ÄIO secures €1.2 million grant to push fermentation-based fats toward industrial scale

Estonian biotechnology company ÄIO secured a €1.2 million (US$1.3 million) grant from Enterprise Estonia in December to advance industrial-scale production of its fermentation-derived Flavoured Fat ingredient, as the company worked to close the gap between lab innovation and real-world food manufacturing.

The funding supported ÄIO’s new three-year FERM-OIL project, which had a total budget of €2.3 million (US$2.5 million) and focused on validating the industrial production of sustainable, functional lipid ingredients made from local food, forestry, and agricultural side-streams. The company aimed to replace animal fats and land-intensive tropical oils with fermentation-based alternatives capable of performing under commercial processing conditions.

ÄIO developed Flavoured Fat as a lipid-rich yeast biomass with an umami taste profile and functional mouthfeel, designed to support a wide range of food applications. While alternative proteins had made significant progress in recent years, the company pointed to a persistent shortage of scalable, sustainable lipid ingredients able to match the performance of conventional fats at industrial scale.

“With FERM-OIL, we were tackling one of the hardest parts of food innovation, the jump from lab to factory,” said Dr Mary-Liis Kütt, Chief Innovation Officer at ÄIO and lead of the FERM-OIL project. “We already knew that our Flavoured Fat performed beautifully in prototypes, from replacing cocoa powder and brown sugar to adding a silky texture to broths and sauces. This project allowed us to validate the process on real industrial lines, generate robust safety data for the novel food dossier, and understand how consumers respond to these new lipid ingredients.”

Over the course of the project, ÄIO planned to optimize its fermentation process at both lab and pilot scale, validate second-generation feedstocks sourced from industrial side-streams, and transfer production to an industrial contract manufacturing facility. Test batches would be used for downstream processing optimization, quality analysis, shelf-life studies, and food safety assessments.

By the end of the program, the company aimed to reach Technology Readiness Level 6, a milestone demonstrating that the production process could operate reliably at industrial scale. Achieving that level would also enable ÄIO to complete the safety work required to submit a novel food dossier to the European Commission.

Founded in 2022, ÄIO focused on converting low-value sidestreams, including residues from the wood, dairy, and broader food industries, into high-value lipids using yeast fermentation. The company positioned its technology as a way to decouple fat and oil production from climate variability, land use, and fragile global supply chains.

“Fermentation gave us a way to turn side-streams into stable, nutritious, functional lipids that were not dependent on climate, seasons, or fragile global supply chains,” said Nemailla Bonturi, Co-founder and CEO of ÄIO. “This grant was a strong signal that Estonia was serious about building a resilient, circular food system. It allowed us to prove to the world that our process could work at an industrial scale, not just in the lab, and that novel lipids could become a reliable pillar of future food security.”

Beyond technical validation, FERM-OIL also focused on customer engagement. ÄIO planned to test Flavoured Fat across savory, bakery, and beverage applications, working directly with food manufacturers to evaluate performance in existing production processes and gather feedback on taste, texture, and consumer acceptance.

The broader objective was to enable food companies to produce essential lipid ingredients locally, using their own sidestreams, while reducing dependence on animal-derived fats and imported tropical oils. ÄIO argued that such models could improve both supply chain resilience and environmental performance.

“Estonia and the wider region had a unique opportunity to lead in circular bioeconomy,” said Professor Petri-Jaan Lahtvee, Co-founder of ÄIO and Professor at Tallinn University of Technology. “With FERM-OIL, we would demonstrate that second-generation feedstocks could be turned into high-value, scalable ingredients. The same facility that today produced commodities could, in the future, also produce next-generation lipids on-site. That was real circularity in action.”

ÄIO reported that it had raised €6.8 million (US$7.4 million) in seed investment to date, alongside approximately €3 million (US$3.3 million) in grants from Enterprise Estonia, the Environmental Investment Centre, and the EU CBE-JU program. Through FERM-OIL, the company strengthened its position in the growing microbial lipids and single-cell oil markets, working with more than 120 partners worldwide, including food manufacturers evaluating commercial use cases.

By laying the technical and regulatory groundwork for a future 4,000-ton-per-year production facility, the project also set the stage for follow-on investment and potential technology licensing deals.

“Ultimately, this project was about making future foods real,” Kütt said. “We wanted a world where essential ingredients like fats and oils could be produced locally, from local resources. Flavoured Fat was our contribution to that future, and this grant helped us get there much faster.”