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Home » World News » Key drivers of food tech investments

Key drivers of food tech investments

Lancashire Gazette by Lancashire Gazette
April 21, 2022
in Featured News, World News
Reading Time: 6 mins read
Key drivers of food tech investments
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Food and agriculture are the most important industries on this planet, with 7 billion customers. According to the World Bank, 10% of global GDP is devoted to food and agriculture. This means that global food and agricultural value would reach $8 trillion based on the $88 trillion global GDP projection for 2019.

In 2018, a record $1.71 trillion was spend on food and beverage in the United States. This includes food purchased at supermarkets and other retailers, as well as away-from-home meals and snacks. The same year, 9.7% American disposable income was spent on food — 5.7% at home and 4.7% abroad — an amount that has remained constant despite economic changes in the last 20 years.

Despite a loyal customer base, the food sector is now facing unprecedented challenges in terms of production, demand, and regulations. These are all resulting from consumer trends. In recent years, consumer demands have changed. The food industry is under significant pressure to innovate due to consumers’ increasing attention on sustainability, freshness, and health.
Innovation imperative

Agtech innovators have developed new ways to harness technology’s power to improve the world’s food supply. The agtech innovations protect crops and maximize outputs. This allows for structural changes in agriculture that can help achieve important sustainability goals such as lowering greenhouse gases, reducing water usage, and possibly even sequestering carbon into the soil.

This is only the beginning. Everyone needs to eat multiple times per day. There is still a lot of opportunity to invest in food and beverage technology (or food tech) that improves the health of our food ecosystem. This includes novel ingredients and better diets through better distribution, preservation, and access.

Technology can be used to improve food. This is a huge opportunity that could lead to increased food consumption and less waste. It also has the potential to reduce the environmental impact of an increasing human population. Venture capitalists are keeping a close eye on this area, conscious of the huge potential. PitchBook reports that funding for food technology has increased from $60 million in 2008, to over $1 billion in 2015. CB Insights reports that unique investments made by VCs and private equity have increased from 223 to 459 in 2015 to 2017, doubling the number of VCs making them. CB Insights reports that food tech now surpasses agtech in terms of both exit activity and total investments. This is a small number considering the large global customer base of food tech, which now includes more than 7 billion people.
Food tech investments: Key drivers

The choices that consumers make about their food are becoming more important. People are busy with work and family and require convenience when it comes time to eat. Quality cannot be sacrificed for convenience. People want to know where their food comes from, what it is made of, and how the production and sourcing affects the environment.

Consumers are increasingly concerned about sustainability, freshness, and health. This has put significant pressure on the industry to innovate.

CPG companies were quick to meet these high-demands in years past. They promised convenient and superior-quality food. However, falling commodity ingredient margins, combined with industry consolidation have discouraged these efforts. Many have refocused their focus — opening the door for a new wave (pun intended!) of innovators and startups.

Consumers today are looking for convenience and consistency. However, they also want nutritious food that is easy to access, reduces waste, and aligns with their brands. It’s never been easier to start a food business. While consumers have become more concerned about ethical principles, they still want convenience. Consumer spending trends indicate that they are willing and able to spend more for food tech innovations that meet their ever-increasing demands for convenience, health, and minimal environmental impact. These market needs are increasing and food innovators have the opportunity to capitalize!
Food tech is here

Groceries and delivery are the most important food tech categories today, while meal ordering is home to the highest number of venture-backed, privately-held startups in food technology. The record-breaking $16.9 million in funding was recorded last year, making it an extraordinary year for food technology. Crunchbase reports that the top three deals of 2013 were $1 billion for Swiggy (India’s largest online restaurant platform); $600 million for Instacart (a U.S.-based grocery delivery service); and $590 million to iFood (a Brazilian restaurant marketplace).

Consumers still have an appetite, despite all the puns! Investors are becoming more cautious about grocery ordering and delivery. This is in response to Blue Apron’s high profile failure, which highlighted challenges such as scalability and inability patent food. They also have concerns about spoilage and contamination throughout the supply chain. Many food tech investors have turned their attention to the new frontiers in food tech after these missteps.
Future of food tech

Food tech innovations are delivering new and innovative approaches to the value chain in three areas. These are areas that offer technological solutions to serious problems in the food industry. We expect these areas will see significant investment and growth over the next few years.

