P R I S M : W H Y T H E B I O - B A S E D M AT E R I A L S M A R K E T I S F I N A L LY P O I S E D F O R G R O W T H

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ARTHUR D. LITTLE

WHY THE BIO-B A S E D M AT E R I A L S
MARKET IS

F I N A L LY P O I S E D
FOR GROW TH

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AUTHORS
Trung Ghi, Philip Webster, Wendy Cheng, Passachon Srisaard, Shane Lim,
Daniel Monzon, Michael Kolk

For decades, the market for bio-basedmaterials1 has been seen as promising
without significantly taking off.

Challenges in sourcing affordable andsustainable raw materials, achieving
economies of scale, and securing

sufficient end-market demand have all
prevented the market from growing.

This is now changing rapidly, reinvigorating the market. Demand is
growing, driven by increasingly environmentally conscious consumers
and governments’ Net Zero targets requiring consumer-focused
product companies to achieve sustainability. Finally, technology
breakthroughs are bringing down production costs for bio-basedmaterials, while improving their performance to make themcomparable or superior to fossil-based counterparts.
At the same time, the increasing volatility within the oil & gas sector
is causing traditional petrochemical players to look beyond theirfossil-based products for new and more resilient sources of future
revenue and growth. All of this is driving interest and investment.
The market is now at an inflection point, with a growth rate that isboth steadying and outstripping the wider materials industry. For
example, bio-based plastics will see 17 percent CAGR growth between
2020 and 2030, compared to just 3.2 percent for conventional
plastics. Several bioplastics will experience major capacity
expansions in the next three years (CAGR), such as polyethylene
furanoate (PEF) at 163 percent, polyhydroxyalkanoates (PHA) at 50
percent, and bio-polyamide (Bio-PA) at 38 percent.
The opportunities are there for both producers and consumer goods
companies. How can players identify and successfully harness
compelling areas for growth in the bio-based materials segment?

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1. Bio-based materials are defined as chemicals and polymers derived partially or fully
from bio-based feedstocks such as biomass, arable crops, and other organic matter.

ARTHUR D. LITTLE

THE TRENDS DRIVING CURRENT MARKETE X PAN S I O N AND G ROW TH
The upsurge of interest in the bio-based materials market iscaused by a combination of both demand and supply factors:

1. DEMAND-SIDE PULL
Producers are seeing increasing consumer demand for bio-basedalternatives in specific areas. These include premium items (such as
in the fashion and automotive sectors), for which higher costs areless of a barrier to purchase, volumes are low, and companies want
the increased brand recognition that comes from being a genuine
sustainability market leader. Additionally, in some niches bio-based
products are the only available or viable option, such as compostablecutlery and tableware for large-scale outdoor catering.
Mass-market consumer goods companies are also dramaticallyincreasing demand. Many have made bold commitments to switch
to fully recycled or bio-based packaging as they have looked todifferentiate and reduce their carbon

MANY HAVE MADE BOLDCOMMITMENTS TO SWITCHTO FULLY RECYCLED OR
BIO-BASED PACKAGING
AS THEY HAVE LOOKED TO
DIFFERENTIATE AND REDUCE
THEIR CARBON FOOTPRINT.

footprint. This gives producers
confidence in expanding capacity toservice this growing need.
Demand is also being stoked by new
and planned regulations designed toincrease sustainability and grow thecircular economy. Many companies
are aiming to get ahead of the curveand build resilience into their supply
chains by mandating bio-basedmaterials before they are compulsory. For example, in the automotive
industry, companies such as Porsche are replacing composites withnatural fibers (such as hemp) to enable recyclability while retaining
the benefits of materials that are strong and lightweight. Producers
that rely on manufacturing materials that are not easily recyclable
will have to respond to this regulatory and consumer demand – byexiting the market entirely, developing breakthrough recycling
technologies (which may not happen quickly enough), or switching
to bio-based materials.

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2 . S U P P LY- S I D E P U S HMany bio-based materials are now mature. For example, biopolyamides (Bio-PA) are now cheaper than most natural fibers while
delivering similar levels of quality and durability.
After decades of aborted attempts, capacity and material availability
have finally expanded from pilot to commercial-scale activities
in many areas as technology barriers have been overcome andinvestment has increased. Thanks to new finance, capacity for
production of furan derivatives is expected to grow by 209 percent
CAGR between 2022 and 2025, albeit from a low base2 . Bio-basedmaterial companies such as Newlight Technologies ($107m Series F
funding in 2022), RWDC Industries ($263m Series B funding in 2021)
and Beijing Phabuilder Biotechnology ($37m Series A funding in 2022)
have all attracted significant new investment. Many oil majors areinvesting heavily in bio-based materials to build future resilience into
their portfolios. TotalEnergies Corbion has expanded polylactic acid
(PLA) operations in Thailand, for example, using the byproducts oflocally grown sugar cane.

