In mid-2020, as stock markets recovered from the initial outbreak of the Covid pandemic, food-tech emerged as one of the most promising sectors on the Tel Aviv Stock Exchange (TASE). It is easy to understand what attracted investors to these companies, at a time when money was available and tech stocks enjoyed rising popularity. This is a field where everyone can understand the final product (honey, meat, milk), and the commercial stage seems within reach.
At the forefront of foodtech were the cloning companies (or 'cultured' as they prefer to call themselves) - food companies that work to produce food using cell cultures - a process that mimics in the laboratory the biological process that occurs in nature. Three such companies reached the TASE by merging with existing shell companies.
The first to do so was Meatech, now known as Steakholder Foods (Nasdaq: STKH; TASE: STKH), which promised the development of cultured meat cuts, followed by Biomilk, now known as Wilk Technologies (TASE: WILK), which works to produce cultured milk, and Beeio Honey (TASE: BHNY), which seeks to produce honey according to the same principle.
However, after a warm reception, and initial rises, the share prices have changed direction, not entirely unconnected from the negative sentiment on the markets plaguing all the dream companies that are still in development stages in a time of sharp interest rate hikes.
The share prices of all three have fallen by about 90% from the record levels of about two years ago, and their coffers are emptying at a rapid rate, without commercial products on the market and no revenue. What's more: they are still looking for a clear business model.
The likelihood that these companies will be able to replace products "from nature" at a competitive price in the near term does not seem high, despite the many benefits that are said to derive from this: the ability to provide well-known and loved food in an ethical manner, without harming the environment, and while severing dependence on the planet's depleting resources.
Beeio Honey - Still seeking the sting
The company was founded in 2018 by brother and sister CEO Ofir Dvash and CTO Dr. Efrat Dvash. The name Dvash is Hebrew for honey and is not coincidental as they came from a family of beekeepers who changed the name to suit the profession. Beeio Honey seeks to develop an artificial beehive to produce artificial honey.
The company, which has a market cap of just NIS 25 million, has successfully produced cultured honey in the laboratory, but will be required to invest millions more shekels to bring the product to market, and this stage is fraught with technological risks. Israeli businessman Adi Zim holds a 24% stake in the company.
In March the company announced that Ofir Dvash will be replaced as CEO and prior to that in December Beeio Honey announced that it was laying off 10 employees - about half of its workforce. In its 2022 financial statement, Beeio Honey reported a NIS 15 million loss, leaving it with NIS 6.5 million cash in its coffers. Management said that without additional funding, it will only be able to continue its current level of activities for about 12 months. The company tried to raise money from a strategic investor but the attempt failed.
It is also unclear which market the company is targeting. Will the honey produced be sold at a competitive price compared with other honey products on the general market, or just to vegan customers who are reluctant to exploit bees in the hive? Will its health benefits be promoted? Each approach requires a different emphasis by different parts of the business.
In January, the Dvashes explained that regulation makes it difficult to develop the product, since each country has different requirements, and that the economic crisis has led to difficulty in raising funds. They added that the company is already planning to move quickly to the commercial stage and reduce dependence on raising funds. But it hasn't happened yet, and there is no timetable for the change.
Wilk's Milk - There is more than one mother
Wilk Technologies 2022 financial report included a going concern qualification attached by the auditors warning that following a loss of NIS 17 million and negative cash flow from activities, there is a significant doubt that the company can continue as a going concern.
Like Beeio Honey, Wilk is firing in different directions. The company currently has a market cap of NIS 68 million and is developing cultured milk as well as milk with cultured yoghourt. Meanwhile, these products have yet to reach the commercial stage and most company reports are about R&D breakthroughs. In 2022, company cofounder Yaron Kaiser told the media that Wilk's products are still years away from reaching the market.
Some optimism can be found in the recent $3.5 million financing round that was completed, led by Danone, one of the world's leading dairy companies. Wilk said that Danone is interested in its maternal milk products, which it may add to its baby food formula.
Cultured breast milk will not automatically contain the mother's antibodies and it is still possible that such a product would be preferred over formula without breast milk. At the end of last year, Wilk only had NIS 3.3 million cash in its coffers, so even the latest financing does not guarantee its continued existence.
Steakholder - mainly printing losses
Initially called Meat Tech, Steakholder was founded by former employees of 3D printing company Nano Dimension (Nasdaq: NNDM) with the aim of brining the promise of 3D printing to the world of meat alternatives, printing meat slices with an authentic texture.
After listing on Nasdaq and delisting from the TASE, the company is traded at a market cap of just $12 million, after falling 93% over the past year.
In December 2021, the company reported on the first 3D printing of a steak, but it was clear that in order to reach a commercial product, further development was required. In its latest prospectus, Steakholder announced that it is now focused on creating collaborations around its 3D printer, for example, with a Singaporean company that wants to print fish fillets.
The company said that it continues to face the challenges of the cultured meat field, but did not specify when it expects it cultured meat to reach the market. In the meantime, Steakholder has laid off workers, and after losing $30 million dollars in the past year, only about $6.5 million dollars remains in its coffers. Also, not surprisingly, a going concern qualification appears in its financial report.
So is there even a place for food-tech companies on the stock market? In the past, when investors have an appetite for risk, companies that are seemingly on the verge of the commercial stage have held flotations. But when it turns out that a marketable product is far away the stock market has problems in providing adequate financing.
However, from past experience we can see that there are stubborn companies that do not give up, manage to raise funds, break through the technological and marketing challenges, and eventually reach significant commercial activity.
Published by Globes, Israel business news - en.globes.co.il - on May 28, 2023.
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