A Hard Sell: Bringing Cultured Beef to Market

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A Hard Sell: Bringing Cultured Beef to Market

Brian Kenny: In the hundred-plus years since journalist Upton Sinclair shined a light on the deplorable conditions in the U.S. meat packing industry in his groundbreaking exposé, The Jungle, per capita meat consumption for Americans has increased 63%. Can the world continue to feed its growing meat-eating population? Today we’ll hear from Professor Jose Alvarez about his case entitled Disrupting the Meat Industry: Tissue Culture Beef. I’m your host, Brian Kenny, and you’re listening to Cold Call. Professor Alvarez teaches in the MBA and Executive Education programs at Harvard. He is an expert in supply chain logistics, and before coming to Harvard he served as CEO for Stop & Shop/Giant-Landover, a major grocery retailer in the United States. Jose, welcome.

Jose Alvarez: Thank you.

BK: So I’m going to give you one scene from the case that stood out to my mind and if you can just take that and set up the context for the case, the protagonist and what he’s thinking about. The scene is a guy on a bike with a $300,000 hamburger in his backpack.

JA: Okay. So Mark Post is a vascular physiologist. He does tissue culture work in the main part of his job at the University of Maastricht on human vascular cells, things that you use to transplant into humans. He became interested in a project that was going on funded by the Dutch government several years ago on tissue cultured beef. Using the same sorts of technologies that we would use for replacement of things like heart valves, and taking a look at how that technology could be used to grow tissue of a cow (in this case the Belgium Blues, which are a very muscular Belgium breed of cow) to grow beef. In the first instance it was to grow hamburger meat, which is actually somewhat complicated, and he had received funding from Sergei Brin and his foundation to—

BK: The Google founder.

JA: The Google founder, right—to grow this tissue cultured meat. They were put under a fairly quick timeframe to create something that they could put in front of an audience. This work had been going on for almost a decade and there had been fits and starts and different leadership in the program and they had never really gotten to the point where they had something that they could show an audience. As Brin and his foundation got involved they said, “One of the things we would want to do is have a proof of concept that we could show people and sort of catalyze people’s imagination around the project.” They did that. They very quickly came together and said, “We will create a hamburger.” So they created a few hamburgers and they each cost about $300,000 apiece.

BK: So those are the hamburgers that are in the backpack.

JA: As is the fashion in the Netherlands, Dr. Post got on his bike that night ready for this program where they were going to catalyze the idea of tissue culture hamburgers with a cooler on the back of his bike that had these multi-hundred thousand dollar pieces of meat that he had developed in his lab and he merrily rode that home and then the next day they went to actually trial the beef in front of an audience with some food experts and a celebrity chef.

BK: I’d like to know, what prompted you to write the case in the first place? Why did you do this?

JA: One of the things of huge interest is the sorts of issues that we’re having with resource constraints around the globe. The meat supply chain is a very resource intensive one in terms of land use, in terms of water use, in terms of feed for the animals involved. We thought it would be interesting to take a look at this potential disruption, innovation in the space, which had been going on now for a while and had finally become a “real thing” because of this trial that had been done with this studio audience in the U.K.

BK: Could you paint a 50,000-foot view of the meat industry so that listeners who have meat probably once or twice a day in their regular diet get a better sense for where that’s coming from and how it’s produced?

JA: Yes. The cow is actually not a very efficient user of energy and water in terms of taking that and converting it into the protein that we crave. If you look at the efficiency of the cow versus something like say a chicken, it is way down the line. It is a very inefficient user of energy, of space, of water. The demand for meat is going up dramatically, especially in developing countries like China. If you think about an inefficient system for production of protein, which is beef production, and then you take this burgeoning demand growth for meat you wind up with a not so pretty picture over the long-term. There’s huge pressure for meat production, but the acreage required, the energy required, the water required to make all of that happen will eventually get us to a point where something will have to give. The part that’s interesting about this case is you can get to a much more efficient means of producing that beef.

BK: You site that there are a billion cows in the world. That’s the figure that’s cited in the case, among many others. And there’s an ecosystem that sort of thrives around the meatpacking industry too. So the economic implications of disrupting this industry would be pretty extreme.

