“We continue to see the pandemic act as a catalyzing agent to accelerate trends that were in motion before it began. We believe that food and agriculture has undergone significant structural changes that will alter the course of the industry.”
So says a new report from S2G Ventures, a VC firm based in Chicago, Illinois. The report, titled “The Ingredients for a Food System Revolution,” analyzes eight pandemics and outbreaks throughout history to pinpoint patterns around financial and economic recovery, innovation, and behavioral changes and norms. The analysis gives a clue as to how the current COVID-19 pandemic is reshaping norms, particularly when it comes to how we produce, get, and eat our food.
As an investment firm, S2G focuses mainly on the food and agriculture sectors, and counts AppHarvest, Shenandoah Growers, and Trace Genomics among its portfolio companies. It follows, then, that the new report is largely focused on how pandemics, epidemics, and outbreaks in the past have changed our food system and how the COVID-19 pandemic is continuing to do that at this very moment. “More decentralization [is] going to occur, more convergence of food and health, more decommodification as well,” Sanjeev Krishnan, S2G Ventures Managing Director and Chief Investment Officer, tells The Spoon.
As the report notes, “While there are many factors influencing the future of our food system, the study of past pandemic economic history is starkly consistent – an innovation cycle begins, and old habits and norms do shift.”
A couple especially compelling areas where this is happening include alternative protein and online grocery.
As traditional meat-processing facilities face challenges and the unit economics for some types of alt-protein go down, we’re seeing more of the latter make its way into the mainstream. Krishnan explains we are moving more and more towards an “all of the above” view of protein. “I think there’s going to be animal protein, plant protein, and cell protein,” he says. Production of animal protein, in particular, will see “natural momentum around more niche, regional, decommoditized” products. Plant-based proteins, meanwhile, will see an increased focus on nutrition and affordability, while more countries will follow Singapore’s lead when it comes to cultivated meat. China is another important place to watch in this area, according to Krishnan.
S2G’s report also honed in on channel digitization, and specifically on the grocery sector. The report notes that a forced transition to online grocery during the pandemic “exponentially increased penetration from 24% to 49% between 2019 and 2020. Seniors became the fastest-growing segment of online shoppers on Instacart in 2020. In future, consumers will take “a hybrid approach” to groceries, and retailers will start to slightly differentiate what they sell online versus in the brick-and-mortar store.
The report also calls out controlled environment agriculture, a convergence of food and health, and food and agriculture digitization as other key areas to watch in terms of how the pandemic is reshaping the food system.
“We can build a more resilient and hopeful food system that both addresses planet health and human health coming out of this,” says Krishnan. “Let’s use the pain and the agony and the anxiety that occurred as a call to action.
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