Climb By VSC: Episode 17

Jay Kapoor: Today I am so excited to have Michael Grunwald, who is a columnist at Canary medium and cohost of the Climate Wars podcast, which is a show about eating on a changing planet. So Michael, thank you so much for joining me today.

Michael Grunwald: Thanks for having me, Jay.

JK: Absolutely. Well, we'll talk about your background and sort of what got you into this work in a little bit. But let's start with the adventure that brought you to our attention, which I thought was really cool. You went on a Bay Area of foodie tour of sorts last year. Tell us a little bit about that trip. And what did you learn from that about the future of food?

MG: Oh, sure. Well, well, I'm working on a book about how to feed the world without frying the world. And actually, when I first started poking around in this area back in 2019, which was kind of the height of the alt protein euphoria, right? When beyond had just gone public, and impossible was in Burger King and everybody was like “Oh, this is going to take over the world” I had gotten to the Bay Area and gotten to see a lot of these companies. And now, this was in December, people were starting to complain about how maybe this was just a fad and it's all going to hell. I thought I should go back and see how things were going. So yeah, so I went in and visited a bunch of these companies. So again, I got to eat plant based food, fungi based food, even some cell based food, cultivated meat. And, it was pretty cool. Yeah. So that was where that Twitter thread came from.

JK: Yeah. And tell us a little bit about that. So you mentioned a couple of different things, right. So there's sort of cell based and then there is, sort of plant based maybe for our listeners who aren't fully up to speed on the differences because they just see meat alternatives as this big category, maybe educate us a little bit on what the sort of scientific differences are on those two types.

MG: I mean, plant based meat, right. I mean, historically, you always had these like veggie burgers that kind of looked like hockey pucks and tasted like cardboard Morningstar and those kinds of brands. Beyond Meat was started in 2009, Impossible Foods in 2011. Those are still the two biggies. And they really had a different theory, which was essentially to fix the kinds of problems that I'm focusing on, particularly climate, but also biodiversity. The fact that more than a third of the world has become an Animal Farm. That really you're gonna have to come up with fake meat. The theory is that meat is basically made of, amino acids and lipids and minerals and, and protein and water and, and that the plants are made of the same things because meat is basically a plant, that's what livestock eat and so the idea is that you could use extrusion heat and pressure to basically kind of march these plant molecules into meat formation, and really try to replicate meat and that's what Beyond and Impossible have tried to do. I mean, even though everybody's down on this sector because Beyond stock went up to 230 and is now down at 13. But I think Starbucks' impossible sausage is a great sausage. That's a breakfast sausage, it's still a little more expensive than a regular one. But, the idea is to get it to taste as good and be as cheap as regular meat and that's the goal. And so plant based was sort of the vanguard of this stuff, right and, and I think beyond has had its struggles. I'm just being honest, I love Ethan Brown, the CEO, but I think Beyond, they're made of pea protein, and I think it just doesn't taste as good yet. I know they're working on it. They're going to try to get the next iteration better. But I do think part of the problem has been a lot of people have tried these plant based options that have gotten a lot of hype. And they said, well, it's not as good yet and that sort of turned them off. It hasn't had the kind of repeat customer stuff that you want. But look I went to Eclipse foods, which is a plant based ice cream place in Berkeley, and it's excellent, its ice cream. And they're working on an entire dairy platform. So they're hoping to be able to do milk and cheese. And obviously plant based milk is already 15% of the milk market in the United States.

JK: What meat alternative stood out to you as a favorite or was the one that really surprised you and your research and your food?

