There is no such thing as a larger trade on our planet than food and agriculture, with a constant, loyal buyer base of 7 billion. In truth, the World Bank estimates that food and agriculture comprise about 10% of the worldwide GDP, which means that, food and agriculture can be valued at about $eight trillion globally primarily based on the projected global GDP of $88 trillion for 2019.
On the food entrance,a report$1.71 trillion was spent on food and drinks in 2018 at grocery shops and different retailers and away-from-home meals and snacks in the USA alone. Throughout the identical 12 months, 9.7% of Individuals disposable private revenue was spent on food 5% at house and 4.7% away from house a proportion that has remained regular amidst financial modifications over the previous 20 years.
Nonetheless, regardless of a stalwart buyer base, the food trade is going through unprecedented challenges in manufacturing, demand and rules stemming from shopper traits. Client calls for and focus have modified lately. An rising focus by shoppers on sustainability, well being and freshness has positioned vital strain on the food trade to innovate.
Lately, agtech innovators have created thrilling new methods to harness the facility of expertise to boost the worlds food provide. Agtech improvements are defending crops and maximizing outputs — enabling structural modifications within the agriculture system that might obtain essential sustainability objectives of decreasing greenhouse gasses, lowering water use, ending deforestation and doubtlessly even sequestering carbon again into soil.
However that is just the start. As everybody must eat (a number of occasions a day!), there stays an enormous opportunity for investments in revolutionary food and beverage expertise, or food tech, that higher the well being of our food ecosystem via novel elements and improved diets by way of higher food distribution, preservation and entry.
The opportunity to make use of expertise to enhance food is huge and extends to bettering food utilization and lowering waste — a key to minimizing the environmental impacts of a rising human inhabitants. Cognizant of this large opportunity, enterprise capitalists are carefully monitoring this area. In line with PitchBook, funding for food tech has skyrocketed from about $60 million in 2008 to greater than $1 billion in 2015. And distinctive investments from VCs and personal fairness funds have doubled from 223 in 2015 to 459 in 2017, in accordance with CB Insights. In analyzing whole investments made, together with exit exercise, food tech has now surpassed agtech on each fronts. That is nonetheless comparatively small, given the food tech sectors giant potential buyer base globally of greater than 7 billion individuals (and rising).
Key drivers of food tech investments
Customers are getting pickier about what they eat. They’re juggling hectic work and private lives, and demand comfort relating to their meals. However this comfort can’t come on the expense of high quality. Now greater than ever, individuals need to know whats of their food, the place it got here from and how its manufacturing and sourcing impacts the setting.
An rising focus by shoppers on sustainability, well being and freshness has positioned vital strain on the food trade to innovate.
In years previous, shopper packaged items (CPG) incumbents rushed to ship on these heightened calls for promising handy, superior-quality food. However falling margins on commodity elements, coupled with trade consolidation, have discouraged these efforts, and many have refocused their consideration leaving the door open for a brand new wave of hungry (pun meant) innovators and startups.
Todays shoppers will not be solely searching for comfort and consistency, however are additionally looking for nutritious food that may be accessed with ease, limits waste creation and aligns with their private manufacturers. In actuality, it has by no means been harder to be a food firm. Client calls for have expanded to incorporate moral mantras however haven’t given approach to necessities of comfort. Nonetheless, spending trends present that buyers are prepared and prepared to pay a premium for food tech improvements that may meet their ever-increasing wants of comfort, well being and low environmental affect. The opportunity for food innovators to capitalize on these market calls for is rising!
Food tech present
As we speak, grocery ordering and supply represents the biggest food tech class, whereas meal ordering contains the best quantity of privately held, venture-backed startups in food tech globally. Final 12 months was an distinctive 12 months for food tech, with a record-breaking $16.9 billion in funding recorded. In line with Crunchbase, the three largest offers of the 12 months included $1 billion for Swiggy, Indias main on-line restaurant market; $600 million for Instacart, a U.S. grocery supply service; and $590 million for iFood, a Brazil-basedrestaurant market.
Whereas shoppers nonetheless have an urge for food (once more with the puns!) for grocery ordering and supply performs, buyers have gotten more and more cautious within the wake of meal package service Blue Aprons high-profile failure (amongst others), which emphasised challenges like scalability, the lack to patent food and spoilage and contamination issues throughout the availability chain. These missteps have led many buyers to show their consideration to new food tech frontiers.
Food tech future
There are three key areas during which food tech improvements are starting to ship utterly new and novel approaches alongside the worth chain. These areas signify technological approaches addressing severe ache factors inside the food trade, and we anticipate that these sectors will expertise vital development and investment consideration within the coming years.
