Start-ups needed for the food of the future

Will drones one day deliver algae proteins to people’s homes? Food companies in Europe and North America need groundbreaking innovations to enable them to remain successful in a rapidly changing market. Rabobank supports this development through analyses and initiatives for start-ups.

‘Bringing new food ideas & new capital to the plate.’ This is the motto of the FoodBytes! summit that will be held in San Francisco on 25 February 2015. It will bring together around 200 food innovators and potential investors. The focus will be on innovations in food and related software and technology. This food start-up event is being organised by Rabobank in association with SF New Tech, which also provides a platform for technological innovations in many other sectors.

Connecting innovators and investors

Why is Rabobank affiliated with this event? ‘Through FoodBytes!, we can leverage our experience and knowledge to connect innovators with investors, and create a platform to turn today’s new ideas and technologies into tomorrow’s solutions’, says Manuel Gonzalez, Head of Corporate Clients at Rabobank West Coast in the United States. ‘Rabobank has been investing in the food and agriculture sector for over 100 years, but new challenges are arising from increased demand for food, changing consumer preferences and the need for sustainable food production. We want to help spur the leaders and technology solutions that will help address the world’s food challenges.’ Rabobank is a leading food and agri bank worldwide. ‘Banking for Food’ is Rabobank’s vision on food security and the role played by banks in this regard.

Developing apps to fight food waste

Rabobank is actively accelerating innovation in the food sector in another way in the Netherlands. The bank has been presenting the Herman Wijffels Innovation Award for sustainable innovations in agriculture and nutrition for many years. Parallel to this, two teams of data experts and software developers have been invited by Rabobank to develop online solutions to fight food waste. They are being asked to come up with an app that will make it easier to export excess food and an app that raises children’s awareness of the waste of food and nutrients. These ideas emerged from a hackathon held in late 2014 during which computer programmers and software developers tackled the topic of food waste.

Western markets are not growing and prices are under pressure

Groundbreaking innovations are badly needed in food and agri. There is a global challenge to feed a growing world population more effectively. Demand for food will grow by 60% in the next 35 years. At the same time food companies in Western Europe and North America are facing saturated markets and finicky and fickle consumers. Margins and prices are under pressure in these markets. ‘The relatively predictable consumption pattern of recent decades has undergone a change and is now characterised by shorter product life cycles, less brand loyalty and a wider range of exotic products than ever before’, says Jelle Groot, an analyst at Rabobank Food and Agribusiness Research. He recently published an analysis on the innovations that are needed in the food sector.

1.1 billion dollars in venture capital

More and more venture capital is being injected into the food sector. Data from Dow Jones reveals that start-ups in food and beverages worldwide raised 1.1 billion dollars in venture capital in the first half of 2014. In comparison, it took a full year to raise the same amount in 2012. Analyst Groot says that, even though everyone has to eat every day, there are risks and uncertainties connected with groundbreaking innovations in the food sector. These risks are both technical (Is it really going to work?) and economic in nature. Because what will consumers be willing to pay in the future? And how proportionate will it be to the purchase price of as yet undiscovered products?

Three trends among Western consumers

What are the trends among Western consumers that innovators and investors should focus on? Rabobank analyst Jelle Groot sees three major trends:

  • Sustainability
  • Convenience
  • Health

More environmentally friendly ingredients

‘People want conventional ingredients to be more sustainable and want to see alternative ingredients come onto the market that are more efficient and environmentally friendly’, says analyst Groot. Examples of this are the use of algae, which have a high level of protein and grow on land that is unsuitable for other forms of agriculture. While algae cultivation is still in its infancy, with low volumes and high prices, Rabobank researchers say it holds real potential. The same applies for insects and the use of plant-based egg substitutes in all kinds of products that currently contain eggs.

Smart shopping list

The convenience trend among consumers reflects the rise of online shopping. A quarter of all food purchases in Western countries could occur online within ten to fifteen years. Will drones at that time deliver the food to consumers’ doors? And whoever does actually visit the physical store will expect smart technology to establish a link between their smartphone, product preferences and the supermarket’s special offers. Groot: ‘Food manufacturers must find ways to get their products onto smart shopping lists. So put your money where your customers are.’

Food as nutrient or as experience

The new technology will also help on another front: health. Groot: ‘Mass adoption of personalised diets can radically change the food industry as consumer awareness is increased and demands change. Processors will have to reconsider product positioning, formulations and portion sizes to develop suitable products. People will make much sharper choices in food as fuel and nutrition for their bodies and food as an experience in terms of taste, scent, social and cultural aspects.’