The opportunity
Decarbonizing businesses and the products we consume requires bio-sourced materials and molecules. That's why biobased natural products are increasingly at the heart of industry roadmaps, new regulations and end-customer expectations.
Besides, there is a growing trend of reshoring some chemicals production in North America to avoid too much dependency on China imports and excessive exposure to international logistics risks.
However, many industries still have few sustainable options available for sourcing from North America renewable, bio-based chemical compounds. Especially when looking for options that are also circular, reliable, and competitive.
Many useful molecules today are made from a few petroleum-derived platform molecules. Climicals aims to provide the market with a platform molecule that is bio-sourced, as well as molecules that are manufactured from this platform. This bio-sourced platform molecule is HMF. Regardless of the scientific details, HMF is a green chemistry platform molecule. It is equivalent to the aromatic cycle of the petroleum industry, which has thousands of applications.
This means that, once produced, HMF can in turn be converted into numerous derivatives for different applications, which can be substituted for fossil equivalents. Climicals targets both HMF and some of its derivatives.
Climicals focuses on flavor ingredients and surfactant ingredients. And, within these two segments, on specific targets combining attractive volumes and prices.
- The 1st market is flavors and fragrances. We see it as our "Beach Head Market". Although it has a TAM of $2.5 billion, it's a small-volume, high-margin market. Some flavor ingredients can be made from HMF, and are quite high-priced. We spoke to many players in the sector, including IFF, MANE, Brenntag, ADM, Firmenich and a few smaller ones, and they all confirmed the interest in being able to supply up-cycled ingredients. It's a dimension that has value for their customers. These discussions enabled us to confirm two compounds as relevant targets. The main limiting factor in the flavoring market is the demand for ingredients to be natural in the EU sense. However, there is still plenty of room for artificial flavors.
- The 2nd market is surfactants. A $50 million market, this is a higher-volume, lower-margin market. It offers a TAM of $1.5 B to Climicals. With 70% of surfactants made from petroleum, the surfactants industry is hungry for new technologies that offer performance advantages while solving pressing sustainability issues. Prices are less favorable than for flavorings, but volumes are much higher, and regulatory constraints lighter.
Climicals’ USP is to offer access to improve supply chain resilience through access to biobased chemical compounds. Climicals will offer the technology to manufacture these products to different types of chemical producers.
Climicals’ ambition is to deploy 100 kg/h capacity units (800 t/year). First in North America, then rapidly in Europe. The commercial plan is to achieve annual sales of $35 million after 5 years of marketing the solution. Ultimately, Climicals aims to become one of the world's largest permeate upcyclers, and a trusted supplier for customers who need molecules made from upcycled residues.
The feedstock and the technology
The raw material Climicals will use is whey permeate.
The dairy industry generates very large volumes of whey permeate. It's a by-product difficult to manage. The current management pathway is simply not sustainable: it's highly cyclical, it consumes a lot of natural gas, it's capital-intensive even though it's not the dairy's core business, and it generates little profit. The Climicals solution simply integrates into the existing permeate flow, replacing the drying process.
Not only that but permeate is also an excellent raw material for Climicals.
- The resource is gigantic (100 Mt/year) without competing with human food,
- The resource offers great security of supply, as permeate production is very stable year-round in terms of composition and quantity,
- The resource is already collected and ready for conversion.
What Climicals' technology actually upcycles in whey permeate is sugar, i.e. lactose. Climicals' technology is a two-stage catalytic chemical process:
- Step 1 converts the sugar into HMF,
- Step 2 converts HMF into a by-product
Market traction and competition
Climicals faces competition on access to feedstock which sets a minimum purchase price for permeate. Climicals faces competition also from incumbent producers of target molecules, which sets maximum product prices. A few other players aim to produce HMF but use new crops production as feedstock.
- A partnership with a major dairy partner, to support scale-up of our process is about to be signed,
- Climicals owns an exclusive license on IP on the technology,
- Customer interest materialized through 4 LoIs and a first sale: 3 flavor companies + 1 surfactant company confirmed their interest in receiving samples for evaluation.
The way ahead
Over the next three years, we will be in a piloting phase to scale the process and prove the solution. Climicals will be working on several aspects in parallel:
- The creation of HMF production capabilities, with a Proof-Of-Concept which will be followed by a pilot, in order to develop our in-house expertise in both the technology and the operational aspects of production.
- R&D to develop our derivative synthesis methods, followed by the creation of derivative production facilities (flavors and surfactants).
- Economic analyses of commercial operations, to find the KSFs of our solution.
- Finally, market validation actions to further develop our intimacy with users and find our first customers.
To achieve this plan, Climicals will gather a 1st team around its founder. A co-founder is being actively looked for.
Conclusion
Climicals has identified a major opportunity to commercialize renewable bio-sourced compounds in various industries.
Climicals has developed a positioning that will offer a reliable and sustainable molecule supply solution for these industries, starting with flavors and surfactants, while solving the major problem of whey permeate for the cheese industry.
This is an opportunity to make the most of the dairy industry's huge 100 Mt/year residue deposit, while opening up markets ranging up to several hundred million $.
Climicals is uniquely positioned by virtue of the raw material we use, our IP, and the markets we target. Our business model is difficult to imitate because of the many dimensions and areas of expertise we have to combine.