FOODTECH: THE BIGGEST EUROPEAN STARTUP OPPORTUNITY YOU DIDN’T KNOW ABOUT.
At the recent SIAL event in Paris, in partnership with Digital FoodLab, we presented a special report on the European Food Tech scene.
In this post we take a look at the results of that report.
One Thousand, three hundred and sixty.
That’s how many FoodTech startups have been founded across Europe since 2014 and over the course of 2018, a new one was launched almost every single day. These are just some of the findings from a report into European FoodTech we presented recently at the Salon International de l’alimentation (SIAL) in Paris alongside our partners Sopexa, Vitagora, CCI Paris Ile-de-France and the authors of the report, Digital FoodLab.
It’s not surprising that Europe should be at the epicentre of food innovation. With a diverse range of languages and cultures, European cities and people are known across the world for their cuisines and food related service and hospitality. From the excellent training of the French Cordon Bleu school, to the familial traditions of the Italian peninsula, generations of agri-businesses in Greece and the fresh fish of the Mediterranean. Food isn’t viewed merely as nourishment In Europe. It is a social, communal and educational activity providing accessible small business opportunities for many people. However, despite this cultural advantage, it is still more likely that innovation in food technology is associated more with the ‘new world’ than the ‘old’.
The report demonstrates how that is changing. For example, during 2017, investment in European FoodTech businesses totalled €4.2 billion, and that figure has grown 20% on average every year since 2014. So why is this category beginning to attract so many entrepreneurs and investors across Europe, and what does this mean for FoodTech on the continent?
A DISPARATE FOODTECH MARKET: THE HAVES AND THE HAVE MORES.
On first examination, the data in the report reveals a polarisation between a small amount of very big deals and a much larger volume of smaller deals. 60% of all funds raised in 2017 (€2.5 billion) were for just three businesses in only two countries, and all of them were food delivery businesses: Deliveroo(UK), Delivery Hero (Germany) and Hello Fresh (Germany).
Similarly, there is a disparity between the major nations of Europe. Whereas the enormous deals in Germany and the UK comprised the bulk of funds, France has by far the most deals in total. This can be explained in two parts. Firstly, France has not created a food delivery unicorn of the type that exists in her two rival nations, and also has a considerably more balanced marketplace across key categories. Secondly, France is home to a well developed Corporate Venture Capital (CVC) structure, and these VC’s have acquired successful businesses at a much earlier stage than has tended to happen elsewhere in Europe: Qui Toque was acquired by Carrefour, Food Cheri by Sodexo, La Fourchette by Trip Advisor and BookaTable by Michelin.
On a global scale, the opportunity for the region would appear enormous, with investment not yet measuring up to the current size of the European agri-food industry as a whole: in 2017, Europe comprised just 16% of global FoodTech investments despite comprising 25% of the total global food market. It is therefore ideally placed to utilise historical and cultural advantages to increase both the number of businesses being launched across FoodTech and the size of investment in the sector.
This can only happen through a process of evolution, innovation and disruption so let’s look at the major FoodTech sub-categories, highlighting one European startup leading the way in each.
DELIVERY & RETAIL:
Since urbanisation began, European cities have had to confront issues of population density, with access to food being just one of those issues. Modern technology allows easy access to a variety of food choices not previously imaginable, and with some of the most densely populated regions on the planet and a history of local, community-based retailers, it makes sense that delivery & retail is a particular European strength.
Consumers across Europe are increasingly taking advantage of the ability to have meals from their favourite restaurants delivered to their door, as evidenced by the major FoodTech deals being the delivery unicorns. It is interesting though that the businesses being created and investment behaviour seem to be split along geographical lines, with German and UK businesses dominating and France being a supercharged growth market for Deliveroo and UberEats in particular.
However the true startup star of the region, across all sub-categories, is Delivery Hero. A Rocket Internet backed business created in 2011, Delivery Hero now operates worldwide. Having gone to IPO on the Frankfurt exchange in 2017, it now has a market cap of over €6.1 billion.