MG: Right now there's this whole sort of fermentation space right beyond that. You have the plant based, which is basically just, they're really good for veggie burgers, much better veggie burgers, scientific biotech, veggie burgers, but then you have different types of basically trying to turn cells into protein. And so there are two different types of fermentation. One that's gotten a lot of attention is this idea of a kind of precision fermentation, where you genetically engineer yeast to express a protein. There's a company called Perfect Day that is trying to make whey proteins, like in dairy. And they've raised $800 million. They're their partners with Archer Daniels Midland. This is like a really serious company. And I got to try their cream cheese and it is cream cheese, right it tastes exactly the same thing because they are expressing the actual protein. They've modified this yeast to really make this protein. The problem is right now it's still expensive. And scaling up is just going to be insane. Perfect Day told me they're going to make 1000 tons of whey next year, which is awesome. The world will eat a trillion tons. So that's where we are. We are not there and it's just a very slow process of scaling up. There's also, I think, some excitement about this. They call it kind of whole biomass fermentation, which is less precise right then precision fermentation and that's basically you put the fungi into the bioreactor, which is basically it looks like a brewery. And you just let the cells grow. And the fungi turns out to be like a really functional protein. And there I visited the better meat company and they gave me deli turkey slices that were absolutely deli turkey slices. They gave me a chicken breast that was a lot softer than a chicken breast, but it was good. They also gave me a steak that didn't work at all, and then there's a bigger company called MIDI that's got their mega ranch in Colorado, which is of course just basically a brewery. But they're much bigger and they're hoping to go national. So I think that's exciting. And then I did get to try some of this cell based stuff, which of course you biopsy a chicken or a cow and you take the stem cells and you grow it into meat. So they would say it's not fake meat, it's meat. And that's very exciting. I did get to try Wild Types sushi. And it was also a little softer, but it tasted like sushi. I went to Just, which is a company that a lot of your listeners might know because they make that a plant based egg.

JK: Yeah, I've had it actually. I've had an omelet made with it. It's really interesting, really good.

MG: It really is. They own 99% of the plant based egg market. They're doing incredible; they've displaced 400 million eggs. Eggs, have gotten so expensive because of the avian flu. They're actually cost competitive, super great, but because their CEO is a little bit crazy and is on a mission to save the world from factory farming. He's decided he's also going to do cell based meat. And they are actually the only company in the world that has the license to sell it. They've been selling a little bit in Singapore, a couple of restaurants and I got to try their chicken breast. And what can I tell you, it tasted like chicken because it was chicken! That was good. Also, I wouldn't say the texture was exactly right. It was like a little custardy but they also did a fried chicken. There the actual chicken part of it was uncanny and really nailed it. They also had the skin which was not even close. It was sort of like a chicken flavored potato chip. And they said “we're still working on that.” But I think when it first was developed in 2013, the first burger was $1.2 million a pound. They're now down to probably a couple $100 a pound. That is still way too expensive for me.

JK: But that is a massive scale improvement. Right? As an investor, I'm always looking at “when is the cost curve going to intersect with the demand curve” And here what we're seeing is that the cost curve is really coming down very quickly.

MG: Exactly. And I don't want to overstate the extent to which those cost curves are going to cross anytime soon. I think upside foods which now has an FDA approval to sell its cell based chicken cultivated chicken, you might start to see a product like that, in a couple restaurants in the next year or two. I tried a pork meatball from Mission Barns and that's an interesting company, because the meatball was it was like 85% plant based, but then 15% cell based animal fat, and their theory is that the fat is the part of what makes meat so meaty, and also a lot easier to grow than muscle when you think of it. Just think how easy it is for us to grow fat and how hard it is for us to build muscle. Right. It's the same thing in a bioreactor and, and there I tasted a pork meat that absolutely nailed it. And they also have bacon that I thought was not even close. But again, I think you will start to see that because on a cost basis, it's going to be a little less exorbitant. They think they're going to be able to compete with organic or other premium meat products and I think that's exciting. And then we'll see how customers react. But the stuff that was originally seen as science fiction, it was exciting to try it to see that it's real, that there are these real companies with real scientists working to solve these problems and I think it's unfair to compare it. it's not kale, it's not that healthy. It's not a whole food, it is processed. But I always say that like what goes on inside a cow is also a process and it's not like these chickens that are bred to grow unbelievably top heavy and fat, so that their legs are breaking. And, they grow to full size in six weeks. I mean, I don't know how natural that is, you know their GMO grain. So I like to give this stuff a chance. Because again, like, I'm not a health expert, but on climate and environment, if you do the comparison, this is how you save the planet.