THE OPPORTUNITIES AND CHALLENGESFOR UPSTREAM AND DOWNSTREAM
P L AY E R S
Understanding the market and seizing opportunities requires four
key capabilities from businesses seeking to operate in the bio-basedmaterials sector, as shown in Figure 1.

1
ACCESS TO
AFFORDABLE ANDSUITABLE
FEEDSTOCK42

ACCESS TOINNOVATIONTO DRIVE

3

OPPORTUNITIESACCESS TO
THE RIGHTTECHNOLOGIESACCESS TO THE
RIGHT MARKETSTHROUGH
PARTNERSHIPSFIGURE 1: UNDERSTANDING THE REQUIRED CAPABILITIES

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2: Source: Arthur D. Little/Nova InstituteARTHUR D. LITTLE

1. ACCESS TO AFFORDABLE AND
S U I TA B L E F E E D S T O C K
The cost of feedstock makes up 60–70 percent of the total production
cost of bio-based materials. Therefore, reliable access to available,
affordable feedstock of suitable quality and consistency is vital tomaintain cost competitiveness against conventional, petroleumbased alternatives.
However, there are natural limits to the amount of biomass that canbe created, based on the world’s available land and the need to growcrops for food. This means

PRODUCERS MUST SECURE
SUPPLIES AGAINST OTHER
PLAYERS WHILE REGULATORSLOOK TO BALANCE A FINITESUPPLY AGAINST INCREASING
DEMAND.

producers must securesupplies against otherplayers while regulators lookto balance a finite supply
against increasing demand.
For example, the EU hastightened restrictions on
the use of edible feedstocks
in bio-based material
production. Thailand only

allows bio-based producers to use the byproducts of sugar caneprocessing, rather than the crop itself.
Producers can build a resilient supply of feedstock in one ofthree ways:
1. M ove production to regions where feedstock costs are lower,such as countries in Asia and Latin America. Arkema has
expanded into India and Asian countries to gain access to castor
beans, which are used as part of the production process of biopolyamide. The textiles industry is increasingly adopting
this practice.
2. B uild partnerships to strengthen access to a consistent andhigh-quality source of feedstock, regardless of geography. HELM
and Cargill have partnered to combine their respective strengths
in chemicals and corn feedstock to open a $300m commercial
facility in the US to produce bio-butanediol (Bio-BDO), a key
intermediate for biopolymers. Long-term commitments are
essential here.
3. Focus on or shift towards sustainably sourced feedstocks
and greater recycling. Companies are increasingly relying on
agricultural byproducts such as molasses, used kitchen oil, andpalm oil waste as feedstocks. As well as increasing supply, thisencourages greater recycling and supports the circular economy.
LyondellBasell is using bio-naphtha produced from 100 percent
waste materials from oil company Neste to create commercial
biofuels (bio-polypropylene and bio-polyethylene) with verified
renewable content. While bio-based materials and recycling arepartly in competition, we ultimately will need both.

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2 . ACCESS TO THE RIGHTTECHNOLOGIESTechnological innovation is vital for achieving satisfactory production
yields, building resilience by allowing a range of feedstocks to be
used, and enabling overall cost-competitiveness.
There are three types of products for bio-based production – dropin, dedicated novel, and non-dedicated novel (as shown in Figure2). In many cases, novel routes are being explored to find ways toimprove production costs and produce bio-based materials with new
functionalities.

CHEMICALLY IDENTICAL TO EXISTINGPETROCHEMICALS; MADE USING SAMEPRODUCTION PATHWAYCHEMICALLY IDENTICAL TO EXISTING PETROCHEMICALS,WITH BIO-BASED PATHWAYS PROVIDING ADVANTAGESCOMPARED TO CONVENTIONAL PATHWAYS:CHEMICALS AND POLYMERSFOSSIL-BASEDOIL– LESS ENERGY REQUIRED IN PRODUCTION– SHORTER TIME TO PRODUCT DUE TO
SHORTER AND LESS COMPLEX PATHWAYS– LESS TOXIC OR HARSH CHEMICALS USEDOR OCCUR AS BYPRODUCTS

DROP-INNOVEL NON-DEDICATEDBIOMASSNOVEL DEDICATEDNEW CHEMICALS AND POLYMERSPRODUCED VIA DEDICATED PATHWAY WITH NO
IDENTICAL FOSSIL-BASED COUNTERPARTS– POSSESS UNIQUE AND SUPERIOR PROPERTIESNOT ATTAINABLE USING FOSSIL-BASEDPATHWAYS

FIGURE 2: BIO-BASED PATHWAYS FOR PRODUCTION OF BIOPLASTICS

In particular, producers are looking to use technology to improvefeedstock conversion (to lower costs) and improve production
capacity, thus increasing economies of scale to cost-effectively
meet demand. For example, despite having a range of uses, fromfood packaging to medical implants, PHA initially struggled as atechnology. Significant improvements in production efficiency andscalability have increased fermentation yield to lower unit production
cost while driving production growth.
Access to the right technology by developing it internally is capitalintensive and has a highly uncertain outcome. Technology licensing is
a common model, and removes the need to develop a new technology
from scratch while mitigating M&A risks. Genomatica is emerging
as a leading technology licensor, offering a wide range of bio-basedmaterials production technologies that are being used by major
players such as Novamont, Qore, BASF and DSM.

