Are There Signs Of Hope For Food Tech Investments? – CleanTechnica

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The global food system, which encompasses production, post-farm processes, and distribution, is a key contributor to emissions. Viable technological solutions can help to reduce the effect of food production, which is responsible for about one-quarter of the world’s greenhouse gas (GHG) emissions. Enter food tech, a multi-billion dollar industry.

Food tech encompasses tools and products from biotech, agricultural technology, robotics, software, and data science that support the food supply chain “from farm to fork,” as Katie Stebbins, executive director of the Food Nutrition Innovation Institute, told the Boston Globe. Each sector within the food tech industry is a separate piece of a larger whole that coalesces to form a sufficient, sustainable, and updated food system.

The food supply system contributes to one-third of the world’s greenhouse gas emissions, according to a 2021 report backed by the United Nations. So finding solutions to make the agriculture supply chain more sustainable is becoming increasingly important. And more tech companies are working on ways to decrease the food industry’s carbon footprint.

The Numbers in Recent Foodtech Investment

Food e-commerce startups have been the dominant recipients of VC funding for more than a decade. Foodtech segments including alt-proteins, food production, and restaurant and retail tech have seen growing popularity.

• According to the alt-protein think tank the Good Food Institute (GFI), the fermentation sector reeled in $840M in funding in 2022, with all-time investment reaching $3.7B.
• Cultivated protein raised $896B last year, according to GFI.
• In the first half of 2023, according to Pitchbook, e-commerce startups raked in 36.2% of total VC capital and 31.9% of total deals.
• The number of companies working on fermentation for alternative proteins across the supply chain rose to 136 – a 12% rise from 2021.
•  The largest deals in the first half of 2023 include a $475 million late-stage VC investment in Getir, a $230 million late-stage VC round in YFood, and a $172 million Series C in Meati.
• While quarterly funding also dropped by 13.9%, the deal count grew to 268 in Q2.
• As of June 30, alt-protein startups represented 23.5% of total VC funding and 24.0% of deals.
• In the last few months, early-stage startups saw the largest quarterly increase in value (65.5%), as companies look to scale up their production processes.
• Food e-commerce deal activity peaked in 2015 when the sector received 51.6% of deals by capital and 84.0% of deals by count.
• Food tech VC funding declined by 75.1% year-on-year, while the number of deals (1,207) was down by 39.3% annually.

The current decline in food tech VC funding is in contrast with an alt-protein survey conducted by GFI in December, 2022. It included 125 investors, 40% of whom were venture capitalists. The results found that 81% of those polled were already financing alt-protein startups or funds, and 87% expected to make investments in 2023 – with VCs being the most prolific in both metrics. Meanwhile, investment in precision and biomass fermentation, as well as cultivated seafood and dairy, was expected to increase.

Consumer packaged goods are not traditionally a popular destination for VC funding, but Beyond Meat and Impossible Foods, as well as the rise of alt-proteins, helped change that.  The online grocery and food delivery categories are maturing as well, and market leaders have emerged. That likely means larger deals but slowed deal velocity in the long term.

Alt-Proteins as Key Food Tech Solutions

While food prices soar, food tech industry issues have collectively exacerbated the strain on manufacturers and brands, writes vegan food writer and editor Anay Mridul. Within alt-protein, companies have been forced to raise prices despite the race to reach price parity with conventional meat and dairy, as well as the need to shift production strategies due to supply chain turbulence. Unfortunately, only 10% of VC funding in agrifood tech went to climate-focused businesses. Mridul comments:

“This echoes a media reporting gap around the food system’s role in global GHG emissions: 93% of climate stories don’t discuss animal agriculture – and those that do rarely touch upon its impact on the environment. It’s led to a shift in consumer perception about meat and its effects on climate change – and not for the better. Readjusting the investment gap – whether it’s VC funding or otherwise – is crucial if we’re to adapt our food systems and avoid further ecological disaster.”

Foodtech investments can assist to mitigate climate pollution, which is rampant in the food sector, according to Our World in Data.

• Half of the world’s habitable land is used for agriculture. Habitable land is land that is ice- and desert-free.
• 70% of global freshwater withdrawals are used for agriculture.
• 78% of global ocean and freshwater eutrophication is caused by agriculture. Eutrophication is the pollution of waterways with nutrient-rich water.
• 94% of non-human mammal biomass is livestock. This means livestock outweigh wild mammals by a factor of 15-to-1.4 This share is 97% when only land-based mammals are included.
• 71% of bird biomass is poultry livestock. This means poultry livestock outweigh wild birds by a factor of more than 3-to-1.5.

Lawrence Haddad, executive director of The Global Alliance for Improved Nutrition (GAIN) and winner of the 2018 World Food Prize adds to the conversation by pointing out that climate and nutrition are fundamentally linked. Yet only 2% of Nationally Defined Contribution roadmaps to lower emissions have solid plans for nutritious foods, and only 16% of National Adaptation Plans do. Of the 350 food and agriculture companies tracked by the World Benchmarking Alliance, no company scores well on both nutrition and sustainability. It’s a missed opportunity, as Haddad explains:

“We know that increased production and consumption of fruits, vegetables, pulses, and nuts – all critical for healthy diets and the prevention of all forms of malnutrition— tend to be low emission. We also know that greater diet diversity is supported by greater production diversity and that also supports biodiversity and adaptation to climate change.”

In closing, it’s interesting to give a nod to agriculture and food advocacy that took place over the last two weeks at COP28. Three important commitments by governments and civil society organizations will ensure that food and agriculture emissions will be aligned with the goals of the Paris Agreement while keeping the sector’s social, economic and health impacts in mind:

• 134 countries signed the Emirates Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action;
• 128 countries signed the COP28 UAE Declaration on Climate and Health; and,
• Over 150 entities signed a Call to Action for Transforming Food Systems for People.

Upon arrival at COP28, many constituents expected to see the Emirates Declaration and the UAE Declaration receive favorable reception.

The fervor over the Call to Action for Transforming Food Systems for People was a bit of a surprise. It unites many diverse actors working in food and agriculture around a shared vision and priority actions for transforming food systems. It calls for a set of time-bound, aligned, holistic, and global targets by COP29 at the latest. It also required actionable, evidence-based, locally appropriate food systems transition pathways to drive further action and accountability from governments, business, and finance actors.

It is a door that’s open for food tech investors.