As Beyond Meat Inc.’s shares were surging in the company’s stock market debut in May, Murad Al-Katib was oddly triumphant, sending smirking emails to Paul Rivett, president of Fairfax Financial Holdings Ltd., about how their big plan for Regina-based AGT Food and Ingredients Inc. was coming together.
Neither AGT Foods, of which Al-Katib was chief executive, nor Fairfax had a stake in Beyond Meat. Fairfax — the storied Toronto-based holdings company with Prem Watsa at the helm — had even passed on an early opportunity to invest, Rivett said.
But as Beyond Meat’s share price nearly tripled during the first day of trading, Rivett and Al-Katib saw proof that their strategy was going to work, because success for Beyond Meat means success for yellow peas, and these two men are now firmly in the yellow pea business.
“What you’re seeing now is the byproduct of a decade of work,” Al-Katib told the Financial Post in early May. “To me, it’s validation of something that I’ve spent my entire career working on.”
Around Easter, before Beyond Meat’s IPO intensified the interest around a new breed of meat substitute, Fairfax spent hundreds of millions to help Al-Katib privatize AGT Foods, which just so happens to be a major processor of pulses — the industry term for dried peas, beans, lentils and chickpeas. Processed pulses can also be the main ingredient in meatless hamburgers and sausages, something Beyond Meat’s success has put squarely into the spotlight.
Outside that spotlight, investors have been funnelling hundreds of millions of dollars into building processing plants in Canada to process peas and other pulses. That means Canada, with its abundance of pulse crops, could possibly become a central supplier to the ascendant meatless industry.
Fairfax now controls approximately 60 per cent of AGT, whose pulses — a majority of them from Canada — are processed in a U.S. plant. Meanwhile, Roquette Frères, the French plant-based ingredient manufacturer that is currently Beyond Meat’s supplier, is spending more than $400 million to build what it claims will be the largest pea processing plant in the world in Portage la Prairie, Man.
“We came to Canada because Canada is a worldwide leader in terms of yellow pea production,” said Pascal Leroy, Roquette’s global head of pea and new proteins business.
What Roquette sees in peas, he said, is not just meat substitutes. “It’s not only about meat analogues. It’s about non-dairy, it’s about nutrition bars.”
Driven by trends toward gluten-free, dairy-free and meat-free products, Canada’s pulse production has steadily grown in the past two decades, from roughly four million tonnes in 2004, to a record 8.4 million tonnes in 2016, according to Pulse Canada.
Beyond Meat, which debuted at US$25 and soared to more than US$175 before settling back down around US$140, owes some of its success to Canada, where A&W Restaurants Inc. was one of the first major burger chains to put its product on the menu. More than that, it appears Beyond Meat’s continued success might rely, in part, on the whims of the Canadian yellow pea sector.
In a prospectus filed ahead of its initial public offering in May, Beyond Meat noted that its main ingredient, yellow peas, come from Canada and Europe, making it “subject to many factors beyond our control, such as the number and size of farms that grow Canadian and European yellow peas.” Roquette won’t start processing peas outside France until its Manitoba plant is operational next year.
“I don’t consider this a craze that’s going to go away,” Al-Katib said.
For him, the craze now surrounding Beyond Meat begins with hummus, more than a decade ago.
In 2003, he was working out of his basement office in Regina, buying pulses, then splitting, canning, packaging and exporting them to India, Turkey, Egypt and China, since there was essentially no domestic market for them outside livestock feed.
Back then he drove around to farms and sat at kitchen tables trying to convince farmers to grow pulse crops. But something changed sometime around 2005 or 2006.
“All of a sudden, everybody in North America was eating hummus,” Al-Katib said. “Consumers were going crazy over chickpeas. So the North American food industry said, ‘Well, wait a minute, we like chickpeas. What other ones can we look at?’ They’re looking at chickpeas, they’re looking at peas, they’re looking at lentils, they’re looking at fava beans.”
