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The Spoon

Daily news and analysis about the food tech revolution

Data Insights

AgFunder: Record-breaking $31B Invested in Agrifood Tech in 2020

Ag tech VC firm, AgFunder, released its annual report on agrifood tech funding today. Companies in this sector raised $26 billion in 2020, a 15.5 percent increase over 2019. If that wasn’t enough, AgFunder actually expects that already record-breaking figure to bump up to $30.5 billion as more deals done in 2020 are revealed.

The AgFunder 2021 Agrifoodtech Investing Report breaks the agrifood tech sector into “upstream” companies, which are closer to the farm, and “downstream” companies, which are closer to the consumer. AgFunder said that for the first time on record, upstream companies outraised downstream companies in 2020. Those upstream companies pulled in $15.8 billion across 1,950 deals, while downstream companies raising $14.3 billion across 1,142 deals.

AgFunder also found that alt-protein/novel ingredient/functional food companies raised $2.3 billion across 26 deals, and that e-grocery was the most funded downstream category, raising $5.1 billion across 119 deals. AgFunder noted that the agrifood tech sector is maturing, with startups at both growth and late stage raising larger deals than ever before.

“This is no longer seen as a niche, experimental and risky sector, highlighted by the increase in the median size of growth stage and late stages deals,” Louisa Burwood-Taylor, head of media & research at AgFunder, said in today’s press announcement. “Investors piled in despite Covid; the first wave of innovators in each category are now mature and able to raise huge rounds with many household names such as Impossible Foods; and the second wave of innovators is now raising much larger rounds than the first wave did at the same stage.”

What’s interesting about that statement is that AgFunder positions this growth in agrifoodtech as being in spite of the pandemic. While the pandemic has inflicted enormous economic difficulties around the world, it also seems like there was increased investment because of the pandemic. Downstream technologies in particular benefited as restaurants and grocers all accelerated adoption of systems that reduced human-to-human interaction and helped meet the rising demand for e-commerce to get our food.

AgFunder’s report reinforces earlier data showing the increased investment in food tech in 2020. Pitchbook said that a little more than $12 billion was invested in food tech companies last year. There is probably some definitional and scope differences between the two reports, but the broader point stands. Food tech companies raised a ton of money last year, and with the pandemic still very much a part of our lives, the breakneck pace of investment will continue in 2021.

U.S. Online Grocery Sales Hit $9.3 Billion in January

Total grocery e-commerce sales in the U.S. hit $9.3 billion this past January, with nearly 70 million households placing an average of 2.8 orders across delivery, pickup and ship-to-home categories, according to a new Brick Meets Click/Mercatus Grocery Shopping Survey.

January’s $9.3 billion in sales is up 15 percent over November 2020, and Brick Meets Click credits a large part of this growth to a 16 percent increase in the number of households that buy groceries online.

Among the survey’s findings:

  • Seventy-seven percent of all online grocery spending went to delivery and pickup.
  • Seventy-eight percent of households engaged with a delivery or pickup service (up from 64 percent in November).
  • Ship-to-home usage rate dropped from 56 percent to 46 percent during the same period.
  • Despite growth in other areas, the overall usage rate in January fell short of the record 76.7 million households that shopped online in April 2020 (at the height of the pandemic’s first wave).

Pickup and delivery’s share of orders grew roughly six percent from November, accounting for 66 percent of all online orders completed during January 2021.

While online grocery saw a lot of gains over the past few months, the overall satisfaction metric (the likelihood of using a specific service again) with online grocery dropped to 56 percent, down 32 percentage point from the record high ratings level in November. Pickup had the biggest drop, losing 35 percentage points.

“Even though many grocers remain capacity constrained – especially with pickup – others are growing market share as they staff up or expand pickup to a larger store base,” David Bishop, partner, Brick Meets Click said in today’s press announcement. “While throwing more labor at the issue isn’t ideal, this, along with improving assembling productivities via enhanced pick and pack practices, is vital to remaining competitive in the near term and not inadvertently giving your customer a reason to shop elsewhere.”

As a grocery industry watcher, it’s always fun when these types of market numbers come out to see if and how people are adopting online grocery. But these numbers are also important because grocer retailers are currently investing a lot of money in systems and infrastructure to fulfill online grocery orders. Ahold Delhaize and Walmart recently announced expanded automated fulfillment centers for their stores, and Kroger will start opening its automated customer fulfillment centers this year.

As vaccines arrive and the pandemic recedes (knocks on wood), the question will be how much people’s habits have changed thanks to COVID, and for how many online grocery shopping will become the new normal.

