From wildfires in Australia to flooding in the American Midwest, the effects of climate change around the world cannot be ignored. Natural disasters are nothing new, but they are being intensified by climate change as never before. And we humans have our fingerprints all over the problem. Our food systems – what we eat and how we procure it – are major drivers of rising temperatures and extreme weather patterns.
As it exists today, our global food systems contribute 25% of the greenhouse gases that give rise to global warming. With population growth topping 1% per year and per capita calorie consumption increasing across the world, global food demand will continue to rise. Meat and dairy production bear much of the blame for our food’s impact on the climate. Livestock accounts for 14.5% of the world’s greenhouse gases — more than all forms of global transportation combined. Worse still, global demand for meat has doubled over the past 30 years as nations become wealthier and larger.
The time has never been better for new technology to disrupt these alarming trends. Food and beverage technology, or “FoodTech,” holds the potential to improve how we eat — from increased food yield, improved nutritional value and freshness to innovations in supply chain and procurement. While in the past the food business has lagged behind other industries in its implementation of new technologies, broad changes in consumer preferences have given startups a new impetus to innovate. An increased awareness of social and environmental issues is driving consumers to look for products and technologies that will help them align their personal values with their purchasing choices. This makes FoodTech a growing and increasingly attractive sector to investors. As a result, over the last five years investment in emerging FoodTech has tripled.
What new developments will shape this promising sector? Below, are three trends in FoodTech that are poised to make an impact and offer significant potential for growth: sustainability, health and personalization, and supply- chain innovation.
Sustainability in FoodTech
Consumers around the world are paying more attention to sustainability and are proving they are even willing to pay a premium for it. Products that advertise sustainability comprise only a small share of the market — 17% — but a recent poll by New York University found that 50% of sales growth among consumer-packaged goods stemmed from sustainability- marketed products.
Such products include plant-based alternatives to animal products and foods boasting transparent origins, which can satiate customers’ hunger for nourishing food, as well as their consciences. Plant-based protein, including protein isolates or concentrates from wheat, soy, pea, and other plants, will continue to gain momentum in the coming years. This growth is why OurCrowd invested in Beyond Meat, a source of alternative, plant- based proteins that innately appeal to the environmentally conscious consumer. The runaway success of the veggie- burger producer is a bellwether for the growing investment opportunity in FoodTech. It has opened consumers’ minds and mouths to alternative meats, and increased investors’ willingness to put significant venture dollars toward startups that promise to revolutionize the food industry.
Retail sales of plant-based meats increased 20% in the US in 2018 — a significant figure considering that all food sales grew only 2% and that production was slowed by a dearth of processing capacity for the pea-protein isolate used by plant-based producers. We predict that alternative protein sales will continue to grow, facilitated by further technological breakthroughs in protein-processing technology that will allow producers to diversify their supply chains and ramp up production.
An additional area of innovation and investment is lab-grown protein technology, with its similarly smaller environmental footprint and innate appeal to generations of tech-savvy consumers. This cellular agriculture combines biotech, tissue engineering, and molecular biology. While commercialization of high- end lab-grown meat and dairy products is still on the horizon, a reported $248.4 million was invested in cellular agriculture companies last year— a number that is set to grow as commercialization nears.
San Diego-based BlueNalu is set to produce real seafood products directly from lab- grown fish cells in a way that is healthy for people, humane for animals, and sustainable for the planet. BlueNalu is pioneering the category of “cellular aquaculture” in which living cells are isolated from fish tissue, placed into culture media for proliferation, and then assembled into great- tasting fresh and frozen seafood products.
