What happened in Food Tech industry the last year?
How did we survive in this crucial 2022?
Looking back to 2022: key findings
Reduced investment
According to the FoodTech Data Navigator, global FoodTech investments dropped 50% YoY, from €54B in 2021 to €28B in 2022*. Despite this fall-off, they were still 20% higher than in 2020.
What caused this drop? The Financial Times also highlights a 44% funding slump between 2021 and 2022, and attributes it to rising interest rates and questions over startup business models. As a result, only 9 FoodTech companies achieved Unicorn status in 2022, compared to 35 in 2021.
Among the companies that achieve unicorn status, some have no revenue yet, a sign that the market still needs to go through a profound correction.
Declining markets are affecting startups valuations, disincentivizing IPOs and SPACs as an exit strategy
After the “SPAC” frenzy of 2021, worldwide economic conditions have lowered enthusiasm for new IPOs in the sector.
Some examples are:
- Instacart recently pulled the plug on its planned IPO,
- None of the companies that were rumoured to go public in June 2021 by FoodHack has followed through
- And none of the seven companies listed in the FoodTech 500 as IPO candidates have made moves towards going public either.
As well the following segments are struggling more than ever to reach profitability — eGrocery, Delivery services and Vertical farming
These companies faced a lot of challenges in the past months:
- Starship Technologies is cutting 11% of its workforce,
- Nuro is laying off 20% of its workforce,
- JOKR will exit two South American markets,
- Getir cut 14% of its staff back in May
The rise in energy costs affected vertical farming companies the most:
Infarm announced it would lay off +50% of its staff, while Fifth Season and Glowfarms are the latest vertical farming companies to declare bankruptcy.
Now more companies are expected to experience difficulties in the new year, and it looks like this trend is not going to end soon.
Investors started reviewing their growth expectations of the plant-based protein market
Over the past few months, we’ve seen investors starting to become more doubtful about the opportunities offered by the plant-based protein sector.
With inflation growth, consumers less and less inclined to pay for premium products, so plant-based sales stagnated in 2022:
- Beyond Meat stock fell more than 83% over 2022 due to poor sales performance
- Oatly’s dropped by 73% for the same reason
So currently, it’s worthless to think that major food companies are still investing significantly in plant-based foods.
Plant-based products have not yet clearly defined their position on retail shelves, and the category has yet to be consolidated.
This ‘crisis’ might prompt investors to turn their attention towards enabling technologies and ingredients in order to produce more scalable meat alternative products.
Should we be concerned about the future of FoodTech?
It’s hard to tell what 2023 has in store for FoodTech, but I doubt that investment trends will change much. Nevertheless, every crisis opens up new opportunities.
The crisis that some segments of FoodTech are faced with will encourage investors to broaden their scope and seek out finance opportunities across the entire food supply chain. As a result, sectors like biotech, Food Waste and and Farm Robotics might get a further boost.
One of the biggest news of 2022 was, without a doubt, FDA’s approval of Upside Foods’ cell-based meat products, which marked an important milestone for the sector. In only a few months from this event, other companies will start commercializing their products in US (e.g. Wildtype, BlueNalu).
