Market trends & outlook

    As world consumption continues to increase along with demand for more sustainable business practices, many large, global companies are looking to get a foot in the door of the biotechnology industry. With its ability to replace petrochemicals and improve the performance and environmental impact of everyday products, industrial biotechnology is attracting more and more interest and investment.

    The world market for industrial enzymes expanded by 5% in 2013, reaching an estimated DKK 22 billion. Growth drivers for the industrial enzyme market include an increasing global population, a burgeoning middle class in emerging markets such as India, China and Brazil, and an expanding bioenergy market.

    Over the past few years, the biotechnology industry has witnessed increasing interest from large multinational companies looking to invest in the field. In 2011, DuPont acquired Novozymes’ largest competitor within industrial enzymes, Danisco. In 2012, BASF, Bayer CropScience and Syngenta acquired companies within the agricultural biologicals market, and in 2013, Novozymes and Monsanto established The BioAg Alliance, also within agricultural biologicals. Whether through acquisitions, partnerships or direct investment in the technology itself, this may spell increased competition, but also confirms the validity and potential of industrial biotechnology.

    “Novozymes’ go-to-market strategy is focused on increasing penetration and showing customers how they may benefit from using more biotechnology.”

    Depending on the industry in which the enzymes or microorganisms are used, different go-to-market strategies are used. In some industries and regions, biosolutions arriving on the market are so new, and at times revolutionary, that they require operational changes and investment for some customers. Therefore, the go-to-market strategies focus more on education, technology de-risking and adoption. In other industries, such as Household Care, customers are well established and looking for new ways to expand the market and make their value chain and products more sustainable. Here, biotechnology has already been adopted, and Novozymes’ go-to-market strategy is focused on increasing penetration and showing customers how they may benefit from using more biotechnology.

    Novozymes is the market leader in industrial enzymes with a 48% share of the world market. The diagram presents an overview of trends, growth drivers and challenges in Novozymes’ industries.

    INDUSTRY

    TRENDS

     

    GROWTH DRIVERS & CHALLENGES

           
    Household Care Higher performance, replacing chemicals, low-temperature washing, compaction   Growth drivers: performance claims, GDP & population, sustainability, replacement of traditional chemicals, emerging market growth
    Barriers to growth: sustained low oil prices, conservative consumers, lack of claim regulation in emerging markets
    Food & Beverages  Food safety, urbanization, input/cost optimization, health and nutrition   Growth drivers: high raw material prices, sustainability, healthy foods, nutritional benefits, emerging market growth
    Barriers to growth: low raw material prices, conservative industries, lack of regulation
    Bioenergy Yield maximization, refinery optimization, biomass conversion   Growth drivers: energy security, high oil prices, sustainability, CO2 reduction, political mandates, rural development
    Barriers to growth: sustained low oil prices, competing technologies, lack of infrastructure, loss of political support, entrenched competitors, feedstock availability and cost
    Agriculture & Feed Increased productivity & yield of plants and animals, sustainable farming
      Growth drivers: high fertilizer and feed prices, increased food demand, regulatory requirements, high raw material prices
    Barriers to growth: low fertilizer, chemicals, raw material and animal feed prices
    Technical & Pharma Non-animal/non-human-derived raw materials, cost optimization, improving product performance, sustainability   Growth drivers: growing and aging populations, sustainability, drive for innovation, consistent quality
    Barriers to growth: fragmented industries, long sales cycles, cost constraints on healthcare providers and increasing data requirements, lack of regulation 

    Interview: A new dawn for advanced biofuels

    After years of planning and battling strong headwinds of skepticism, the advanced biofuel industry is now coming together at speed. In early October, Novozymes’ partner Beta Renewables officially opened the world’s first commercial-scale cellulosic ethanol facility in Crescentino, Italy. Using Beta Renewables’ PROESA™ engineering and production technology and Novozymes’ Cellic® enzymes, the $200 million facility will initially produce up to 50 million liters of cellulosic ethanol a year from agricultural wastes and energy crops once up to full capacity.

    The obvious and much-discussed benefit of advanced biofuels is as a more sustainable, less carbon-intensive alternative to fossil fuels in the transport sector. However, derivatives of cellulosic ethanol can also serve as building blocks for many applications in the renewable chemical industry, including bioplastics. Indeed, the biomass conversion industry is key to more sustainable value chains in a variety of industries that currently base their products on fossil fuels.

    These factors present both enormous opportunities and challenges – logistical, financial and political – for the players within biomass conversion.

    In the following interviews, Thomas Videbæk, Executive Vice President for Business Development at Novozymes, and Guido Ghisolfi, CEO of Beta Renewables, discuss the future of the biomass conversion industry and how to realize its great promise.

    Thomas Videbæk, Executive Vice President for Business Development at Novozymes

    What does Beta Renewables’ new facility mean for Novozymes’ partnerships in advanced biofuel plants in 2014 and 2015?

