Food tech entrepreneurs — real activists for societal change
Let’s be honest; we, Homo sapiens species require more efficient and sustainable food systems in order to feed our growing population. Demand for food is expected to raise by 60% by year 2050 as a result of increasing population to 9.8 billion and heightened rate of urbanization. Global warming places additional pressure on our food systems, as water and arable land are becoming scarcer, extreme weather conditions more common, and pests and diseases more spread.
Food tech has the potential to have a crucial role in solving the challenges of our current food systems. These companies innovate and apply novel technologies throughout the food value chain from production to recycling. Many food tech companies have an inherent mission to have a positive impact in our society and they achieve this through the means of business and aim at financial returns for their investors as any other for-profit company. Food tech companies provide great examples of using business as a vehicle to solve the most pressing societal challenges.
This blog post discusses the three influential roles that food tech companies have in our society. As meat production is as part of the food value chain facing severe problems, it is used as an example to illustrate the impact of food tech companies. Finally, venture capital’s (VC)perspective on food tech is discussed.
Food tech entrepreneur’s three activist roles in our society
- Creator of solutions
Food tech companies provide first and foremost solutions that tackle sizable challenges in our food systems, such as meat production. Meat production, put in few words, is extremely inefficient and unsustainable. Firstly, raising livestock requires a substantial amount of land and water that are becoming even scarcer assets. When adding the opportunity cost of land usage, the effect becomes even larger. Nearly half of all crops that are grown and harvested are fed to the livestock, which could otherwise be consumed directly by humans. Secondly, livestock accounts for as much as 15% of the greenhouse gas emissions.
While a total plant-based diet could feed twice as many humans as our current diets do, humans have sticky habits, meat eating being one of them. Rising income levels are expected to increase demand for meat even further. Clean meat, also referred as cultured meat, companies are tackling efficiency and sustainability challenges of meat production. It is a technology, where animal cells are extracted from living animals, and the cells are then grown in bioreactors. Instead of raising a whole animal to get meat, this technology focuses on growing just the meat cells. Sounds smart and is, in fact, revolutionizing: clean meat production could require 99% less land, 96% less water, and produce 96% less greenhouse gas emissions that conventional meat production.
Even though there are no commercial clean meat products in the market yet, several forerunners, such as Memphis Meats and Mosa Meat, are racing to find ways towards commercialization. Biggest challenges towards commercialization lie in scaling the production and achieving more complex muscular structures. For example, achieving a T-bone steak in-vitro requires extremely advanced methods in cell culturing that still need to be developed.
While clean meat companies must still achieve some serious technological advancements before full-scale commercialization, novel plant-based meat alternatives are already available for a wide consumer base. These plant-based alternatives mimic the texture and even the taste of meat in their products. The most well-known company developing a plant-based meat is perhaps Beyond Meat that went public in May 2019 and raised over $240M via its IPO.
2. Educator of the public
As most of food tech companies are consumer-facing, they can have a direct influence on our culture, eating habits, and attitudes. Certain distribution channels, such as retail and restaurant franchises, are especially efficient ways in reaching a wide consumer base. Several plant-based alternative meat companies have very recently collaborated with fast food chains. In August 2019, Burger King announced that Impossible Whopper, a burger with Impossible Food’s plant-based patty, will be made available in its all 7000 locations. Subway, on the other hand, announced a partnership with Beyond Meat and sells Beyond Meatball Marinara sandwich in nearly 700 US and Canadian stores now.
Likewise, cricket and other insect companies aim at providing a more sustainable protein source for a wide audience. Crickets have not only high nutritional values, but also hold the potential to stabilize our global food supply according to the UN. Crickets produce only 1% of greenhouse gases of cattle and require 0,04% of water that cattle in producing the same mass of protein. However, establishing a positive consumer perception towards insect protein as human nutrition still requires substantial effort. Most Western consumers perceive insect protein as unpleasant and are reserved for involving them as part of their diet. Therefore, the education function is even more accentuated among insect companies.
The consumer base luckily seems adaptable to and curious about new solutions. Burger King reported a 19% increase in foot traffic in locations that offered Impossible Whopper, a burger with plant-based patty during their test period in April. The rise of millennials to purchasing power in our economy is another reason to remain positive towards adopting solutions for more sustainable food systems. Millennials, a generation born between 1980s and mid-1990s, will soon comprise 40% of the purchasing power. They are also generally known to be relatively aware of environmental sustainability. Thus, it is fair to expect that there will be inherently more demand for sustainable solutions in the market.
3. Catalyzer of change in conventional industries
Food tech companies are catalyzing change across food systems. By launching novel products on the market, these small companies motivate big corporates to keep up with the change. For example, the world’s biggest producers of meat have been hedging for a more meat-free future after the emergence of meat alternatives. Tyson Foods Inc., the second largest producer of meat, founded Tyson Ventures, their corporate venture arm in 2016, which invests into disruptive food technologies including clean meat. Maple Leaf Foods, which used to be a conventional Canadian meat producer, has taken a step further and redefined itself. Maple Leaf is referring itself as “a sustainable protein company” and has invested into cricket farming among others. Corporates have a good reason for adapting their strategies, as it is estimated that demand for conventional meat will drop by more than 30% during the next 20 years.
It is fascinating how small companies with novel and innovative solutions can create momentum and urgency for change across industry. This is certainly a powerful characteristic of small companies with scalable technologies.
VC outlook on food tech
VCs have globally noted investment opportunities in food tech. The global VC investments in food tech companies have grown steadily year by year reaching $14.3B in 2018. However, most investments have been directed to food delivery companies and left food tech companies tackling crucial sustainability challenges with limited funding. For example, novel plant-based alternatives for meat raised $900M in VC funding, and clean meat companies attracted globally only $50M funding. One major reason for this relatively low amount of investments in clean meat is its distance to commercialization. In order to achieve full-scale commercialization, companies need to achieve major technological breakthroughs especially related to mass production.
Despite small total investments in protein alternatives, private investments play a highly important role in enabling technological advancements in the face of public funding’s lack and reluctance. It is great to see that several VC funds, such as Five Seasons Venture and Fifty Years, have a strong focus on investing in more sustainable and efficient food systems. Inventure is also actively looking investment opportunities in this food tech sector now, having invested previously in food delivery.
The required scale of change in transforming our food systems is unprecedented. Accomplishing this change requires unified and collaborative actions from our society, where food tech entrepreneurs can take the leader role at several fronts. VCs can and should actively support them, while seizing lucrative investment opportunities. Food tech companies are role models in showing how solving the world’s most pressing problems can be accomplished through the means of efficient for-profit business. Our humanity’s future requires more mission and impact-driven entrepreneurs!
Thank you especially for Ekaterina Gianelli, who supported during the research and writing process!