JK: I think if any of our listeners haven't watched the documentary Food Inc. I'm sure you've come across it Michael, probably came out I think a decade ago. it's eye opening. When you just see the factory farming process for beef, for pork, for chicken and I think for a little while after like it really made me think twice about what I was ordering. And then again, as we talked about a little bit earlier, it's what's accessible, right? I mean, the cheapest food right now is McDonald's, $1 or a happy meal whatever. And it's processed chicken and it's quick, and it's easy, and it's also, in the long term, contributing to the massive unhealthy epidemic of obesity that we're seeing in this country as well. So it's interesting to see those two trends kind of come together where meat is getting so much easier to make. It's obviously causing a health crisis on one end, and it's causing a climate crisis on the other.

MG: That's right. Well, I think one way for your listeners in particular to think of this as an investor, I think one thing that's really interesting and again, I come at this very much as a climate dork, and that's how I got into this stuff in the first place. Take your hat off to JBS and Smithfield and Tyson, they are unbelievably efficient at what they do, which is essentially turning feed into food, right for us, but the animal is an inherently inefficient way of doing that. Just think about it, right? You've got to, for a chicken, you've got to grow our respiratory system so that it breathes and stays on. You got to grow feathers and beaks. You've got to make it so that it can clock and route around. None of that is producing meat. And obviously from a cow, it's very much the same way all think of all that poop that you're producing. You've got to keep this thing alive for a couple of years. Instead of just growing the meat industrial chickens which are incredibly efficient. It's probably nine calories into the chicken to get one calorie of meat for us. But, cows are like, probably 40 to 50 50 calories and to get a calorie out. And that's why we're taking a third of the world to feed cattle which provide 3% of our calories and that's basically the problem. I'm gonna write a whole book about it. I hope it's gonna be more complicated and interesting than that. But if you really want to think of why meat is a problem, particularly ruminant meat, beef and to a lesser extent lamb and dairy as well. It's because the Earth is becoming an animal farm as we have more human beings. We just hit 8 billion, we're going to hit nine and a half by 2050. With more and more they get less poor and the first thing people do when they become less poor is to eat more meat, we're going to need 75% more land. And that's basically going to mean the end of the Amazon and the end of the Congo rainforest. Or we're gonna figure out ways to make our diet less land intensive. Yeah, that's me.

JK: Yeah, yeah. I mean, it's a bad capital efficiency problem, right? As an investor when you look at 50 calories in for one calorie out or nine calories in for one calorie out. I'm just from a capital efficiency standpoint, that doesn't make sense. And then you think about the land and all the ancillary issues.

MG: Yeah. Just cutting out the middleman. Right. Yeah, exactly. And we're not even talking about things like, this problem with antibiotic resistance, right there health studies that predict that's going to kill 10 million people every year by 2050. Well get rid of animal agriculture and you're not going to have that problem. You're even seeing concerns that the proximity of people and animal agriculture could cause more pandemics and God knows we've seen what that can do to the economy. So there's definitely a lot of use cases for this stuff. There's a lot there's a real argument for why we want to do it. But obviously, it's not self-executing. And, I know a lot of people in this industry who talk about a really good game about how once it tastes good and gets us, it gets as cheap as meat. we're going to take over the world and it's like, that's great, but first, you got to, it's got to taste as good and get as cheap and most likely, that hasn't happened yet.

JK: It's interesting that we were sort of talking about the InterLink between, consumer choice, and then obviously, the broader climate impact, right. And I always say consumer choice is also tied. to health. I know I've said this on a past episode of the show, but like, for me as somebody who tried to get away from red meat, so I moved over more to fish. And then I learned about the whole challenges with microplastics and ocean fish and antibiotics and farm raised fish. There's really no where you're going where you're avoiding a negative health impact. And then I guess talking about price a little bit like there's one thing to say is that these products are going to be easily accessible in cities, right? You're in Miami, I'm in New York, you're in the Bay Area. These are places that are a little bit more conscious, where you'll be more likely to see the Impossible Foods sausage sandwich at the local Starbucks. But as you think about the middle of the country, you think about this, this vast country that we have most of it being used for meat production. Like is it realistic to assume that we're gonna see customer adoption, get to the scale that we need, even just in this country before we talk about, globally?