ReFED: Food Waste has ‘Leveled Off’ Since 2016, But More Must Be Done

The total amount of food wasted in the U.S. has leveled off since 2016, while food waste per capita has decreased 2 percent over the last three years, according to ReFED’s newly launched data hub, the Insights Engine. But more must be done to meet the country’s goal of cutting food waste by 50 percent by 2030.

First announced last year, the Insights Engine is an online hub for data and analysis related to the global food waste problem. Among the other findings ReFED released today:

  • In 2019, 35 percent of food went uneaten or unsold. That’s the equivalent of throwing away $408 billion or 1.9 percent of U.S. GDP.
  • More than 50 percent of waste at the farm level is from food that does not get harvested but is perfectly edible.
  • Seventy percent of food waste at restaurants and foodservice businesses comes from customers not finishing their meals.
  • At-home food waste remains the largest generator of food waste in the U.S.

ReFED estimates that an annual investment of $14 billion will be needed to implement the kinds of solutions that will reduce food waste by 45 million tons annually. The Insights Engine reviews over 40 of these solutions, analyzing them based on things like net economic benefit, greenhouse gas emissions reduced, jobs created, and meals recovered. The Engine also provides a directory of organizations helping fight food waste, a tool that tracks current and upcoming food waste policies, and an “impact calculator” that puts into numbers the impact of food waste on the climate, economy, and population.

Roughly 1.3 billion tons of edible food worldwide goes to waste each year, and experts predict this number will jump to 2.1 billion by 2030. Solutions to this problem span everything from food rescue companies to technologies for preservation, cold storage, harvest and post harvest, and many other ideas, tools, and processes.

As a companion to the Insights Engine, ReFED also released its “Roadmap to 2030” framework today, which will help the organization implement the solutions found in the Insights Engine. It outlines seven “key action areas” for fighting food waste over the next 10 years, and also includes a financial analysis of where investments (public, private, philanthropic, and capital) should be directed.

Orders for Food and Consumer Goods Robots Grew 56 Percent Last Year

Often when we write about the growth in food robotics, it’s based on anecdotal data. For example, over the past year robot startups have told us that thanks to COVID-19, they’ve seen a surge in demand.

Now, thanks to the Association for Advancing Automation (A3), we have some hard numbers to reaffirm what we’ve already been reporting. The A3 announced yesterday that for the first time last year, orders of robots for non-automotive purposes surpassed automotive robot orders. According to the press announcement, sales of robotic units in North America in 2020 were up 3.5 percent over sales in 2019. North American companies ordered 31,044 robotic units at a value of $1.572 billion last year.

For our specific purposes here at The Spoon, the A3 said that orders for food and consumer goods robots grew by 56 percent in 2020. And not only were more robots being ordered for the food sector, they were being used for higher-level tasks. Mark Joppru, Vice President, Consumer Segment & Service Robotics, US ABB Robotics and Machine Automation, said in the A3 press release:

In food applications, for example, where robots were traditionally used to automate simpler processes like case loading, they are increasingly being commissioned for higher value processes, like directly preparing food, resulting in improvements to food safety and hygiene. While these trends have existed for several years, COVID has changed perceptions and priorities for customers, accelerating the adoption of robotic automation.

This echoes what we’ve been hearing from food robot startups throughout the pandemic. Cleanliness and hygiene are the new priorities for the companies buying food robots. Robots provide a contactless way of preparing, ordering and delivering food, create more social distance in kitchens and can help alleviate staffing issues.

Just as important, robots are getting more sophisticated and, as Joppru points out, able to complete higher value tasks. Flippy is working the fryers at White Castle. Woowa Brothers delivery bots are integrating with elevator and security systems to increase navigation within buildings. And robot kiosks like RoboEatz can prepare 1,000 meals before needing a human to refill the ingredients.

Given the constant stream of robot news we’re been writing, it’s not too hard to imagine that this time next year, we’ll be writing about record growth for the industry in 2021.

Black Box Intelligence: December 2020 Restaurant Sales Were the Lowest Since July

The fourth quarter of 2020 was bad for restaurant sales, with December being “the worst month” since July, according to the latest data from Black Box Intelligence, which shared the information in its monthly Nation’s Restaurant News update.

By December, same-store sales growth fell to -13.3 percent year over year, while same-store traffic growth clocked in at -18.6 percent. In comparison, same-store sales in November were at -10.3 percent and same-store traffic growth at -16.3 percent.

Black Box noted that multiple factors contributed to poor sales numbers for restaurants in November and December. Those included a hike in COVID-19 cases and new dining room restrictions as a result of those rising case numbers. It being wintertime, colder weather limited or eradicated outdoor dining options in many parts of the country, further contributing to lagging sales numbers.

Despite the poor sales numbers, Black Box suggests that restaurants “were successful” in raising guest sentiment for their brands in December. 