JA: If you go through the value chain you have the people who are actually growing the cattle, but then you also had the people who are growing the feed to feed the cattle. You have veterinary products that are being used to keep those animals healthy. You have the whole transport industry to move the cattle from wherever it is that they’re being grown to either a feedlot or if there’s no feedlot, if they’re going directly to a slaughterhouse, to the slaughterhouse. You have all the slaughterhouse workers. You have the folks who are involved in the tanning and leather industry, which are byproducts of the cattle industry. And then you have all the butchering that goes on, all the retail supermarket work that goes on as well. If you think about putting that altogether into a number it’s millions of people who are involved in that industry and could obviously very easily be disrupted if this comes to fruition.

BK: And one of the eye-popping statistics in the case for me was that you talk about land usage and 40-plus percent of land being used to either raise cattle or to raise the crops that feed the cattle versus four percent of land being used to raise consumable healthy vegetables. That’s pretty amazing and seems like a huge disparity. (Editor's note: 30% of land is used for pastureland or growing cattle feed.)

JA: Right. Again, the resource allocation seems a little bit odd. And there’s another problem here in that the climate change characteristics of growing beef are also not very favorable. If you think about the entire value chain and how much carbon is created in that value chain it’s also problematic in the long-term as well.

BK: So people see the environmental issues, I think. A lot of people have concerns about the way animals are treated in the process of raising consumable meat.

JA: And that’s really the driver for Sergei Brin. He is very much an animal rights advocate and that was the driver for him in this instance around tissue culture beef.

BK: Let’s go back to Dr. Post because it seems like the number one challenge on his plate, so to speak, at least initially is gaining public acceptance. If we go back to he’s now got his three hamburgers at this public demonstration, can you sort of set that up for us and tell about how that went?

JA: I think generally the acceptance was pretty high, especially for first time through. One of the things that’s interesting about the burgers is that they are completely lean. There is no fat. If you think about a burger with no fat, it might not be the best flavor. But generally the critics who tried the beef found it to taste like beef, which it should because it’s animal tissue. There’s really no discernible difference between what he’s done in the lab outside of a cow and what a cow does inside of its body. So he’s been working on the next iteration here, which includes growing fat cells from tissue cultures so that he can create these hamburgers with the fat, which would give it an even better mouth feel. Now the big question is, when you ask especially anyone over say 25 years old how are they going to react. Usually there’s a yuck factor involved, which is an interesting marketing problem, and that really is the crux of the case—not so much that you have this very interesting technology that could revolutionize an industry that needs help because it’s a place that is seeing great growth, but also has lots of questions and lots of limitations. The real issue in the case is how the heck do you market this thing because most people are going to say, “Okay. I understand all the problems and maybe I don’t like the idea that these cows are getting slaughtered and have lots of questions around the environmental issues and everything else, but I like my beef and this other thing looks like this weird sort of—“

BK: It’s like science fiction-y, genetically modified.

JA: Right. But it’s not. It’s not a genetically modified organism. It is cells that are taken from the Belgium Blue strain of cattle and then grown outside of the animal instead of inside of the animal. But it is quite a marketing challenge. How do you get something that is becoming real? It’s not science fiction anymore. They’ve actually created the burger. They’re getting pretty far along with a production-ready model of this so that they can scale it up and actually make it affordable.

One of the things that really struck me about this case as a retailer was the fact that you could get consistent beef. One of the problems that I had seen through survey work that we did at Stop & Shop, when I was there, is that consumers may like your meat sometimes but not always. And this is true in restaurants as well. You might have a great cut of beef today in your meal, but then you come back a week later and it’s not quite the same. That has to do with the fact that the growing conditions, the feed, the emotional state of the animal when it’s slaughtered. There are lots of different issues that can go into why that piece of beef isn’t exactly the same as what you had a week ago or two weeks ago. In this case it’s consistent. From a retail perspective and from a consumer perspective that would be really interesting.

BK: So I probably shouldn’t expect to see this on the menu at my local burger joint any time soon?

JA: It will be interesting to see. Dr. Post thinks that within the next five years he will have scale production of the product. Now, it will probably still be a niche product in that it’ll be somewhat expensive, probably two to three times the cost of a normal burger for the first iteration of scaling here. But as the technology improves that will change. So I would think that within the next five to seven years you will probably see it in sort of a far-reaching, forward-looking sort of restaurant that’s trying to find something interesting and different that’s a niche and a little bit more expensive. But you probably won’t find it in McDonalds in the next five to seven years.

BK: Well I’ll be lined up whenever that day comes. Jose, thank you for joining us.

JA: Yes. Thank you.

BK: You can find this case, along with thousands of others, in the Harvard Business School Case Collection at HBR.org. I’m Brian Kenny. Thanks for listening to Cold Call, the official podcast of Harvard Business School.

