Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Novonesis Pivoted to Microbial Solutions
Transcript
- Lucas: So, Luna, have you ever heard of a company called Novonesis? Luna: I can't say I have. What is it, some kind of tech startup? Lucas: Not exactly. It's actually the result of a massive merger that closed in early 2024. Novozymes and Chr. Hansen came together to form this company. And they are now the world's largest player in what they call microbial solutions. Luna: Microbial solutions — that's a broad term. What does that actually mean in practice? Lucas: Think of it as using bacteria, yeast, and enzymes to solve industrial problems. Instead of chemicals, you use biology. For example, they make a probiotic for chickens that helps them grow without antibiotics. That's one product. But the platform goes way beyond that. Luna: Interesting. So how did this pivot come about? Novozymes was always the enzyme giant, right? Lucas: Right. Novozymes had been the global leader in industrial enzymes for decades. But by the late 2010s, enzyme growth was slowing. They needed a new growth engine. Merging with Chr. Hansen, which specialized in probiotics and food cultures, was a way to broaden the portfolio into whole microbes—not just the proteins they produce. Luna: So it's like going from selling a tool to selling the entire workshop. Lucas: Exactly. And that's the essence of the pivot. Instead of just enzymes that catalyze reactions, they're now engineering living systems. That opens up entirely new applications. Luna: Can you give me a concrete example that a listener could mention to a friend tomorrow? Lucas: Sure. There's a product called Bactocell. It's a probiotic for poultry and aquaculture. It's been shown to improve growth performance and reduce the need for antibiotics. In a world where antibiotic resistance is a huge concern, that's a game-changer for farmers. Luna: So they're not just selling a replacement for antibiotics—they're selling a preventative approach. Lucas: Precisely. And that's the kind of value proposition that resonates with regulators and consumers alike. It's not about treating disease; it's about maintaining health through the microbiome. Lucas: And this is where the pivot gets really interesting. Novonesis isn't just a supplier anymore. They're positioning themselves as a partner in sustainable transformation. They want to be the go-to for companies that need to reduce their chemical footprint. Luna: But surely there are challenges. Scaling up a bacterial product is different from scaling up a chemical process. Lucas: You're absolutely right. And that's one of the reasons this is such a compelling story. The technical hurdles are real. You need to ensure stability, efficacy, and safety across different environments. But Novonesis has decades of experience in fermentation and microbial production, so they have a head start. Luna: It does sound like a natural fit. But what about the cultural challenge of merging two very different companies? Lucas: That's always the risk. Novozymes was very much an enzyme company, with a strong culture of innovation in that space. Chr. Hansen was more about food cultures and probiotics, with a strong customer-centric approach. Merging them required careful integration of not just portfolios but also of mindsets. Luna: And how has that played out so far? Do you have any sense of whether it's working? Lucas: Well, the company has been pretty transparent about their goals. They're targeting a compound annual growth rate of 6 to 8 percent, which is ambitious for a company of their size. They've also been investing heavily in research and development, especially in areas like plant health and human health. Luna: And it's not just about poultry. They're applying this to crops too, right? Lucas: Yes. They have biofungicides and bioinsecticides that are derived from microbes. These are designed to replace synthetic pesticides. The market for those is growing fast as regulations tighten on conventional chemicals. Lucas: And here's a thought: we've talked about a lot of pivots on this show, from Netflix to Nintendo. But this one is different. It's not about changing consumer behavior—it's about changing the fundamental inputs of an entire industry. Luna: That's a bigger lift. It's like convincing the whole world to switch from petroleum-based everything to bio-based alternatives. But with the climate crisis, that's exactly the kind of change we need. Lucas: And it's not just altruistic. The financial incentives are there. Biological solutions can be more cost-effective in the long run, especially when you factor in environmental compliance. Lucas: Look, I want to pause here for a second. We deliberately don't run ads on this show—that's a choice we've made since day one. If you find these conversations useful, and you want to support that ad-free model, the link is buy me a coffee dot com slash fexingo. It's a small way to keep this going, and we genuinely appreciate it. Luna: Yeah, it's a good reminder. We get emails all the time from listeners who say these episodes have changed how they think about business. If you've gotten something out of it, consider supporting us. Lucas: Alright, back to Novonesis. So, we've talked about the product side. But there's also a strategic pivot in how they go to market. Instead of just selling to large corporations, they're now working with smallholder farmers in developing countries. Luna: That's a significant shift. How does that work? Those markets are notoriously fragmented. Lucas: They've set up partnerships with NGOs and local distributors. The idea is to provide affordable biological solutions that improve yields without requiring expensive chemical inputs. It's a win-win: farmers benefit, and Novonesis gains scale in new markets. Luna: But is there a risk that they're spreading themselves too thin? Multinational biotech, smallholder agriculture, and everything in between. Lucas: That's a fair question. But they're not doing it all at once. They've identified four focus areas: food and beverages, agriculture, human health, and household care. Each has a clear set of products and a clear market need. Lucas: And within agriculture, they're being selective. They're not trying to replace all pesticides tomorrow. They're targeting specific crops and specific pests where their solutions are proven to work. Luna: So it's a focused pivot, not a wild swing. That's interesting because in many corporate turnarounds, you see companies trying to be everything to everyone. Lucas: Exactly. And the data backs that up. Novonesis has been quite disciplined about their R&D spending, with a clear return on investment. They're not just throwing money at every possible idea. Luna: What about the regulatory side? Is that a barrier to scaling these products globally? Lucas: It is, but it's also an opportunity. In the European Union, there's a push for more sustainable agriculture, and the regulatory environment is becoming more favorable to biologicals. The U.S. is a bit more mixed, but the trend is definitely toward approving safer, more sustainable products. Lucas: There's also a fascinating angle here around the microbiome of the soil. Novonesis is working on products that enhance soil health, which could improve carbon sequestration. That's a double win—better yields and climate benefits. Luna: So they're not just pivoting their own business; they're helping other industries pivot too. That's a meta-pivot. Lucas: Ha, that's a good way to put it. And it's why I find this story so compelling. Most pivots we've covered are about a single company adapting to survive. This is about a company that's betting its future on enabling entire industries to adapt. Luna: Is there a risk that the market for microbial solutions doesn't grow as fast as they expect? I mean, we've seen plenty of hype around biotech before. Lucas: There's always that risk. But the demand drivers are strong. Antibiotic resistance alone is a massive global problem, and the World Health Organization has been pushing for alternatives. Plus, consumer preference for natural products is not a fad—it's a long-term trend. Lucas: And here's the thing: they're not just selling a product; they're selling a solution to a problem that's not going away. That gives them some resilience. Luna: So, what's your takeaway from all this? What's the one lesson listeners should take away? Lucas: I think it's this: the most successful pivots aren't about what you're leaving behind—they're about what you're becoming. Novonesis didn't just add a new product line; they fundamentally changed their identity. And that's what allowed them to see new possibilities. Luna: That's a great place to leave it. Thanks for joining us, and we'll see you next time.