Ambience, which in this case relates a lot to cleanliness and transparency around safety procedures, saw the largest improvement in terms of guest sentiment: “Meeting or exceeding [guests] expectations for safety is rewarded with positive feedback online.” 

Somewhat tricker is sentiment around the actual food. Food sentiment “dropped considerably” from November to December. This occurred simultaneously alongside a rise in off-premises orders and a slowdown in dining room sales due to the aforementioned restrictions. As Black Box states in this latest report, sentiment around food has “always been significantly lower” than food in the dining room. 

Restaurants have grappled with the challenge of maintaining quality food in a takeout environment since the pandemic first shut down dining rooms nearly a year ago. Tactics for better to-go food include things like paring down menus to the basics and completely redesigning menus to feature delivery-friendly fare.

Off-premises orders are now the major money-maker in the restaurant biz, and will likely continue to be for some time. The simultaneous rise of ghost kitchens only adds to this focus on delivery and takeout formats. All of which is to say that restaurants must continue to improve their to-go food, regardless of what happens to same-store sales over the next few months.

Brightseed’s First Major Phytonutrient Discovery Finds Black Pepper May Help with Fatty Liver

Brightseed, which uses artificial intelligence (AI) to uncover previously hidden phytonutrients in plants, today announced preclinical data from its first major discovery targeting liver and metabolic health.

The discovery was made with Forager, Brightseed’s AI platform that looks at plants on a molecular level to identify novel phytonutrient compounds (for example, antioxidants in blueberries). Once found, Forager then catalogs these compounds and uses that information to predict the health benefits of those compounds.

With today’s announcement, Brightseed’s Forager has identified phytonutrients that can help with fat accumulation in the pancreas and liver, a condition linked to obesity. Brightseed explained its findings in a press release, writing:

Using a computational approach with data from Brightseed’s plant compound library, Forager identified two natural compounds with promising bioactive function, N-trans caffeoyltyramine (NTC) and N-trans-feruloyltyramine (NTF). Researchers determined that these compounds acted through a novel biological mechanism governing the accumulation and clearance of liver fat. The preclinical data was presented in the fall of 2020 as a poster session at The Liver Meeting® Digital Experience hosted by American Association for the Study of Liver Diseases, and published as abstract #1679 in Hepatology: Vol 72, No S1. 

The release continued:

IIn preclinical studies, NTC and NTF acted as potent HNF4a activators, promoting fat clearance from the steatotic livers of mice fed a high fat diet, by inducing lipophagy.  HNF4a is a central metabolic regulator that is impaired by elevated levels of fat in the bloodstream resulting from chronic overeating. Administered in proper doses, NTC and NTF restored proper function of this central metabolic regulator, including maintaining healthy lipid and sugar levels in the bloodstream to normalize organ function. Their activities were confirmed using a cell-based human insulin promoter activation assay. Forager found NTC and NTF in over 80 common edible plant sources. 

One of those plant sources, Brightseed Co-Founder and CEO, Jim Flatt told me by phone this week, is black pepper. Now, before you run out and grab your pepper grinder, there is still a lot of work that remains before the results of this discovery bear out.

First, the compounds still need to go through clinical trials to validate Brightseed’s initial findings. This includes not only confirming any health benefits, but also determining the doses and best methods for administering the compounds. Then the best plant source for those compounds needs to be determined as well as the best method for compound extraction. Flatt told me that if all goes well, you can expect to see some form of supplement on the market by the end of 2022.

Even though that is a ways off, part of the reason to be excited by today’s announcement is because of how little time it took Brightseed to make this particular discovery. Through its computational processes, Flatt told me his company was able to shrink what used to take years down to months. “Fifteen to 20 percent of time that is computational saves us 80 percent of the time in the lab,” Flatt said.

Brightseed has already analyzed roughly 700,000 compounds in the plant world for health properties and says it’s on track to surpass 10 million by 2025. Doing so could help unlock a number of previously unknown treatments for a number of ailments and conditions as well as general improvement to our metabolic and immuno health.

In addition to independent research such as today’s findings, Brightseed also partners with major CPG brands to help them identify new applications for their products. For instance, Danone is using Brightseed’s technology to help find new health benefits of soy.

Brightseed’s announcement today also reinforces the bigger role AI will play in our food system. AI and machine learning is being used to do everything from turning data into cheese, to solving complex issues around protein folding.

As more discoveries using AI are made, more investment will be poured into the space, which will accelerate even more discoveries.

Ketotarian, Mushrooms and Innovation Among Kroger’s 2021 Food Trend Predictions

Grocery giant, Kroger provided its food trends recap of 2020 and predictions for 2021 over the weekend. And while the list is definitely a PR move, it does provide a little insight into where the retailer thinks food is headed over the coming year.

