Food companies partnering to develop novel ag: Rabobank

New openness to collaboration is shaping large food and agribusiness companies’ approach to novel production methods including biological inputs, fermentation and cellular ag, according to a report from Rabobank’s FoodBytes unit.

The July report explains how industry giants are addressing demand for investment into those new production methods and “hyperlocalization” by teaming up in novel ways. Among developments highlighted in the report are agricultural machine manufacturer AGCO’s investment in ag-focused artificial technology startup Greeneye Technology; Continental Grain Venture’s biological inputs investments and John Deere’s joint venture with GUSS, which offers unmanned spraying technology.

“Corporates are behind the curve. Even if they want to move fast, they move slow,” FoodBytes global head of food and ag startup innovation lead Anne Greven told Agri Investor. “Whether it’s large protein companies or large consumer companies, they need things to grow inside their organization and they have all agreed they are much better having outside forces they are a party to grow those – with their assistance – as opposed to inside organizations. We’ve seen fewer and fewer of those successes.”

Rabobank’s report summarizes recent development in markets for each of the three new production methods, as well as efforts to respond to consumer demands for localization with $1.6 billion of investment in 94 deals focused on technology to shorten supply chain. It cites data showing that last year there was $1.1 billion invested across 127 deals in novel farming systems; $6.4 billion through 224 deals in cellular ag and fermentation; and 132 deals in the farm biologicals market valued at $3.2 billion.

A discussion of drivers of growth in the biologicals market, for example, highlighted how rising prices for conventional agrochemical inputs has provided a key tailwind.

“We are at a tipping point, from a commercial perspective, that industry participants will take growth companies more seriously and have a better understanding of how to partner together,” the report quotes Chris Abbott from Continental Grain Ventures as saying of biologicals.

Herding cats?

Because the group of investment firms focused on food and ag is relatively small and already specialized in certain parts of the supply chain, said Greven, the impact of the new partnerships highlighted in the report on general investment patterns is less pronounced than it might be in other sectors.

“There tends be a herd mentality, but not as much as you might expect like on the true tech side [the] ‘Oh, these two guys invested, so I’m in it’ [mentality]. You don’t see that yet, in the same way,” she said. “There are groups that invest alongside each other because they work well and we’re not seeing that in the same magnitude we’ve seen on the tech side.”

The FoodBytes report highlights research from risk management platform Resilinc that showed that supply chain disruptions increased 88 percent last year and supply shortages increased by 452 percent. Ongoing supply chain challenges have helped sustain habits of cooperation that were discussed before covid, but in fact came into reality during the pandemic, said Greven.

“More and more, the corporates and private equity guys are aligning with specific sustainability goals around food and agriculture. I cannot say they have totally defined them or are using them solely as their investment thesis. What I am seeing is they are driving their decision-making way more,” she added. “My guess is after this summer – where climate change is clearly accelerating and there will be massive, continued issues that we have this year – we are seeing more and more alignment.”

The evolution towards more direct collaboration is also visible in the FoodBytes platform itself, which began in 2016 as a startup pitch competition. In 2021, FoodBytes transformed into a member-driven platform network of more than 50 corporate and investor partners focused on investing in agtech related startups between the seed and Series C and rounds.