The insect industry is facing growing pains, price comparisons to commodity ingredients and fluctuating demand that challenge its path to profitability. Yet, even with these hurdles and regardless of where insects are produced, there’s significant room for innovation and optimization. From advances in feed efficiency and genetics to improved automation and regulatory support, industry leaders see multiple opportunities to drive down costs, increase scale, and unlock insect farming’s potential as a sustainable protein source for the future.
Efficiency and automation
Two primary levers can significantly reduce costs further: substrate optimization in nutrition and genetics. “These areas go hand-in-hand, as they can have a major impact on feed efficiency, which remains a key cost driver in insect farming. Both fields are still in their early stages within the insect industry, so investing in R&D is essential,” said Entobel.
“We’re seeing a wave of innovation from companies globally in both technology and business models. For instance, fermenting low-nutrient organic waste creates a nutrient-rich feedstock for insects that can cut raw material costs by up to 5 times compared to using byproducts from wheat and corn,” said Paul Brown-Kenyon, CEO of Nutrition Technologies.
“By cultivating more productive insects, producers can boost yields and help the industry scale faster, which would ultimately make insect protein more competitive with existing feed ingredients,” added Thomas Farrugia, CEO of Beta Bugs.
Further automation could also help reduce costs, particularly in countries with higher labor expenses. “The insect industry is coming of age and maturing quickly, but there’s still huge potential for reducing costs, even in regions where labor and energy costs are higher. Achieving this will require integrated technology, like software, machinery, energy efficiency, and operational excellence based on first principles,” said Leo Wein, founder and CEO of Protenga.
To achieve growth, substantial investment is needed, but investors also want to see growth potential and profitability before committing capital. “Unlike traditional industries like poultry farming, where systems are well-established, insect farming still has considerable room for optimization on both the CAPEX side (modularization to lower CAPEX costs) and the revenue side (price optimizations through scale, application development, and new co-product offerings that maximize value from bioconversion processes),” Wein explained.
“Insect production has always been seen as a CAPEX-intensive business, requiring brick and mortar as well as massive machinery. Our approach is different. By leveraging the tropical climate found in Malaysia, we’re able to deliver results with a much lower CAPEX spend,” said Brown-Kenyon.
To date, many of the bigger insect farms, including Ynsect, have focused on vertical integration. By developing a specialized supply chain, each actor can drive down costs, innovate faster and be more competitive. “This includes being able to outsource breeding and also the R&D activities, minimizing the cost of entry, simplifying the operations (since the producer only has to produce) and enabling faster payback of assets,” Farrugia said.
Other challenges and opportunities
Commercial traction is currently the biggest growth driver in the industry. Insect producers could attract investment and scale faster if revenues were higher, but demand for insect meal remains low due to the current low prices of fishmeal and other protein commodities. “Diversifying revenue beyond larvae-based products, such as by capitalizing on frass, will be essential to navigating these dips in the feed market,” said Brown-Kenyon.
Frass is the primary output by volume at most insect facilities but is treated as a low-value byproduct. “A growing body of evidence shows that well-processed frass can add significant value to agriculture as an organic fertilizer and biostimulant. Frass has the potential to transform the insect production business model by leveraging economies of scope as well as economies of scale to reach profitability,” said Brown-Kenyon.
Attracting capital for scaling up is challenging today, partly due to some producers not meeting milestones, which has increased investor skepticism. “Recently, the investment landscape has shifted from venture capital to strategic funders. As the industry matures and proves out commerciality, we anticipate more significant investments from traditional sources (debt, private equity, pension funds) and government initiatives to drive sector growth. This is similar to how wind farming moved from feasibility in the 1990s and scaled up in the 2000s,” Farrugia observed.
“We need forward-thinking companies willing to support insect products while the industry is still emerging. Partnering with clients to conduct trials and demonstrate the value of insect-based ingredients will help drive down costs and enable industry growth. Securing long-term partners and building resilient teams that are aligned with this vision and can strategically plan for the journey ahead, including capital allocation and focus, is vital,” Entobel emphasized.
Collaboration within the value chain, such as the recent one between Dutch retailer Albert Heijn (part of Ahold), Klaas Puul, Skretting, Veramaris and Protix, allows the industry to address challenges more effectively and capitalize on opportunities. “Whether it’s scaling globally or further harnessing the potential of insects, we believe in the power of collaboration to maximize positive impact on the food system and actively seek partnerships within the aquafeed sector. Major insect producers have volumes available for aquaculture on a commercial scale, though not yet enough to replace traditional raw materials completely. Collaboration with feed manufacturers is essential to accelerate factory expansion, reduce costs, and secure the financial support needed for large-scale production. We invite feed manufacturers to conduct larger-scale trials to evaluate the specific benefits of black soldier fly ingredients,” Protix said.
Regulatory opportunities
Clear regulatory support is crucial, particularly for new markets. “As insect proteins gain broader recognition, more countries are establishing frameworks for importing and safely handling novel feed ingredients. Partnering with governments to promote sustainable feed alternatives would be immensely beneficial. Incentives for sustainability-focused projects could accelerate growth, and partnerships between regulatory bodies and private industry will help unlock these opportunities. There’s an important role for industry associations to advocate for regulatory support that can facilitate smooth and fast scaling,” said Wein.
“In terms of feedstocks, the industry would benefit from easing restrictions on the materials that insects can consume. Lower-value or even negative-value byproducts could dramatically reduce feed costs, making insect protein meal more competitive with other affordable feed ingredients,” Entobel added.
Government support, such as requiring circular, low-impact ingredients or providing tax incentives, could drive rapid growth and encourage further investment, according to Protix.
Despite the current challenges, the future of the insect industry holds promise for both producers and consumers. With ongoing innovations in feed optimization, genetics, and automation, along with a growing commitment to sustainable practices, the industry is steadily advancing toward greater efficiency and scalability. As regulatory support and market interest continue to grow, insect farming is well-positioned to become a competitive, eco-friendly source of protein, contributing to a more resilient and sustainable global food system.
“While we do experience the occasional setback, it’s important to celebrate that we now have multiple commercial-scale operations producing black soldier fly products. Rome wasn’t built in a day, and neither is our industry. But when it’s fully developed, it will be a part of everyone’s daily lives,” concluded Farrugia.
