14th November, 2023, 16.30 CET


Stefan Palzer, Chief Technology Officer, Nestlé S.A.

Bruno Monteyne, Bernstein

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Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

Bruno Monteyne, Bernstein:

Thank you very much, Alexia, and to Synthesis Capital. I think very interesting for investors to hear a companies like Synthesis is investing. And hopefully, now, next Nestlé, a company that might work with some of their companies as an important intermediary in bringing these technologies to scale. Good afternoon, everybody. Today, now, we'll be joining our discussion with Stefan Palzer, Chief Technology Officer at Nestlé.

Our discussion with Stefan today is about how Nestlé thinks and plans for alternative proteins in the coming decade. I think Stefan will start with some slides, get up to speed on what Nestlé is doing. After that, I'll be discussing with Stefan and I will be taking questions from you, the audience. Please use the Pigeonhole links actively to give me plenty of questions for Stefan later. And now, first and foremost, Stefan, welcome very much to Bernstein's event today.

Thanks for joining today. And I think you have some slides for us to share. Is that correct?

Title Slide

Stefan Palzer, Chief Technology Officer, Nestlé S.A.:

Yes. Thank you, Bruno. It's great pleasure to join all of you for this event around alternative proteins. And indeed, before we dive into this subject, I have a couple of slides to share with you.

Slide: Purpose-driven innovation

Let me start a bit with our R&D strategy at Nestlé, which is obviously aligned with the company's strategy. It's all about developing products which are good for you and good for the planet. And that's for people, pets, and across all life stages.

And if we talk about our priorities, we have defined a set of priorities, which we call the fundamentals. And that's probably very similar to many of the food companies in the space. It's about food safety and quality. It's about taste and aroma. It's about nutrition, and diet, affordability, and finally, also sustainability. It's very important to keep these fundamentals also in mind if we talk about alternative proteins. Because each product which we develop using alternative proteins has to fulfill these criteria and has to deliver on these attributes.

And then in the company, we defined four areas where we have our innovation focus, where we want to grow ahead of the market. And one is alternative proteins. And that's spot on. That's


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

exactly here at the event. It's a priority for us in the company. And we've explained to you a bit how we address this opportunity. Then we have also coffee and systems, which was always a focus of our company. Early life and medical nutrition. And then also, finally, science-based nutrition. If we talk about alternative proteins, we talk foremost about plant-based proteins, but we include also fungal, algae proteins, single cell proteins. We also did some trials in the space of insect proteins. Happy to share a bit our experience here. And that was also discussed in the last part of this event. We talk also about precision fermentation and cultured food.

Slide: Achieving consumer preference for alternative proteins

If we dive into alternative proteins and specifically also plant-based proteins, we need to ask ourselves, how can we convince consumers to buy those products?

Initially, the industry maybe thought, if you have a very sustainable product and it's somehow okay in terms of taste and nutrition, it will sell. It's very clear that consumers need to be convinced by a holistic value proposition, by quality which is delivered at a competitive price. Very simple, we need to excel on all those base attributes, which I had shown on the last slide, the fundamentals. Only sustainability is here not enough. What does that mean?

That means recognizable ingredients. That means also taste and aroma. I'm very proud to share with you that we have now the first alternative protein products, for instance, we brought now, and you see that here on the slide, a fish fillet which is at par with real fish. We started to compare now our products which we bring to the market with the real animal-based products. And not only with competitors in the space which are developing as well and selling as well products which are based on, for instance, plant proteins. But it's also about affordability. Let's not forget, and especially now in times of economic downturn, affordability is getting increasingly an issue. Many consumers cannot afford any longer those products. And if we want to enter a market where purchasing power is low and where also there's potentially no cold chain, then we need totally different formats.

Slide: From alternative, to hybrids and purely delicious veggies

For us, the opportunity is also much bigger than just alternatives which are mimicking meat, fish, egg, and so on.

We look at using plant proteins to innovate, really, across our portfolio. For instance, here on the left-hand side, you see an example of one of our latest alternative products. It's a plant-based


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

schnitzel. But now we launched also a range of hybrid products. In these hybrid products, we combine animal-based with plant-based proteins. And there are several advantages. First of all, we are able to deliver very affordable product, but also very nutritious product, and products which have very little compromise when it comes to taste versus the real animal-based product, and last but not least, the opportunity includes also great-tasting vegetable dishes, which are rich in protein, which are not necessarily mimicking an animal-based product, which have an identity in themselves.