Consumer food tech

The consumer food tech segment of food technology investment focuses on the development of technologies that are primarily targeted at the consumer. This segment is focused on satisfying consumer-driven needs. Consumer food tech innovators include companies that distribute meal kits, alternative protein/diary, and nutrition.

The organic food trend was at its peak, and it began to become commoditized. A new food trend took its place. It seems that everyone is getting into this meatless trend, regardless of what name they are given. Advertisements and news announcing the arrival of “meatless” meat are not to be missed.

Fast food giants Burger King and McDonald’s now offer meatless burgers. This is a great way to attract new customers who typically shop at Whole Foods or Trader Joe’s. Memphis Meats and Ikea are two other examples. They are also working on vegetarian versions of their infamous Swedish meatballs.

It doesn’t stop there. Other companies are also working to commercialize alternative proteins, such as Clara Foods (eggwhites from cell cultures), Ripple Foods, and Oatly which are focused on creating dairy- and nut free milk alternatives. UBS estimates that there could be a 28% increase in the market for plant-based protein products over the next decade. This is compared to the current market of just $5 billion.

Companies like Renaissance Bioscience, Just, and Brightseed are also pursuing new frontiers in the field of biological and nutraceuticals. They seek to create food and nutritional supplements in cleaner and smarter ways.

Industrial food tech

Some companies are focused on the food, while others focus on how to produce, package, and distribute this new generation of healthy, sustainable and innovative food. Industrial food tech refers to the sub-segment within food tech that addresses fundamental business models and B2B issues in the food industry. These companies include innovators in new processing and packaging technology, as well as new/functional ingredients with improved nutritional, labeling, or formulation characteristics.

Food tech investments will increase in order to deliver on the promise for healthier and more sustainable food systems.

Apeel Science and Hazel Technologies, food preservation technology companies, are leading the charge in reducing food waste while improving product quality during transport. Pre-consumer food wastage accounts for 40% of all food lost in the United States. A reduction in arable land could be possible with improved food-waste profiles.

This segment will also include food processing/grading technologies. P&P Optica, a food inspection startup, has been granted financing to help them develop their foreign object detection and food quality technology. This hyperspectral technology has the potential not only to improve food safety in automated foreign object detection but also to standardize and improve meat quality grading over time.

This sector is expanding rapidly with the emergence of industrial ingredients such as sweeteners, emulsifiers and firming agents. Large-scale food producers face increasing consumer demand to innovate while also ensuring sustainability. Aromyx, a company that measures taste and smell, is helping to improve production processes in a variety of industries, including pharmaceuticals, chemicals, agriculture, food and beverage, and consumer packaged goods.

Procurement & Supply Chain

The importance of increasing visibility into food supply chains is evident in the Chipotle contamination scandal and others. By commercializing new methods of tracking food origin, Safe Traces and other startups help to increase food traceability. Consumer awareness about food fraud is increasing. Food traceability and records of provenance are also important. These demands have created strong business cases for innovation in food supply chains to meet them. The changing consumer preferences for quality, convenience, and gourmet food products in food service have led to an increase in fast-casual restaurants. This has put pressure on restaurants to rethink delivery models.

Finistere portfolio companies Farmer’s Fridge and BingoBox offer chef-prepared meals and snacks in convenient vending machines and unmanned automated convenience stores. Starship Electronics and 6D Bytes use AI and machine learning for healthy food preparations like smoothies. Starship Electronics also has a fleet that delivers food to customers in partnership with local restaurants.

This segment is home to innovators who are concerned with traceability, sustainability and improving freshness. Good Eggs and Farmdrop, for example, deliver fresh, sustainably sourced groceries in reusable packaging. Full Harvest, on the other hand, encourages food supply chains to “shop ugly” by using surplus or imperfect produce that would otherwise go to waste.

Technology will play an increasing role in the production, packaging, delivery, taste, and smell of food. Food tech investments will increase in order to deliver the promise of healthier and more sustainable food systems around the world. We are what we eat.


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