Aldo González
CEO & Co-Founder
Heartbest Foods
Expert Contributor

Why FoodTech is Becoming Relevant and Why You Should Care

By Aldo González | Tue, 08/03/2021 - 09:03

Food is this lovely language we all speak and understand. It connects us in many ways, represents who we are, our culture, tastes, personality, so what would it look like if what connects us (what we eat) truly represented us and shifted the planet toward a positive change?”

I wrote down this personal manifesto five years ago. At that moment, I was only 22 years old; it seemed like an idealistic mindset. Today, I can't believe there is no bigger intersection between opportunity and necessity in any other industry than in the food and ag-tech sector.

If we continue with business as usual, we will blow every planetary boundary. We need innovation to be done the right way and it must be done rapidly. We need a food future that doesn’t include using more land, while lowering emissions and eliminating animal mistreatment. We have work to do to fix our broken food system. I have never been more worried and excited at the same time in my whole life.

Why Food-Tech is Becoming the World’s Most Relevant Industry

There is no bigger industry on our planet than food and agriculture, with a consistent, loyal customer base of 7 billion. In fact, the World Bank estimates that food and agriculture comprise about 10 percent of global GDP, meaning that, food and agriculture would be valued at about $8 trillion globally based on the projected global GDP of $88 trillion for 2019.

On the food front, a record $1.71 trillion was spent on food and beverages in 2018 at grocery stores and other retailers and away-from-home meals and snacks in the US alone.

However, despite a stalwart customer base, the food industry is facing unprecedented challenges in production, demand and regulations stemming from consumer trends. Consumer demand and focus have changed in recent years. An increasing focus by consumers on sustainability, health and well-being has placed significant pressure on the food industry to innovate.

Food Innovation Imperative

In just the past few years, alternative proteins have transformed from a niche category to a mainstream phenomenon. Plant-based applications are now a fixture at fast-food restaurants around the world, plant-based milk is a household essential, and you can taste meat grown from animal cells in restaurants in Singapore and Israel.

Based on a BCG + BlueHorizon report, by 2035, every 10th portion of meat, eggs and dairy eaten around the globe is very likely to be alternative. That’s a lot. If the alternative-protein market were a country, by then it would be a Top 50 economy, larger than Finland’s 2020 GDP. Is this unrealistic? Not at all. Public concern for the climate — and, more broadly, sustainability — is rife.

Many consumers want to reduce the amount of animal protein in their diets, especially if they can do it without sacrificing taste or paying more. In addition, fully 85 percent of investors now incorporate environmental, social, and corporate governance (ESG) criteria into their investment strategies.

But this is just the beginning. As everyone needs to eat (multiple times a day!), there remains a huge opportunity for investments in innovative food and beverage technology, or foodtech, that better the health of our food ecosystem through novel ingredients and improved diets via better food distribution, preservation, price, and access.

The opportunity to use technology to improve food is massive and extends to improving food usage and decreasing waste — a key to minimizing the environmental impacts of a growing human population. In examining total VC investments made in Mexico, foodtech represents the second-biggest VC gap opportunity compared to the US investments realized last year, with US$2.3 billion, only behind e-commerce and with a CAGR between 2014-2020 of 105.2 percent in the US and 56.5 percent in Mexico, according to Euromonitor & Pitchbook.

Key Investment Drivers

Consumers are getting pickier about what they eat. They are juggling hectic work and personal lives and demand convenience when it comes to their meals. But this convenience cannot come at the expense of quality. Now more than ever, people want to know what’s in their food, where it came from and how its production and sourcing impacts the environment.

Consumer foodtech is the segment within food technology investment that focuses on development of technologies primarily marketed toward the consumer. Whether it is plant-based dairy, novel distribution systems or nutrition-based tech, this segment aims to assuage consumer-driven demand. Examples of consumer foodtech innovators include alternative protein/diary, nutrition, and meal-kit distribution companies. Plant-based, dairy-less, animal-free … regardless of the name given, it seems like everyone is getting into the foodtech craze. News or ads trumpeting the arrival of “cheese-less cheese” are unavoidable.

Contemporary consumer awareness of the perceived negative health, environmental and animal-welfare impacts of animal-based dairy consumption has resulted in a surge in demand for viable plant-based protein alternatives.

Fast-food giants Burger King (via Impossible Foods) and McDonald’s (via Beyond Meat) are now serving meatless burgers on their menus, attracting new customers that typically shop for food at Trader Joe’s or Whole Foods.

But it doesn’t end there. Other innovative companies are working on the commercialization of alternative proteins, such as Clara Foods (egg whites from cell cultures), and Perfect Day (animal-free milk protein made from flora through unique fermentation). UBS estimates that the market for plant-based proteins alone could expand from just under $5 billion at present to some $85 billion over the next decade, at a roughly 28 percent growth rate year-over-year.

In years past, consumer packaged goods (CPG) incumbents rushed to deliver on these heightened demands — promising convenient, superior-quality food. But falling margins on commodity ingredients, coupled with industry consolidation, have discouraged these efforts, and many have refocused their attention, leaving the door open for a new wave of hungry (pun intended) innovators and startups.

Today’s consumers are not only looking for convenience and consistency, they are also seeking nutritious food that can be accessed with ease, limits waste creation and aligns with their personal brands through new digital experiences. In reality, it has never been more difficult to be a food company. Consumer demands have expanded to include ethical mantras but have not given way to requirements of convenience. However, spending trends show that consumers are ready and willing to pay a premium for foodtech innovations that can meet their ever-increasing needs of convenience, health and low environmental impact. The opportunity for food innovators to capitalize on these market demands is growing at a tremendous pace.

Why You Should Care

Food is the most potent tool we have for physical and mental well-being and there are huge gaps between consumers who agree it’s important for food brands to offer wellness options versus consumers who think brands are actually delivering wellness. The Global Wellness Institute reports a US$702 billion Healthy Eating, Nutrition & Weight Loss Wellness market in 2018.

Consumers measure a brand's purpose in part through its wellness impact. The purpose is real to consumers when a brand improves their lives, their community, and the environment — all characteristic of a holistic wellness brand. Wellness makes purpose tangible, but customers have higher expectations. Wellness in terms of food has been extremely correlated to plant-based applications and innovations, opening a bigger market opportunity with the intersection of the plant-based market with the US$4.5 trillion wellness economy. According to Oglivy, Mexico has the highest wellness food gap, where 91 percent of the consumers agree it's important that food brands offer wellness options while only 61 percent think brands are delivering.

Fig. 3 Consumer wellness gap in the food sector, according to Oglivy

The bad news is that we don't have much time to change things around. The good news is that, somehow, we can all participate actively in this transformation. That's the nobility of this industry. It also where, in my humble opinion, I expect that the brightest and most-determined talents will start participating in the coming years.

Changing the world sounds like a utopian idea but we forget that it is compounded by individuals. We all know about the problems that are happening but the constant among all of them is our indifference; it is the lack of consciousness that it can only start by changing ourselves first. To all my dear friends already participating in this industry, I can only express my gratitude and admiration for you all. Let's keep pushing for a better tomorrow, today.

The data used in this article was sourced from:  
● Euromonitor 2020: Unstoppable Rise of Plant based Alternatives ● Ogilvy: The Wellness Gap ● TechCrunch 2021: The present and future of food tech inv
Photo by:   Aldo González