Slide: For global deployment of plant proteins ambient formats are required

Also, for us, very important to not only deliver a chilled format and frozen format. First of all, if you're relying on a cold chain, it's coming at a cost. It has an impact on at what price point these products can be offered.

But it has also some consequences for the environmental footprint. You can imagine it's very energy-intensive to keep those products at low temperature. At Nestlé, we now developed also a wider range of ambient format, which we can offer also in markets where there's no cold chain. We can offer them at very affordable price points. And they have an extremely good environmental footprint because you don't need to put energy into a cold chain, and you can transport much less weight because you don't transport the water. And this ambient format, it's fairly easy for us to develop them because as a company, we always had our strengths in ambient format, which we developed under the Maggi brand, for instance, in many markets globally.

Slide: Introducing alternative proteins across formats and brands

On next slide, you see how we innovate then across the different brands, across different formats, from frozen, to chilled, to ambient. And also, across different geographies, and we develop, basically, alternatives for all animal protein types. For dairy proteins, for different type of meat proteins, but also on the right-hand side, you see also now our portfolio when it comes to seafood and egg proteins.

Slide: Different expertise is required for the development of innovations

To develop those products, a lot of expertise is needed and it's expertise along the food value chain. It's really suboptimal to start with the wrong raw material. We established ourselves also in the space of agricultural science.


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

We even funded an entire institute for agricultural science just to have the right raw materials which are going into the product development. If you start with the raw material which has less beany notes, for instance, of course you need to correct later much less. You need less processing to refine this raw material and you need not to cover any unpleasant taste. Then the next thing was also to step our efforts in analytical science, nutritional science. Material science comes into the game when we formulate products. Culinary expertise, extremely important. We started to work also with top chefs in the world to really close the taste gap towards existing animal-based products. And finally, you need also to pack the products in a very attractive packaging.

Slide: Piloting different approaches

And the last slide I just want to share, it's not only about plant-based products. And plant-based, there's still a lot what we can do.

We can work much more on the raw materials. And the trend is here towards less refined raw materials because they have a better environmental footprint. They are often also more nutritious. But that might mean also raise specific plant varieties to start with. We also did some pilots in precision fermentation. We launched a product in US, which is a hybrid between plant-based product where we also included dairy proteins coming from precision fermentation.

Happy to share also with you a bit the learnings of this pilot. We have activities linked to yeast, fungal, and also algae proteins. And finally, we have also collaboration with some startups in the space of cultured meat and seafood. That's a bit how we address the opportunity at Nestlé. And now also happy to take any question which you might have.

Q&A Session

Questions on:

Driver behind alternative food proteins

Reduction of animal protein need for climate change

Bruno Monteyne, Bernstein:

Thank you, Stefan, for that. Very helpful. Stefan, if I understand this correctly, from your previous communications, the real driver behind these alternative food proteins is clearly the sustainability angle.

20 to 30% of greenhouse gas emissions come from the food supply chain. We have a wealthier population that wants ever more protein. If we want to have any chance of keeping climate change


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

under control, we probably need to change to more alternative proteins. I presume that Nestlé has its own view of what climate change scenario we'll be going through. To achieve those greenhouse gas emissions reductions, what is the size of the change we need?

If you put yourself out in 2030 or 2050, what percentage of current meat, dairy consumption do you think the world will have to find ways to transition from as is to a status quo to alternative proteins?

Stefan Palzer, Chief Technology Officer, Nestlé S.A.:

Bruno, the driver is not only sustainability. We are also convinced that in certain markets, there's too high meat consumption. And we know science will tell you that this is not very beneficial for health. If the consumption of red meat is too high, you're running in the higher risk of, for instance, colonic cancer. It's not only sustainability. It's sustainability and also health. Both together. If you listen a bit to the scientists out there, you get very different projections how much of the animal protein market has to be converted to alternative proteins.

Recently, in September, there was a new study in Nature. And in this study, the scientists said, if under 2050 we would half the consumption of meat and dairy, we could achieve a 31% reduction of greenhouse gas emissions linked to this protein consumption. And if you then also factor in the land which is liberated could be reforested, this could mount up to 91%, they said. We all agree that we need to go there.

