French dairy giant Danone has made a strategic investment into Israeli startup Imagindairy Ltd.. which could pave the way to joint collaboration on developing animal-free dairy products for consumers using precision fermentation technology.

‘Multi-layered partnership’

“It’s a very nice investment that will help us to move forward,” Imagindairy’s co-founder and CEO Dr. Eyal Afergan told The Times of Israel. “It’s a multi-layered partnership, with the investment on one end and talks to build collaboration with the R&D teams to develop animal-free products, and eventually once we have the right product and we have everything in place like cost, price and taste, then this could lead us to a commercial agreement.”

Imagindairy has raised $28 million in Seed funding since its launch in 202o from investors including Target Global, Strauss Group, Emerald Technology Ventures, Green Circle Foodtech Ventures, Collaborative Fund, and New Climate Ventures.

The investment marks Danone’s first foray into the tech that relies on microorganisms to reproduce proteins identical to those found in animal-based dairy. But as its second investment into alt-dairy in a month, it points to the food giant’s interest in diversifying its dairy. The announcement follows Danone’s investment into another Israel-based alternative dairy producer last month. Danone announced a $2 million investment into Wilk, the startup using cell-based technology to reproduce human breast milk for the infant formula market.

Both investments signal market viability for alternative dairy products and likely collaborations with Danone. Multinational giants including General Mills, Bel Brands, Starbucks, Nestlé, and Mars have partnered with precision fermentation producers, chiefly the U.S.-based Perfect Day, using its precision fermentation animal-free whey in ready-to-drink and confectionery products, among others. Unilever is also reportedly in talks with Perfect Day about new product development.

“Our proprietary technology is a very comprehensive technology that allow us to improve the productivity of our organisms: It is the difference between having a cow that gives you one liter of milk a day or 40 liters of milk a day,” Afergan told The Times. He says it takes the fungi, the yeast, and bioengineering, along with using AI machine learning technology, “to help us improve production of the protein much more efficiently and with much higher quality.”

Market potential

The announcement comes on the heels of Israel’s first regulatory approval for precision fermentation dairy. The Health Ministry gave Rehovot-based Remilk the green light to bring its product to market.

Imagindairy says it is working to bring its whey protein, to the U.S. market and is also developing a range of other milk proteins, including casein proteins and alpha-lactalbumin. Danone’s investment will provide strategic and operational support to Imagindairy.

“Danone is a powerhouse in the dairy space so naturally, we can work together under various modes of collaboration,” Afergan said in an interview with AgFunder News. “We see their investment as a positive indication of their support and interest in this space. We, of course, continue to also work with additional partners within the dairy industry.”

Afergan says it takes time to build a new category and there’s already “great interest” among dairy companies to explore this space. And, he says, there’s a lot of excitement on the consumer side too, “so it may take more time to finetune the right products and consumer messages, but we’re very confident in the immense potential of this market.”