MG: Well, I guess the honest answer is I don't know, right? You'll look at what's happened with electric vehicles Right? Which were very much a niche product for a few coastal elites, right and are made seems like just maybe hit a tipping point where they're, they're starting to sell and certainly in Europe and China, the numbers have just gone off the charts like China a third of your vehicles sold last year. We're electric. In the US, there was also a big bump. And so, we'll see I mean, but certainly, what we can say about these kinds of new technologies, is that they won't work if they're not there, or at least they won't go mainstream if they're not better and cheaper. Right, that we know. Like, there will be some early adopters like Ed Begley Jr. he'll get one, he'll eat whatever vegan product to put in front of him. But for for most people, like I'll admit like, and I'm even a climate dork, but it took me until 2017 to get solar panels and electric car, because that's really, that's when the cost really became certainly solar sort of became a no brainer, and the Chevy Bolt was at that point, kind of in the ballpark and certainly over the life of the car cheaper. good enough. And I think for most plant based and plant based and certain meats, we're not there yet, and certainly for the other, the cellular stuff. it's not even on the market yet. But also just think of how young this industry is, right? I mean, the entire industry is really like Hampton. Creek, which is now just they had their first products on the market in I guess, maybe 2012 Their mayonnaise, which they're not even making any more, the first Impossible Burger was 2016. this is like an incredibly young industry while like, the cow is a pretty mature technology, right? So I think you can expect this stuff to get better. And my assumption has been that as it gets better, more people are going to eat it and you do see sometimes like Cracker Barrel started offering like right like a plant based impossible sausage, like six months ago, and it created this whole hubbub worth a lot of people who wanted to own the libs, saying, like what's happened to crackle girl, you're going woke, and these are Biden burgers. And certainly there's a danger that in the same way that there was a time when Tesla's were seen as Obama cars, right? That's certainly not these days. But I think there is a danger of this stuff getting caught up in the larger political culture wars. But I do start from the premise that if they get the taste right, and they get the cost right and to some extent, it's already I think, as healthy as what it's replacing, even though it is absolutely a processed food. I assume people will eat it right. I mean, I saw Bloomberg just did a whole story, which cover story basically saying that this stuff is a fad. And it's never gonna happen. And the basic argument was that it's processed food, so people don't want it. But I don't know. I feel like Americans kind of like the process.

JK: Yeah. Especially the different things that we do to it right? If you're talking about getting sort of raw meat from the grocery store versus getting something at a fast food chain, those two things might as well be different, different animals. One of the things I'm always curious about in this space, because again, a lot of our listeners are investors, some of them are founders, always thinking about, where is this investable? Where's the opportunity in this broader alternative meat? Space, or the majority of the companies that you're talking to? Are they venture funded or they have joint sort of venture models with the big producers you mentioned, Tyson is involved as an investor. Purdue is involved as an investor . I'm sure it's the same thing in the beef and the pork industry. What does the capital structure or investment structure of these things look like? For investors that are potentially like, Hey, I, I believe this is the future. I want to get involved.