But maybe that's not the right question. The right question is how to convince consumers. And do we need really to ban all dairy and meat consumption? First of all, it's very important to realize, the objective should not be to ban and to eliminate all dairy and meat consumption. Dairy, you need for early life nutrition. If I want to nourish a child and the mother has not enough breast milk, the second-best option is cow's milk.

And this milk has been created by Mother Nature to grow small mammals. We cannot nourish small children with plants. Plants are simply not having the right nutrients to do that. Dairy, we need, to some extent, for early life nutrition. Later, for adults, it's getting less important, and adults can, without any problem, live also without dairy. Meat is not required for human nutrition. But let's face it. In some parts of the world, you cannot grow grains and vegetables.

There, the people will rely for their living, for their nutrient intake on meat. The objective is not to ban totally meat and dairy. It's to reduce. And if we reduce already, we convince people who are


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

consuming today, sometimes seven days per week, massive amounts of meat to go to only one or two days per week, we have gained a lot. We need to see, how can we convince people to move to a flexitarian diet where they consume much more plants and where there's significant reduction on meat and dairy consumption?

Obviously, that's the question, how to convince people. Because we have, on one hand, this macro view where people say, we need to tackle climate change. And that's why we need to macroscopically reduce dairy and meat consumption, which is correct. But when it comes to the purchase decision of single consumers, this element is getting less relevant. Here, it's all about what I've showed on the previous slide, is really to have products which are convincing by the quality, by their taste, by their nutritional density, and then to offer those products at a competitive price point.

If we do that, we will be able to take consumers with us. And it's true. At the beginning of the whole movement, when we started the journey, maybe the gap towards animal-based products was still very significant. When the first plant-based products came on the market, there was a significant gap. And now what you see, this gap is closing. And to close it further, precision fermentation might play also a role. That's, I think, for me, a very important question.

Question on:

Driving the shift from animal protein to alternatives

Bruno Monteyne, Bernstein:

Thank you. It's very helpful because your last point is really almost leading strongly into my next question. Most innovations have been very successful, have been consumer-driven. It does something better than what they had before. And this is very… Even if think about your own innovation with Nespresso coffee, it was simply better coffee, much easier to make. You can understand why you get fantastic growth. Now this is very different.

The key argument behind all this innovation is the world needs it rather than consumer really wants it. And you did mention something there. You said, look, we can't just ban it. I'm not thinking about banning. But do you think this transition is even possible without any stronger legislation? And the legislation does not necessarily mean simply banning. Legislation could be more smartly crafted. Do you need it? And are you actively trying to influence legislation to make sure that change happens?

Stefan Palzer, Chief Technology Officer, Nestlé S.A.:


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

Look, regulation and legislation can be helpful. For instance, if subsidies for meat and dairy will be removed, of course, plant-based products get more cost-competitive. They gain competitiveness in the market. And hence they would gain consumer acceptance. Regulation and legislation can be helpful. But ultimately, we still need to convince consumers by quality. And it's right, think it through, it's the same with travel. Everybody would agree we need to travel a bit less.

And if you take a plane, it's a huge carbon footprint, which each of us has. The moment people move into a travel agency to plan their summer vacation, that's all forgotten. And it's a bit similar here. Of course, conceptually, everybody agrees that meat consumption needs to come down. But it's important to get the single purchase decision right. And that means high quality. That means also that we have to increasingly, what I said before, benchmark our developments with the animal-based products, in order to see how big is the taste gap.

At the beginning of this whole development, that has not been done. And people were benchmarking plant-based against plant-based, but that's not the right benchmark. The real benchmark is real milk, is real meat. And once we can compete with that, I think we are in a good place. And to close this gap, I said it's about precision fermentation, but it's also about hybrids. If you work on a hybrid and you don't replace, in a product, the entire animal-based protein, you can deliver something which is much closer to the original and people will not see that as a tradeoff.

And ultimately, to go then to products which are not even mimicking animal-based products is, of course, the ultimate goal. But we need to accompany consumers on this journey, finally, that they increase their plant consumption, and they reduced their animal protein consumption.

