Merit Functional Foods, which entered receivership March 1 after just two years’ operation, has sold all its remaining finished and raw inventory and directed much of the proceeds toward “full repayment” of its debt to its operating lender, CIBC.

That’s according to the latest report from Merit’s court-appointed receiver, PricewaterhouseCoopers (PwC), which said in its Nov. 14 filing that the sale process it launched March 13 “has not yet led to an executed purchase agreement.”

PwC’s Nov. 14 report included a supplemental document laying out the details of that sale process so far — but that supplement was ordered sealed in a Nov. 23 ruling by Court of King’s Bench Judge Chris Martin in Winnipeg.

Information in that supplement is “commercially sensitive” and “would cause serious and irreparable harm and prejudice to Merit’s creditors and stakeholders in respect of the disposition of the (Merit) assets,” PwC said in its Nov. 14 filing.

PwC said it doesn’t intend to keep the supplemental document sealed indefinitely, but at least until “such time as a sale transaction for the assets has successfully closed.”

Meanwhile, PwC said Nov. 14, its separate process to sell Merit’s remaining product inventory has yielded about $3.3 million, down from a valuation of $3.8 million estimated back in March.

The receiver said it has also collected about $571,000 of outstanding accounts receivable — about 93 per cent, with the other seven per cent now seen as “likely being uncollectable.”

In its previous report in late March, PwC had said CIBC was owed about $5 million plus interest, fees and other costs. That amount included a cash-collateralized $1.025 million letter of credit the bank had placed with the Canadian Grain Commission (CGC).

PwC had said in March that Merit’s records showed no farmers were still owed money for any crops the processor had in its possession. In its Nov. 14 report, PwC noted the CGC had released its CIBC-issued letter of credit later in March.

As of Nov. 17, PwC said, Merit was estimated to owe CIBC about $4.157 million — including the cash collateral CIBC still held from the CGC letter of credit along with interest and other costs accrued since the receivership took effect March 1.

CIBC, as Merit’s operating lender, had been deemed “first-ranking creditor in respect of accounts receivable and inventory” and was seeking a payment out of those net proceeds, PwC said in its latest report.

Merit’s other secured creditors have approved the use of those proceeds to pay CIBC in full, “in order to reduce the amount of interest and costs continuing to accrue with respect to the CIBC indebtedness.”

Merit had opened for business in early 2021, with major shareholders including Vancouver plant protein firm Burcon NutraScience, U.S. agrifood firm Bunge, and former executives of Hemp Oil Canada.

Burcon had said in April this year it planned to submit a bid for the Merit assets in co-operation with another plant protein company it didn’t name.

Merit’s two remaining secured creditors include Export Development Canada (EDC), which was owed about $58.6 million, and Farm Credit Canada (FCC), owed about $36.4 million — neither total counting interest or other costs that have accrued since March 1.

EDC and FCC were in a consortium of lenders, also including CIBC and Agriculture and Agri-Food Canada (AAFC), that had provided Merit with $95 million in debt financing starting in 2020.

AAFC’s contribution was a 10-year, interest-free $10 million loan from the department’s AgriInnovate program.

— Glacier FarmMedia Network

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Burcon NutraScience Corporation, which focuses on plant proteins and ingredients for the food and beverage sector, says it will offer start-to-finish product development services for processors.

“We saw that gap in the industry and we’re offering what we feel will fill that gap,” said Martin Schweizer, Burcon’s vice-president of technical development.

Start-to-finish product development is important for Manitoba agri-food processors to limit the costs of generating new products.

The services will fill “that gap between the bench level and the commercial-scale production where you can try out things on a pilot scale,” Schweizer said. “It’s hitting that sweet spot where process and scale-up validation don’t have to be cost prohibitive and oversized.”

Burcon’s Winnipeg Technical Centre comprises 10,000 square feet of lab and pilot-scale production space.

The company hopes to attract food processors looking to upcycle byproducts, develop end-to-end processes or validate and ramp up a process. Customers will be able to leverage Burcon’s infrastructure and food processing expertise, along with its team of scientists and engineers, to develop and deliver new products and solutions, the company has said.

There are other food product scale-up services that can take a new product idea and work with the processor on ways to commercialize it.

However, Burcon doesn’t delve into commercialization. It has instead hung its pitch on the promise of technical expertise, particularly in the plant protein space.

“There hasn’t been a facility where companies can test their ideas on a pilot level that offers our whole spectrum of protein technologies,” said Schweizer.