Client food tech
Client food tech is the phase inside food expertise investment that focuses on improvement of applied sciences primarily marketed towards the patron. Be it plant-based meats, novel distribution programs or nutrition-based tech, this phase goals to assuage consumer-driven calls for. Examples of shopper food tech innovators embody various protein/diary, diet and meal package distribution firms.
Because the natural food pattern reached its peak and started to commoditize, one other food pattern has risen to take its place. Plant-based, meatless, animal-free regardless of the moniker given, it looks like everyone seems to be entering into the meatless craze. Information or advertisements trumpeting the arrival of meatless meat are unavoidable.
Quick food giants Burger King (by way of Impossible Foods) and McDonald’s (by way of Beyond Meat) are actually serving meatless burgers on their menus, attracting new clients that usually store for food at Dealer Joes or Complete Meals.Memphis Meats is one other instance, as is the retail bigIkea, which is engaged on a vegetarian model of its notorious Swedish meatballs.
Nevertheless it doesnt finish there. Different revolutionary firms are engaged on the commercialization of various proteins similar toClara Foods (egg whites from cell cultures), andRipple Foods andOatly which are centered on growing dairy and nut-free milk options.UBS estimates that the marketplace for plant-based proteins alone may develop from just below $5 billion at present to some $85 billion over the following decade, at a roughly 28% development charge year-over-year.
In the meantime, firms likeBrightseed,Just andRenaissance Bioscienceare blazing new trails on the organic and nutraceuticals entrance, looking for methods to supply food and dietary dietary supplements in cleaner, smarter and extra sustainable methods.
Industrial food tech
Whereas some firms concentrate on the food itself, many others are exploring tips on how to course of, package deal and distribute this new wave of sustainable, wholesome and revolutionary food. Industrial food tech is the sub-segment of food tech that focuses on addressing elementary enterprise mannequin and B2B ache factors inside the food trade. The firms embody innovators in novel processing and packaging expertise and new/practical elements which have improved dietary, labeling or formulation traits.
Investments in food tech will proceed to extend to assist ship on the promise of more healthy, extra sustainable food programs.
Food preservation expertise firms likeApeel Sciences andHazel Technologies are main the way in which in lowering food waste, whereas bettering produce high quality throughout transportation. It is a large concern ripe for innovation, aspre-consumer food waste comprises 40% of all food wasted in the U.S. Improved food-waste profiles may allow an total discount in required arable land.
Food processing/grading applied sciences will even be on the forefront of this phase; for instance, food inspection startup P&P Optica has obtained financing to develop their food high quality and overseas object detection expertise. This hyperspectral tech has the potential to offer not solely food-safety enhancements in automated overseas object detection, but additionally to allow meat high quality grading to be standardized and improved over time.
Coupled with a burgeoning sector in industrial elements like emulsifiers, sweeteners and firming brokers, amongst different components, this phase is rising shortly as large-scale food producers are going through shopper strain to not solely innovate, but additionally to take action sustainably. Corporations likeAromyx are working to quantify issues like style and odor to assist improve manufacturing processes throughout a variety of industries, from prescribed drugs and chemical substances to agriculture, food and drinks and shopper packaged items.
Provide chain & procurement
The Chipotle contamination disaster (and others prefer it) underscores the significance of bettering visibility into food provide chains. Safe Tracesand different startups are serving to to rising food traceability by commercializing new modes of monitoring food provenance. Client consciousness relating to food fraud and necessities for food traceability, in addition to information of provenance, are rising. This has created a robust enterprise case for innovation within the food provide chain to fulfill these calls for. Altering shopper preferences for high quality, comfort and connoisseur merchandise in food service has led to an increase within the class of fast-casual eating places and positioned strain on quick food eating places to rethink their supply fashions.
Startups likeFarmers Fridge (a Finistere portfolio firm) andBingoBox package deal chef-curated meals and snacks in conveniently positioned merchandising machines or unmanned, automated comfort shops.6D Bytes makes use of AI and machine studying to arrange wholesome food, like smoothies, whereas Starship Electronics has, in partnership with native shops and eating places, launched a fleet of robots that ship food to individuals.
Innovators on this phase are centered on traceability, sustainability, bettering freshness and eliminating food waste. For instance, Good Eggs andFarmdrop ship contemporary and sustainably sourced grocery food in reusable packaging, whereasFull Harvest encourages the food provide chain to buy ugly through the use of imperfect or surplus produce that may have in any other case gone to waste.
Know-how will proceed to play an more and more crucial position in how the food we eat is produced, how it’s packaged, how it’s delivered, the way it tastes, feels and smells and how it’s reused and repurposed. Investments in food tech will proceed to extend to assist ship on the promise of more healthy, extra sustainable food programs for the world. In spite of everything, we’re what we eat.