Question on:

Form of alternative food proteins

Bruno Monteyne, Bernstein:

You've actually answered my next question, because I was going to try to elaborate on, why try to mimic the current animal proteins? But you're clearly saying it's a matter of acceptance getting people on the transition with the end stage. I keep looking forward to an amazing alternative protein that doesn't try to mimic anything, but that simply tastes good. I personally quite like [inaudible].

Stefan Palzer, Chief Technology Officer, Nestlé S.A.:


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

You're absolutely right.

Bruno Monteyne, Bernstein:

It doesn't seem to mimic anything. I don't think there's anything wrong with some amazing taste.

Stefan Palzer, Chief Technology Officer, Nestlé S.A.:

No, you're absolutely right, Bruno. Look, but food is also about culture. And many people love their spaghetti bolognese. And now to say, I offer you spaghetti broccoli, is probably not the solution. We need to have also products which are really mimicking the real meat that people can cook their traditional dishes, but without using meat. And there, they have a certain justification. It's also, look, in families, the reality in families…

I don't know how this and your family around you, but I can tell you, of course, you have families where you have vegans, you have vegetarians, you have still people who love meat. And these alternatives allow to cook dishes which are close to original and the whole family can enjoy that. I don't know if you realize that bit. In the recent years, there was more and more fragmentation of food consumption. Families were not eating any longer together.

And here, we have now solutions which can bring the family again around the table. You can enjoy a spaghetti bolognese which is close to meat-based product in terms of taste experience, but which is made with plant. And I think that's great. With time, this need to mimic animal-based proteins will disappear and consumers will get increasingly used to consume more and more plants. And they will then probably not any longer miss the spaghetti bolognese. And then they're happy with a great pasta which is made with veggies in itself.

Question on:

Cost of technology needed to produce alternative food proteins

Bruno Monteyne, Bernstein:

You mentioned a few of the technologies, whether that's precision fermentation. We heard about cell growth before. They were in your slides. And we heard from the investment company, Synthesis Capital, just before. They're clearly all still too expensive to play material role today. But I presume you have a good eye and a visibility on the cost curves. And can you comment to some extent, by what order of magnitude are they too expensive today?

But also, at what rate are costs coming down? Are we 100 times too expensive, but it's getting better, five times cheaper every single year? Can you give us some ideas and a view over what


Nestlé Bernstein 2023 Fireside Chat Alternative Proteins

Tuesday 14th November 2023

time horizon you think there'll be an acceptable source of technology for the standard Nestlé meal?

Stefan Palzer, Chief Technology Officer, Nestlé S.A.:

With pleasure, Bruno. Look, it started like that also four, five, six years ago with plant-based. The initial plant-based products were also very expensive. And now the prices are coming down. Initially, those products were sold mainly in out-of-home and premium restaurants. And that's exactly what you see, of course, also with precision fermentation and cultured food. You see hybrids being tested, piloted in the marketplace.

And also, we piloted some of those products where we combine plant-based with proteins coming from these new technologies in order to manage the cost. Because if you would take pure proteins coming from precision fermentation or cultured food, the cost would be very high. Precision fermentation, I would say probably it's not absolutely out of scope that proteins from precision fermentation will reach cost parity somewhere between 2026 and 2030.

If you listen to the projections, if people are very optimistic, they say 2026. Today, these proteins are more than double of the cost of an animal-based protein. Optimists would say, 2025, 2026, they reach cost parity. I think it's more realistic to talk about 2030. And until then, we can still innovate using those proteins by using them in hybrids. You manage your cost equation out of the combination of plant-based proteins and proteins coming from these new technologies.

When it comes to cultured food, I think the challenges are much bigger. Precision fermentation has much higher degree of maturity because we were using the technology already for active ingredients since many years. But cultured food has, first of all, a problem that cell lines are not always stable. You see a drift in those cell lines used to produce the cultured food. Then the growth media. Let's not forget somehow we need to produce the media to feed the cells.

And this growth media has first to be affordable, but also sustainable. And we are not yet there. Then the scaling, a huge problem is to get to scale. On lab scale and small scale, still feasible. You take a scaffold, and you place the cultures on the scaffold. But the challenges are much bigger. And I do believe the whole industry was probably by far too optimistic when this is scalable. I think we are looking at timelines beyond 2030. At the end, let me also be clear there, I think that these technologies will be a part of the solution. But it will take a bit longer than most people would have thought.



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Nestlé SA published this content on 24 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 November 2023 11:47:08 UTC.