But before we get into Kroger’s predictions, let’s take a quick look back at what foods trended at the retailer over 2020. Kroger compiled its results from year-over-year sales growth across Kroger’s business including its roughly 2,800 retail stores as well as pickup, delivery and ship. Based on that, these foods were the big winners of 2020:

  • Zero-Calorie Soft Drinks
  • Four-Cheese Mexican Blend Shredded Cheese
  • Flavored Potato Chips (Hot & Spicy, Regional Flavors & Meal-Inspired Varieties)
  • Sauvignon Blanc Wine
  • Heavy Whipping Cream
  • Fresh Burger Patties
  • Artisan Breads & Restaurant-Style Buns
  • Bulk Individual Coffee Pods (96-Count)
  • Party-Size Bags of Variety Chocolate
  • Black Forest Ham

Snacks. Cheese. Wine. Kroger’s list does seem to accurately reflect our collective mood during the pandemic year, when most of us were locking down and not leaving the house. Perhaps what’s more interesting, however, is what’s not on that list: Plant-based foods. Or plants of any kind, really.

This lack of plant-based burgers is in contrast with larger data showing that sales of plant-based meat (Beyond Burgers, Impossible Burgers, etc.) skyrocketed during the pandemic. The animal-based meat supply chain was strained as people panic-shopped, and ethical concerns over meat processing were raised as meat packing facilities became COVID hotspots.

That there were no plant-based foods on Kroger’s list could be a function of the type of shoppers the store gets, or that the growth in plant-based foods wasn’t enough when compared with the other foods. Snack foods, in particular made a comeback during the pandemic as we all tried to find comfort where we could.

Comfort food is actually a trend that Kroger sees continuing into 2021, writing that “Easy-to-prepare comfort foods are on the rise as consumers look to balance convenience and quick preparation times with flavorful meal options.”

While plant-based foods may have been absent from Kroger’s 2020 trends list, the retailer predicts that a “ketotarian” diet will become more popular this year. As Kroger explains, a ketotarian diet is “a plant-based spin on traditional keto guidelines. Consumers can expect to find a growing selection of these plant-based, high-protein foods on grocery shelves in the year ahead.”

While we’re talking about plants, Kroger also predicts that mushrooms will play a bigger role in our diets this year, writing “Consumers should expect to see mushrooms play a starring role in a variety of new products in 2021, including blended plant-based proteins, condiments, spices, seasonings and more.” We’ve actually been watching this mushroom mania play out over the past year here at The Spoon as mushrooms and mycelium kept popping up as the backbone for new types of proteins including cuts of plant-based meat.

One of Kroger’s 2021 predictions is also near and dear to our Spoon hearts: Innovation in the fresh food aisle. Kroger said to look out for in-store hydroponic farms and plant-based coatings like Apeel that extend the shelf-life of produce among the new technologies to look out for.

A trend that Kroger didn’t mention was food-as-medicine, a space which the retailer has been a leader in. We probably shouldn’t tie this list too much into overall business strategy for the company, but it’s noticeable, given everything that is on the list.

Whether or not it’s a PR stunt, Kroger’s predictions actually seem pretty reasonable, though I wish they had predicted a few more robots, especially since they are building out all those automated warehouses.

Data Analysis Shows Strong Foot Traffic Debut (and Dropoff) for Amazon’s Woodland Hills Fresh Store

It was by no means high on the list of disappointments in 2020, but I was still bummed that I couldn’t visit Amazon’s first Fresh grocery store in Woodland Hills, CA when it soft launched in August of this year.

It was Amazon’s first full, physical supermarket (the company had opened smaller scale Go Grocery stores before) and excitement was high. What types of Amazon-type technology would Jeff Bezos bring to the grocery sector?

Evidently a lot of people were keen on checking out Amazon, Fresh, according to data released this week from Placer.ai, a company that uses mobile phone location data to gather and analyze foot traffic to real world retail locations.

According to Placer, Amazon Fresh saw a surge of customers in the first weeks it opened to the public in September. In a blog post this week, outlining its findings, Placer wrote:

The first week saw visits on par with two local players with very strong visits rates, Trader Joe’s and Ralphs. But, Amazon Fresh quickly burst ahead with four of the next five weeks seeing the location drive over 5,000 more visits per week than either of those two competitors.

Amazon Fresh was also getting roughly the same number of visits per visitor as comparable grocers. Ralph’s and Trader Joe’s were seeing 2.4 and 2.2 visits per visitor respectively, while the new Amazon Fresh was already seeing 2 visits per visitor, indicating that people were having a good enough experience at Fresh to come back.