While Burcon is known for its work on plant protein, Schweizer said the company isn’t afraid of moving outside those lines.

“We’re not limiting ourselves to plant proteins only,” he said. “We have a huge knowledge base in protein processing and can build off of over 250 years of combined experience. We’re happy to apply that to whatever challenges are out there.”

There are different ways that Burcon could work with a company, he added.

“Probably the most straightforward is when somebody who has an idea about developing a certain product or process comes to us and says, ‘I want to try it out using your pilot plant and produce some product that I can then use to do testing’.”

In this case, the customer is paying for access to Burcon’s equipment.

Another approach involves a customer with an idea for a product who doesn’t know how to proceed.

“That’s where we can use our technology and our expertise and then work with the customer to develop a solution,” he said.

Michael Mikulak, executive director with Manitoba Food and Beverage, said he thinks Burcon is providing an important service.

“It seems like they’re focused on providing services for companies looking to create a new product,” he said. “That is very expensive and difficult. It requires research scientists and it requires very specialized equipment.”

Though Burcon isn’t limiting itself to plant protein and may fill a niche in the industry, Mikulak said it doesn’t fill the gap his organization has identified.

“At Burcon, these are people who have really significant scientific chops, and that doesn’t come cheap, but we’re working on more of a general kind of support ecosystem for small and medium-sized businesses as they’re looking to scale up,” he said.

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After announcing last month it would submit a bid for the next-to-new Merit assets, Vancouver-based plant protein firm Burcon NutraScience said Monday it’s now “participating in a bid” for Merit in co-operation with “an industry plant protein company.”

Burcon didn’t identify the other party in its release Monday. It did say that if their joint bid is successful, the two parties “intend to restart the facility and together, strive to reach profitability.”

Burcon CEO Kip Underwood said it “firmly believe(s) that Burcon’s technologies and process expertise are fundamental to the Merit facility’s future profitability.”

Having just opened for business in early 2021, with major shareholders also including U.S. agrifood firm Bunge and former executives of Hemp Oil Canada, Merit was placed into receivership March 1.

Court-appointed receiver PricewaterhouseCoopers (PwC), in its first report filed March 31 with Court of King’s Bench in Winnipeg, said it had set a deadline of last Friday (April 21) for formal bids on the Merit assets, and expects to “determine the accepted offer” by Friday this week.

PwC hasn’t yet said how many formal bids it got for the Merit assets by the deadline. In its March 31 report, it said it had already conducted 14 visits to Merit’s Winnipeg plant site with potential buyers and scheduled five more, “with several interested parties traveling from overseas and other parts of North America.”

Burcon, in its release Monday, reiterated it “expects there to be competing bids (and) there is no assurance that the bid will be accepted by the receiver.”

PwC had said in its report that it expects to have reached a “definitive agreement” with a bidder no later than May 12 and to formally close a deal by the end of May at the latest.

If the Merit plant does reopen, it would then need to reconnect its supply chains with farmers in its catchment area.

Daryl Domitruk, executive director with Manitoba Pulse and Soybean Growers, last week told the Manitoba Co-operator that, to his knowledge, growers who’d contracted with Merit for this year have been released from those agreements.

“Then the question is, do I continue to grow peas or do I switch to another crop,” he said. “That’s a decision that the growers have probably made by now.” — Glacier FarmMedia Network

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Merit, whose major shareholders include Vancouver plant-based protein firm Burcon NutraScience, U.S. agrifood firm Bunge and former executives of Hemp Oil Canada, was placed into receivership March 1.

According to the first report from receiver PricewaterhouseCoopers (PwC), filed last Friday with Court of King’s Bench in Winnipeg, a “data room” has already been set up and an information brochure circulated to some prospective buyers. PwC said it also “may continue to identify and initiate contact with other such parties.”

PwC, in its report, said it will accept “qualified offers” for Merit’s assets until 4 p.m. CT on April 21, and expects to “determine the accepted offer” by April 28.

A “definitive agreement” would then be reached by no later than May 12, court approval granted by May 26, and a deal closed by “not later than May 31.”

Burcon, which has a 31.6 per cent stake in Merit, has already announced it will bid on the Merit assets.

In a separate release Thursday, Burcon said it’s since been in discussions with the receiver, “continues to conduct due diligence and is furthering its efforts to put forth a compelling bid” to PwC for the Merit assets.