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A Hard Sell: Bringing Cultured Beef to Market

Brian Kenny: In the hundred-plus years since journalist Upton Sinclair shined a light on the deplorable conditions in the U.S. meat packing industry in his groundbreaking exposé, The Jungle, per capita meat consumption for Americans has increased 63%. Can the world continue to feed its growing meat-eating population? Today we’ll hear from Professor Jose Alvarez about his case entitled Disrupting the Meat Industry: Tissue Culture Beef. I’m your host, Brian Kenny, and you’re listening to Cold Call. Professor Alvarez teaches in the MBA and Executive Education programs at Harvard. He is an expert in supply chain logistics, and before coming to Harvard he served as CEO for Stop & Shop/Giant-Landover, a major grocery retailer in the United States. Jose, welcome.

Jose Alvarez: Thank you.

BK: So I’m going to give you one scene from the case that stood out to my mind and if you can just take that and set up the context for the case, the protagonist and what he’s thinking about. The scene is a guy on a bike with a $300,000 hamburger in his backpack.

JA: Okay. So Mark Post is a vascular physiologist. He does tissue culture work in the main part of his job at the University of Maastricht on human vascular cells, things that you use to transplant into humans. He became interested in a project that was going on funded by the Dutch government several years ago on tissue cultured beef. Using the same sorts of technologies that we would use for replacement of things like heart valves, and taking a look at how that technology could be used to grow tissue of a cow (in this case the Belgium Blues, which are a very muscular Belgium breed of cow) to grow beef. In the first instance it was to grow hamburger meat, which is actually somewhat complicated, and he had received funding from Sergei Brin and his foundation to—

BK: The Google founder.

JA: The Google founder, right—to grow this tissue cultured meat. They were put under a fairly quick timeframe to create something that they could put in front of an audience. This work had been going on for almost a decade and there had been fits and starts and different leadership in the program and they had never really gotten to the point where they had something that they could show an audience. As Brin and his foundation got involved they said, “One of the things we would want to do is have a proof of concept that we could show people and sort of catalyze people’s imagination around the project.” They did that. They very quickly came together and said, “We will create a hamburger.” So they created a few hamburgers and they each cost about $300,000 apiece.

BK: So those are the hamburgers that are in the backpack.

JA: As is the fashion in the Netherlands, Dr. Post got on his bike that night ready for this program where they were going to catalyze the idea of tissue culture hamburgers with a cooler on the back of his bike that had these multi-hundred thousand dollar pieces of meat that he had developed in his lab and he merrily rode that home and then the next day they went to actually trial the beef in front of an audience with some food experts and a celebrity chef.

BK: I’d like to know, what prompted you to write the case in the first place? Why did you do this?

JA: One of the things of huge interest is the sorts of issues that we’re having with resource constraints around the globe. The meat supply chain is a very resource intensive one in terms of land use, in terms of water use, in terms of feed for the animals involved. We thought it would be interesting to take a look at this potential disruption, innovation in the space, which had been going on now for a while and had finally become a “real thing” because of this trial that had been done with this studio audience in the U.K.

BK: Could you paint a 50,000-foot view of the meat industry so that listeners who have meat probably once or twice a day in their regular diet get a better sense for where that’s coming from and how it’s produced?

JA: Yes. The cow is actually not a very efficient user of energy and water in terms of taking that and converting it into the protein that we crave. If you look at the efficiency of the cow versus something like say a chicken, it is way down the line. It is a very inefficient user of energy, of space, of water. The demand for meat is going up dramatically, especially in developing countries like China. If you think about an inefficient system for production of protein, which is beef production, and then you take this burgeoning demand growth for meat you wind up with a not so pretty picture over the long-term. There’s huge pressure for meat production, but the acreage required, the energy required, the water required to make all of that happen will eventually get us to a point where something will have to give. The part that’s interesting about this case is you can get to a much more efficient means of producing that beef.

BK: You site that there are a billion cows in the world. That’s the figure that’s cited in the case, among many others. And there’s an ecosystem that sort of thrives around the meatpacking industry too. So the economic implications of disrupting this industry would be pretty extreme.

