Foodtech: Can New Wave of Startups, Scaleups Save the World?
Home > Entrepreneurs > Startup Contributor

Foodtech: Can New Wave of Startups, Scaleups Save the World?

Photo by:   Vincent Speranza
Share it!
By Vincent Speranza - Endeavor
Managing Director of Mexico and Latam Regional Adviser


Foodtech is about to burst … in a good way, of course. It is now a well-known and shared experience: confinement modified our consumption habits, forcing us to eat more at home and less outside. This, in turn, led to supermarkets having to reinvent themselves.

The pandemic also accelerated a new consciousness, especially regarding the environment, ethics, equitable consumption, and the origin and traceability of the products we purchase. These topics are integrated into our narrative, which is leading us, as consumers, to opt for brands that share these interests and values.

We are also seeing an increase in entrepreneurial activity related to food technology, with companies that are reinventing the different links along this value chain to overcome the various frictions that have been built between the parties, from those who are innovating with healthy, natural, organic, and healthy products, or even alternative foods, and those that market them with originality, to those that move these products throughout Mexico, Latin America, and the US. 

In fact, there are 323 startups and scaleups in Latin America that belong to this vertical, with proposals that are causing disruption in their fields. For this reason, Endeavor and PepsiCo recently joined forces and launched the study, “The FoodTech Landscape in Latin America,” with the purpose of analyzing the sector and contributing to the development of a sustainable foodtech entrepreneurial system in the region.

The key findings of this report are:

  • These companies employ more than 29,000 people and have raised US$1.7 billion in capital since 2011.
  • The Top 3 categories represented are Logistics and data management (22 percent), Sales (17 percent), and Organic, natural or healthy products (16 percent). Others include Packing and packaging, Transportation and distribution, Marketplaces and e-commerce.
  • Among foodtech companies with less than 10 years of operation, only 24 percent have managed to scale and employ 50-plus people. This small subset of companies is responsible for 83 percent of total jobs in the sector.
  • Corporate Venture Capitalist (CVC) activity in the sector quadrupled in 2020. Bimbo, Wayra and FEMSA are leading the scene in Latin America.
  • Twenty-six percent of foodtech startups have expanded internationally. The most popular destination for expansion is the US, followed by Mexico and Brazil.

Speaking about Mexico in particular, it is interesting that our country is one of the most popular expansion destinations for foodtech ventures. The reasons are several: the size of the market is key, but also that the countryside is a fundamental part of Mexican food culture, along with the opportunities and challenges that revolve around this strong dependence on the land.

Regarding this last, I can say that the distribution and logistics factors, meaning the delivery of the products and its commercialization, both for e-commerce and for traditional businesses, represent critical elements for the success of startups and scaleups. Yet, both areas have many opportunities for improvement because we are a huge country and large distances increase the complexity of transporting food and perishables. We must also remember that Mexico is an exporter of many foods, so these challenges are not only internal but extend to international logistics.

Another common challenge of foodtech entrepreneurs that we detected in the study is that they all compete against giants. The big players are dominant and very likely to acquire early-stage companies to have them in their portfolio, or to copy successful phenomena, such as quick delivery.

Thus, the dynamic is usually “David versus Goliath,” which implies that the new actors have to be very agile, know how to choose their market niche very well, and have a very particular communication with their target audience so that, when they reach the shelves, they are already known to have an accelerated adoption curve. It is not minor.

I think this is going to be an industry in which there will be a lot of mergers and acquisitions, especially by large companies for startups, which is going to stimulate the ecosystem in a positive way. And it should be noted that we are also going to more often see cases of acquisitions between scaleups and complementary startups to accelerate operational expansion. Such is the case of Jüsto, the first Mexican digital supermarket that recently acquired Freshmart, the main online supermarket in Peru.

I am very excited to think about what the evolution of this industry will mean, but I predict that it will benefit humanity, thanks to its holistic approach to environmental and fair-trade issues. If these companies do it well, they will dignify the farmers and create better conditions for the environment, which will mean, in turn, that the planet will do better. Thus, its impact can be gigantic.

That is why Endeavor is supporting foodtech entrepreneurs; their mission is not an easy one, especially in a country where the rates of obesity, diabetes and bad habits are so high. This is a very patient race and they will need enough funding and oxygen to hold on and stay on their feet.

True, they are in a very dominant and powerful industry, which is also well funded. But that's what the fintech industry looked like a few years ago when the first financial technology startups were born, and look at where this ecosystem is today. I think that, currently, foodtech is like fintech in its infancy, breaking the mold and changing the culture one step at a time. But, in about five years, there will be unicorns and ultra-dominant foodtech brands that are going to change the rules of the game.

Time will tell, but I do believe that these entrepreneurs can change the world, especially because they are forcing us to modify our mentality and habits so that we are more aware and respectful of nature and the way we relate to it. It may be a very romantic point of view, but I am sure that we are not the only ones and that, by joining forces with other dreamers, we will achieve a true transformation for our current and future well-being.

Photo by:   Vincent Speranza

You May Like

Most popular