Placer reports that one of the reasons Amazon Fresh enjoyed so much foot traffic is because of the store’s “True Trade Area.” When picking a location for a store, a grocer might consider its main customer base to be within a straight five-mile radius of that store. But Placer’s data gathering shows that this strict geographic limitation isn’t accurate, and that a store’s shopping base can actually come from further out. This expanded reach is what Placer calls the True Trade Area.

As you can see from this map, Amazon Fresh Woodland Hills’ True Trade area actually covers a large swath around Los Angeles, so it was pulling customers from outside of Woodland Hills.

I was curious about some of Placer’s findings, so I spoke with Ethan Chernofsky, Placer.ai’s VP of Marketing (and author of the Amazon blog post), by phone this week. My first question was whether some of Fresh’s sizeable foot traffic could be attributable to curbside pickup. Amazon.com’s customer base it so huge, perhaps people were just ordering groceries online and picking them up at the Fresh store, even if that meant driving to another part of town. But Chernofsky said that was unlikely, given the length of time people were staying at the Fresh location.

But while Amazon Fresh enjoyed an early boom in foot traffic, starting in October, Amazon Fresh saw its numbers fall. As the Chernofsky detailed his analysis “Between October and November, the Amazon Fresh True Trade Area decreased by 27.1%, just as monthly visits declined 27.6%. On the other hand, Ralphs saw visits rise 13.7% as its own True Trade Area declined by 7.1%.”

One explanation for the drop could be that the excitement wore off, and what was once shiny and new was no longer shiny and new. Chernofsky doesn’t think that’s it though. As he wrote in a corporate blog post “the close relationship between visits per visitor metrics between the top local grocers indicates that this location was actually succeeding in driving repeat visits even among the launch buzz.”

Instead, Chernofsky attributed the drop to the COVID resurgence in Los Angeles this fall. As the virus reemerged, travel and work was limited, so there was less cross shopping, or tacking on a visit to the grocery store during an errand.

Amazon Locations Around Los Angeles

Another factor could be the fact that Amazon added three additional Fresh locations in Los Angeles since the opening of the first Woodland Hills location. The Northridge and North Hollywood locations both opened in mid-November and seem like they would draw from the same pool of customers as the Woodland Hills location’s True Trade Area.

Regardless, data like that from Placer is worth looking at to see how well Amazon is doing as it starts its forays into real world grocery. I’m still looking forward to a time when I can see the Amazon Fresh stores in person.

Report: Foot Traffic to Major QSRs Down by 50 Percent from Start of Year

It’s probably not much of a shocker to learn that far fewer people are venturing inside quick service restaurants (QSRs) these days. There is, after all, a global pandemic that continues to rage across the U.S. But Yahoo Finance posted a story over the weekend with actual data showing just how precipitous the drop in foot traffic has been for a number of major QSR brands.

According to location intelligence service Gravy Analytics, as of December 8, foot traffic to Burger King, Popeyes, KFC, Pizza Hut, Taco Bell, Domino’s, Papa Johns and Starbucks fell 50 percent compared to February 2020. Furthermore, Gravy Analytics reports that foot traffic to Chick-Fil-A, McDonald’s, Wendy’s, Dunkin and Chipotle dropped more than 40 percent compared with pre-pandemic levels.

Obviously the key word here is “pandemic,” which forced big changes to restaurants of all sizes here in the U.S. Early on in the pandemic, restaurants in various parts of the country were forced to close dine-in operations entirely. Though many have reopened, most dining rooms still operate under reduced seating capacity and other restrictions as states continue fighting the virus. [I REWROTE THIS GRAF FOR CLARITY]

Given that fewer people could physically stand and sit inside a restaurant, it makes sense to see the kind of drop in foot traffic that Gravy Analytics reported. And as we learn more about COVID, especially how it travels farther and faster inside restaurants than previously thought, these types of limitations are likely to stay in place until the vaccines are widely available. The question now is, even when the vaccine arrives, will people still want to dine in, or equally as important, will QSRs want them to?

In response to the pandemic, QSRs have been aggressively pivoting away from dine in and more towards drive-thrus and delivery. In the back half of this year, McDonald’s, KFC and Burger King have all announced various plans for future store designs to emphasize pickup and drive-thru operations rather than dine in options. At the same time, the rise of delivery services like DoorDash and Uber Eats means that hungry consumers don’t even need to leave their couch if they want a Big Mac or a Whopper.

With 2020 almost in the rearview mirror (thankfully), and the aforementioned vaccine on its way, hopefully the numbers we see from QSRs and all restaurants will be a lot better.