JA: If you go through the value chain you have the people who are actually growing the cattle, but then you also had the people who are growing the feed to feed the cattle. You have veterinary products that are being used to keep those animals healthy. You have the whole transport industry to move the cattle from wherever it is that they’re being grown to either a feedlot or if there’s no feedlot, if they’re going directly to a slaughterhouse, to the slaughterhouse. You have all the slaughterhouse workers. You have the folks who are involved in the tanning and leather industry, which are byproducts of the cattle industry. And then you have all the butchering that goes on, all the retail supermarket work that goes on as well. If you think about putting that altogether into a number it’s millions of people who are involved in that industry and could obviously very easily be disrupted if this comes to fruition.

BK: And one of the eye-popping statistics in the case for me was that you talk about land usage and 40-plus percent of land being used to either raise cattle or to raise the crops that feed the cattle versus four percent of land being used to raise consumable healthy vegetables. That’s pretty amazing and seems like a huge disparity. (Editor's note: 30% of land is used for pastureland or growing cattle feed.)

JA: Right. Again, the resource allocation seems a little bit odd. And there’s another problem here in that the climate change characteristics of growing beef are also not very favorable. If you think about the entire value chain and how much carbon is created in that value chain it’s also problematic in the long-term as well.

BK: So people see the environmental issues, I think. A lot of people have concerns about the way animals are treated in the process of raising consumable meat.

JA: And that’s really the driver for Sergei Brin. He is very much an animal rights advocate and that was the driver for him in this instance around tissue culture beef.

BK: Let’s go back to Dr. Post because it seems like the number one challenge on his plate, so to speak, at least initially is gaining public acceptance. If we go back to he’s now got his three hamburgers at this public demonstration, can you sort of set that up for us and tell about how that went?

JA: I think generally the acceptance was pretty high, especially for first time through. One of the things that’s interesting about the burgers is that they are completely lean. There is no fat. If you think about a burger with no fat, it might not be the best flavor. But generally the critics who tried the beef found it to taste like beef, which it should because it’s animal tissue. There’s really no discernible difference between what he’s done in the lab outside of a cow and what a cow does inside of its body. So he’s been working on the next iteration here, which includes growing fat cells from tissue cultures so that he can create these hamburgers with the fat, which would give it an even better mouth feel. Now the big question is, when you ask especially anyone over say 25 years old how are they going to react. Usually there’s a yuck factor involved, which is an interesting marketing problem, and that really is the crux of the case—not so much that you have this very interesting technology that could revolutionize an industry that needs help because it’s a place that is seeing great growth, but also has lots of questions and lots of limitations. The real issue in the case is how the heck do you market this thing because most people are going to say, “Okay. I understand all the problems and maybe I don’t like the idea that these cows are getting slaughtered and have lots of questions around the environmental issues and everything else, but I like my beef and this other thing looks like this weird sort of—“

BK: It’s like science fiction-y, genetically modified.

JA: Right. But it’s not. It’s not a genetically modified organism. It is cells that are taken from the Belgium Blue strain of cattle and then grown outside of the animal instead of inside of the animal. But it is quite a marketing challenge. How do you get something that is becoming real? It’s not science fiction anymore. They’ve actually created the burger. They’re getting pretty far along with a production-ready model of this so that they can scale it up and actually make it affordable.

One of the things that really struck me about this case as a retailer was the fact that you could get consistent beef. One of the problems that I had seen through survey work that we did at Stop & Shop, when I was there, is that consumers may like your meat sometimes but not always. And this is true in restaurants as well. You might have a great cut of beef today in your meal, but then you come back a week later and it’s not quite the same. That has to do with the fact that the growing conditions, the feed, the emotional state of the animal when it’s slaughtered. There are lots of different issues that can go into why that piece of beef isn’t exactly the same as what you had a week ago or two weeks ago. In this case it’s consistent. From a retail perspective and from a consumer perspective that would be really interesting.

BK: So I probably shouldn’t expect to see this on the menu at my local burger joint any time soon?

JA: It will be interesting to see. Dr. Post thinks that within the next five years he will have scale production of the product. Now, it will probably still be a niche product in that it’ll be somewhat expensive, probably two to three times the cost of a normal burger for the first iteration of scaling here. But as the technology improves that will change. So I would think that within the next five to seven years you will probably see it in sort of a far-reaching, forward-looking sort of restaurant that’s trying to find something interesting and different that’s a niche and a little bit more expensive. But you probably won’t find it in McDonalds in the next five to seven years.

BK: Well I’ll be lined up whenever that day comes. Jose, thank you for joining us.

JA: Yes. Thank you.

BK: You can find this case, along with thousands of others, in the Harvard Business School Case Collection at HBR.org. I’m Brian Kenny. Thanks for listening to Cold Call, the official podcast of Harvard Business School.

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