Over the past decade interest in food, how food gets to the consumer and, most importantly, how food is created has risen exponentially and this consumer interest is correlated with the growing supply of capital being invested in the food tech sector.

Technology in food production is not a new phenomenon and ‘Food Tech’ as we understand it today has existed within the industry for a while, as ingredients companies sought out means to replace fat and sugar in products to appeal to health-conscious consumer. The latest revolution in Food Tech is occurring across the industry and incorporates areas which we would define as ‘low’ food tech to ‘high’ food tech. ‘Low’ food tech can be defined as changes in the way a product is sold and distributed to a change in what we can eat, and ‘high’ food tech can be defined as changes in the way product is produced.  

These changes are arising in part due to a growing supply of capital and a shift in the behaviour of some consumers, driven by environmental concerns such as carbon footprints, or concerns over animal welfare and human health. Evidence of these changes can be seen in data: Pitchbook recently estimated that in 2020 private equity invested $18.1bn in 767 investments compared to less than $500mn and 67 deals in 2010. In this article, we outline areas in which food tech has changed the landscape of the industry and key themes for low- and high- food tech businesses.


    ‘Low’ food tech businesses have attracted the most attention and share of the increased capital deployed into the food tech sector, and in recent years, direct-to-consumer distribution businesses such as Deliveroo, Just Eat and Gousto, have seen increased growth and popularity that has only been accelerated by the pandemic. The combination of a slick interface with consumers through smartphone apps and streamlined distribution or fulfilment centres at the backend is one that has become fairly commoditised. This technology cannot be protected as intellectual property and as such, new entrants can easily enter the market. The value of businesses with ‘low’ tech depends on first-mover advantage – that is, being the first to enter a market, as their business models cannot be protected as intellectual property and competitors can replicate these models. Businesses depending on these innovations need to maintain their value and market position through brand image and customer satisfaction, rather than on their tech stack.   

    Plant-based food businesses likewise have a relatively modest level of ‘tech’ innovation, and while businesses such as Beyond Meat, Impossible Burger and Oatly have grown quickly, their growth is based on the perception of consumers being healthier and more environmentally friendly. Similar to the direct-to-consumer businesses, the entry to the plant-based food business is low and distribution and manufacturing are the only two tech elements that require finesse. It is clear however, that these low-tech businesses, described above, do represent a significant change in the industry: in a recent report Venture Capital Fund, Five Seasons Ventures, estimated the market value of these Food Tech businesses at a staggering €559bn. While it is important to note that this high valuation can in part be attributed to the inclusion of Ocado and Uber Eats, as well as Chinese consumer platform Meituan, these statistics represent a significant change.  


    Arguably the most interesting part of the Food Tech story is around how food is produced and therefore what we eat. This can be split into two areas: farming and the development of food in labs. On vertical farming, while technological innovation has improved over time, it is unclear to what degree that ‘tech’ creates a barrier to entry in vertical farming given the high energy and land costs, and water usage challenges. 

    The latter is a more interesting story. As the environmental appeal of ‘factory’ grown vs. farmed protein increases, the scale of investment going into food tech has increased. A recent report from the think tank RethinkX predicted that, due to the scale of investment going into Food Tech, by 2030, lab-based proteins will be 10 times cheaper than animal proteins and the number of cows in the US will have fallen by 50%. Unlike vertical farming, this area of Food Tech is likely to throw up sustainable barriers to entry via patents and should therefore generate high valuations despite regulation and food safety being barriers to development. However, the journey to becoming profitable may be longer than the low-tech businesses in the food sector, impacting the ability to attract capital.  

    Clearly, consumer behaviour has a high impact on how levels of capital are allocated across the food sector and developments in ‘high’ tech and ‘low’ tech food businesses. With the growth of the direct-to-consumer trend, ingredients companies who are able to protect their methods as intellectual property may be able to perfect their product and take it directly to supermarket shelves, if they continue to see investment. 




    Oghma Partners | United Kingdom