CPPIB backs alternative dairy producer with $50m commitment

The Canada Pension Plan Investment Board’s C$6 billion ($4.3 billion; €3.8 billion) Thematic Investing group has backed alternative dairy producer Perfect Day with a direct $50m investment.

CPPIB led the second tranche of the start-up’s Series C funding round, which raised $160 million – more than double the $140 million raised by Perfect Day at the end of last year.

Leon Pedersen, managing director and head of Thematic Investing at CPPIB, told Agri Investor one of the characteristics that convinced the LP to back the start-up is the size of its potential addressable market.

“Through our research, we have a very high confidence that he the addressable market is there and is growing,” said Pedersen.

“If you take the security of supply chain, getting a quality product with a good shelf life that you can distribute globally and is addressing lactose intolerance, you can take the whole Asian market in there. The opportunity is really, really big.”

Perfect Day’s patented production process involves isolating what it describes as “milk’s essential genes” and adding them to microflora – naturally occurring organisms that can produce large quantities of protein.

This “dairy flora” is then fermented to convert plant sugar into the milk proteins whey and casein and arrive at a protein that is “nutritionally identical” to cow’s milk. The start-up’s products include cheese, butter, milk, ice cream and yogurt, but it has so far only launched an ice cream product.

Pedersen added that being potentially the first company to use flora fermentation in this new way gives the start-up several advantages that appealed to CPPIB.

“Do we have patent protection around this? Do we actually have proprietary technology that we believe can give the company a sustainable moat for the longer term? And do we believe that this company can reach the right cost points in terms of scaling up?” he said.

“Believe it or not, we actually collaborated a lot with our healthcare experts internally to understand what’s going on because the same process [microflora fermentation] is being applied in producing insulin. Perfect Day ticks a lot of boxes in that analysis. So this was actually one of the really good investments we could see.”

Other investors to join the second tranche of the Series C include existing investors Temasek and Horizons Ventures, among others.