Al-Katib calls it the “Hummus Effect,” a re-examination of the power of pulses that started to catapult the sector to agricultural stardom. The new king of that sector, surprisingly enough, could be the yellow pea.
To really understand why the humble yellow pea is the darling of the meatless industry, you need to understand what is inside the yellow pea.
Peas, like all pulse crops, are made up of three main components: starch, fibre and protein. Companies such as Roquette and AGT Foods can separate the pea into the three parts: the starch is good for gluten-free noodles; the fibre is good for livestock feed and pet food; and the protein is good in the meatless world.
Extracting the protein from the pea is a complex and fascinating process, since simply grinding the pea down and pulling out all the protein doesn’t make for a convincing meat substitute, because pea proteins, like most vegetable proteins, are globular. They look like little spheres, said University of Guelph food scientist Michael Rogers. But meat proteins look like fibres. In short, the textures don’t match.
Modern processing can isolate each of the four classes of protein in the pea. That way, processing plants can produce a set of pea proteins that “can be made to mimic or behave like animal proteins,” Rogers said.
“I have to isolate that very narrow class of proteins,” he said. “With enough force we can change those (proteins) to look more and more like fibres.”
To do it, first you break the pea by crushing it, cooking it at high heat or blasting it with water.
“Once you’ve broken that cellular structure up, you’ve got to get that protein out,” Rogers said.
To do that, the pea is sifted into its component parts — a process called dry fractionation. But for a more precise protein extraction, solvents are needed.
“Sometimes you have to make the environment alkaline or acidic, and that’ll pull some proteins out. Some you have to add salt to it, and that will extract them out, and then other ones you have to use ethanol because they’re not soluble in water,” Rogers said. “You use all these different liquids, that have different chemistries, that can then pull those proteins out of that whole food matrix.”
After a drying process, the liquid is gone, leaving behind a concentrated protein powder.
Canada is a major pulse producer, with at least five processing plants in Western Canada, and several more either under construction or in the planning and feasibility stage, said Bill Greuel, head of Protein Industries Canada, a federally funded “supercluster” bent on developing the domestic pulse sector to feed growing demand for meat, dairy and wheat alternatives.
But Greuel suggested the Canadian pulse industry has a fleeting opportunity to become a key supplier to the meatless industry.
“We’ve got a lot of work to do in Western Canada,” he said.
One of the main goals for the pulse-processing sector in Canada is making what is known as TVP: textured vegetable protein. Getting TVP right is key to mimicking meat. To make it, you push a mix of pea protein — or any plant protein — through a tube, a method called extrusion.
“You know when you were a kid and you had a Play-Doh set and you put Play-Doh in the thing and pushed the lever down and it squirted a tube of Play-Doh out the other end? That’s extrusion,” said Derek Vella, head of the University of Guelph’s Food Innovation Centre.
As the protein passes through the tube at high temperatures, under high pressures, it fills with air pockets.
“The way that TVP is made is really similar to the way a Cheezie is made,” Vella said. “When it comes out of that high pressure, it basically pops and it turns into a big puffy hairy thing.”
TVP can look different depending on what the manufacturer needs. It can have big air pockets or small ones; it can be cut in small bits or long ones as it shoots from the tube; it can look like oatmeal or it can look like pork rinds. But at the right dimensions, mixed with the right combination of oil, water, spices and a product from yeast with molecules that resemble hemoglobin, the end result tastes like a burger.
The complex process is partially why Beyond Meat and its competitors have struggled to get enough supply. Regardless of the money flowing into the sector, it’s difficult to build and run a factory that can efficiently turn a pea or a bean into protein, starch and fibre.
Al-Katib — who boasts that he supplies protein extractions to “all the major brands in the world” — said it costs at least $100 million to build a plant that can produce pea protein isolate at a major scale.
“You can buy equipment, but you’ve got to operate it,” he said. “If you can’t extract to the highest efficiency, you will lose millions of dollars, because the wrong product is going into the wrong stream.”
The goal is “perfect isolation,” Al-Katib said. But achieve that, he adds and it could be that “pulses are the new Canadian gold.”