On July 30, there was an unexpected announcement from American firm Bolt Threads, revealing that the production of its mycelium-based leather alternative, Mylo, had come to a halt. Mylo had emerged as one of the most promising and innovative materials in the fashion industry. Notably, renowned designer Stella McCartney collaborated with Bolt Threads to test and develop Mylo, leading to the release of the Frayme bag crafted from this remarkable material in 2022.
In an effort to scale up the use of Mylo, McCartney joined forces with Adidas and Kering in 2020 to form the Mylo Consortium. Both companies conducted trial runs with Mylo, with Adidas incorporating it into their Stan Smith trainers, and Kering’s Balenciaga also utilizing the material in trial products. However, despite the initial interest, Mylo did not progress beyond the Frayme bag, which carried a steep price tag of $2,000.
Bolt Threads is currently seeking an investor to propel Mylo towards wider commercialization, but for the time being, production has been put on hold. The company attributes this pause to investors redirecting their focus towards other opportunities, including AI. However, several other factors, outlined below, have likely contributed to the financial challenges that led to the discontinuation of Mylo’s production.
Elyse Winer, a partner at investment firm Material Impact and also the CMO of material innovation company Gen Phoenix, emphasized the critical factors that companies must meet to succeed in the sustainability-driven market.
According to Winer, three key metrics play a pivotal role: performance, sustainability, and price parity. Meeting these requirements is vital for companies aiming to thrive in this space. Startups often face challenges in meeting these criteria, resulting in the development of lab-scale or limited production runs. While this approach might suffice from a marketing standpoint, it falls short of reaching the mainstream until all three requirements are met.
Gen Phoenix has been actively collaborating with various brands to foster sustainability in the industry. They recently partnered with Coach for the launch of Coachtopia, a sustainable sub-brand. Additionally, the company has been working with Doc Martens and Jaguar to scale the production of alternative leather materials for these brands. Gen Phoenix has built a strong reputation over the past 15 years by servicing the aviation, rail, and bus industries, excelling in producing durable recycled leather.
Luke Haverhals, the founder of material innovation company Natural Fiber Welding, shed light on the price dynamics of alternative leather. He pointed out that most leather currently sells in the price range of $2 to $5 per square foot. For alternative leather to gain widespread acceptance among brands, it needs to offer better profit margins. CEOs are more inclined to support sustainable initiatives that are economically viable for their companies.
In recent times, offtake agreements have become a standard practice between startups collaborating with brands and manufacturers. Carlo Centoze, CEO of textile innovation and IP company HeiQ, explained that an offtake agreement involves a brand and a value chain partner reaching a deal on the price, quality, and quantity of a material to be purchased over the next five years. These agreements are seen as bankable deals, allowing startups to secure credit from banks based on these agreements and subsequently fulfill their commitments.
Different brands have approached offtake agreements in various ways. For instance, Hugo Boss CEO Daniel Grieder directly invested in HeiQ’s polyester-replacement cellulose yarn at its lab stage in 2022, with the offtake agreement following later. Meanwhile, other brands like Allbirds and Stella McCartney, through the investment company Collab Fund, have taken risks by investing in Natural Fiber Welding through a part-ownership model, while Ralph Lauren made a direct investment in the company.
Offtakes provide protection for brands, while upfront investments offer greater stability for startups. However, hard offtake agreements are uncommon in the fashion industry since they are often conditional on meeting specific performance, cost, and scale criteria. This dynamic can pose challenges for startups like Mylo, as agreements made early in the development process are subject to conditions, and the process can feel like a cat-and-mouse game as all parties involved assess and manage risks.
Gen Phoenix, on the other hand, has adopted a different approach, establishing 10-year plans with its partner brands instead of the usual five. According to CEO Elyse Winer, this longer-term approach fosters collaboration and acknowledges that startups may face bumps along the way without being penalized, ensuring a more supportive and sustainable partnership for both parties. The emphasis lies on co-developing contracts that honor the spirit of the relationship while encouraging managed risk-taking.
In the long run, the cost of not embracing new technology and material innovation is likely to outweigh the current challenges that brands investing in sustainability are facing. Tricia Carey, Chief Commercial Officer at Renewcell, one of the prominent textile-to-textile material innovators partnering with brands like H&M, noted that European brands are more proactive in understanding and adopting increased sustainability measures compared to their U.S. counterparts.
As brands navigate the future, access to sustainable materials and compliance with regulations, such as the E.U. regulations impacting brands selling in Europe, will be critical factors. Failing to innovate and adapt to sustainability demands could result in higher costs and penalties in the long term, particularly when it comes to extended product responsibility.
Investors are particularly interested in technologies and materials that can make a significant impact on sustainability today. Elyse Winer, speaking on behalf of Gen Phoenix, expressed that senior leadership in forward-thinking organizations acknowledges the urgency of addressing the climate crisis and recognizes that taking calculated risks is essential to be a category leader.
Brands willing to take risks and embrace sustainable innovations are more likely to be rewarded, provided they can navigate the challenges of the macroeconomic environment. Coach’s success with the Coachtopia products, selling out twice within two days of launching, exemplifies the potential of scalable material innovations.
In conclusion, the path to a sustainable future demands bold action from brands, and those who embrace change, innovation, and responsible practices are likely to thrive in this evolving landscape.
Source: www.glossy.co / Zofia Zwieglinska