Connecting Demand to Supply: 2021 Food Supply Chain Tech Outlook

This is a guest post written by Seana Day and Brita Rosenheim, Partners at Culterra Capital, an advisory firm focused exclusively on tech-driven innovation across the food system. You can also find their 2020 Farm Tech and Food Tech Industry Landscapes and analysis at Culterra Capital.

We have been covering the Food Tech and AgTech sectors for the past decade, yet COVID-19 thrust the food supply chain into the spotlight as we could have never anticipated. Against the backdrop of the current pandemic, as well as nearly $500 billion in annual food waste occurring from food harvest to distribution and retail globally, it was time for a dive deep into the technology that will shape the food supply chain in 2021 and beyond. 

For those also following the tech-driven food sector it is no surprise that, to-date, most investment and innovation fanfare have been focused on the food system end-points of AgTech and Food Tech. However after our recent odyssey into the Food Supply Chain Tech category, it is quite clear to us that there is a tremendous, untapped opportunity for vertical-specific technology companies which are focused on serving the unique needs of the food supply chain.

It is with this sense of urgency and optimism about new frontiers of innovation, agility and investment that we launch Culterra Capital’s inaugural 2021 Food Supply Chain Tech Landscape:

Click image to enlarge.

For the purposes of this analysis we have highlighted a handful of predictions for the year to come, as well as emerging themes and key innovation trends that we believe will continue to impact the four supply chain pillars (Supply, Production, Logistics/Distribution, Demand).

While we cover a number of digitalization-driven opportunities for food system participants to strengthen their resilience, profitability and agility, we will reserve deeper dives into the sector-specific drivers and practical adoption obstacles in later reports. But first, a brief primer on navigating the landscape before we dig into our key takeaways below:

How to Navigate the 2021 Food Supply Chain Tech Landscape

  • “Food Supply Chain Tech” here generally refers to the technology enabling the processes and movement that occur between the farm gate and the loading dock/back door of the grocery retailer/food service provider. 
  • This is a heatmap, not a comprehensive catalog: While clearly not exhaustive, this map is meant to illustrate the layers and variety of technology solutions, early stage to mature, and primarily enterprise or B2B-focused. We have generally filtered the companies based on their food and ag customer base, and while mainly US-focused, have included a handful of global companies. Our FarmTech (inside the farm gate) and Food Tech (retail/food service/D2C) landscapes cover the other end points of the food system.  
  • IT-Driven Focus: The landscape focuses predominantly on digital technology-related companies, and although hardware is (mostly) unplugged from this landscape, there is a strong recognition that hardware is an essential part of the technology landscape, especially as it relates to key trends around Industry 4.0 and networked equipment.

In order for us to drive down and understand the many, extraordinarily complex functions involved in the food supply chain, we have organized the market around four key pillars of activity: 

  1. First Mile (Supply)
  2. Production / Food Processing (primary and secondary)
  3. Distribution and Logistics
  4. Retail / Food Service / D2C (Demand)

Across the bottom of the landscape, we included value chain players which integrate across multiple pillars.  

Is Data Automation Bringing Sexy Back?

The overall food and ag industries are among the lowest penetration of digitalization relative to every other sector of the global economy. And while it is well understood across the food industry that modernization and investment in data infrastructure represent a necessary and essential first step, the challenge of “going paperless” is still a real hurdle.

Yes, we understand that “going paperless” is less sexy than, perhaps, micro-fulfillment robotics. But increased workflow and data automation solutions in the food supply chain holds significant power to help the food supply chain leapfrog into digitalization.

Data automation leverages ML/AI to digitize and automate document processing and manual back office processes like managing vendors, suppliers, contracts, key communications, appointments, and so on. Because of the highly fragmented nature and sprawling ecosystems, data automation brings critical resource management, accuracy and most importantly, an underlying digital foundation to the food supply chain. 

Examples of workflow and data automation solutions focused on the food sector include Proagrica, Big Wheelbarrow, and Wholesail. 

A digital foundation is also a key enabler of business innovation for participants up and down the Food and Ag system, like data-driven demand prediction. For example, today our food system is fundamentally supply-driven. Crops or livestock are harvested at a point in the season, and the producer is a price taker. Producers have long sought to overcome this risk / reward imbalance by vertically integrating, and we continue to see that from all sides whether it is Kroger or Walmart integrating their dairy supply chain, or Driscoll and Naturipe branded berries.

Those players who have access to demand data from the retailers, consumers and foodservice outlets, and can control several steps in the supply chain, can better understand when and where to sell, as well as how to maximize their profit through demand insights. 

Similarly, with better demand data flowing into the distribution, logistics and production pillars, companies can better manage over / underproduction and reduce waste, while also improving the utilization of their own assets (equipment, labor, utilities, storage, etc.). 

