Investment Thesis on the Future of Food

Author: Shuyej Uddin (Venture Capital Fellow at Sutton Capital)

You may have noticed the food industry is an ever increasing and dynamic industry. The current market span suggests we will need to produce more food in the same system of which approximately 30% fewer people are fed less. Why are less than 30% of people fed less? To answer such questions, in this blog, the focus is on the food market, as well as the future of food.

Market Analysis

The food industry will be analysed both globally, then in American and then in Europe. Most of the analysis will focus on America, as the region focuses most food technology related to production, whereas in Europe of the €508 million investment in Farming and Production technology, since 2015 it has been the least favourable type of food technology investment with food delivery technology and innovative food delivery brands being the most favoured. Moving forward, the global food tech market size was $220.32 Billion in 2019, and it is anticipated to reach $342.52 Billion by 2027, at a CAGR of 6.0% during the forecast period. As noted earlier, consumer habits is a strong factor influencing the food market, and has promoted this trend. For instance, 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 United States alone. In turn, many investors have seeked investment in food technology to further grow the food industry.

The figures, figure 1 and figure 2, show that the food ecosystem has changed. The food ecosystem explains the interconnected system between the produce and consumer of food, and the relevant other stakeholders. First, specifically, consumers had a strong connection with wholesalers traditionally. However, through advancement in technology, consumers have become increasingly connected with food, by directly accessing producers. Consumers can add reviews, either telephone producers, post on social media such as Twitter to possibly ‘complain’ about the producer. In other words, advancement in communication technology has stimulated the producer and consumer connection. Producers, therefore, pay careful attention to food production seeking measures of improvement. Hence, the food industry has changed, which will be further discussed, next.

Figure 1: Food Ecosystem in the past

Source: Deloitte

Figure 2: Food Ecosystem Today

Source: Deloitte

Second, there are a few noticeable changes in the market. Producers have access to many ingredients used in food which have changed. Raw ingredients have become cheaper with the cost of wheat falling by 35% in real terms over the past 30 years, and at the same time the value of food is increasing. There have been supply chain advances such as improvement in livestock production and how plant based food is developed. As the value of food has increased, so has producers focus on how food is produced, and price of food. More will be discussed in the next following sections.

Third, there is the change in political dimension that has influenced the food market, hence producers have focused on improving food production. In the UK there have been political shifts such as the UK and EU relationship which will affect farmers revenue. In India, there have been protests on agriculture due to lower income given to farmers. In the US, there have been agricultural changes too. Figure three, shows that corn yields, used in the production of food, have grown by approximately 500%. Such changes are some of the substantial growth in the industry, through political improvement. The corn yield growth is largely related to the fact the US economy has been supporting its producers, who have thus in turn improved the way food is produced. So, we know that advancement in technology, change in consumer habit, and changes in political scope has influenced the food market, next we present a few statistics related to the food market, and then critically analyse the future of food based off historical factors influencing the way food is produced, and new trends that will grow in the food market.

Figure 3: Corn Yield Data in the US

Source: Our World in Data

Advancement in technology is the most significant driver in food market. In Europe, there have been many noticeable changes in farming and production technology, although not as significant compared to America. Most VC investment is happening in Europe, €3.4 billion, but only €0.8 billion is investment in farm and production technology, and the least favoured type of investment in food tech, most popular being delivery platforms. However, due to the pandemic, a real challenge on the supply chain, companies have seeked to improve production. Natural challenges are not too common in Europe and America, less common in Europe, which is why there has been little interest, although now growing, in farming and production technology. Also, due to the political structure in Europe farmers are protected, so there has been no direct competition, but due to Brexit, there will be a change in how farming is undergone. Another words, in the near future, farming and production technology will grow in the near future, at a increasing rate. Nevertheless, Europe has a strong growth prospect in farming and production technology.

