We are in a “worrisome place.”
This isn’t a sentence you’d expect to hear from a founder after raising $85 million in funding; let alone a female founder from Africa who just broke records for the largest-ever Series B on the continent. (The deal is also in the top 10 largest fundings for a female-founded agtech company.)
But Ethiopian Sara Menker is seeing first hand the worrying impact of Covid-19 on the price of staple foods worldwide.
Through her company Gro Intelligence — which was founded in Nairobi, Kenya, in 2014 and has since opened a second office in New York, US — Menker and her team collect a raft of agricultural and climate data from across the globe.
Using artificial intelligence, they model that data to glean insights for a range of clients, including governments, financial institutions, agrifood businesses, and retailers.
Analyzing the data, Menker has noticed the impact of increasingly protectionist measures by key food-exporting countries as they wrangle with the simultaneous demand and supply shock that Covid-19 has created.
Calling ag protectionism the big theme for this year, Menker explains that over the past few months these producer countries — such as Argentina, Brazil, Indonesia, Russia, and Ukraine — have taken measures such as increasing export taxes or placing caps on the amount of food commodities that they’ll ship overseas. Argentina, for instance, has completely halted exports of corn until the end of the month in an effort to protect domestic supply.
At the same time, many of these economies are suffering from currency devaluation, causing the price of food to rocket.
“Food inflation in these local economies is becoming a very real thing. That is one thing no government ever wants,” Menker tells AFN.
Unlike earlier on in the pandemic, when supply chains were hit by severe labor shortages and other restrictions, it’s not the high-value and high-margin crops that are particularly exposed anymore, she adds.
“It’s the staples that keep society going and that every person on the planet [needs to be able to] afford. So thematically the world’s changing into this — honestly speaking — pretty worrisome place.”
Climate shocks
The impact of Covid-19 is not Menker’s only concern. Alongside the announcement of its Series B round co-led by Intel Capital — the VC arm of the computing giant — Gro unveiled its own climate indices to enable clients to measure and track the impact of climate-related events on their businesses.
While these indices will be available to clients across industries — including financial services providers who Menker expects to create financial products based off of them — they’re particularly relevant to agrifood.
Menker gives the example of the US, where a series of climatological events last year created an unexpected amount of pressure on the supply of commodity crops, again increasing prices.
It’s typically taken for granted that the northern and southern hemispheres’ opposite growing seasons will provide a “natural hedge,” so that if there’s a particularly bad drought in the US one year, Brazil and Argentina can step in to fill gaps in supply.
But now, “you’re seeing way more types of disruptions happening to the same place. And most of the places have never experienced these types of disruptions before,” Menker says. In the US alone, 2020 stated with floods that impacted planting in the corn belt; later the same region faced unusually dry weather, followed by strong winds. California also suffered from wildfires.
“Basically every region in the world had a climate-related supply side shock” last year on top of the challenge of Covid-19, Menker says.
She hopes and expects clients will use her indices to hedge against the risk that these climate events present.
That could be a fund manager with investments in companies exposed to certain such events, hedging against those events taking place. But equally, it could be a food company hedging against the potential damage to supply or demand of a certain ingredient due to weather.
Clients can also use Gro’s climate data to help measure and reduce their own carbon footprint – something that seems particularly timely as consumers increasingly seek out environmentally sustainable and ethical products and services.
Gro will use the Series B funds to continue expanding its platform and reach more clients. In addition to Intel Capital, other investors in the round were Africa Internet Ventures — a strategic partnership between TPG Growth and EchoVC — DCVC, GGV Capital, Rethink Food, and Schusterman Family Investments. Also participating in the round were former Citigroup and Time Warner chairman Dick Parsons and several family offices, including those of former Estée Lauder chairman Ronald Lauder and Searchlight Capital Partners founder Eric Zinterhofer.
