While the Covid-19 pandemic has devastated many industries, its impact on the food sector has been varied. On one hand, there has been a global increase in spending on groceries, as the popularity of cooking from scratch has grown, and many have turned to local retailers and producers. On the other hand, farmers and other food providers have been challenged with oversupply issues as lockdowns and border closures have caused shortages of seasonal agricultural workers in some regions, and impeded the transfer of goods between other regions. Farmers typically supplying restaurants and cafes have suffered cancelled orders, and many have struggled to adjust their offering to fit alternative markets.
As the world begins to pick back up the pieces after Covid-19, investor mindsets are changing. At the same time, the global business landscape is accelerating digital transformation and unlocking opportunities for innovators, offering solutions to the challenges we now face in the food supply chain. One bright spot has been the increase in agri-tech investment thanks to the opportunities that the sector offers to a fragile food supply chain, which is trying to adapt and recovery.
From agriculture to agri-tech: farmers first
Although for many robotics and automation may seem like a futuristic concept, farmers have been powering this technology for years. Even traditional farmers are used to working with rather sophisticated machines. However, as technology becomes faster and more complex, it is important to keep the farmer at the forefront of its implementation. In this context, many larger companies are seeking collaborations with more agile-minded start-ups that have a closer connection with the farmers.
Opportunity for investments
It is not just start-ups making a B-line for agri-tech, increasingly more corporates are seeking to give back to the land with more sustainable practices as consumers care more about the environment than ever. The good news for innovative companies is that their target end-users provide an essential function: growing food. There will always be demand for food and now larger brands want to take part in offering the added benefit of sustainability to their consumers.
Agriculture 4.0 and Blockchain
The introduction of Agriculture 4.0 has produced a new term to describe those companies which are adopting new methodologies such as the Precision Agriculture, which - according to the European Parliament definition - is “a farming management model based upon observing, measuring and responding to inter and intra-field variability in crops”. The overall goal is to increase the productivity of the crops while ensuring a higher environmental sustainability.
If there is one technology that is currently on everyone’s lips, that is Blockchain. We constantly hear and read about new use cases or services claiming to be based on this technology and tracking the origin of the food is one of such applications. By using solutions based on Smart Contracts, it would be possible to write all the transactions in a Blockchain and, therefore, ensuring the legitimacy and origin of each transaction. It could even be possible to control the treatment given to the product throughout the supply chain, making sure the labelling at the point of sale is coherent and reducing the risk of fraud.
In Italy, the Smart AgriFood Observatory is a reference point for start-ups and innovators in this sector. The Observatory studies the digital innovation processes that are transforming agriculture and food supply chain with the aim to bring together different areas of expertise: economic and operational; technologic and agronomic. The goal is to convey research results to decision makers, initiating opportunities for stakeholders to meet and debate, to promote communication and value innovation, and to develop culture by spreading information and knowledge about digital innovation.
Financial trends in the Agri-food sector
The Agri-food value chain offers a growing number of attractive investment opportunities, driven by some compelling global trends. Over the last decade, the share of private sector investment in food and agribusiness has grown relative to public sector investment.
In line with the challenges faced by investors, some key trends that are emerging in this sector are the continued growth across farmland investments and private equity, the increasing prominence of venture capital and private debt investment and a surge in innovation driven investment decisions.
Overall, optimism prevails in terms of agri-food investment demand and is bolstered by continued growth and diversity in consumer demand. Thankfully, the sector is well positioned to face the current challenges through a rising flow of capital and diversifying investment funds. At the same time the pressure coming from the introduction of Agriculture 4.0 and the Blockchain will contribute to build a more resilient food system while attracting higher investments.
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