MG: Right. Well, yeah, they basically all started with venture funding. And one thing that was really interesting that I think and this may help explain, I think, the kind of trough of disillusionment is that, particularly the big three, that everybody talks about, right? Beyond impossible and what was then Hampton Creek and now just, they were the first three to raise a ton of venture money, 2011 through 2015, they all raised like, I think that between the three of them, they had raised like $600 million. And, at the time when there was nothing else out there, it was really just those three and one thing that was interesting is that they really pitched themselves as tech companies. I've seen Josh Tetrick, the CEO of just I've seen his initial pitch deck, and to me, it's kind of hilarious. Like the first slide is basically it's like, here's here's Amazon, a technology company, doing X and they say, how they took on Barnes and Noble, books and then took on toys and then took on the world. And Hampton Creek is a technology company specializing in food, and we're going to take on mayo and then cookies and then every conventional egg. And investors went crazy for it, right. I mean, it was like, COSLA was first and Peter, Dill and Lee came in with the guy, the richest guy in Asia whose name is suddenly escaping me and Marc Benioff. And Richard Branson and Bill Gates and Jack Welch were in upside. These companies were like, everybody was throwing money at them. And the idea was that they would grow like a tech company. And they were obviously using technology, but their food companies. This is what I feel like was forgotten. And this is why when beyond was suddenly valued at the same, their valuation was higher than Tyson's, and it's like, but they've ultimately got to make food. It's not like they're not selling an app that there is a cost of production for each additional unit. It's not like Facebook. And they were being valued like Facebook.

JK: So I can't believe we've gotten this far without talking about how how you found yourself in this world because you've written for some amazing publications Washington Post time, Politico, and now you've sort of shifted full time to writing about the clean energy transition, and you know how to feed the world without frying the world. How did this become your beat, Michael?

MG: Well, it's funny. I mean, look, I wrote my first book and came out in 2006. It was an environmental book about Florida. About the Everglades and, and got me sort of interested in environmental issues and kind of moved me to Florida, but I was continuing to cover, still at the Washington Post. And then at Time Magazine, covering politics and policy. And so I got really interested in climate and started to really write a lot about clean energy. And in fact, my last book, which was about Obama's first term, has a ton about the kind of how Obama's stimulus had $90 billion for clean energy and really launched the clean energy transition in the United States. Wasn't my full beat, but I wrote a lot about climate. And then I actually got my solar panels. I got my Chevy Bolt, and I guess it was 2018. I was writing a magazine story at that point, I was at politico, and I was writing about my own life in the new green economy. And I had this throwaway line about how, basically like I told you that I did it for the money I was kind of mercenary and that things I was still kind of too lazy and selfish to I still don't unplug my computer at night or I don't like line dry my laundry and I haven't gone vegan. And then I was like, You know what I'm like, I've been writing about the climate for a decade. And I'm not actually sure if going vegan is actually good for the climate. I know, everybody says it is. But like, it's one of those things like the fellow farting cows, I don't know. And so I actually called this one guy I knew and I was like, is me really bad for the climate? And he was like, Uh, yeah. And I was like, Okay, I didn't know that. And the fact that I didn't know it made me think like, Hmm, if I'm not sure, like, and I actually write about the climate, probably most people don't really know about that stuff. Right. So as I started looking into it was really when the Beyond IPO hit, and suddenly people were starting to talk about this food and climate together for the first time. But it's really like there are a million books about energy and climate, right about fossil fuels. And, don't get me wrong. That's like a really big problem. Food is only 1/3 of the climate problem. At this point. But fossil fuels, it's like, at this point, we kind of get it. Fossil fuels are bad, like we need to use less of them. You eventually used and used none of them. And the way to do that is we need to electrify the economy and kind of convert to zero emissions electricity. It's like and that's the transition. We know the path. We've started it. The question is how long it's going to take right while it's food. We don't know shit. Like, we don't know, like, we hadn't started the path. Nobody was talking about the path, people don't, the experts don't agree on the path. So that just struck me as something much more interesting and, while at this point, the energy transition is sort of like a kind of political story about human will. This is like food, climate and agriculture. This is still a figuring out story. What do we do about the story and that, that really excites me?

JK: Yeah. When, when can we read the book and what is I guess the broader goal, is it hoping to have legislative change? Is it hoping to get more industry leaders, more dollars flowing in, or is it just like telling stories that you feel like are being told me what's the goal and when can we when we have the books?

