Nestlé is pushing further into the alternative dairy market with the announcement of a partnership with animal-free dairy company Perfect Day.
The details of the partnership or the first product launch have not yet been disclosed. Nestlé’s U.S. R&D Accelerator will pilot the “novel product” in the U.S. market later this year in a “test-and-learn” process, the company said in a press release.
“We are exploring emerging technologies that can lead to animal-friendly alternatives that are nutritious and sustainable, without compromising on taste, flavor, and texture,” Heike Steiling, head of Nestlé’s development center for dairy products, said in a statement. “Bringing together our unmatched R&D expertise, innovation capabilities and scale, we are working to develop and test novel animal-free dairy protein-based products to complement our wide-ranging portfolio of plant-based alternatives.”
The new “milk-like beverage” product will use Perfect Day’s precision fermentation technology to genetically engineer whey into real dairy proteins without the need of a cow. Perfect Day claims its technology produces whey protein that is “molecularly identical” to that of cow’s milk, yet is less resource-intensive than whey from conventional dairy processes. Though the company has not yet detailed which of its brands are working with Perfect Day, Nestle produces and sells Carnation, CoffeeMate, Nesquik, Blue Bottle and Starbucks at Home beverages in the U.S.
The announcement represents Nestlé’s continued interest in emerging technologies and its commitment to more sustainable production methods. In 2021 Nestlé Health Science acquired a majority stake in plant-based nutrition company Orgain. The company’s 2021 “Creating Shared Value and Sustainability Report” laid out a framework to creating a net-zero dairy supply chain and promised to expand its portfolio with more plant-based options and invest in initiatives to reduce the carbon footprint of dairy
Nestle has already made strides to increase its reach into vegan and plant-based products. It announced last week that its test of a vegan KitKat chocolate bar made with rice milk was a success and will eventually be released Europe-wide. Nestlé launched its pea protein milk alternative Wunda in May 2021.
Perfect Day is no stranger to partnering with CPG companies both large and small. It has leveraged its precision fermentation technology recently in a string of high-profile partnerships that include CPG powerhouse General Mills and confectionary company Mars, to create alt-dairy cream cheese and chocolate bars, respectively. The company’s strategy has been to pick one use case for dairy proteins (for example, chocolate bars, ice cream or cream cheese) and then roll out as many partnerships as it can that show proof of concept.
Fluid milk has been of particular interest for Perfect Day. In late 2021, the company tested a barista milk with a very limited amount of Starbucks locations, although there has not yet been a wider rollout of this offering. Over the last year, the food tech company has also supported the launch of tetra packed, shelf-stable milk options with Betterland Foods, Tomorrow Farms and, most recently, Strive Nutrition. Within the beverage space, the company has also released whey powders designed for protein shakes in partnership with Natreve and MyProtein, as well as under its own California Performance Co, part of subsidiary The Urgent Company.
Perfect Day has been involved with the development of these offerings to varying degrees. For example, a Perfect Day spokesperson said the company was uninvolved in the development of Betterland’s milk, simply providing the protein itself. The Nestle partnership, however, seems to hint at a larger relationship.
Perfect Day initially launched as a CPG company focused on animal-free dairy alternatives, testing its own fluid milk alternative, but quickly pivoted the business to ingredients. After a relationship with ingredient supplier ADM failed to move forward, Perfect Day began selling its protein directly to food and beverage brands. The company last raised $350 million in a 2021 investment round led by Temasek and Canada Pension Plan Investment Board (CPP Investments) bringing the company’s total funding up to $750 million at the time.
The Perfect Day and Nestle announcement comes just months after CPG giant The Kraft Heinz Company announced a joint venture with the Not Company, which at the time only sold fluid milk alternatives in the U.S., to produce more plant-based products. Meanwhile, Pepsi also has a joint venture with protein producer Beyond Meat. While the duo’s first product under the PLANet Partnership partnership banner was a line of jerky, Pepsi has hinted that beverage products may also follow.
These partnerships can benefit emerging brands by giving them access to R&D, sales and marketing resources it does not yet have in house. Getting a product into the market quickly can also help to show proof of concept for what is still a novel process or ingredient. At the same time, large companies are spared the capital expense required to develop these ingredients, and are able to meet consumer demand for sustainable products in a more expeditious manner.
“While [the alt-dairy] category is still very young, we know consumers are looking for products that have a reduced environmental footprint, and we are evaluating this avenue as a future growth opportunity for our business,” said Joanna Yarbrough, head of the R+D Accelerator.