The Multiple Realities of the Ag-Food Tech Industry

*Written in collaboration with Alejandro Salinas, Investment Professional at RRG: https://mx.linkedin.com/in/asalinases

You might recall that the light emitted from the sun takes a little over 8 minutes to reach the Earth. In the context of gazing upon the endless expanse of space, when you look across the universe, you’re looking back through time.

Time and space have always been contemplated within the context of outer space but if you take a step back, you might see huge contrasts within our own atmosphere, comparing different places that are within the same time frame and, yet, look so far apart. Are we conditioned by our context and the formation of a collective mindset of generations? Or do we have to change our circumstances to participate in the transformation of the world?

Time makes its mark very differently in diverse regions of the world; this contrast is much more noticeable by an ever-compounding gap in policies, technology development and made even more evident within industries like food and agriculture. We live in multiple realities at the same time.

What role do governmental policies play in these multiple realities?

Let's look at the facts:

There’s a lack of faith in governmental bodies across the world. Sixty-five percent of US adults think their government is doing little to limit climate change (Pew Research, 2020), and research (IPCC Report, 2018) shows that the worst impacts of climate change could be irreversible by 2030.

The UN recently shared studies urging governments to develop guidelines that promote “win-win” diets. The Plates, Pyramids, Planet report, compiled in collaboration with the Food Climate Research Network (FCRN) at the University of Oxford, concludes that a plant-based diet has advantages for health and the environment. Yet only four countries – Brazil, Germany, Sweden and Qatar – promote diets and food systems that are not only healthy but sustainable, the study says. The Netherlands and the United Kingdom have since followed suit.

“Growing numbers of people now understand that diets rich in whole-grains, legumes, fruits and vegetables – with reduced consumption of meat and smaller quantities of high-fat and high-sugar foods – are good for our bodies,” explains lead author Carlos Gonzales-Fischer of FCRN.

He said that there is ample evidence showing that such diets have much lower environmental impacts than the unhealthy and unsustainable eating patterns that are increasingly prevalent today. “So, by eating well for our own personal health, we’re also doing right by the planet – in essence, it’s a win-win,” he added.

More than 80 governments already issue dietary advice, and the number is rising. However, most governments have yet to issue national dietary advice, and this gap is particularly apparent in low-income countries – only five in Africa have such guidelines. And most existing guidelines still fail to consider the environmental impacts of dietary choices. Anna Lartey, Director of FAO’s Nutrition and Food Systems Division, stressed that Sustainable Development Goal 2 makes a clear link between the needs for healthy nutrition and sustainable agriculture. “It’s time that dietary guidelines reflect that relationship,” she said.

Let's run the numbers:

More than 6 million diet-related deaths a year could be prevented by 2040 if nine countries representing 50 percent of the world’s population and 70 percent of the world’s emissions adopted climate policies that promoted plant-based diets, according to a study in The Lancet Planetary Health. For each nation – Brazil, China, Germany, India, Indonesia, Nigeria, South Africa, the UK and the US – researchers compared current climate change policies with two alternative scenarios: one that included a shift toward a flexitarian diet and another with a 50 percent flexitarian diet and 50 percent vegan diet.

Another study found that a global shift to a plant-based diet could reduce mortality and greenhouse gases caused by food production by 10 percent and 70 percent, respectively, by 2050. A global dietary shift would save an estimated 79 million human lives and avoid 5.1 million deaths per year. Estimates for a completely vegan diet project closer to 129 million lives saved and 8.1 million deaths avoided. These projections also saw trillions of dollars saved in healthcare costs by 2050.

So, while environmental and healthier diets and technology development for a brighter and more sustainable future are becoming extremely serious focuses worldwide, Mexico won an unenviable second place in a daily contest held at the United Nations Climate Change Conference in Glasgow, Scotland. Presented by the Climate Action Network (CAN), a global network of more than 1,500 civil society organizations in over 130 countries, “Fossil of the Day” awards are given to the countries that are “doing the most to achieve the least” in terms of the progress on climate change. Mexico was awarded second place “for pumping more, not less, money into the fossil fuel industry, building oil refineries, and delaying policies aimed at carbon emissions reductions.”

There is a lot of work to do for transformational change and right now it is more on the side of the private sector and technological development to participate, any way we can, in the inclusion of healthier and more sustainable options through food disruption.

The Times They Are A Changin'

According to BH & BCG, with advancements in technological innovation and full regulatory support, alternative proteins could take up as much as 22 percent of the entire global protein market by 2035, a new report reveals. While this “best-case scenario” will require all three pillars in the sector – plant-based, cell-based and fermentation – to reach price parity, researchers’ conservative estimates still point to alternative proteins capturing over a 10th of the market at baseline, with Asia-Pacific dominating demand growth.