As for America, food technology advancement has become common. Many venture capital funding has been allocated to food technology, specifically firms focusing on farming and production advancement. Funding for food tech has skyrocketed from about $60 million in 2008 to more than $1 billion in 2015. Investment has been made towards companies such as Vital Farms; Manna Tree has recently invested in Vital Farms which offer 100% grass fed and grass finished beef, so plant based food and healthier meat is becoming the norm and companies offering such products are becoming popular. In fact, Morgan Stanley estimates the combined market for plant-based meat and milk will grow to more than US$80 billion U.S. by 2030. Likewise, healthier meat but also a change from cultured meat is becoming the norm too. Finistere Ventures has invested US $8.4 billion in food technology, specifically in Memphis Meat of which accommodates cultured meat as there is ‘room to make improvement on meat production’. Therefore, investment in plant based and meat production advancement is important, but why? Such factors will be discussed later.

Moreover, there have been other ways of farming advancement, quite different to America and Europe, in other countries around the world such as Israel. This point is quite brief but in Israel CropX has had more investment by Finistere Ventures, Innovation Endeavors and GreenSoil Investments. The company invests in technology to improve crop yield by providing real time analysis on soil status, through low cost and easy to use hardware and software technology. The company is seeking to expand to America. Therefore, other global firms are aware of how the US is advancing in farming and production advancement, as that is where most food technology growth is growing substantially.

Next, we look to understand the recent exit strategies. By understanding the recent exit strategies, we can seek to understand based on recent investments, whether these investments have long term or short term interest. Fair life, which operates in producing dairy products, had received from a acquisition by Coca Cola, $562.92 million. Beyond Meat had a recent IPO, where there was a marginal positive increase in the number of shares bought, 10%, of its actual shares bought compared to its expected shares bought. More noticeably, exit strategies in the industry are less common, and the outbreak of the Covid-19 pandemic has further reduced the number of exits. What is important to know is that exit strategies are not that common, and acquisitions are more common than IPO’s. The reason for that is because companies that invest in farming and production technology, food technology, invest for the long term. However, due to the pandemic and increasing concern for healthier means of food production, and overall better quality food, in the near future, next five years, we may see more common exits, but the industry has great scope to grow, first in America, then Europe, the other global continents. We next seek to understand all possible factors that will encourage not only the food market to grow, but growth through food technology. In other words, the most significant factors driving food technology growth. Thus, we can better understand the future of food which seeks to accommodate food technology advancement.

Environmental Concerns

One of the concerns most consumers have when they consume food, is how the food production process influences the environment, either positive or negative. One of the ways the production process influences the environment will influence how the future level of food supply. Food accounts for more than 26% of global greenhouse gas emissions. Environmental degrading means international or national organisation will set policies to ensure greenhouse gases are controlled. As seen earlier, the industry is several influenced by polices. This may also mean a hike in prices of food or reduction of proportion of what you receive currently for the price of food you pay today. Such changes will influence consumer habits, which can strongly influence the industry. In today’s society, sustainability has been a concern. Therefore, a strong driver of food technology is to mitigate environmental concerns, as the food industry seems to become interconnected with environmental concerns.

Climate Change

Climate change is an environmental concern, but not that of which is created by food production or food supply, rather an issue as to how climate change caused globally by all industries, is currently influencing food production. The increased C02 caused by climate change can have a fertilizing effect, reducing the growth of grains, fruits and/ or vegetables. At the same time, food will possibly reduce the size of nutrients. So, to ensure food can mitigate the effects of climate change, food technology is likely to grow, and the food industry seeks to work in parallel with damage caused by climate change.


With the current concerns on the environment, consumers are also increasingly concerned about their health. Consumers want better quality food, consumers are seeking measures to understand what ingredients are being used in their products. As seen earlier, in the market, companies that focus on food quality are growing investment. Moreover, one of the drivers that has allowed consumers to seek the information of quality of food, is the digitalisation of food shopping where consumers can search how the food was processed. In addition, due to the pandemic, the importance of fitness and health has become common, and as the fitness industry grows so does the importance of health, and the sort of food individuals consume is influential on their health. Thus, more consumers, at an increasing rate, want transparency, so the future of food seems to indicate that the sort of ingredients used in food will be a concern for many food retailers and outlets which will grow food technology.

Plant based products

The environmental concerns and the food ingredients bring the next topic of the importance of plant based products being consumed in food. A report by food found that less than 20% of Americans, and less than 25% of Canadian want at least 70% of their meals to contain plant based products, and “100%” clean ingredients. So, there is a demand for food companies to use fresh plants in their food, and to deliver fresh plant based foods. The future of food seems to suggest an increasing concern for healthier food.