However, Burcon added, it “expects there to be other competing bids” and “there is no assurance that Burcon’s bid will be accepted by the receiver.”

Merit’s secured creditors include Export Development Canada (EDC), owed $58.6 million plus interest, fees and other costs; Farm Credit Canada (FCC), owed $36.4 million plus similar costs; and CIBC, owed $5 million plus costs. Unsecured debts owed to trades and other creditors as of March 1 were estimated at $2.4 million.

The Canadian Grain Commission is also running an audit to see if CGC-licensed Merit still has any “outstanding liabilities” owing to farmers who delivered crops to the plant, PwC said.

However, PwC added in its report, according to Merit’s records, no farmers are owed for any crops that Merit “has purchased and are in its possession.”

PwC last month laid off 77 Merit employees; kept on 23 “key” staff under agreements running mostly to the end of this month at the latest; and retained three former managers on an “independent contractor” basis.

Three of the “key” staff have since quit, while others continue to maintain the plant, handle product sales and accounts receivable and help in the sale process, PwC said.

PwC said last Friday that as of March 1, Merit had about $3.8 million worth of inventory — about $2.7 million of which has since been invoiced awaiting payment before delivery. About $231,000, or half of Merit’s other outstanding receivables, has also since been collected.

Built starting in 2019, Merit’s 94,000-square-foot plant opened in early 2021 and began accepting canola and yellow peas to process product lines such as Puratein canola proteins, Peazac pea proteins, and MeritPro protein blends using Burcon’s protein extraction technology.

In 2021 Merit had projected it would be able to eventually expand to take up to 100,000 tonnes of canola and peas per year.

EDC, FCC and CIBC were members of a consortium of lenders — also including Agriculture and Agri-Food Canada — who altogether had provided Merit with $95 million in debt financing starting in 2020. AAFC’s contribution came in the form of a 10-year, interest-free $10 million loan from the department’s AgriInnovate program.

Merit in 2020 had also picked up $9.5 million in support from the Protein Industries Canada supercluster to back product development.

EDC and FCC filed Feb. 24 for a receivership order, saying Merit was “suffering significant cash flow shortages” during the first three quarters of 2022.

The two Crown-owned lenders said in their filing that they expected Merit to run out of operating cash by around March 3 or 4 and it would then “no longer be able (to) operate its business as a going concern.” — Glacier FarmMedia Network

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Two days after Merit entered a court-ordered receivership, Vancouver-based Burcon NutraScience announced Friday it “intends to submit a formal proposal to acquire the business.”

Burcon said Merit’s receivership “was an anticipated step in the process of addressing Merit’s financial situation” and “does not alter” Burcon’s plan to buy the business.

Burcon, whose current ownership stake in Merit is about 31.6 per cent, said Friday it “remains actively engaged in discussions” with PricewaterhouseCoopers (PwC), Merit’s court-appointed receiver.

The receivership was requested in a Feb. 24 filing by federal lending agencies Export Development Canada (EDC) and Farm Credit Canada (FCC), who in 2020 provided debt financing toward Merit’s construction and start-up. In their filing, they put the principal and interest owed to them at about $58.5 million and $36.5 million respectively.

Burcon, whose ownership group also includes U.S. agrifood giant Bunge and former executives of Hemp Oil Canada, said it “believes that it is in a unique position to bring Merit’s business to profitability.”

“Merit’s facility was designed and built to produce protein ingredients using Burcon’s technologies,” Burcon CEO Kip Underwood said in the company’s release Friday. “Merit’s business is a strong strategic fit for Burcon by providing additional revenue sources, better connection to customers and markets, and direct influence over the manufacture of Burcon’s protein ingredients.”

Burcon said it has the “process engineering expertise to improve bottom line performance through production efficiency gains” and can leverage its “innovation portfolio” to launch “new plant proteins beyond pea and canola.”

Merit’s co-CEO Ryan Bracken had said in a LinkedIn post on Wednesday that “while our proteins have been formulated into countless products globally, we couldn’t quite get to the level of cashflow needed to operate the business profitably, quick enough.”

EDC and FCC had said Feb. 24 they expected Merit to run out of operating cash by around March 3 or 4 and would then “no longer be able (to) operate its business as a going concern.”

The construction of the Merit plant in Winnipeg’s CentrePort industrial park came during the rise of the COVID-19 pandemic in North America, which Bracken said meant that “we started up prior to understanding the full impact of what COVID could do to our business plan.”

