Why the food tech sector is giving investors food for thought

by | Nov 8, 2022

By Neil Shah, Executive Director of Content & Strategy at Edison Group

Russia’s invasion of Ukraine and the worsening climate crisis represent two of the most significant challenges to global food security since the end of the Second World War. With news that Russia is withdrawing from the grain transportation deal that it signed in early July, the US government predicts that countries in the global south will feel an immediate and harmful impact to their food security.[1]

Combined with the growing impact of climate change which is fragmenting global food supply chains, companies and governments alike are increasingly looking to food tech to tackle food insecurity.

New food production technologies and products – ranging from hybrid plant-based through to fully 3D printed steaks – have the capacity to change the future of the food industry and tackle the root causes of global food insecurity. This in turn represents a significant opportunity for investors with a strong appetite for growth and sustainability.

Demand for alternative proteins is on the rise

It is widely accepted that 2022 has been a difficult year for global financial markets, and the food tech industry is by no means immune. Beyond Meat, a leader in plant-based meat substitutes, has seen its shares collapse nearly 80% and its growth stunted by high inflation and rising competition.[2]

Despite initial setbacks, if it is to improve and produce healthier and more environmentally friendly methods of food production, the food industry is increasingly incorporating and investing in food technology.

Alternative protein companies, for example, have so far this year raised $1.7 billion USD, with the alternative protein market size forecasted to represent 10-45% of the global meat market by 2035.[3] This growth in investment mirrors the shift in consumer behavior over the last few years, with many now looking for sustainable and nutritious meat-free alternatives.

For investors, this represents an opportunity to invest in an industry which is expected to become an integral component of the multi-billion dollar global food industry.

The new food frontiers

Indeed, technological innovation within the industry is broader than investors might think. AI powered indoor farms, cultured meat-based alternatives, and other alternatives to industrialised food production methods provide transformative solutions to the challenges faced by the food industry.

Outside of tackling food insecurity, technological innovations also support manufacturers through optimising the cell lines and scaling up the process from laboratory to pilot size, to produce alternative meat products that move towards replicating the sensory experience of conventional meat as closely as possible.

As companies move towards the development of more biologically and sensorily equivalent alternative proteins, there is significant potential for investors and companies alike to capitalise on the global and systemic trends supporting sustainability, food safety and food security.

Emerging markets feeding growth

A recent report examining total investments made, including exit activity, found that food tech has surpassed agtech for the first time in history.[4] This is particularly the case in emerging markets. With a growing emphasis on food security and sustainability Asia has been leading the foodtech revolution, with over half of the annual intellectual property filings for alternative proteins originating from Asian-based companies.[5]

With a renewed effort in the Asia-Pacific region to tackle climate change, food tech innovation could help replace traditional food production techniques whilst also providing people with access to nutritious alternative proteins. For investors looking to invest in initiatives which will make a positive change to the world around them, the food tech sector is endeavouring to help win the war against hunger.

However, as more investors continue to get excited about these opportunities in the emerging food tech sector, startups and established businesses alike will have to provide investors with more than food for thought. Effectively communicating their mission to investors unfamiliar with the sector will help businesses to drive forward with their dream to revolutionise the way we think about food production.

[1] https://www.reuters.com/world/us-says-russian-grain-deal-move-is-having-immediate-impact-food-security-2022-10-31/

[2] https://uk.news.yahoo.com/beyond-meat-introduces-beyond-steak-shares-down-more-than-80-year-to-date-123544294.html

[3] https://www.foodingredientsfirst.com/news/report-reveals-a-record-us17b-investment-in-alternative-proteins-in-first-half-of-2022.html

[4] https://www.cbinsights.com/research/food-beverage-startup-investors/

[5] https://www.rootsanalysis.com/reports/plant-based-meats-intellectual-property-landscape.html

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