More to plant based food is that modern genetic methods, and advancement in genetic engineering can aid further growth in plant based food. These approaches have caused the development of flood resistant, and insect resistant rice crops, which can be the solution to ever increasing human growth population and the risk of starvation, which is explained next. It is also important to note, due to such reasons, CropX the firm that we mentioned earlier has had investments to grow in America, to accommodate the growing demand of plant based food.

Plant based products can be the solution to also ever increasing human population, which is predicted to increase to more than 11.2 billion in the next 80 years causing the increased likelihood of starvation, and other human food related issues. New scientists and technology are breeding the editing of genomes of plants, to increase their growth, grow more food, be water efficient, and resistant to pathogens. With healthier plant based food, and science growing the speed of healthier plant based food, the future seems to suggest an increasingly growing plant based food focus which will be accommodated through food technology.

Food for health

We discussed climate change, ingredients and plant based food, but why is eating healthy a trend? As the world advances in technology, to quickly develop cognitive skills, or as the sporting world advances such as Football, and growth in the fitness industry such as 28% Europeans exercising over 5 hours per week, as you probably heard of the Super League, athleticism is advancing too. What that means is that people want a better quality of life, economies want their citizens to be healthier for economic growth. Even so, the pandemic is a health related crises, and globally people are becoming increasingly concerned of the food they consume, so food for health is a major trend. To meet future health needs, which is related to better food by overcoming the drawbacks of climate change, healthier ingredients, plant based food is becoming common as explained; food technology advancement can accommodate such changes. Hence, food for health is a strong driver of the future food market.

Lab Grown Meat Advancing Livestock production

The farming industry will start to respond more to the environmental agenda, and health agenda. Next, we turn to the facilitation of production, specifically we have discussed investment by Finistere Ventures on Memphis Meat and the IPO of Beyond Meat. Why has investment in meat producing companies become a trend? The next few paragraphs explain the factors leading to lab grown meat, consequently the future of food, as a means for advancement in livestock production.

Meat production has traditionally been produced differently across continents. The traditional meat production is not sustainable, regardless of the means to produce meat. In Northern America, most of the meat is grain fed and is less sustainable. In the continent of Australasia, meat production is sustainable as animals are not displacing grain production. However, as global demand for meat grows, it is likely that all forms of traditional meat production is likely to lead to displacement of grain production. Well, around 30% of earth’s land area is used for livestock farming. As part of that land area, depending on the region, some of that land is used for grain to feed animals, and grow other animal products. This means, current means of livestock production is at risk of causing animals to spread diseases to other animals, or develop diseases. Therefore, there is a challenge to improve livestock production for the welfare of animals ensuring healthier meat which is not at risk of disease or illness, leading to sustainable means of livestock production.

Similar to farming, plant based farming, factory farming has environmental concerns too. It uses a lot of energy, as explained earlier, with little land area (30%) to grow animals. This means factor farming is prone to causing emissions, specifically methane (37%), and 18% of greenhouse gases. In addition, since farming is energy intensive, animals require a lot of food leading to concerns of food shortage. For instance, enough calories is produced for 10–11 billion people, but most food is fed to animals. Together with the concern current unsustainable meat production discussed earlier, and that there are environmental concerns on meat production, as well as food shortage there is likely to be advancement in production technology to ensure sustainability of food which is lab grown meat.

As for meat livestock, there is a new concept of lab grown meat. The motivation to build lab grown meat is to solve the sustainability issue, environmental concern and food shortage. Lab grown meat is meat grown in labs through animal cells. Animal stem cells are used and grown in a lab, outside of the animals environment, which develop muscle tissue similar to a stake. Already in other parts of the world such as Singapore, lab grown meat have been approved for sale, which will likely continue in the US. Lab grown meat will ensure less pressure on livestock meat production, leading to the reduction of red meat consumption and increasing demand in lab grown meat. Due to less factor farming, there should be a reduction in emission too. Likewise, there should be less energy intensive means of livestock production, which would mean that more food is available to feed people reducing global poverty. Alternatively, lab grown meat itself can also help alleviate poverty. Thus, the future of food seems to suggest a growing interest in lab grown meat to not only solve production issues, but a global issue of poverty. The latter being a strong factor in increasing the popularity of lab grown meat.