FOODSERVICE:
It could be argued that the hospitality industry was created in Europe. From the traditions and terminology used in restaurants across the world, to the vaunted Swiss hotel schools, Europe possesses a level of food service to which all others aspire. With that in mind, it is natural that some resistance be encountered from traditionalists as this category undergoes the growing pains of evolution.
Technology moves at such an all-encompassing pace that it would be unusual if food service were left untouched, with a great example of that being Ekim. A partnering of two engineers who claim they “love food, even more than robots”, they are due to launch ‘Pazzi’, an autonomous robot which cooks pizzas right in front of customers, in 2019 and have raised €2.2 million from investors including Daphni.
FOOD SCIENCE:
A category which perhaps best combines what European food is all about — allying traditional techniques with technical skill. Think of the great European restaurants which created molecular gastronomy and the food multinationals selling their products all over the world, and this category makes perfect sense in a European context.
Out of this environment comes Feed, a French business creating meal replacements in the form of drinks, powders and bars. Made from natural ingredients, Feed products provide 100% of balanced meal requirements. Creating a meal which you drink in a nation more famous for long, multi-course lunches and dinners may seem risky, but Feed has so far raised €18.5 million from investors including Alven Capital.
AGTECH:
Agriculture is welded to European history and culture; from Greek olive farmers, to French vignerons and the EU directive about how bent a banana needs to be. A fundamental and foundational aspect of European life, development and disruption to this category would be welcomed across the region as pressure increases on farmers and the taxpayers which often supplement their production.
Belgian startup Peas & Love hopes to bring fresh and organic products to urban centres with their centrally located, subscription based farms. These city gardens offer local communities the chance to pick fresh fruit and vegetables, attend events and learn how to cook healthy recipes. So far they’ve raised €1.5 million from investors including Eutopia.
MEDIA:
Europe, with its diverse and fractured language market, has managed to avoid most of the carnage sweeping through traditional media the world over. With particular local interests and customs, the spread of the web didn’t necessarily expand access to more content from other countries as occurred in the UK and the US. Additionally, consumption habits differ from country to country and therefore local media has ridden a social media wave to their benefit not detriment.
That said, the network effects of social media have also been latched upon by a few crafty and disruptive entrepreneurs upending the veritable food apple cart. So it is with French startup Chefclub.tv. In just two short years Chefclubhas become THE powerhouse media brand for food in France and beyond with tens of millions of views of their original, light and fun content on YouTube and across Instagram, Snapchat and Facebook. Started by three brothers who claim they were “neither cooking experts, nor comfortable in front of the camera”, Chefsclub has demonstrated what passion, invention and innovation can do to a traditional mindset and that explains why they’ve raised €3.2 million from a bunch of investors including Kima Ventures.
FRANCE vs UK vs GERMANY: SO WHERE EXACTLY IS HOME FOR EUROPEAN FOODTECH?
As demonstrated, the UK and Germany have had the few unicorns that France lacks in recent years and in just a few deals secured the bulk of investment funds. However ,with a larger number of deals in total and more than twice as many investments of more than €500K than any other nation, France has the most balanced ecosystem for new FoodTech founders.
Consider these figures alongside the diversity of the local marketplace, the breakneck growth of the startup ecosystem (especially in Paris) a well-established food industry and a dining scene ripe for disruption and it could be argued that there is no better location for entrepreneurs to launch a FoodTech startup than in… France.
Each sub-sector has its distinct advantages and challenges and a local marketplace with further room for growth alongside the corporate know-how to succeed on a global scale. Therefore, Europe is ideally placed to deliver the evolution, disruption and innovation, alongside the investment, to take advantage of particular local strengths within each FoodTech sub-sector.
To find out more about European FoodTech, download the report here, watch presentations from SIAL here or contact Digital Food Lab.
Meanwhile, if you’re a FoodTech entrepreneur then we at Eutopia would love to hear from you, you can reach out to us here.
Thanks Philippe Vella !
