The truce in the US-China trade war came just in time for the Chinese New Year of the Rat.
While the world’s eyes were on the economic fallouts, the Chinese agrifood sector was moving at China’s usual lightning speed. Luckin Coffee—the digital-first Starbucks rival—became the fastest IPO in history when it listed on Nasdaq in May 2019. Alibaba Singles’ Day broke new records of all online sales events, hitting $1 billion in the first minute and eight seconds as upstart food brands charged to top-selling spots. The plant-based aisle exploded with startups and corporates scrambling to keep up with fickle consumers.
Inspired by an article I put together after interviewing some of the leading foodtech VCs before the end of 2019, my friends over at Bits x Bites, the China-based foodtech investor, asked a group of Chinese investors, agricultural and food corporations, market and legal experts what to expect in agrifood innovation in 2020.
Bobing Ren, vice president of Baidu Ventures, the VC arm of China’s largest search engine and investor of agricultural drones and AI startups:
“Food tech in China is set to see explosive growth. Both upstream and downstream food companies have to adapt to the challenges that come with changing dietary preferences and a massive population going through economic transformation.
“We’re particularly excited about the outlook of smart agriculture. China’s farming sector has been lagging behind developed countries. We will see more applications of our agricultural technology in developing countries, such as AI, robotics, and sensors and deep learning for computational biology.”
Joseph Zhou, managing partner, Bits x Bites, a Chinese food tech VC that is also China’s first to invest in cellular agriculture and gene editing startups:
“Bioscience will continue to eat into food and ag. U.S. and European companies are reimagining new biotech applications in what we eat and drink as the world gets hungrier for more clean-label and bio-based health products. Meanwhile China is stepping up as a global partner for industrial production. Whether plant extraction or fermentation, China already leads the world in biomanufacturing capacity. And with more local scientists focusing on novel strain design and scale-up R&D, China can help bring more new bio-based ingredients to market.
“More global consumers will embrace “food as medicine.” We will see growing global uptake of therapeutic products based on TCM (Traditional Chinese Medicine). Machine learning will be vital to expedite healthful compound discovery and provide the science backing to draw more consumers to these solutions.
“Finally, we expect more new faces to break into food tech investing in China. More Chinese TMT-focused VCs are discovering that food and ag also offers many patentable technology investing opportunities that they were used in mobile and other digital segments. This a welcome step forward for the food tech ecosystem in China and the world.”
Liu Yuan, senior investment manager of Shinean Capital, the family office for the QiaQia family. QiaQia Foods is a listed seed and nut snack company in China:
“China’s food sector is attracting more attention and capital. The reason is simple: Consumers are hungry for something different.
“First is children’s food. Today, no impressive brands exist. Although population growth has slowed, the children’s food market still presents strong demand. Traditional giants have not given enough attention to product innovation. Another opportunity is plant-based protein beverages. Besides the traditional soybean milk, plant-based drinks made from quinoa, oats, peas have not yet been tapped.”
Ian Lahiffe, managing director for China, Japan and Korea at Antelliq/ MSD Animal Health, the digital animal monitoring solutions company acquired by Merck in 2018:
“Led by enterprises like New Hope, Wen’s Group, Mengniu and Yili, China’s previously-fragmented animal protein production has been rapidly consolidating. Larger farms can now help facilitate more market needs for agritech. Meanwhile, African Swine Fever is creating pressure in China to develop vaccine solutions and bio-security solutions. AI solutions are coming from both corporates like JD.com and Alibaba and start-ups such as Loongtech, Yingzi, and Pulizi.
“In general, there is a lot of excitement about new technologies in China. However, agtech will continue to lag behind foodtech in the near future.”
Susan Jin, product line leader, Probiotics, Cultures, and Food Protection Ingredients, Asia Pacific at DuPont Nutrition & Health, the conglomerate’s division focusing on the food sector:
“Food tech will see more developments in aging, plant-based, as well as digestive and immune health.
“By 2030, more than half of the world’s population over 65 will live in Asia. China is the most rapidly aging country. The elderly population will require specialized food products, including nutrient-dense, diverse protein, functional foods that are easy and pleasant to eat.
“Plant-based will move mainstream. It is already widely used in food and beverages but the sources of plant protein perform differently. There are still many application challenges to tackle, whether flavour, function, supply, cost, consistency, or nutritional value.
“In digestive and immune health, consumers of all ages are concerned about nutritional absorption, disease prevention, and allergy concerns. Fermented foods and probiotics have strong appeal, and applications will expand beyond today’s cultured milk and instant beverages.”
Ping Chew, regional head of food & agribusiness research & advisory, Asia, Rabobank, the food and agriculture bank:
“Chinese consumers demand safety, health and wellness, transparency and sustainability, and traditional companies are unable to fully respond. Environmental compliance cost will exert pressure to improve efficiency and reduce reliance on land and water and reduce waste.
“Product innovation is picking up speed due to consumer uptake as well as competitive moat expansion by Chinese companies. Dairy giants Mengniu and Yili have both been growing their new plant-based beverage footprint.
“In 2019, President Xi made a speech about China needing to “seize the opportunities” presented by blockchain. Now that end distributors or channels like Hema are adopting traceability due to consumer demands, it will have an impact up the supply chain.”
Sam Gao, partner at TopGuide Food and Agri Advisory, a Shanghai consultancy specialized in alternative protein, central kitchen, and bakery:
“In alternative protein, China lags behind the US, Israel and Europe by a decade or more. The shortage of R&D talents hinders domestic development. Time hasn’t been in local companies’ favor, as international brands like Oatly are advancing their China-centered strategy and are making quick inroads.
“We have overtaken the West in how food can be ordered and delivered, not just because of the technology, but because we have a densely-populated country, which makes logistics less costly than US and other countries. Startups build on data-based solutions to target narrower consumer segments and provide more tailored value propositions. We will see fewer brands survive with a mass-market strategy.”
Wilfred Feng, senior legal counsel, China food regulatory expert at Dentons Law Offices, the world’s largest law firm with many food MNC clients:
“A critical issue puzzling the industry is the Chinese regulatory deadlock in evaluating and approving new food ingredients sourced from genetically-modified organisms. It would be great to see it resolved in 2020. If it happens, it will greatly encourage food technology innovation and commercialization in China.”
Stay tuned for the AgFunder/Bits x Bites China AgriFood Investing Report for 2019. And don’t miss the 2050 China Food Tech Summit in Shanghai on July 16-17, 2020.
This article originally appeared on Forbes.