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What 2020 has taught the agrifood sector: resilience

November 2, 2020

If there is anything the world has learned from the pandemic about the future of food it’s that food chains need to be more resilient. Ireland is a case study in how to achieve it.

The small European island country was reeling after the global financial collapse—as most places were. But with its financial sector in shambles, it turned to its food producers to help rebuild its economy.

Ireland developed a national food and farm strategy called Origin Green. At the center of the strategy was widespread farmer-producer collaboration and a commitment to sustainable growing, raising and harvesting practices.

The bet paid off: as consumers have become increasingly conscious about their foods’ sources and growing methods, Ireland has succeeded in using the program to market and grow demand for its products worldwide. Today, more than 95% of the country’s exports are products of the Origin Green program.

“Ireland created the worlds first and only national sustainability program with teeth,” The Shelman Group founder Mary Shelman, who advised on the Origin Green program, told AFN. “The only way a small island country could be successful doing that was to choose to be different. They were never doing to compete on cost.”

The Covid-19 pandemic has made clear that the global agrifood sector is at a similar inflection point. Border closures have disrupted trade. The lesson: food production and value chains need to become more localized. There have been surpluses of some staple items and a complete dearth of others. The lesson: supply chains need to be more efficient and better prepared for shocks. Facilities have been stalled or shuttered because of coronavirus outbreaks among farm and factory workers. The lesson: facilities need to be safer, and labor shortages need to be offset with technological improvements.

There can be no meaningful improvement in food chain resilience without a focus on sustainability, says Shelman, who led the Sustainability Insights discussion at the AgTech NEXT virtual summit, hosted by the Donald Danforth Plant Science Center.

Sustainability framework

Most of the value in sustainable food systems happens on the farm. To help growers, buyers and food intermediaries understand how to capture that value, Shelman and Damien McLoughlin at UCD Michael Smurfit Graduate Business School in Ireland have developed a framework for thinking about sustainability across the food system.

Shelman and McLoughlin’s “pathways to a sustainable food system” map out food production strategies based on how financially rewarding and collaborative they are: in the lower left quadrant are defenders of current low-collaboration and low- or steady profit-making approaches; in the upper-left are developers of highly-collaborative system-wide approaches, like Ireland’s Origin Green program; in the lower-right, are innovative “disruptors” who are developing game-changing but highly-proprietary new technologies that change the way food is produced; and in the upper-right, are companies that seek to “defy” the current food system by throwing out the playbook and rebuilding it completely (think Oatly and Impossible Foods.)

“We’re not saying that any one is better than another. We’re just giving people a way of understanding what is happening in the food system and talking about it,” explained Shelman. “And actually, we need some combination of all of this. The worst thing that could happen for global food is for all of these approaches to be competing with each other.”

The three startups that presented in AgTech NEXT’s Entrepreneur Insights’ session exemplify the need and demand for players along each “pathway.” All three’s business models are anchored by a mission to improve the global food system, albeit with different solutions. TerViva is commercializing plant protein and vegetable oil from the pongamia tree, a crop known for its soil restoration qualities. Greenlight Biosciences is focused on high-tech sustainable crop treatments, like its non-toxic potato pest treatment. And Bushel offers an app that allows agricultural cooperatives to stay better connected to its growers, improving efficiency and cutting waste from the grain and egg supply chain.

Unlocking value in unexpected places

TerViva in particular is a case study in just how much value there is to gain in sustainable agriculture, including from unexpected sources. When the company started out, it knew the pongamia tree was a hardy plant with regenerative properties for soil. Its beans, however, have not historically been used as a food source, so TerViva’s founder Naveen Sikka initially focused on harvesting the trees’ beans for biofuel.

“On the success of our early plantings and proof [points], we began to invest in higher-value applications for the plant protein and vegetable oil that come off of pongamia,” said Sikka. “Approximately a decade in is a company, we offer plant protein and vegetable oil to the big consumer packaged goods companies like Kellogg’s, Unilever and General Mills. It is number one, tasty and functional, and number two, affordable, because of the way in which we grow these trees.”

Becoming a plant-based protein company wasn’t TerViva’s original intent, but it was a natural result of the company’s mission to be as low-waste, circular and regenerative as possilbe. Now, as the “alternative” protein space grows to meet the world’s growing protein demands, Sikka champions the work of companies developing cellular meats and protein fermentation processes. But while there are “a lot of different approaches to increasing our food supply and our food resiliency over the next couple of decades,” he says, “the answers can also lie in nature, and using a broader basket of more sustainable crops to meet our food needs.”

Investor response

Agrifood tech investors appear more eager to chase sustainable, disruptive solutions. After a brief slowdown in capital commitments at the start of the pandemic, agrifood tech investing is back in full swing, AgFunder’s mid-year investment trends report found. On AgTech NEXT’s Investor Insights panel, Finistere Ventures’ investment director Ingrid Fung observed that agtech solutions—those closest to the farm—were rebounding more quickly than food tech ventures, even though food tech attracts more capital.

“With the pandemic, there’s a perfect convergence of pressures that is driving greater recognition that agriculture is important to long-term planetary health,” Renee Vassilos, director of agriculture innovation for The Nature Conservancy, told AFN. (Vassilos joined Sherman and S2G Ventures’ chief investment officer Sanjeev Krishnan during the Sustainability Insights discussion.)

The Nature Conservancy, an environmental nonprofit, is predisposed to spotting opportunities to improve sustainability. For its own investment portfolio, the organization is focusing on initiatives and enterprises that are restoring soil health. But Vassilos notes that investors’ interest in other sectors like vertical farming and alternative proteins is helping drive competition broadly in agrifood—“a space that historically hasn’t had to deal with this kind of competition and pressure to innovate.”

“These companies represent a very small percentage of the market, and it’s important to remember that their share will remain small for some time yet,” she added. “But the opportunity is there to [accelerate their] momentum to drive improvement in traditional agriculture.”

It isn’t just specialist agrifood investors who are recognizing the opportunity to invest in a more resilient food system; the pandemic has driven more generalist investors into the sector, observed Larry Page, principal at venture capital firm Lewis & Clark AgriFood, on the AgTech NEXT Investor Insights panel.

“Robotics, automation, traceability, digital [solutions] are facing some pretty serious tailwinds,” he said. “We’ve seen an interesting influx of generalist investors—tech funds, software focused groups—that want exposure to some of these markets.” Some agrifood ventures are even beginning to raise “opportunistic rounds,” he added.

Lewis & Clark Agrifood is a specialist in the sector, as its name implies, and it tends to invest in early-stage ventures, cutting checks of $5 million to $15 million. But another promising trend that points to the stickiness of resilience and sustainability as an agrifood investment focus is the number of companies looking to go public, Page noted.

The well-known example is alternative meat company Beyond Meat, which IPO’ed last year. More recently, ethical egg producer Vital Farms went public in August. And high-tech indoor farming venture AppHarvest and alternative protein-focused Natural Order Acquisition Corp. have leveraged special purpose acquisition companies—known as “blank check companies”—as a pathway to capturing the public markets’ appetite for agrifood investing.

“The public’s opinion of food and agriculture has dramatically improved as a result of COVID,” said Page. That is showing up in the public markets, which are “really valuing responsible agriculture that is done sustainably, with a smaller environmental impact,” he added. “It’s interesting to watch the markets react to the fact that agriculture is one way by which you can do good and feed the world.”

The Donald Danforth Plant Science Center is a sponsor of AFN. 

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