This post is part of a collaboration with F&A Next, an AgFunder Network Partner. F&A Next was founded by Anterra Capital, StartLife, Rabobank and Wageningen University & Research. Read about F&A Next 2019 here.
A few years from now, the coronavirus pandemic may feel like a distant memory. For now, it seems to be the only relevant issue. And even when the immediate threat of the pandemic is behind us, signs of how it’s reshaped daily life and business are sure to linger.
The global food system is a perfect example. “We have several portfolio companies on the supply chain and logistics side of food and agriculture, and their customers are undergoing a transformation with both demand and supply changes,” observed Sam Smith-Eppsteiner, partner at Innovation Endeavors, at F&A Next’s global virtual summit last week. That transformation, she suggested, will spur new agrifood technology innovation and investment priorities.
At F&A Next’s fifth annual summit, over a thousand doers, investors and observers in the sector joined the virtual edition with Covid-19 and its impact on the agri-foodtech sector on their minds. Here are three big takeaways about how the pandemic is and will reshape how we cultivate, move, and consume food for the foreseeable future.
Restaurant marketplaces like Deliveroo and Glovo were the big winners in European agri-foodtech venture capital investing last year, according to AgFunder’s latest European Agri-FoodTech Investment Report. eGrocery and Cloud Retail Infrastructure, which encompasses ghost kitchens and last-mile delivery services, were the next most invested categories across the supply chain. That trend may hold for 2020. In light of coronavirus, there’s “quite a bit of money going into solving issues around food delivery and foodservice,” AgFunder’s Rob Leclerc observed during his keynote presenting the report’s highlights. “I don’t think that changes; maybe there’s a huge spike of capital into that environment.”
But as Smith-Eppsteiner said, Covid-19 is creating visible long-standing supply chain issues, and large food and beverage companies are looking for investable solutions to modernize their supply chains and build disruption resilience.
That could lead to shorter supply chains, said Anuj Maheshwari, managing director of agribusiness at Singapore’s Temasek. “A lot of countries are worried about food security, and the best way to deal with food security is to produce locally.”
In Singapore, where Temasek is based, most food is currently imported. Border closures with neighboring Malaysia shone a spotlight on the risks of being heavily import-dependent and may kickstart greater investment in agri-foodtech as a result.
“Singapore; it’s a tiny little country. We don’t have that much land here,” Maheshwari explained. “The only way we can grow food in Singapore is by using technology—whether it’s vertical farms or aquaculture or cell based protein or alternate protein.”
The same thinking is happening in the Gulf peninsula, which imports 80% or more of its food supply.
Automating farm operations and food processing will be crucial to making localization happen, said Leclerc. “To get localized supply chains, you need to come up with cheaper labor. Automation is going to be the big solution that allows you to solve that.”
The focus on technology to improve food system efficiency and resilience isn’t only a consideration for wealthy countries; smaller agrifood players in emerging markets like India are tapping into the trend too.
“For the longest time we have been talking about how supply chains in emerging markets can be can be disintermediated through digital [transformation],” observed Maheshwari. Covid kicked that transformation into high gear. “As the brick and mortar supply chains stopped functioning, there was no other way to move goods than to trade them online.” Online marketplaces are now seeing exponential user growth, Maheshwari added.
With billions of people worldwide confined to their immediate communities, and furloughed jobs and lost wages putting pressure on disposable income, food consumption trends have been turned upside-down in a matter of weeks. For one, canned and dry goods are making a come-back.
“People are appreciating the value of being able to store food in their pantries at home,” observed Nicholas Fereday, executive director of research at Rabobank’s research.
Where people are buying fresh foods, their focus is on locally-produced goods, noted Adam Anders, managing director of Anterra Capital, the agri-foodtech VC that’s part of the F&A Next consortium.
Food producers should anticipate increased consumer price sensitivity, particularly if the global economy tilts towards a protracted recession. “Price [of food] is going to be very important in a recession environment. I think some of the luxuries are going to be falling off the shopping list,” Anders said.
Robbert de Vreede, Unilever’s executive vice president of global foods, argued that consumers’ financial pressures create both necessity and opportunity for food companies to be more creative and develop new lines of business. “There will be more people who will struggle to pay their family meal. So how can we keep food accessible and affordable and inspirational?”
That said, unpredictable times do drive unpredictable behaviors. For instance, it may not be surprising that unhealthy and less healthy “comfort food” consumption is on the rise, amid the increased stress of stay-at-home orders. “People are not as much interested in weight loss,” amid the pandemic, observed Alon Chan, co-founder of consumer intelligence platform Tastewise.
At the same time, healthy eating is also on the rise—very much on the rise; Chen pointed to a 50% increase in the consumption of healthy foods as those who opt for healthier options generally are eating greater volumes of it at home.
What’s worth noting is that consumers are not choosing either-or; in fact, they’re sometimes combining healthy and comfort foods in unusual ways. “They’re really drinking a cocktail but they’re adding camomile. Or they’re going to hard kombucha, which is helping your digestive system, but also can help you kill time,” Chen observed.
Some of the consumer behaviors amid the pandemic may be reactionary and short-lived. It’s to-be-determined whether canned foods are making a genuine comeback, for example. But what the pandemic has done, participants agreed, is elevated consumer consciousness about health, and the overall role food plays in turn.
“I think people automatically get more interested in their health. Everybody is thinking about health—that comes up in top of mind,” observed Rickard Öste, founder of dairy-alternative company Oatly. Oatly itself experienced a surge in demand for its shelf-stable oat milk in the early days of the pandemic. This consciousness will likely drive “an increased interest in nutrition-protective foods and foods that drive immunity,” added Anders.
A positive by-product of that could be a shift towards more science-based food innovation. Often food fads are lacking on hard, scientific evidence, to the detriment of the overall integrity of the global food system. “Previously, people were fond of fashions in food, and fashions in nutrition as opposed to facts,” lamented Anders. “I hope that what happens [is that the pandemic] helps us bring a more scientific view to the forefront.”
“Let’s also take the opportunity to think strategically [about] how we want to improve our food system,” he continued. To do that, science will have to play a key role. Deeper reflection on human behavior will too. “[The pandemic is just putting a focus on the weaknesses in our system, and making us all reflect a little bit more on some of our own behavior. I hope that that means we’re going to end up with a safer, more efficient, more environmentally friendly, and hopefully more profitable food system.”