    It means a lot because now we’re not talking about a fantasy fuel; we’re talking about something that is happening for real on a commercial scale. And to be able to demonstrate that to potential customers is invaluable.

    How is Novozymes doing on its long-term growth target of selling enzymes to 15 biomass conversion facilities by 2017?

    We signed a deal earlier this year with Raízen in Brazil, things are moving at the Beta Renewables plant in Crescentino, Italy, another plant is being built by GranBio in Brazil, and we recently agreed to supply enzymes to M&G Chemicals’ planned biorefinery in China. When I look at the list of prospects, I feel confident that, by 2017, we’ll have 15 commercial-scale facilities using our enzymes.

    What is the benefit to working with various partners who have different process technologies?

    Our partnership with Beta is very important; we work intensively together to learn about how our enzymes and Beta’s processes work together and how to optimize that. There are a number of factors that impact the choice of process technology for advanced biofuel projects, including biomass type and availability, funding and local conditions. If some of our partners decide to pursue another technology due to such factors, then we have the flexibility to work with them as well.

    What might prevent the market from adopting advanced biofuels?

    We can perform our enzyme hydrolysis at a price that’s competitive, but demand is a major bottleneck. That’s why certainty would mean a lot in this industry. This is a new technology, which means more risk for investors. That risk includes whether there will be a market for advanced biofuels. They need clarity about the frameworks for the kind of market the ethanol is going into. If we could get clarification that we have a mandate in the EU, and if we could feel confident about the Renewable Fuel Standard in the U.S., that would mean a lot for both these regions and for those who export to these regions.

    Another factor contributing to this uncertainty is the biomass supply chain, which in some regions is in the process of being established for the first time. Biomass suppliers are still working to supply biomass on a secure, cost-competitive basis. Combined with the uncertainty surrounding market demand for advanced biofuels, this could make it more difficult to secure funding at this early stage of industry commercialization. 

    What applications are there for biomass conversion other than advanced biofuels?

    There are many players considering the use of cellulosic feedstock as raw material for biochemicals. When large bottle manufacturers talk about renewable plastic, a lot of them are talking about plastic from cellulosic material. That could be a very interesting opportunity. Here you already have the market; people are asking for these solutions today.

    We could also use the same enzyme technology and activities in other areas, such as animal feed applications, where we would benefit from all we’ve learned about cellulosic degradation. Like food, there is a growing need to produce animal feed more sustainably. If we could treat cellulosic material in a way that made it more digestible, we’ll have tapped into another emerging opportunity.

    Guido Ghisolfi, CEO of Beta Renewables

    How is the Crescentino plant performing?

    We've been shipping batches to several countries and are now certified and authorized for France, the Netherlands and Italy. With this type of first-of-its-kind plant, complications tend to stem from a mechanical and handling point of view. This is a very large plant; the quality of the biomass is not always consistent, and feeding 25-plus tons biomass into the plant is an engineering challenge in itself. From the biochemical – including enzymatic – point of view, we're very happy: The performance is there. From the mechanical point of view, we’re correcting initial glitches, we see the plant is running and we want to ensure it runs 24/7.

    Where will you build your next biomass conversion plants?

    The outlook is getting steadily brighter. GranBio’s cellulosic plant in Alagoas, Brazil, which uses the PROESA™ technology, is starting up in 2014. Alongside M&G Chemicals, we’re developing a biorefinery in China’s Anhui province to produce bio-MEG (monoethylene glycol) from biomass. We’re also hard at work on Project Alpha in North Carolina in the U.S., our first project in North America.  Additionally, we’re in advanced discussions with a number of potential licensees in various regions to deploy our technology and sign agreements or licenses in 2014. Beyond that, there’s a long list of people interested in building plants in Europe, Africa, South America and the U.S.

    How can the Mossi Ghisolfi Group use its experience in producing PET (polyethylene terephthalate) plastics, and now commercial-scale cellulosic ethanol, to create a viable market for bioplastics?

    We’ve said publicly that we’re pursuing the possibility of producing raw materials for PET, and there’s considerable demand from our customers. 

    Our design and research are developing the same PET from renewable materials, while other companies want to change the polymer itself. We believe we should make indistinguishable molecules that can be fed to existing plants to produce the raw materials to make PET, based on cellulosic sugars, rather than produce different products as substitutes for PET. We believe PET should remain PET, as there are hundreds of billions of dollars invested in facilities worldwide designed to handle PET – and it’s not realistic to expect all this to be thrown away because we invented another polymer.

    What are the threats to growing your business in cellulosic ethanol and in biochemicals?

    A year ago people would tell you there's no technology, no money, no scale, no biomass. Now they can’t say there’s no technology, and competitors’ technology will also arrive in around the next 12 months. Also, multiple feedstock technologies are now emerging, so it doesn’t force the technology toward one type of biomass, and that’s easing the supply chain issue, which still remains the most important issue to be solved. But to deploy this technology worldwide, we have to know which biomass to use, at which price, and under which social and sustainability conditions.