MOM Knows Best?

Mostly overlooked by venture capital investors, there has been a dearth of significant outside investment in food production and manufacturing business tools, like Manufacturing Operations Management (MOM) software, which represents a collection of systems for managing end-to-end manufacturing processes and automation. The core MOM subsystems include: 

  • MRP (Material Requirements Planning):  packaging, raw material planning, procurement scheduling, etc.;
  • MES (Manufacturing Execution Systems): used to track and document the transformation of raw materials to finished goods; and
  • Other categories of Enterprise Asset Management which fall into this broader manufacturing tech category. 

Largely the domain of established and legacy software companies, vertical, food-focused MOM and Enterprise Resource Planning (ERP) systems are becoming increasingly recognized for their potential to supply foundational, batch-level data for AI/ML-driven analytics, more nimble food production processes, greater workflow automation, optimization of procurement, and so on.  

At the same time, the broader technology landscape is shifting from a traditional manufacturing automation stack (ERP/MOM) to a IIoT stack (Industrial Internet of Things) which leverages a combination of app development, platform cloud, connectivity, and hardware. This intelligent manufacturing stack will be central to unlocking the promise of a more agile, visible and collaborative food supply chain.  

In looking ahead, it is important for tech innovators to understand both the complexity and opportunity stemming from ERP/MOM/IIoT stacks, as the critical data captured in these subsystems has multiple beneficiaries and is also poised to enable business model innovation across the value chain, from ag producers, to manufacturers, distributors and beyond. 

As an example, it is generally a challenge for ag producers to track and trace raw materials once they hit the processor (both primary and secondary). In food value streams like protein (animal) processing, automation and batch processing are hard to achieve given the nature of tracking disassembly (“primary” – one carcass that turns in hundreds of cuts or many SKUs) vs. assembly (“secondary” – a dozen ingredients combined into one product or SKU). 

However, increasingly sophisticated and connected MOM systems are beginning to deliver batch-level tracking which makes verification of farming practices (regenerative, non-GMO, organic, etc), genetics / genealogy or origin claims easier to authenticate.  

This is one of many examples that reinforces our belief that domain-specific manufacturing software and systems for the food and beverage sector are essential. The level of tracking complexity and data integration can be dizzying, but there are a handful of innovative companies that are building solid, scalable businesses such as Dairy.com, ParityFactory, Wherefour, and Food ID, among others in the space. 

The Cold Chain is Heating Up

As noted in The Spoon’s coverage, the pandemic shifted a large number of people to online grocery shopping, and many of those new online shoppers will continue to shop online. Notably, this surge in digital grocery orders also included more online fresh / perishables purchases, both in retail environments as well as direct to consumer (D2C). This growth is expected to continue even as grocery shoppers migrate back to in-store shopping. For context, e-commerce grocery is now expected to account for at least 21.5% of US grocery sales by 2025, (up from a pre-Covid prediction of 13.5%). 

We believe this increased demand will catalyze cold chain suppliers and 3PLs to meaningfully bolster their digital infrastructure and investment in tech solutions, as we have seen with high flyers like Lineage Logistics. They will feel greater pressure to adapt to the dynamic demands of buyers, such as faster speed of delivery, decreased waste, real-time inventory visibility and traceability of products. 

These objectives are not possible without integration and interoperability solutions which create the linkages necessary to overcome the massive amounts of existing siloed data. These solutions layer on top of existing supply chain planning, execution and equipment control systems, integrating them to further optimize for analysis and real time planning / visibility across various parts of the supply chain. 

Without harmonized data, the cold chain can’t truly unlock efficiency or capacity, nor adequately respond to supply-demand volatility. Tightly linked systems to share this data can have a significant impact on the shelf life of perishable products (reducing waste), the assurance of quality (product, producer or marketplace differentiation), and support agility in demand-driven forecasting. Examples of startups focused on providing innovative solutions in this sector include AgroFresh’s Fresh Cloud, Backbone AI, and Afresh.

Looking Ahead to 2021 

The food supply chain differs in some respects from our traditional understanding of Food Tech and AgTech because it encompasses industries with relatively well-established players and technologies, many of which are horizontal software (with a multi-industry offering) and logistics companies. Due to this, as well as the highly-regulated and labor intensive nature of the supply chain, historically it has been a more difficult industry for nimble start-ups to penetrate. 

Today, we see the majority of participants across the food supply chain setting the table with foundational data and digitizing basic workflows. This is the essential first step. Basic digitalization, strengthening collaboration tools, automating some data sharing, and looking for ways to streamline labor will be key themes in 2021.

