Tallinn-based biotech startup ÄIO will be able to speed up the FERM-OIL project after receiving a €1.2 million grant from Enterprise Estonia. The initiative aims to develop environmentally friendly, non-animal fats and oils at an industrial scale for food production. The grant represents nearly half of the project’s total €2.3 million budget and marks a major step toward commercialising fermentation-derived lipid ingredients.
From University Spin-Off to Food Biotech
Founded in 2022 as a spin-out from TalTech, ÄIO brings together academic research and applied biotechnology. The company focuses on producing food-grade fats and oils using yeast fermentation, converting low-value side-streams such as wood residues and agricultural by-products into lipid-rich ingredients. This approach reduces reliance on animal fats and palm oil while offering a faster, lower-impact production process.
Strong Public and Private Backing
The new funding adds to ÄIO’s growing financial base. To date, the company has raised €6.8 million in seed funding and secured close to €3 million in grants from organisations including Enterprise Estonia, the Environmental Investment Centre and the EU’s Circular Bio-based Europe Joint Undertaking (CBE-JU). The latest grant is designed to bridge the critical gap between laboratory innovation and industrial food manufacturing.
Closing the Lipid Innovation Gap
Despite rapid advances in plant-based and alternative proteins, the food industry continues to face a shortage of sustainable lipid ingredients that can deliver taste, texture and functionality at scale. Many early-stage lipid alternatives struggle with regulatory approval and economic viability. ÄIO’s FERM-OIL project is designed to directly tackle these challenges.
Scaling from Lab to Factory
“Scaling is definitely one of the most challenging aspects of food innovation,” said Dr Mary-Liis Kütt, Chief Innovation Officer at ÄIO and lead of the FERM-OIL project. She noted that ÄIO’s Flavoured Fat has already shown strong performance in prototypes, from replacing cocoa powder and brown sugar to enhancing the texture of broths and sauces. The project will enable industrial-line validation, novel food safety testing and consumer perception studies.
Three-Year Path to Industrial Production
Over the next three years, FERM-OIL will focus on advancing Flavoured Fat from lab and pilot stages to full industrial production. Key activities include optimising fermentation processes, validating second-generation feedstocks from food, forestry and agricultural side-streams, and transferring production to an industrial contract manufacturing facility.
Regulatory Readiness and Scale-Up Plans
Test batches produced under the project will support downstream processing optimisation, quality and shelf-life studies, and the generation of safety data required for EU novel food approval. By the project’s conclusion, ÄIO aims to reach Technology Readiness Level 6 (TRL6), demonstrating readiness for industrial-scale deployment and enabling submission of a novel food dossier to the European Commission.
Building the Next Growth Phase
Reaching this milestone would support follow-on investment plans, including a potential 4,000-tonne-per-year production facility and future large-scale licensing agreements with food manufacturers.
Fermentation as a Food System Solution
Nemailla Bonturi, co-founder and CEO of ÄIO, said the grant validates the company’s approach. “Fermentation allows us to turn side-streams into stable, nutritious and functional lipids without relying on climate, seasons or fragile global supply chains,” she said, adding that the funding will help prove industrial-scale feasibility.
Customer Testing and Market Validation
Alongside process development, ÄIO will work with potential customers to test Flavoured Fat in savoury, bakery and beverage applications, gathering feedback on performance, taste and consumer acceptance. The broader goal is to enable local lipid production using manufacturers’ own side-streams, reducing dependence on animal fats and land-intensive tropical oils.
Toward a More Sustainable Food System
As pressure mounts on the food industry to decarbonise supply chains and diversify ingredient sourcing, ÄIO’s progress highlights how fermentation-based innovation can help build more resilient and sustainable food systems.
