that had ever thought of this idea of making real milk ingredients and particularly milk proteins, without animals,” said Pandya, in an interview with Bloomberg Government.

While investors have focused their energy on lab-grown meat companies, such as Memphis Meats, many of them aren’t close to coming to market. Perfect Day, on the other hand, has already put out product and plans to make announcements about investors in the upcoming months.

Vegans Pandya and Ghandi had both experienced the science and research behind cell-based meat during their college years and realized there were “really core” engineering challenges that haven’t been worked out yet, according to Pandya.

“If you’re using tissue engineering to make meat you’re using a technology that isn’t even really possible yet for medicine to make something that has to be virtually at commodity price,” said Pandya.

Perfect Day uses science that already exists. “We’re the kind of impatient people that go and start a start-up,” he said.

Which led to the online ice cream sale.

“In part, the ice cream launch was meant to signal to the market, ‘Hey, here we are.’ The protein is being made in large enough, pure enough, functional enough ways it can now be used in food,” said Pandya.

Simple Science

Since the protein used in the ice cream is identical to cows’ milk, according to Pandya, the package labeling is required to include “contains milk” for allergy warning purposes.

But since their product doesn’t meet the FDA’s definition for milk, defined as the lacteal secretion from a cow, it has brought forward a “particular challenge,” said Pandya.

Pandya said the FDA has left it in Perfect Day’s hands to create labeling language that doesn’t confuse people and is fact-based.

FDA declined to comment on the specifics of Perfect Day’s labeling status. “In general, all labeling must be truthful and not misleading, among other requirements,” said Nathan Arnold, FDA spokesman, in a statement.

In the case of plant-based beverages, FDA requested public comment on specific topics related to the labeling of plant-based products with names that include the names of dairy foods such as milk, cultured milk, yogurt, and cheese, following an uproar from the dairy industry regarding the FDA’s lack of action on labeling rules.

“This is so new that I don’t think there’s a clear answer and so they’re more looking for us to take a stab at it and have good argument behind why we make the decisions we make,” said Pandya.

The preferred labeling from the milk producers’ group for cell-based dairy products is “synthetic,” according to Bjerga. While it is “nice flattery” that Perfect Day acknowledges dairy is a desirable product, he said, “it is not milk as it is defined, it is not milk as it is produced and not even milk the way it’s composed.”

Consumer Trust

Perfect Day could face challenges in gaining consumer trust, according to consumer and food safety advocates, citing concerns over transparency in ingredients and safety regulations from FDA.

“It is hard to assess safety risk when the entire process is not transparent,” said Sarah Sorscher, deputy director of regulatory affairs at the Center for Science in the Public Interest.

Photo – ALEX EDELMAN/AFP/Getty Images
A woman walks her milk cow at the Iowa State Fair on August 8, 2019 in Des Moines, Iowa.

Perfect Day was confirmed by a third party as Generally Recognized as Safe, also known as GRAS, according to Perfect Day co-founder Gandhi. Companies can hire experts or consultants to review their product and see if it’s safe, with the finding reviewed by the FDA.

However, GRAS is a “completely inadequate system” and wasn’t designed for these advances in food technology, said Sorscher.

Currently, “companies are allowed to self-certify without any transparency and it’s a completely indefensible system,” she said. Perfect Day’s GRAS confirmation was filed with FDA and they expect to hear whether it was accepted in the next six to nine months, according to Gandhi.

FDA declined to comment on any future announcements or a timeline on GRAS confirmation.

Future Investment

When companies able to grow meat in a laboratory went public, traditional meat and poultry companies began to invest and buy in. Just last year, Tyson Foods Inc., the largest meatpacker in the U.S., co-led a $2.2 million seed investment in Future Meat Technologies, which is developing a technology to produce fat and muscle cells without the animal. In a potential echo of that, Perfect Day has agriculture giant Archer-Daniels-Midland Co. as an investor, but it’s unclear if traditional dairy companies will ever take a stake.

The International Dairy Foods Association, which represents both traditional and alternative dairy products, said cell-based dairy companies like Perfect Day aren’t yet part of their membership.

“Food products created with cellular innovation are still very new, and in that regard, we’re like many others—paying close attention to how regulators and consumers react to these offerings,” said Matt Herrick, senior vice president of communications at IDFA.

What it comes down to is “if dairy sees itself as raising cows or producing milk,” said Sorscher, who predicted the dairy industry will fight these products and their labeling.

Perfect Day’s stylish, colorful website says the company is on a mission to make cows, people, and the planet happier. But it’s also clear the founders are businessmen ready to take on an established product.

Perfect Day wants to work with the dairy industry, but it isn’t asking permission “to use such and such language,” said Pandya. “It’s how we can work together and collaborate to ensure the best future for dairy and the best availability for what consumers are looking for.”

“The language we use isn’t subject to negotiation with any other party,” he said.

To contact the reporter on this story: Teaganne Finn in Washington at tfinn@bgov.com

To contact the editors responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com; Jonathan Nicholson at jnicholson@bgov.com