Recognizing the necessity of a shift away from animal agriculture, OurCrowd has also invested in Ripple Foods, a company looking to transform the dairy case. Realizing that the watery nut milks currently on the market had little in common with the real thing, Ripple set out to develop a technology that could create a delicious, protein- rich alternative to convert even the pickiest dairy consumer. Using a proprietary production process, the company developed “Ripptein,” a protein made from peas that the company claims is purer than any other plant protein on the market. Ripptein is the differentiator of Ripple’s plant-based milk, which is both nutritious — boasting eight times the protein of almond milk — and tastes like the real thing. Customers have taken notice: Ripple products are now in over 15,000 grocery stores across the United States.
Health is Personal
Increasingly, consumers are also seeking out personalized approaches to health and nutrition. This is influenced by the prevalence of wellness rhetoric in every aspect of society, as well as the recent ability to analyze large health and nutrition-related data sets using artificial intelligence (AI).
We expect to see an increase in startups delivering personalized- diet products through machine learning (a subset of AI). The notion of a personalized diet is based on the belief that there is no optimal diet that applies to all people. Rather, our highly individual metabolisms, health histories, and microbiomes require customized, algorithm- informed eating plans. A commercial test has already been developed by Israeli startup DayTwo to give recommendations for a personalized diet.
OurCrowd portfolio company DouxMatok is also making strides in health related FoodTech by offering consumers reticent to change their diets a healthier alternative to sugar. The company’s proprietary flavor- targeting technology increases the intensity with which human tastebuds perceive sweetness while maintaining the same taste, texture, and color of ordinary sugar — all without any artificial aftertastes. The company also straddles other trends by using sustainable “green” chemistry.
In addition to increasing consumer concerns about health and personalization, FoodTech innovations reflect a growing desire for convenience. Rather than venture out into the cold or even dial up a restaurant, consumers are opting to order both restaurant food and groceries on a growing variety of delivery apps and platforms. Delivery companies around the globe have received a windfall of investments as they vie for market dominance. But as the food-delivery app space begins to be dominated by a few large players, the future of this segment will be in emerging services that consolidate and streamline food production and delivery-service aggregation. It’s a sign of just how major an impact food delivery services have made on the restaurant industry that multiple delivery services have debuted “ghost kitchens” — commercial kitchens that operate without a brick-and-mortar location attached. We expect that the reduced cost of operating delivery-only kitchens will allow new brands, as well as established ones, to grow further in the delivery market.
Meanwhile, when it comes to home cooking, online-grocery delivery has become increasingly ubiquitous as consumers take advantage of the convenience of doorstep delivery. The sector is poised for significant growth, and is projected to take up 20% of the grocery market share by 2025. However, it’s a low-profit- margin enterprise, operating under the constraints inherent in grocery sales. New developments in this sector will be driven by innovations in technology. We believe that predictive analytics and machine learning can propel the online grocery business to new heights by automating and anticipating orders, allowing perishable goods to arrive in Instagram-ready condition.
When it comes to food procurement, startup energy is focused on supply-chain innovations geared towards improving supply-chain efficiency and reducing food waste. Israeli startup Trellis, for example, has built an AI-powered supply-chain optimization tool. By applying AI to historical harvest data, market, and weather trends, the company provides predictions and recommendations to food producers, reducing agricultural waste and improving production efficiencies. BT9 is another startup that has developed an end-to-end cold-supply-chain management solution with real- time monitoring and alerts.
Silo is also looking to make a dent in the urgent problem of food waste. Globally, approximately 30% of food produced for human consumption is thrown away each year. In the US, that percentage is nearly 40%, costing households an estimated $165 billion annually. To address this issue, Silo has developed one- touch vacuum sealing containers designed to help keep food fresh up to five-times longer. The containers’ built-in IoT (Internet of Things) technology tracks kitchen inventory, enabling consumers to know how long their food will be good and when groceries need to be reordered. Other food technologies that could have a major impact on the supply chain include companies that aim to make the food- supply chain more trackable, meeting customer demand for transparency and, through greater clarity on sourcing, heading off pathogens and contaminations before they can have adverse health effects.
About the Author
Friederike Kaiser, Associate, Portfolio Management
Talia Lavin contributed to this article