New research shows that at our current trajectory, 11 percent of all meat, eggs, dairy and seafood eaten globally will be made from alternative protein sources by 2035 – and this figure could jump to 22 percent with the right regulatory support and rapid innovation to accelerate the trend. The findings were published on March 24 in a first-of-its-kind study by Boston Consulting Group (BCG) commissioned by Zürich-based alternative protein industry investor Blue Horizon.

According to the analysis, the alternative protein market is set to top US$290 billion by the mid-2030s, driven by “unparalleled growth” in consumer demand. That’s the conservative baseline estimate. In terms of market production capacity, it marks a jump from the current 13 million metric tonnes to 97 million metric tonnes.

Researchers cite “faster technological innovation and full regulatory support” as the key to speeding up this growth even more, which would push the market share of alternative proteins to 22 percent – a rate that the report says would mean Europe and North America would reach the level of “peak meat” by 2025. After that, the consumption of animal proteins declines.

While plant-based alternatives are at the forefront of the race and are set to reach price parity within two years – if not sooner – fungi, yeast and algae proteins that make up the fermentation-based space are in the running for price parity by 2025.

Another technological example in the ag-tech sector is a university creating “digital twins” of tomatoes whose ultimate goal is to “increase resource use efficiency of greenhouse tomato systems, resulting in lower dependence on external energy inputs, a further reduction in CO2 emissions and optimization of water use and fertigation.” A virtual crop that perfectly emulates the behavior of a real-life greenhouse-grown-plant is fed into a database, analyzing what alternatives are the most efficient for its development with as few resources as possible. At the same time, there are thousands of small farmers who are struggling with the striking forces of the swiftly changing climate, completely alien to tech that might reduce or inhibit the potential of crop-loss. Same world, different solutions.

So, does our circumstance define us? Latin America is setting the scene.

If in 2019 the foodtech firms won their space and opened room for new solutions, by 2020 these companies are expected to go much further. "Over the past 2 years we’ve seen an explosion of food tech companies developing different kind of innovations on the consumer facing side of the agrifood value chain. Certainly there’s talent and opportunity here in Latam, but most importantly it became evident the need to rethink the system as a whole - there’s no food with out Ag and so we are seeing more and more startups building that bridge wit h all sorts of technologies”. Camila Petignat, Partner at The Yield Lab

But although the Latin American consumer is open to new technology solutions, the foodtech businesses, just like other disruptive companies in other segments, also need to operate in a regulatory environment that does not comprise their business models to the fullest.

The pandemic has either killed your industry, or made it grow exponentially, and the latter is true for foodtech around the world and in Latin America. The tremendous success of food delivery startups such as Rappi and iFood have brewed competition in the sector, with entrepreneurs clamoring to see who can do it better – and more importantly – faster. It’s an industry with infinite possibilities.

“It’s such a huge business; it’s not a winner takes all model, that’s what makes it such a fascinating industry,” said Jose Guillermo Calderon, co-founder and CEO of RobinFood, a food delivery startup based out of Colombia. RobinFood now operates in other Latin American markets as well and claims to be, “Latin America’s largest cloud-restaurant company.”

A new report by Pitchbook puts 2Q21 global VC deals in foodtech at $6.2 billion into 280 companies. The foodtech sector includes technology-driven startups developing products and services that are changing how food has traditionally been discovered, purchased, delivered, prepared, and consumed.

Within the industry, food e-commerce continued to be the leading driver of investment activity in 2Q21, and in Latin America, in 2019 and 2020 alone, the online food delivery market grew by more than 30 percent, nearing $6.8 billion, according to statista. Colombia’s Rappi takes a big piece of the pie, as the most funded food delivery startup in the region with $2.25 billion raised to date.

These are some of the ag-food techs representing the new landscape of sustainable and healthier transformation in Latin America through innovative and inclusive initiatives.

Ag-food tech entrepreneurs are starting new initiatives seeking a greater impact in people's lives.

I believe that the complexity of scaling-up a new venture seeking positive transformation in terms of sustainability, accessibility, and inclusion in Latin America has a greater level of complexity due to lack of awareness, distribution constraints, deep technical skills and industry understanding of the new technologies, but the momentum is rising at an unprecedented pace. The proper alignment of all of the stakeholders (customers, entrepreneurs, VC's, corporate, gubernamental policies, among others) is essential for the industry to boom in the right direction.

We all live in these multiple realities within the same time and space. From region to region, it can feel like we live some years apart. As the famous Spanish philosopher José Ortega y Gasset said, “I am I and my circumstance; and, if I do not save it, I do not save myself.”

That's why I greatly admire entrepreneurs in the Latin American region; they are not only trying to save our context but reinvent it.