To be sure, COVID-19 revealed accelerating demand for tech ready to scale (vs. new innovation). Yet that is not the end of the story. We see most of the exciting food supply tech innovation springing up around the perimeters of the landscape, particularly from analytics and strategy plays within First Mile (Supply) and Retail / Food Service / D2C (Demand).

For start-ups, those that can differentiate themselves with proprietary, unique data cleansing tools have an important edge. As we know from AgTech and Food Tech, this is one of the principal activities that many innovative companies spend vast amounts of time working on. The same holds here in the Food Supply Chain.

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Seana Day and Brita Rosenheim are Partners at Culterra Capital, and Venture Partners at Better Food Ventures, each with 20+ years of investment, M&A, and strategy experience within the food, ag and tech verticals. Their analysis on the Agtech and Food Tech sectors are regularly used by participants in the space to understand the quickly evolving landscape.

Report: $8.37B Invested in Food Tech During First Three Quarters of 2020

Venture capital flowed into both ag tech and food tech investments during the first three quarters of this year, according to a new report out today from Finestere Ventures.

Created in collaboration with PitchBook, the report found that AgriFood tech startups raised a total of $11.6 billion as of the end of Q3 2020. AgTech investment totaled $3.07 billion during that time (up from $2.7 billion invested in all of 2019), and food tech investment totaled $8.37 billion through Q3 (up from $7 billion in all of 2019). Finestere said that the majority of capital invested in both sectors went to later stage deals, illustrating market maturation.

Like everything else in 2020, the COVID-19 pandemic was a big influence on where investments flowed. Finistere said in its report that indoor farming was a big beneficiary of funding as demand for fresh produce increased along with insecurities around food supply chains. On the food tech side, the pandemic spurred investment in startups in e-commerce delivery and meal kits.

Finestere’s analysis correlates with the more general back-of-the-envelope-style tracking we at The Spoon have been doing around food tech investment. Just between May and June we tracked more than $699 million in funding announcements from food and ag tech companies. More recently, we reported on nearly $1 billion in food tech funding just in the month of October.

“With more than $46B of venture capital flowing into ag and food advances over the past decade, AgriFood tech has become a focus of tremendous investor interest. As COVID shone a light on some of our food and agricultural production system fragilities that need strengthening, capital flowed in to support the trend to dine at home,” Arama Kukutai, co-founder and partner, Finistere Ventures said in the press announcement. “While substantial progress has been made, there is still a long way to go. The investment trend we are seeing is long overdue in a massive sector that has been under-invested, and there is a lot of room for further growth. Building a sustainable ag and food ecosystem is absolutely critical, and it will take a lot of time and more capital.”

Tastewise Launches Its AI-Powered Food Prediction in the UK

Tastewise, which uses AI to predict consumer food trends, announced today it has launched its platform in the UK and added more localized data to help restaurants and food producers in that region better anticipate consumer eating habits. According to a press release sent to The Spoon, Tastewise has integrated data from 183,000 restaurants and delivery menus, over 2.8 billion social interactions, and 1.2 million online recipes from the UK into its platform.

The Tastewise platform, which launched in February of 2019, helps CPG companies better predict food trends through artificial intelligence (AI). It analyzes consumer touchpoints (think Instagram photos and online recipes) to find not just what foods consumers are eating right now but also their deeper motivations for choosing those foods. When we spoke about a year ago, Tastewise CEO Alon Chen used the example of sauerkraut to illustrate the point: 

“Right now, according to [Chen], it’s a popular food, but the trend is less about raw cabbage and more about the process behind it, which is fermentation . . . Food companies analyzing data via the Tastewise platform can see such data and consider how they might implement fermentation into their offerings.”

Tastewise counts Nestlé, PepsiCo, General Mills, Dole, and other major CPGs among its customers. With today’s launch, UK-based food businesses will also be able to utilize the platform to get more real-time insights into consumer food behavior, which is a must in these pandemic-stricken days, according to Tastewise: “The pandemic has made it clear that it’s imperative to have your finger on today’s pulse each time a decision is made,” Chen said in today’s press release.

Speaking of which: along with the news of its UK launch, Tastewise also released a new report on UK consumer food trends during the pandemic so far. Among them:

  • Sustainable foods are rising 52 percent in popularity year over year, though health and fitness are motivating this trend, not environmental concerns.
  • UK demand for meal kits is up 200 percent.
  • CBD is fading in popularity.

Tastewise is not a sensory platform a la Spoonshot or Climax Foods. However, it is similar in that it leverages AI to help companies bring in-demand products faster by sinking less money into traditional R&D. And given the upheaval the pandemic has caused across the food system, both CPGs and foodservice companies will be leveraging more AI in the future to keep costs down by offering their customers the most relevant items possible.