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ARTHUR D. LITTLE

3. ACCESS TO THE RIGHT MARKETST H R O U G H PA R T N E R S H I P S
There is growing demand from consumer product companies looking
to differentiate, increase their own supply chain resilience, and meetcurrent and future regulatory requirements.
This is increasingly led by luxury brands, for which price is less ofa factor and purchasers expect sustainability and good businesspractices as a given. For example, both Burberry and Gucci havereleased products made from

SUCCESS MAY REQUIREMATERIALS PLAYERS TO MOVE
BEYOND THEIR TRADITIONALECOSYSTEMS TO ENGAGE WITHEND CUSTOMERS.

Econyl (nylon made from fishingnets, fabric scraps, and industrial
plastic).
Matching supply with demandrequires close partnerships toensure bio-based materials meetexact customer needs. This can be achieved through co-development
and close collaboration to explore new opportunities and create
targeted solutions.
Building strong partnerships with end customers enables:– Resilience of production and supply for both parties– The ability to scale production to drive cost efficiencies, basedon secure future sales. Dutch-based PEF producer Avantium hasestablished a network of collaborators from multiple industries,
including Lego and Carlsberg, to explore the use of PEF in different
end products. Consequently, it has successfully achieved offtake
commitments representing 50 percent of its upcoming commercial
plant capacity, with additional capacity reservations of up to67 percent– The ability to improve processes to deliver economies of scale– The ability for producers to position themselves as a premiumor high-quality option, enhancing margins. Genomatica hasestablished a partnership with high-end sportswear brandLululemon Athletica to integrate bio-based nylons into
Lululemon’s sustainability product portfolio
Success may require materials players to move beyond theirtraditional ecosystems to engage with end customers. Origin
Materials is collaborating with a network of global automotive
manufacturers on raw materials standards, carbon neutrality, andother key sustainability topics in the automotive supply chain. This
enables it to create a market for its own carbon-negative chemicals
to be deployed in high-value mobility applications such as fabrics,
plasticizers, seat foams, engineered polymers, tires, and hoses.

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As well as building collaborative partnerships and ecosystems,
producers will require new capabilities, such as around ensuring
adherence to international quality standards and being able to certify
the credentials of their bio-based materials and demonstrate thatthey are, in fact, predominantly bio-based.

4 . A C C E S S T O I N N O V AT I O N T O D R I V E
OPPORTUNITIESAs the bio-based materials market expands and matures in many
areas, continued innovation is vital. However, materials science has
traditionally suffered from under-investment. Producers therefore
need to build materials

AS THE BIO-BASED MATERIALSMARKET EXPANDS AND
MATURES IN MANY AREAS,
CONTINUED INNOVATIONIS VITAL.

science capabilities thatallow them to develop
bio-based products suchas polymers and plastics
that are identical to or
better than conventional
alternatives. They alsoneed to be able to provide unique solutions that cater to the specificdemands of downstream industries, such as through embodied
plastics.
Feedstock innovation is also vital in, for example, combining biobased feedstocks with recycled materials. For example, PTT MCC
uses 50 percent bio-based materials when producing polybutylene
succinate (PBS). This enables its end customers to meet their requiredsustainability standards.

K E Y S T R AT E G I E S F O R S U C C E S S
Producers also need to understand and follow three key strategies
when evaluating opportunities to add to their bio-based materials
portfolio.
1. Take advantage of a positive and supportive regulatoryenvironment

There is a growing global push for the use of sustainable, recyclable
materials, based on environmental and Net Zero considerations. Thisis leading to legislation in two areas:– Regulations that aim to increase demand. These can take theform of encouraging or mandating bio-based materials and/or
discouraging the use of fossil fuel-based materials, such as throughsingle-use plastic bans.

