Fermentation 101: Economic Aspects

Published by Saleh Akrami on

The potential of fermentation to disrupt manufacturing industries and bring the much-awaited biological revolution is being continuously validated by a large body of scientific literature, but also by market trends. The market of fermentation reached $75 billion in 2023 and is expected to grow at a 6.9% compound annual growth rate from 2024 to 20301. The demand for biological products is certainly building up, but reaching the projected growth necessitates both technically and economically viable manufacturing technologies, able to deliver quality products at competitive costs.

Currently, the commercial success of fermentation technologies is limited to the pharmaceutical industry, where high margins ensure a profitable business model that easily covers R&D, operational, regulatory, and other costs. However, in industries with lower margins, like agriculture, the cost of goods and capital expenses necessary for establishing and maintaining fermentation facilities are a greater challenge, limiting the impact of this technology. To which degree and why – let’s find out.  

Types of Fermentation Technologies and Their Economic Implications

Not all fermentation approaches are equal when it comes to their cost-competitiveness. Some are very simple and have low resource requirements, while others require sophisticated equipment and expertise.

Traditional Fermentation

Traditional fermentation methods, such as those for producing food products like wine, beer, bread, and yogurt, rely on natural processes and relatively simple equipment. These processes are cost-effective and have lower capital expenditure needs due to their simplicity – they usually run under ambient conditions and do not require expensive equipment. However, they are typically lower in productivity and are limited to small-scale production, which restricts scalability and profitability on industrial scales.

Liquid-state (Submerged) Fermentation (LSF)

Liquid-state, also known as submerged fermentation, involves cultivating microbes in a liquid medium, where sophisticated equipment is necessary to control and optimize the cultivation process. It’s widely used in the production of antibiotics, enzymes, and biofuels. LSF generally requires high capital expenditures for bioreactors, sterilization systems, and downstream processing equipment. However, this process yields high product concentrations and can get more economically efficient at scale. As such, LSF is more suited for products with high market demand where upfront investment is justified by expected returns.

Solid-State Fermentation (SSF)

SSF involves the growth of microorganisms on moist solid substrates, often without free-flowing water. SSF is generally less capital-intensive compared to LSF, as it requires simpler equipment and has lower energy costs due to minimal aeration and agitation requirements. SSF has proven economical for producing enzymes, organic acids and biopesticides, especially in regions with limited resources. However, SSF often involves challenges in scaling up and ensuring consistent quality, which affects profitability.

Pseudo-Solid-State Fermentation (PSSF)

Pseudo-solid-state fermentation (PSSF) is an emerging method that combines aspects of SSF and LSF, creating a semi-solid medium that is fully sterile and enables easier aeration, nutrient distribution, and downstream processing. It surpasses SSF in scalability and product purity, and LSF in cost-effectiveness, while consistently yielding high-quality products. This novel approach to fermentation offers promising economic advantages. With successful commercialization, PSSF could bridge the deficiencies of state-of-the-art LSF and SSF approaches, unlocking the commercial value of fermentation to a wide range of industries.

Cost Factors in Fermentation Technologies

To understand the economics of different fermentation approaches and technologies, it is crucial to consider the key cost factors:

  1. Raw Materials: The availability and cost of raw materials play a significant role in determining the economic feasibility of any fermentation process. Substrates for microbial growth are a recurring expense, and their cost can significantly impact the economics at larger production scales. LSF often uses expensive substrates to maintain high productivity, in contrast to SSF, which utilizes inexpensive agricultural byproducts, or even waste streams. PSSF relies on a low-cost, widely available natural biopolymer as a substrate, easy to produce and efficiently separate in downstream processing – reducing expenses at multiple production phases.
  2. Energy and Utility Costs: Running the equipment necessary for LSF is quite energy-intensive, with significant costs associated with aeration, agitation, and cooling. In contrast, SSF has lower energy demands but often comes with lower productivity, which increases the cost per unit of product.
  3. Labor and Operational Costs: SSF and traditional fermentation often require more manual oversight, especially for tasks like inoculation, mixing, and monitoring, increasing labor costs. LSF, though more automated, requires skilled technicians, impacting operational expenses.
  4. Scale-Up and Capital Investment: Scaling up processes to meet industrial demands is the key economic challenge for every fermentation production endeavor. For LSF, this often entails significant capital expenditures in bioreactor infrastructure, which may not be feasible for smaller players. Conversely, SSF can be scaled more flexibly with less financial investment, albeit with operational complexity that impacts its economic viability.
  5. Process Optimization and Innovation: Investing in research and development for process optimization can lead to significant long-term savings by improving yield, reducing waste, and shortening cycle times. However, these innovations often require upfront investments.
  6. Regulatory Costs: Complying with regulatory standards, particularly in food, pharmaceuticals, and biofuels, adds another cost barrier. This includes expenses for trials, certification, safety testing, and compliance, which vary from region to region, but are essential for market entry.

Market and Product Value Impact

Fermentation can deliver a wide range of products – from something simple as alcohol to something highly sophisticated as cutting-edge cancer therapies. Consequently, the cost of a product unit can vary significantly, depending on the required input materials, technological complexity of the operation, and the market value of the product.

High-Value Products: Fermentation is cost-effective for high-value products like pharmaceuticals, specialty enzymes, and nutraceuticals. LSF is commonly preferred for these applications as it allows high control over the production environment and yields quality products at scale. The high market value of the end products justifies the investment in capital and operational expenses required for LSF.

Commodity Products: For commodity products like biofuels, bio-based chemicals, and bulk food ingredients, minimizing production costs is crucial to remaining competitive. SSF is commonly employed to manufacture these products since it is a more economically favorable option than LSF. However, reaching industrial-scale production with SSF is notoriously difficult, and unreliable product quality is a highly limiting factor.

Consumer Demand and Pricing Pressure: As consumer interest in sustainable and bio-based products grows, the market becomes increasingly price-sensitive. Technologies like PSSF, which can efficiently produce high-quality products with low-cost materials and achieve high productivity at scale, will gain a significant competitive advantage in the expanding fermentation market.

Outlook and Economic Potential of Fermentation Technologies

Fermentation as a solution for industrial production has been gaining significant traction over the last decade. Being able to produce virtually anything via biological means is now not just a possibility, but a probability. Driven by technical advancements in biotechnology, process engineering, and optimization, as well as by growing sustainability demands, fermentation is set to disrupt manufacturing industries. However, its full commercial success is yet to fledge, once the key technological and economic challenges are met.

The future economic success of fermentation technologies will significantly rely on process optimization, increasing the productivity of existing capacities, balancing costs, and aligning with market trends to meet the growing demand for biological products.

Takeaway

Fermentation technologies hold immense potential to revolutionize industrial manufacturing, driven by advancements in biotechnology and increasing demand for sustainable, bio-based products. While high-value markets like pharmaceuticals already showcase their economic viability, broader adoption of fermentation in industries with tighter margins faces high production costs, scalability issues, and unreliable product quality. Emerging approaches like PSSF offer promising solutions to bridge these gaps, combining cost-efficiency with scalability. As the fermentation market expands, addressing these challenges through innovation, process optimization, and strategic investments will be key to unlocking its full economic and industrial potential.

  1. Fermentation Chemicals Market Size, Share & Trends Analysis Report 2024 – 2030. Grand View Research. ↩︎

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