The pandemic and other factors ultimately led to a “doubling” of input costs, border closures, customers shuttering their own research and development facilities, interest rates “rising exponentially” and lenders and investors becoming more risk-averse, he said.

In all, he said Wednesday, the company’s move into receivership spells “the end to Merit as it stands today.” — Glacier FarmMedia Network

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PricewaterhouseCoopers (PwC) on Wednesday announced it’s the receiver for both Merit Functional Foods Corp. and the numbered company that owns Merit’s processing plant and property in Winnipeg’s CentrePort industrial park, following an order granted Wednesday in Court of King’s Bench in Winnipeg.

Federal lending agencies Export Development Canada (EDC) and Farm Credit Canada (FCC) filed Feb. 24 for the order, citing principal and interest owed to them at about $58.5 million and $36.5 million respectively.

The two lenders, in their filing, said they expect Merit to run out of operating cash by around Friday or Saturday this week, at which time it would “no longer be able (to) operate its business as a going concern.”

A joint-venture firm with major shareholders including Vancouver plant-based protein firm Burcon NutraScience, major U.S. agrifood firm Bunge and former executives of Hemp Oil Canada, Merit “began suffering significant cash flow shortages” between January and September last year, EDC and FCC said.

Since September, the two lenders said, Merit has been conducting an out-of-court sales process aiming to sell both its business and the Winnipeg plant — but that process “did not generate any formal offers” for the lenders’ consideration.

Burcon, which holds a 31.6 per cent stake in Merit, in a separate statement Tuesday had disclosed EDC and FCC’s plans to seek a receiver. Burcon also said it “intends to continue its discussions with Merit’s lenders… in order to seek a potential funding solution for Merit’s business.”

Burcon CEO Kip Underwood, in a Feb. 8 letter to that company’s shareholders, said Merit’s stakeholders in September had put up loans of $3 million to “address Merit’s anticipated liquidity requirements as it continued to ramp up its production and sales.”

Merit late last year sought “to identify a new strategic investor for its business,” he wrote, adding that “to date, no funding has been received from a new investor.”

Merit, for the past six months, “has made significant progress,” he wrote, improving daily production performance and increasing its year-over-year sales, while customers say Merit’s products are “best-in-class.”

However, he added, “unfortunately, the overall financial performance of the business has fallen short of expectations and led to the current cash flow concerns.”

Burcon, he wrote Feb. 8, had been “exploring interim financing for Merit while working on a more specific, longer-term funding solution” and was “prepared to fund ongoing operating expenses and debottlenecking capital with support from our largest Burcon shareholder to back the overall project.”

Burcon on Feb. 14 released results for its third quarter ending Dec. 31, showing Merit’s total revenue for the quarter at $3 million, up 146 per cent from the year-earlier period. Burcon for the quarter booked impairment charges of $12.3 million related to its investment in, and loan to, Merit.

Underwood, in his letter Feb. 8, said Burcon has “real concerns about Merit’s financial situation and viability” and “recognize(s) the news of Merit Functional Foods’ situation may be a surprise.”

However, he stressed, if its funding plans for Merit are successful, “Burcon could have, for the first time in its history, a chance to own its destiny… While there is risk in our current path, we believe this also presents Burcon with a significant opportunity.”

Built starting in 2019, Merit’s 94,000-square-foot plant opened in early 2021 and began accepting canola and yellow peas to process product lines such as Puratein canola proteins, Peazac pea proteins, and MeritPro protein blends using Burcon’s protein extraction technology.

In 2021 Merit projected it would be able to eventually expand to take up to 100,000 tonnes of canola and peas per year.

Its more recent products have included Peazazz C, a pea protein with a “smooth, grit-free texture” for ready-to-drink beverages, launched last July, and Organic Peazazz C 850, a certified organic version, last December for use in beverages, protein powders and protein bars.

EDC and FCC were members of a consortium of lenders including Agricultural and Agri-Food Canada and CIBC providing Merit with $95 million in debt financing starting in 2020. AAFC’s contribution came in the form of a 10-year, interest-free $10 million loan from the department’s AgriInnovate program.

Merit that year also picked up $9.5 million in support from the Protein Industries Canada supercluster to back product development. — Glacier FarmMedia Network

CORRECTION, March 2, 2023: The notice of motion filed Feb. 24 by EDC and FCC states Merit was expected to run out of operating cash “on or around March 3-4, 2023.” An earlier version of this article incorrectly referred to those dates as “Thursday or Friday.”