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ARTHUR D. LITTLE– Regulations that aim to increase supply. These could be financial
and/or non-financial incentives, as have been deployed by the Thai
Board of Investment, or bans and taxes on fossil fuel-based goods.
The US REDUCE Act has doubled the import tax on fossil-based
virgin plastic resins from $0.10 to $0.20 per pound, forcing suppliers
to consider bio-based alternatives.
However, legislation is still maturing – for example, in the EU, labelingpackaging as “bio-based” only requires 20 percent of the packaging
material to be bio-based. This will change, as a current consultation isrunning around a new legislative framework.
To plan appropriately, producers need to build a deep understandingof the regulatory environment and, in particular, how changes will
put pressure on their actual and potential customers to increase
their use of bio-based products. Given the long-term time scales
producers work to, this planning should be prioritized to position
them effectively for the future.
2. Build and leverage the ability to create a technology advantage
Technology advantage is a key driver in the producer’s direct control.
It is critical to commercial viability and the wider adoption of biobased materials in the absence of subsidies/regulations.
Producers should look at three areas to build advantage:– Feedstock advantage to give flexibility. For example, Bluepha’s
fermentation technology allows it to use a wider range of biomass
and waste feedstock in the production of PHA compared to rivals.
– Process advantage through fewer inputs and processes.
Genomatica’s Geno BDO technology delivers advantages overconventional processes, as it does not require succinic acid as
an intermediate.
– Properties advantage to enable the wider use of bio-basedmaterials. Roquette is working with personal care player Syntheon
to expand the use of succinic acid, moving beyond its traditionalrole into high-value cosmetic segments.
By working together with downstream partners, producers can bothdevelop technology advantages and secure complementary expertiseto further refine their strengths.

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3. Target markets with high growth potential
When identifying significant-size markets, those with high growthpotential and little competition are ideal targets. While markets
meeting all three criteria might be hard to come by, working in
partnership with launch customers will help identify opportunities
and provide early revenues, mitigating risk. For example, luxury
fashion apparel brand Stella McCartney pioneered the world’s firstbio-based faux fur in partnership with DuPont Biomaterials in 2020.
However, high growth potential and a lack of competition does need
to be balanced with other drivers (such as technology advantage),as shown in the case of succinic acid, an intermediate for polymer
production. Despite significant growth in demand, only four players
are currently operating within this space, due to struggles to scale
up technology in a cost-effective manner and obtain cheap-enoughfeedstocks. While technology advancements are now being made, it is
not yet clear whether they will lead to large-scale commercialization.

B U I L D I N G A S T R AT E G Y F O R S U C C E S S
The path to achieving success in the bio-based materials market
remains difficult. Market leaders need to align the four capabilities
with the three key strategies, starting by securing the right feedstockand building a strong understanding of the product landscape,geography, and technology.

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ARTHUR D. LITTLE

INSIGHTS FOR THE EXECUTIVE
Beyond identifying a clear winner, players should retain several key
principles throughout their bio-based materials journey:– A ct now to be ready for the future. Suppliers should focus on value
chains that are most at risk in the future and/or where a premium isalready being paid now.
– D isrupt the market as opposed to playing in the market. Insteadof following market trends, players should consistently identify
ways to develop a unique proposition and create new market
demands to remain relevant. Develop technologies with a protective
moat to buy time in the short term to enhance and safeguard yourcompetitive edge.
– V iew bio-based materials as a future core business. As opposed
to seeing bio-based materials as a mere sustainability initiative,
players should internalize the potential of bio-based materials as
the successor of fossil-based resources.
– T ake a partnership approach. Both producers and consumer goods
companies should build early partnerships to explore and scale
opportunities to reduce risk and build capabilities without overinvestment.
– B alance the bio-economy with the circular economy. Beyond theuse of bio-based feedstocks, players can consider expanding andintegrating recycled materials into their product offering.
– B uild scale. As with any process-based industry, you need to beable to grow production. Do you need partners, such as fossil-fuelplayers with experience of scaling operations?
– Find a focus amidst the white noise. While the opportunities
within the bio-based materials space are vast, players should
identify key technologies and markets to allocate resources to,rather than spreading themselves too thinly.

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ARTHUR D. LITTLE

TRUNG GHI
is a Partner in Arthur D. Little’s Singapore office anda member of the Energy & Utilities and Chemicals
Practices.
PHILIP WEBSTER
is a Principal in Arthur D. Little’s UK office and amember of the Chemical and Technology & Innovation
Management Practices.
WENDY CHENG
is a Consultant in Arthur D. Little’s Singapore office
and a member of the Strategy Practice.
PASSACHON SRISAARD
is a Business Analyst in Arthur D. Little’s Thailand
office and a member of the Strategy Practice.
SHANE LIM
is a Research Analyst in Arthur D. Little’s Singapore
office and a member of the Strategy Practice.
DANIEL MONZON
is a Partner in Arthur D. Little’s Argentina office anda member of the Energy & Utilities and Chemicals
Practices.
MICHAEL KOLK
is a Partner in Arthur D. Little’s Amsterdam office
and a member of the Chemicals and Technology &Innovation Management Practices.

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