It’s Not Bacon, It’s Burcon!

The interest for meat alternative markets has been galvanized since Beyond Meat made headlines with its IPO last year. Since then, the never ending media coverage and excited new investors to the space have certainly helped the plant based food industry officially go mainstream from being just a niche industry not so long ago.

One company that has been around much longer than Beyond Meat and whose share price has benefited from the recent industry spotlight is Burcon (TSE:BU).

Over the years Burcon has gained its reputation of being one of the few leading industry experts in innovating technologies for the production of large scale high quality, cost effective plant based proteins and other ingredients.

The company boasts that it maintains an extensive portfolio of over 280 patents, and more than 260 additional patent applications developed over a span of more than 2 decades.

Merit Functional Foods Corporation

Through its wholly owned subsidiary, Burcon Nutrascience Corp, the company has recently began expanding its operations beyond its R&D phase by establishing a joint venture called Merit Functional Foods Corporation along with two other veteran food entrepreneurs on May 23rd, 2019.

The company owns 40% of the venture and has initially provided its share of the capital contributions worth $4million in June 2019 by way of shareholder loans.

Burcon has also made additional contributions of $4m to the joint venture on September 2019. According to management, the partnership will utilize these funds to construct and commission a 94 thousand square foot state of the art protein production facility in Manitoba, Canada.

The facility is expected to be completed by Q4 2020. Once up and running, the facility would be able to process approximately 20 tonnes of peas annually and produce 4 tonnes of consumables products.

Under a licensing agreement with Merit Foods signed on May 2019, the venture is given the exclusive rights to utilize Burcon’s technologies required to produce, market and sell Burcon’s pea, pulse and canola proteins products.

Production at the facility will also include a new line of products the company introduced to the market in the same month called Nutratein-PS and Nutratein-TZ. These products contain a blended mixture of pea and canola proteins rich with amino acids and with nutritional value equaling or exceeding that of animal protein products like dairy and eggs.


Burcon has signed an agreement with Archer Daniels Midland Company (ADM) to grant them an exclusive license to produce and sell its CLARISOY soy protein brand worldwide for 20 years. This product which is an isolated soy protein soluble with a minimum protein content of 90% can be mixed with various beverages from coffee to energy drinks.

Since the signing of the agreement, Burcon has filed more comprehensive patents associated with its CLARISOY brand to further enhance its commercial viability. ADM has agreed to integrate these applications to the agreement going forward, which could help extend their contract to the year 2035.

Burcon made headlines earlier this year on January 2020, when they announced a partnership with Nestle featuring Merit Foods as well. Through this partnership Nestle will be able to further accelerate its own line of plant based meat and dairy alternatives with minimal eco-footprint.

This collaboration will see Nestle’s own plant based food experts and Burcon’s existing extraction and purification technologies working together to develop new breakthroughs at Merit food’s state of the art production facility. Nestle already has its own product selling in certain key markets worldwide such as the Awesome Burger.

Financial Overview

Even with its technology and portfolio of patents, the company still has not earned a significant amount of revenue yet but is planning on generating a lot more in 2021. At the moment, the company only generates revenue in the form of royalty income solely through its patents and licensing agreements with Merit Foods and AMD.

According to its most recent filing for the quarter ended on December 31st, 2019, the royal revenues were neglible, while expenses related to research and development has dropped by 72% year over year.

This large drop in R&D expenses could signal the finalization of most of its product development which could hit the market soon and open up more sustainable streams of revenue for the company. Until then, the company relies predominately on various financing activities to supply the cash it needs to operate.

Just prior to the end of the recent reported quarter, the company closed a non-brokered private placement of $9.5 million on December 10th bringing the company’s total cash balance to $6.8 million after certain immediate expenses were paid.

This would have enabled the company to operate for another 2 quarters given its current cash burn rate. However due to its new growth initiatives like its partnership with Nestle, the company has raised further capital through a bought deal on February of this year.

Furthermore, on June 22nd, 2020,the company was granted an interest free loan of $10million due in 10 years by Agriculture and & Agri- Food Canada (the “AIP Loan”) to help finance its Merit Functional Foods venture’s production facility.

Banking On The Future

Burcon’s CEO Johann Tergesen acknowledged during an interview on Bloomberg that so far the company has raised over a hundred million in capital solely through financing activities as a “pre revenue” company. He stated that this was made possible thanks to the ever rising popularity in plant based products and the increasing realization of the sector’s potential in tackling various issues caused by the dominant meat industry.

Tergesen definitely has a point, according to a 2018 article published by Nielsen, plant based food alternatives has grown by double digits. For instance plant based yogurt and cheese alternatives have grown by 31% and 45% respectively. This has led to a surge in new entrants to the meat alternate market, such as Kellogg Co., Conagra Brands, Kroger Co., and most notably Impossible Foods & Beyond Meat.

The recent boom in this space has enabled the latter two companies on the list to expand its presence in many restaurants locations. While Impossible Foods now distributes its Impossible Burgers in over 17 thousand locations such as Burger King and White Castle, Beyond Meat serves in more than 26 thousand locations including Tim Hortons, and other McDonalds chains.

The prospects for this sector was so promising that following only several months after Beyond Meat hit its blockbuster IPO, Tyson Foods Inc. sold its 5% stake in the company and went onto lead its own brand of alternative meat products, called Raised & Rooted. This brand currently has several plant based product applications including nuggets and of course burgers.

The Big Picture

By taking a step back and looking at the food industry in general from a top line point of view, the global meat industry is still reigns supreme.  The global meat industry is estimated to be worth roughly $1.4 trillion while the US meat industry only shares $270 billion of that total.

On the other hand, the US plant based alternative meat sector in 2018 was only worth nearly $670 million which is 0.25% of the nation’s meat industry.

Although it is a behemoth, one could agree that the meat industry has peaked in innovation and optimization, while the plant based meat alternative sector is still in its infancy stage and there is still significant innovation ahead.

Consumers have clearly identified environmental and animal welfare are important factors in driving their decision to consume plant based alternative proteins. In this backdrop, if plant based proteins were to take 10% market share from the US meat industry over the next 10 years it would represent $27 billion revenue potential.

Something To Chew On

The momentum in the sector shows no signs of slowing down. While Sector leaders like Beyond Meat and Impossible Foods are ramping up their production to meet the growing demand for these products, one should also keep a close watch on smaller players in the space like Burcon.

The company currently has a comfortable cash buffer until it earns sustainable revenue next year. A new partnership with Nestle and the upcoming opening of its Merit Foods facility in Q4 2020, will certainly help the company capture market share in this growing industry.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.


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