Covid showed "vulnerabilities" in food chain and "urgent need" for investment

CommentaryAlternative proteinPlant-Based FoodTech

Nitza Kardish, CEO, Trendlines Agrifood fund, looks ahead at the key trends shaping the industry for investors, entrepreneurs and the market, as the sector matures.

The Trendlines Group first started investing in the agrifoodtech sector in 2011, long before it become a mainstream investment sector. At the time, both in Israel and internationally, there was little investor interest in the sector, even though Israel is renowned for its advances in agricultural technologies, largely developed out of need for food security and using meagre natural resources.

We found ourselves having to create an ecosystem of investors, entrepreneurs, researchers, and strategics to create interest for this hugely important sector. This was done first and foremost by mapping out the markets and the players, as well as defining our investment strategy and beginning to invest in a portfolio of companies. 

Another initiative to ramp up interest and communicate our mission outwards was to establish the AgriVest Conference, which is happening this October 26th for the 7th time.

We were excited about agrifood and changing the way that food is produced and consumed, but even we didn’t foresee the tremendous global growth that we’ve witnessed over the last decade. According to a recent report by Agfunder, “agrifoodtech startups globally raised $24 billion in the first half of 2021 – getting very close to the total for all of 2020, which broke records with around $30 billion in funding for the category".

Looking forward to future trends, this is what I predict will be the areas of focus, for investors, entrepreneurs, academia, and of course the market.

More sustainable food production

A big factor that will continue to drive most of the trends in agrifoodtech stems from the urgent need to make food production, from the farm to the plate, more sustainable. As climate change has become a major force that every industry must address, agricultural practices will feel the pressure.

Both consumers and governments will demand that food production follow sustainable practices, ensuring enough supply, but assuring that sources reduce greenhouse gas emissions and don’t encourage deforestation, water waste, use child labor, use of harmful chemicals, and any practices that prove unsustainable.

 

1. Carbon balance

Carbon balance will become a main force, with abilities to measure emissions and carbon capture remotely and more accurately. We will see initiatives to reduce agricultural impact on carbon balances and planet sustainability – using business models related to carbon credits as a driver. Examples of practices already driving change are regenerative practices to absorb carbon into the soil, use of microbes to increase sequestration in the soil. There are also other developments such as feed additives for cows to reduce methane emissions from their gut. 

 

2. Next-generation farms/vertical farming

Arable land has just about been exhausted. To produce more without increasing farmland, many initiatives and technologies exist to find ways to grow produce upwards (vertically), instead of expanding land use. Future developments will be in optimising to decrease costs and to develop the variety of crops that can be grown vertically or in indoor farms. The drivers of this trend will be a combination of consumer appetites for healthier food accessed closer to harvest time, land scarcity and global warming that continue to challenge conventional farming.  

 

     3.  Biologicals

Developing products that are environmentally friendly have grown from several sources. The understanding that we can’t produce food using practices that destroy or deplete land and water have become clearer. Additionally, both crop pests and livestock have become resistant to chemicals and antibiotics respectively, and novel ways of overcoming this while still producing enough food need to be found. As in other areas, precise and specific treatments that don’t kill or harm other organisms in the ecosystem are highly sought out.

 

4. Supply chain improvements and reduction of post-harvest waste

Even before 2020, we saw innovations in food chain management. Covid-19 highlighted the importance of efficient supply chains and alternative ways of growing, processing, transporting, and selling food to consumers.  Newer technological tools such as AI and SW provide quality control of crops before they are shipped, and logistics management. Traceability tools enable produce or food tracking from farmer to fork. This is critical in being able to reduce waste, to plan precise food production chains and provide accurate information to food companies and consumers.

 

5. Alternative protein

Plant-based solutions will witness improved quality, taste, scalability, and price competitiveness. Plant-based alternatives face challenges connected to health with the concern that they are too industrialized.  Cell-based meat/fish/poultry seem to answer the solutions of cutting down on livestock emissions and eliminating animal cruelty concerns. However, these technologies face challenges of scalability and production at a competitive price, notwithstanding the question of the sustainability related to the production of cell-based substitutes in big bio-reactors. Another alternative protein is insect protein, which is a very acceptable protein in certain cultures, but faces the challenge of adoption in others. Milk and dairy substitutes will be plant-based, cell-based, and fermentation-based.

 

6. Functional foods

Development of functional foods or ingredients that contribute much more than their caloric value, foods/ingredients that contribute to wellness and nutrition and have ‘medicinal’ qualities beyond their calorie count. This trend is also connected to personalized medicine and the ability to analyze gut microbes and match foods/ingredients to achieve more precise and personalized nutritional value. We’ll see the use of a combination of technologies to create traditional foods using unconventional methods, maintaining our supply of those foods without compromising on unsustainable or unethical production practices.

 

7. Empowering smallholder farmers

Smallholder farmers account for a large percentage of the world’s food producers and are important economic drivers in local communities. Improving smallholder farmers’ access to market and financing is a rapidly growing market in Asia, for example. Developing digital technologies suitable and customized for smallholder farmers, together with traceability tools, and the promotion of and transformation to more “sustainable” agri practices will see a revolution in this type of agriculture and could make a huge difference to these communities.

 

We’ll see the adoption of technologies developed in other industries translated into future food production capabilities. The symbiosis and combination of digital, biological, chemical, and other advances will allow us to reimagine new ways of growing and creating better foods and ingredients.

I believe in 2021+ deal sizes will grow, and more investments will be made, since many investments were on hold due to Covid-19, when investors were more conservative and hesitant and are now doubling down on their existing portfolios. I imagine more investments will be made into early-stage companies and the rounds will increase in size. The pandemic as well as climate change issues, served to highlight the vulnerabilities in our food production chain and the urgent need for investing in our near future food.

After a decade of building and developing the ecosystem of innovation, entrepreneurship, and technological breakthroughs in the field of agri-food, I look forward to the stage of maturation of the field and its transformation into a real industry.

My expectation is that the next decade of agrifood will be the decade where we see innovative products on the shelves, a decade where we see many factories producing alternative proteins, natural food colors, biological pesticides, all approved by regulators and making a real change in the market. I hope we will see the transition from an adventure called “agrifoodtech” to an industry that is applied globally and changes the way we produce, regulate, and consume food.