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New chief executive tells BusinessGreen Plus how company plans to exploit huge opportunities in expanding bio-products market By Will Nichols 07 May 2013 Novozymes new chief executive has identified sustainable agriculture as a key development area for the Danish bio-tech company over the coming year. Peder Holk Nielsen stepped into the role last month charged with continuing Novozymes’ success in developing catalytic enzymes for the manufacture of products as diverse as biofuels, household cleaning products, and pharmaceuticals. Prior to his official investiture, Nielsen told BusinessGreen that there is “a lot of opportunity” in BioAgriculture – effectively helping farmers boost yields without increasing their use of land, fertilisers, or chemicals, by using micro-organisms that boost agricultural yields, ensure crops better absorb nutrients, and act like pesticides. Nielsen says the market for these bio-agricultural technologies is estimated to already be worth around $1bn and is growing at between 10 and 15 per cent a year. The reason for this rapid expansion is obvious: WWF estimates we will need the equivalent of two Earths by the middle of the century to provide for a global population that is expected to top nine billion; at the same time, the UN predicts agricultural demand will increase 70 per cent, while supplies of phosphate, a non-renewable resource essential for crop growth and healthy soils, are declining at around three per cent a year. According to Nielsen, applying the right cocktail of biological organisms and enzymes can add four to five per cent to crop yields , making it cost effective for farmers to invest in the technology. When you add in growing environmental awareness among consumers and stricter legislation around the impact to chemicals, the case for bio-agricultural approaches, says Nielsen, is becoming overwhelming. “We are convinced that farming has to go more sustainable and that the market will grow,” he says. “Long term, we also know there will be scarcity of raw materials including food materials, therefore yield enhancement is also going to be important. “Ultimately, we are trying to help customers build more sustainable businesses and use renewable raw materials, use less raw materials, and use less water.” The only problem is, as he admits, nobody fully understands how micro-organisms work. “The company that discovers how micro-organisms and roots interact will have the opportunity to develop products and do much better,” he says. “There’s a lot of insight to be gained [and] … we hope to bring new models to market.” In November, Novozymes purchased Natural Industries , a US company selling micro-organisms that serve to protect fruit and vegetables. But while Nielsen does not rule out further acquisitions, he says Novozymes will more likely seek to grow its BioAg business through strategic alliances and its own research and development. The company spent around 14 per cent of its revenue on research and development across all areas last year, which has also helped it refine enzyme products for biofuel production that Nielsen says can significantly increase ethanol yield from corn. And this year Europe’s first industrial-scale advanced biofuels production facility is due to come online, operated by Beta Renewables, a company in which Novozymes took a 10 per cent stake last October . Advanced biofuels are seen as more sustainable than current crop-based fuels as they are derived from waste materials, such as agricultural residues, wood, grasses, or other substances that do not compete with food production, such as algae. However, despite developers being confident the fuels could be cost-competitive with ethanol and fossil fuels by 2016, financing plants has proved difficult in Europe, leading to the bulk of global investment focusing to Asia and the Americas. But Nielsen is confident that Beta Renewables new Crescentino plant in Italy will prove vital in demonstrating to European farmers how providing materials for biofuels can generate an extra revenue stream and subsequently drive the rest of the industry. “The idea is that [at Crescentino] the customer trials his own raw materials,” he says. “There are a lot of people who have a biomass supply but no clue about the technology. That is the sweet spot Beta Renewables fits … and I’ll be disappointed if we don’t then see more plants in Europe.” However, there are clearly challenges ahead. Novozymes’ first quarter results showed a seven per cent drop in bioenergy enzymes sales on the same period last year and other companies are likely to see similar drops or, at best, only slight growth, until more markets are available. Some producers are in favour of targets for advanced biofuels, but the experience in the States shows that even binding targets provide no guarantee of reliable growth. Perhaps another US programme could show the way. The US Navy aims to procure half of its fuel from renewable sources by the end of the decade to improve its security of fuel supply, and has invested in building plants to supply that need. Clearly, there is an opportunity here for European governments to not only make similar procurements, but supply allied nations, and in doing so, drive its own domestic producers. Continue reading →