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Winnipeg-based Merit Functional Foods announced Thursday it has received a $30 million “capital investment” from Bunge, giving the U.S. grain firm a “minority interest” worth 25 per cent.

Burcon NutraScience Corp., a joint-venture owner in Merit, said in a separate release Thursday that Bunge bought equity directly from Merit as well as additional shares and debt from other “existing Merit shareholders who are Burcon’s joint venture partners.”

Bunge’s acquisitions make Vancouver-based Burcon the largest single shareholder in Merit, at 33.3 per cent, Burcon said.

The deal announced Thursday also includes an agreement between Bunge, Burcon and Merit’s other shareholders in which Burcon now has the “right, but not an obligation” in “certain circumstances” to take part in a sale of “not less than all” of its Merit shares.

Also “in certain circumstances,” Merit has the right to buy out from Burcon its May 2019 license and production deal, in exchange for an amount “representing the discounted future royalties over the life of the license agreement.”

The agreement in question granted Merit a 20-year exclusive license for Burcon’s pea and canola protein technologies. The Merit plant is to be set up to make Burcon’s Peazazz and Peazac pea proteins and Supertein, Puratein and Nutratein canola proteins.

Having Bunge on board, Merit said Thursday, “will expedite the construction of Merit’s state-of-the-art plant-based protein production facility” which is billed as “the only commercial-scale facility capable of producing food-grade canola protein in the world.”

Construction of the Merit plant in Winnipeg remains “well underway” and on track for the plant to be “fully operational” by December.

Merit’s said its product portfolio of pea and canola protein ingredients “supports the growing need for highly functional and taste-forward plant-based applications.”

Bunge, as one of the “leading processors of canola in Canada… has strong origination expertise and will supply Merit with critical inputs,” Merit said.

“We’re excited to have a global partner like Bunge recognize our mission and assist us in accelerating our plans and path to launch,” Merit co-CEO Ryan Bracken said in the company’s release.

“Bunge also holds a deep knowledge of international commodity markets, which will help reinforce our canola business with customers globally.”

Burcon CEO Johann Tergesen said much the same in that company’s release, that Bunge’s investment “secures the future for Merit, which will benefit greatly from Bunge’s large canola origination footprint and multinational platform.” — Glacier FarmMedia Network

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Meat substitutes from plants in burgers, nuggets and many other foods are a fast-growing industry, driving up demand for crops that produce them.

Canada is among the world’s largest growers of peas and the biggest producer of canola, crops high in protein that technology companies like Burcon — a joint-venture partner in Merit — can separate and isolate for use in foods and beverages.

The agreement with Nestle is long-term, with no expiry, Burcon CEO Johann Tergesen said in an interview. Nestle will buy pea and canola proteins from a 20,000-tonne-per-year Merit plant to be built by the end of this year in Winnipeg.

Merit will process the proteins using Burcon technology under a licensing agreement.

“It’s a little bit like Christmas morning for those of us who have been doing this for 20 years,” Tergesen said.

“In the early days, I had to explain to people what protein was. Now it has been a wild ride.”

Burcon stock jumped 36 per cent in Toronto to $1.89 per share, touching its highest price in nearly three years. Nestle stock rose 0.9 per cent in Switzerland.

With the deal, Burcon expects to report its first-ever commercial revenue and profit in 2021. Terms were not released.

Nestle launched soy and wheat protein-based “Incredible Burgers” in Europe last year. The deal gives the company access to a range of ingredients for its foods and beverages, using the “unique expertise” of Burcon and Merit, Nestle chief technology officer Stefan Palzer said.

It comes after Beyond Meat this month struck a similar supply agreement with France-based Roquette, which is also building a pea protein plant about 90 km west of Winnipeg at Portage la Prairie, Man.

The new commercial demand “provides a real sense of optimism for the future,” said Gord Bacon of Pulse Canada, an industry group representing pulse farmers and processors.

“To have a diversified market base is what every group producing commodities or ingredients in Canada would hope for.”

With so much of Canada’s peas exported raw, finding enough supply to satisfy the Nestle deal will not be a challenge, said Ryan Bracken, Merit’s co-CEO. The company is already planning to expand the Winnipeg plant under construction to more than double production.

— Reporting for Reuters by Rod Nickel in Winnipeg and Silke Koltrowitz in Zurich; additional reporting by Kelsey Johnson in Ottawa.

