As we continue to see the world adjust to the coronavirus crisis, it’s clear that the outbreak of COVID-19 has created profound change in the global food system. While the outlook continues to fluctuate by the day, many aspects of the industry will be transformed long term.
The FoodBytes! first-quarter trend report explored six areas it expects to drive innovation in the ‘new normal’.
The second-quarter report dives deeper into four start-up innovation areas that the FoodBytes! team expects will support lasting food sector change, offering a data-driven snapshot of the pandemic-proof innovations it believes are here to stay.
1. Shortening the link: farm-to-consumer channels on the rise
With weak supply chains and concerns over food security exposed by the pandemic, we have seen criticism of complex global supply chains with calls for shorter, more locally diverse alternatives. One category that has received great attention is farm-to-consumer eGrocery.
“Many investors may revisit the space with new vigor in light of COVID-19 as consumers look to buy produce directly from the source,” wrote the FoodBytes! team. “Previously representing a relatively small portion of the farm tech investment landscape in 2019, this category is gaining more traction as consumer demand for supply chain transparency grows.”
FoodBytes! has observed an increasing number of start-ups building e-commerce channels and platforms that bring the farmer closer to the consumer.
FoodBytes! startup alums working from the farm gate to the consumer plate have raised funding since the start of 2020, specifically those focused on scaling transparent supply chains.
Thistle, which delivers farm-fresh meals to consumers, raised $5M in January. Connected farming alum Kakaxi raised a second round of seed funding to scale its remote data-capture device that enables transparency of growing conditions for CPG brands and agribusiness.
Finally, mushroom micro-farm startup Smallhold also closed $3.7M in funds to support its work to shorten the mushroom supply chain and engage consumers in local production in a novel way.
The convenience and security of online shopping means the shift towards it is not going away, claimed Anne Greven, Rabobank’s global head of F&A innovation. "This is a sticky switch that isn't going to go back,” she said.
She added that start-ups should not fear a drying of funds as we creep towards a COVID-inspired global economic crisis.
"As long as you have a real thought out, conscientious plan and you have something that's unique, our sentiment and what we’ve been hearing from investors is that there is new money to be put into work in this space.”
2. Food loss mitigation on the agenda
Currently around 30% of the food produced globally is wasted. FoodBytes! fears an extended pandemic will increase food waste further due to lack of foodservice demand and the logistical challenges in redirecting food to retail.
Companies around the world are trying hard to eliminate pandemic-fuelled food waste, and start-ups that offer valuable solutions to mitigate food loss are well placed to weather the storm.
“We see many startups that have developed machine-learning algorithms or AI-driven technologies that enable retailers to track freshness and cut food losses along the value chain, like alums Wasteless and Afresh,” noted the FoodBytes! team
As an illustration, Intello Labs closed $6M for its AI food grading tech in May, focusing on efficiency and waste mitigation along the supply chain. Food waste reduction-focused grocery delivery startup Imperfect Foods saw subscriptions increase by 40% in 2020 alone and closed $72M in Series C funding in May to expand geographically.
3. On-farm automation and digitisation
FoodBytes! expects to see greater adoption of ag-tech innovations such as precision agriculture, robotics and indoor farming.
Labour shortages exacerbated by COVID-19 safety concerns have, for example, sparked the development of new technologies that minimise worker presence across the production process, while at the same time helping companies reduce costs.
FoodBytes! noted renewed interest from labour-challenged farmers to robotic start-ups such as alum Burro (FKA Augean Robotics), which just raised a $1.6M round.
“We think there’s going to be greater money available for robotics…there will be money for those ideas,” added Greven.
However, a disadvantage of new technologies such as indoor farming and aeroponics are high energy costs. The Financial Times reported last year, for example, that “despite the excitement, the sector is littered with bankruptcies because of the high costs of initial investment into the facilities as well as expensive running costs, including energy to power the LED lights and ventilation, as well as labour.”
Greven said she was confident that high costs would eventually come down as big food companies up their investments to explore new technologies.
“The margins for the farmers have been quite slim and that has been the biggest challenge for the farmers implementing and adopting new technology,” she said. “We're starting to see that at the corporate level, such as Danone, there are efforts to create more value for the farmer to make these investments. I do think that we are going to start seeing this shift to adoption of new technologies happen faster.”
FoodBytes! added that investments in robotic startups have been historically low, however the need to grow crops safely in this new world showcases just how valuable data-driven farming can be.
Other alumni in the broader farming digitisation space have seen investment traction during the pandemic, including AI-powered dairy tech start-up Connecterra. The company raised a $8.72M Series B to make farming practices more efficient and regenerative through robust insights. Soil analytics company Trace Genomics raised funding during the pandemic to expand its solutions to improve sustainable farm productivity and restore living soil.
4. The continued proliferation of plant-based meats
It has been much reported that the pandemic has accelerated the trend toward buying animal-free products and plant-based alternatives. Swiss food giant Nestle, for example revealed that its vegetarian and plant-based range grew 40% in the first half of its financial year as more consumers experimented with new and perceived healthier food options in home during global lockdowns.
FoodBytes! observed growing consumer concerns around the sustainability of animal consumption coupled with meat supply chain disruption have increased demand for plant-based foods. Illustrating this trend was plant-based meat producer Beyond Meat experiencing a 141% sales increase in the first quarter of 2020.
On the corporate R&D front, Planterra Foods, a division of protein leader JBS, has just launched a new plant-based line, Ozo, which is made of a blend of pea, rice and fermented shiitake mushroom protein. The mushroom protein is supplied by alum Mycotechnology, which recently raised a $39M Series D.
According to Nielsen data, overall plant-based sales globally have increased 90-240%, depending on the category, since March.
This uptick has been a boon to a handful of FoodBytes! alumni on the financing side. InnovoPro received a cash infusion of $15M in April to boost production of its novel chickpea protein which has applications in meat alternatives, confectionery, ice cream and more. Sustainability-boosting plant-based meat additive Better Meat Co announced $5.6M to expand partnerships with protein industry leaders, including Tyson and Smithfield, just before the pandemic lockdown began. Else Nutrition announced $6M in funding in March to debut its line of plant-based complete nutrition products for toddlers.
“The COVID-19 pandemic has made it clear that players in our food and ag system must be prepared for constant change and transformation,” said Greven.
“Rabobank is now playing a much larger role in helping companies adopt the innovation mindset and capabilities that are essential for a resilient food supply, as well as long-term business success.”