Nevertheless, while lab grown meat can solve many of modern day challenges, there are a few issues. First, we explain the issues related to environmental challenges. Researchers find that if the production of lab grown meat significantly depends on fossil fuel(s), as the process is energy intensive then environmental concerns such as climate change can be worsened. However, in the near future with an increasingly growing interest in Europe, discussed under ‘market analysis’ there should be more lab grown meat being sold as globally lab grown meat becomes popular, so should the problems associated with lab grown meat, reduce. Second, one of the concerns is that it is expensive, and prices are a strong influencer on consumer habits in the market for food as seen earlier under ‘market analysis. However, as more investments are made towards farming and production technology, specifically livestock production improvement (including lab grown meat), then as markets evolve so should prices become cheaper. If prices do become cheaper, then there is a higher chance that lab grown meat grow in sales. Despite the importance of prices on consumer food, consumers are also concerned with quality of food. Lab grown meat seems to suggest a better means of meat, better quality. So, holistically, lab grown meat is still likely to be very popular among consumers. Hence, the future of food seems to suggest more sales in lab grown meat.

Moving forward, we mentioned how plant based food, ingredients, and in other words healthier food is becoming more common. One of the benefits of lab grown meat, is that it can not only target those seeking healthier food, but also target a new market of vegans or vegetarians to consume meat. Vegetarian or vegan food is becoming more common, but some consumers opt for this choice, to avoid eating animal products, purely to avoid hurting animals. Lab grown meat is an alternative to a new means of producing means, which then causes the avoidance of hurting animals, but potentially, and highly likely to increase demand for meat production, of which is animal friendly.

There are a few important points to highlight, and that is a growing demand in lab grown meat through cheaper prices, better quality of food, and an attractive market for vegetarians and vegans. Already we noted that the market for lab grown meat exists in Singapore. How much time will it take before lab grown meat grows in popularity globally? Well, according to figure 4, and Ron Shigeta, the market could become popular at an increasing rate. The red line in figure 4 suggests the price of lab grown meat is decreasing at a rate faster than a few powerful, existing technologies. As consumer habits is a strong driver of the food market, and price affects consumer habits substantially, as basic economics would suggest, due to the elasticity in demand, we may see a market arising in the US, and globally sooner than anticipated.

Figure 4: Analysis of price of Lab Grown Meat

Source: Ron Shigeta

Food waste

Approximately a third of global food is wasted. In developed economies, food is wasted by consumers, and in developing economies food wastage occurs at production facilities due to inappropriate facilities to stock food. Better food production facilities require more land, more water and better quality soil, of which will be aided by technology. Science will need to advance with crop growing facilities, and cleaner water to be accessed to important sites where food are grown.

As for developed economies a few changes have been made. Many retailers such as TESCO have decided to stop sending food to landfill sites, and that food will either be donated for human consumption or go to animal feed. Technology is being used in catering companies to ensure there is a reduction in oversupply and scraps. Even the head of Corporate at COmpass Group UK & Ireland has commented in the catering business, managing overproduction is important. Increasingly, it can be suggested that food waste is being managed better in the developed world, and technology is being advanced to manage supply chain issues.

Touching thoughts

Environmental concerns are increasingly becoming a worry due to food sustainability issues. Climate change may have a negative impact on the quality of food. Food ingredients, and plant based products are becoming even more of a theme. Livestock production will see a new change in lab grown meats, similar to plant based products which have seen genetically modified crops, a major trend and change in the food industry.

What the main point of the article is to suggest, the food industry is evolving. As summarised earlier in the main events, the minor changes are environmental change, plant based products, healthier food, and reduction in food waste. The major change, and a disruption in the food industry, is the future of livestock production. It will disrupt the existing farming and production markets, by influencing the three major factors influencing the food market; advancement in production technology, changing consumer habits and being favourable among economies, specifically advanced economies such as Singapore (latest), hence policies will likely be designed to support lab grown meat and reduce global challenges related to meat. What this means is that consumers should in the near future become familiar with this new source of meat, as it could be a viable option for consuming meat (and potentially other livestock through lab grown techniques in the near future), and we will witness a new change in the existing food industry.

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