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In Saskatoon on Wednesday, federal Industry Minister Navdeep Bains announced the Protein Industries Canada (PIC) supercluster has approved a new $27.6 million project to breed high-protein canola hybrids for both human consumption and animal feed, using gene-editing technology.

Participants in the new PIC-backed project also include ag chem and seed firm Corteva Agriscience, the Canadian arm of agrifood giant Bunge, and Calgary plant-based ingredients processor Botaneco.

Corteva on Wednesday hailed the effort as “the first commercial plant-breeding project focused specifically on canola protein quality improvement.”

High-protein seed genetics “will transform Canadian canola to be both a high-value oil and a high-value meal crop,” Corteva Canada president Bryce Eger said in that company’s release.

The new seed varieties to come out of the project “are expected to be well suited for both traditional processing methods like crushing and newer technologies like the one being developed through the supercluster’s first supported project announced in June,” the government said in its release.

The project will bring in genetics from Corteva’s breeding programs as well as from public-sector sources such as Agriculture and Agri-Food Canada, PIC said.

Bunge, meanwhile, will process the high-protein canola, “resulting in high-protein meal to be used in poultry and swine feeding studies to quantify animal performance,” and will also evaluate new end-use markets.

High-protein canola produced through the project will also be used in Botaneco’s processing platforms, creating protein concentrates for use in aquaculture studies as well as protein isolates for human food testing.

“By investing in breeding to improve protein and reduce fibre, we will increase the value of Canadian canola and open up new markets for food and feed applications, resulting in higher demand and prices for the meal,” PIC CEO Bill Greuel said, noting the meal is “traditionally sold at a discount.”

Being able to offer a high-protein and reduced-fibre meal “will allow us to sell into local feed markets where we currently struggle to compete,” Ryan Law, North America canola commercial manager for Bunge, said in the same release.

The feds are investing up to $13.6 million in the new project through PIC, while $14.05 million will come from other consortium partners, PIC noted.

Canola R+D has generally focused on yield and traits such as pod shatter and disease resistance, Corteva said — traits that are “critical to profitable and sustainable production.”

This breeding program, however, “will place Canadian canola researchers in a global leadership position and create an entirely new canola ecosystem,” the company said.

New isolates

The goal of ramping up canola’s overall protein content dovetails with another project in which PIC announced an investment separately the previous Friday.

In Winnipeg that day, Bains and senior local MP Jim Carr announced up to $9.5 million in PIC backing for a project to commercialize “new highly-soluble, highly-functional pea and canola protein isolates.”

The new isolates to come out of the project “will eliminate the grittiness experienced with less soluble proteins and will improve the flavour profiles of plant-based products, including in plant-protein beverages and meat alternatives,” the government said.

Merit Functional Foods, Pitura Seeds, The Winning Combination and the Manitoba Food Development Centre are collaborating on the project, which is expected to use patented technology from Burcon NutraScience to produce the new protein isolates “with more than 90 per cent purity.”

The PIC investment “will be matched at least dollar for dollar by industry and other partners,” the government said.

Merit is building a plant at Winnipeg’s CentrePort to produce plant-based proteins; The Winning Combination, another Winnipeg company, processes natural health products and dietary supplements and “will help Merit assess pea and canola functionality and stability.” The Manitoba Food Development Centre at Portage la Prairie is a fee-for-service agency which handles R+D and commercialization work for Manitoba agrifoods and ingredients.

Pitura Seeds, based near Winnipeg at Domain, Man., will use its seed cleaning plant to develop cleaning standards to “achieve optimal protein and quality levels for canola and peas,” and will also test varieties for the best “agronomic fit” for Prairie growers. — Glacier FarmMedia Network

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The play looked smart after the stock surged more than 250 per cent since the faux burger and sausage maker’s initial public offering in May. Indeed, Beyond Meat’s market capitalization of $9.9 billion is now larger than that of Bunge, a 201-year-old firm with 31,000 employees (all figures US$).

No wonder many top agricultural firms want to grab their cut of the booming market for plant-based fake meat. Bunge’s investment is just one example of how grain traders and seed companies are trying to capitalize on a market that now accounts for five per cent of U.S. meat purchases — a share expected to triple over a decade, according to investment management firm Bernstein. That growth would mirror the fast ramp-up of milk substitutes made from crops such as almonds.

“I definitely think this is going to continue to drive demand,” said Vince Macciocchi, president of the nutrition group at Archer Daniels Midland, one of Bunge’s chief rivals.