MG: Look, I'm a kind of explanatory journalist, I guess. And I'm a storyteller. And my idea is always to kind of let the chips fall where they may but certainly, I think there are a ton of misconceptions in this space. And if you, if you've ever listened to climate awards, we talked about some of them, this idea that kind of, like, local and organic food is going to save the climate that's wrong. The idea that GMOs are terrible for the climate is also wrong. So, so certainly, some of this is trying to, trying to explain and debunk, but really, the first half of the book is going to be about this problem that we've been discussing. And the second half is going to be looking at solutions. And I hope it'll just be fun to read and kind of, it will inspire people to sort of figure this shit out. Because don't believe me, I haven't figured it all out. I'm just talking to people who are working on it, but I do hope that I will hear their stories when I finish this frickin book.

JK: I didn't mean to add pressure. I'm sure your editor is already on top of you. I guess where I’ll close with you, Michael is like, with all the doom and gloom that's out there we've talked about how much of the world is being used to feed a small population. Tell me what gives you optimism about the current fight against climate change, whether or not it relates to how we feed the world or even something broader.

MG: Well, I mean, I am somewhat optimistic. I think, I would say, I've become much more optimistic that these problems are solvable, and maybe a little less optimistic that we're actually going to solve them as a society. I mean, I think look at COVID Right, which was this extraordinarily extraordinary technological challenge that that we saw of like this, right? It was amazing, like, coupled with really big brains did some really amazing stuff. And they and faster than anybody could have imagined they came up with this miraculous vaccine. And then society just had to kind of, react and, act in ways that kind of then solve the problem and that it turns out, are big brain species kinds of shots right. And so, I, like I've become more optimistic, that these awesome technologists are going to basically come up with a climate vaccine, in the form of whether it's alternative proteins or alternative agricultural techniques, etc, etc. And maybe, less, less optimistic that we're going to take it. So, yeah, and I worry about that. I'm optimistic about our technological abilities. And I'm optimistic that as finance starts flowing into this, like, particularly look at like carbon markets, and, this stuff is, there's it's early days, and there are all kinds of problems with it. But a lot of people in my world, they love crapping on carbon credits, right. And what I always say is that it's like, it's like the worst solution except for all the others. And I do think that we're gonna see hundreds of billions of dollars flowing into things that will make the problem less bad. Which is an unbelievable opportunity. But B also means like, we gotta get it right. We kind of know with with energy, like we know what to do, but with, with land and food, that's not clear yet and we have not yet figured out a way to use quite, carbon finance or climate finance to fund the stuff that's just good for the climate and is additional and doesn't leak and is just going to help and, push good solutions and crowd out bad solutions that I think is the challenge. And, and I'm more optimistic honestly, about the kind of financial system and the technological ecosystem than I am about the political system. Although you're looking at the inflation Reduction Act, even the political system is coming. along. So

JK: Slowly, but surely, right. No, I really appreciate you saying that. And I would echo a lot of what you've said, Mike, I mean, the two biggest takeaways I think, that I have from our conversation today; one is look at the technology can progress as well as they want, but the consumer demand and meeting that consumer demand, which means, better and cheaper and better could mean how it tastes, how it feels, how healthy it is. And cheaper is pretty obvious. It needs to get to cost parity. That is paramount, and that's going to be a paramount goal. And look, venture investment and capital can only get you so far. But after a certain point, you have to meet the customer where they're at. And the second thing which I think you opened my eyes to is like how young this industry really is right? And I just think about the progression that we've had in like solar panels and 10 years ago. What is the cost structure for putting solar panels on your house? It was an IT cost as much as the damn house itself. And now we're talking about right, a 10th of that cost or a 20th of that cost. And so that actually I think is such an interesting perspective to keep in our mind. Especially as investors, especially as entrepreneurs, is that if you believe you can make a change in this industry. It's still early days. And that's actually really exciting. Because there's value to be had and there's solutions to be built here. So, Michael, I think we'll close there. This was a fantastic conversation, really enlightening for me. I'm excited for when your book comes out. And we hope to have you back when it does so we can chat about some of the things that you learned as you finish putting it together.

MG: Absolutely. I've really enjoyed talking. Thanks so much and thank you so much.

JK: Yeah, definitely. And we're gonna link some of your articles that we mentioned and we'll link the climate wars podcast so they can dig in with you if they want to learn more about this stuff as well.

MG: Thanks so much.