ADM and privately-held grain trader Cargill are selling processed peas and soy proteins to consumer food companies and restaurants that use them to make vegetable burgers, sausages, fish substitutes and other faux-meat products. They are also getting into the business through acquisitions and corporate partnerships or by leveraging their labs and research capabilities to help make new plant-based products for clients including food and beverage makers.

Seed company Corteva — which spun off in June after a merger of Dow Chemical and Dupont — is studying potential vegetable seed offerings.

Grain traders and seed-makers are following the lead of Beyond Meat and another startup, Impossible Foods, along with traditional meat producers such as Tyson Foods and Maple Leaf Foods that have cashed in on plant-based meat substitutes. Demand for meat alternatives has soared as consumers add plant-based protein to their diets for health reasons and out of concern for animal welfare and environmental damage from livestock farming.

Tofu, made from soybean milk, is the best known meat alternative and has been around for decades. But in recent years, other crops such as black beans, peas, lentils, canola, beets and sunflower have become popular in products made to taste like or replace meat.

The big agricultural firms are in part playing defense. Grain traders supply the world’s livestock farms with animal feed – a business that would suffer if fake meat sales rise at the expense of real meat. Seed companies such as Bayer sell to farmers who grow the corn and soybeans that are now sold mostly to feed livestock.

Surging demand

ADM this year created a new position — director of “flexitarian” solutions — to focus on developing products for food companies who are targeting the market for a mostly plant-based diet, Macciocchi said. The company is also considering repurposing an animal-feed plant in Rotterdam to produce human-grade soy products, he said. ADM has expanded its plant-protein team of scientists and marketers in the past three years even as it aims to cut its overall workforce.

“We’ve dedicated a significant amount of our team – the technical side of our team, as well as the commercial side of our team – to plant-based proteins,” Macciocchi said.

Cargill in August announced an additional $75 million investment in North American pea-protein producer Puris — which supplies Beyond Meat. That triples its original $25 million investment in January 2018.

Cargill’s customers have been clamoring for pea or soy protein products, including alternative meats, said Laurie Koenig, who leads a Cargill unit developing such items.

“We’ve never seen this kind of pull before from the market,” Koenig said.

Like ADM and Cargill, Bunge is now looking to supply ingredients to startups and large companies involved in the imitation-meat trend, Bunge CEO Greg Heckman said in an interview.

“There’s just so many ways that it is touching our business,” he said.

Seeds of a new market

Seed developer Corteva has discussed expanding into research or small acquisitions in vegetable seeds in part to take advantage of increasing demand for plant-based proteins, CEO Jim Collins told Reuters. Corteva’s ability to research breeding and genetics of corn and soybean crops could be applied to vegetables, he said.

“The whole vegetable-seed industry is interesting to me,” Collins said.

Rival Bayer also could enter the market as a provider of plant-based meat alternatives, an executive said in August, without providing details. The company, which sells seeds and farm chemicals, said it also offers products for plant-based protein sources such as soybeans, tree nuts and peas.

Toronto-based pork processor Maple Leaf two years ago bought U.S.-based Lightlife Foods, a plant-based burger-maker, to expand its reach into a market with boundless potential, chief executive Michael McCain said. While the trend is starting in North America and Europe, it will expand worldwide within a decade, McCain said.

Marfrig Global Foods SA is making a plant-based burger for the Brazil market — made from soy supplied by ADM, and sold at Burger King starting in November.

ADM is building a pea protein plant in North Dakota, while France’s Roquette and Verdient Foods, backed by Hollywood director James Cameron, are building plants in Manitoba and Saskatchewan respectively.

Fake meat makers largely rely on soy, wheat, and peas, according to the Good Food Institute, which promotes the alternatives. But a wide variety of other crops play a role, presenting an opportunity for companies that maintain relationships with farmers.

In a Winnipeg laboratory that doubles as a kitchen, a Burcon NutraScience food scientist grills black bean burger patties that are held together with canola protein, rather than the usual eggs — making such burgers appealing to vegans. The company makes protein ingredients from canola, pea and soy, and business is brisk.

“The plant-protein industry is as hot as it’s ever been,” said Burcon vice-president Martin Schweizer.

— Reporting for Reuters by Rod Nickel in Winnipeg and Tom Polansek in Chicago; additional reporting by Tina Bellon in New York and Karl Plume in Chicago.

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