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Investors getting hungry for personalized, plant-based foods

Equity providers are betting on a steady stream of deals born out of technological advancements and the quest to solve 'last-mile' logistics, a survey found.

Investors expect food innovation-related opportunities to cluster around customization, plant-based offerings and the continuing evolution of the grocery supply chain over the next five years, according to a Rabobank survey.

Their enthusiasm about personalized food is being fed by progress in big data technology that makes it easier to use biomarkers from blood, DNA and metabolic functions to tailor individual diets, the lender said. Investors, according to the report, are being comforted by the popularity of DNA testing companies such as Ancestry.com and 23andMe, which have already made the public hungry for cellular-level knowledge of themselves.

“Consumers have been accustomed to personalizing their experiences in other aspects of their life – from clothing to soft drinks – and have begun to expect the same options for their nutrition, but until very recently, food and nutrition have been a one size fits all throughout the industry,” Rabobank said.

The survey, which asked 200 institutions to pinpoint the food innovation presenting the biggest commercial opportunity in the next five years, also found them quite interested in plant-based foods.

Respondents applauded Beyond Meat and Impossible Foods for their roles in expanding that market beyond the US’s self-identified vegans, which number to less than 2 million, according to the report. Many expected demand for plant-based foods to continue its strong growth over the next five years, citing to the rise of plant-based ‘dairy’ products from 1 percent to 10 percent of the fluid-milk market as an indication of the possible pace.

Following its $65 million Series C funding round in February, the co-founder of California-based dairy alternative provider Ripple Foods told Agri Investor that his firm has focused on both taste and texture to differentiate itself in a market Rabobank now tallies at about 60 companies offering plant-based milk alternatives.

The rise of ‘Grocerants’

The report also addressed ongoing repercussions of Amazon’s acquisition of Whole Foods in August, including the possibility of opportunities stemming from the evolution of grocery stores into “grocerants” that also offer dine-in options. More broadly, Amazon’s entry into the grocery sector has accelerated investors’ interest in other areas of supply-chain innovation, including reduction of waste, blockchain and automation, according to the report.

“Second-guessing the impact of Amazon and what they will do next in food appears to be popular enough to warrant becoming an Olympic sport,” quipped Rabobank. “The conversation centers around the challenges of incumbents in adapting to an omnichannel environment, such as balancing the online and offline worlds.”

“Second-guessing the impact of Amazon and what they will do next in food appears to be popular enough to warrant becoming an Olympic sport”

QIC chief executive Damien Frawley told Agri Investor that the fund currently has two marketing execs spending time in Asia to help NAPCO, a beef producer it owns, formulate a strategy suited to China’s fast-growing online distribution channels.

Some respondents also highlighted the potential for direct-to-consumer models, arguing that even Amazon is currently struggling to tackle the logistics supporting the “last mile” in their delivery models.

Such challenges were reflected late last year, when Arlon Group-backed natural and organic online grocery retailer Door to Door Organics ceased operations. The company cited unspecified “events in our industry” complicating fundraising, which market sources told Agri Investor were a probable reference to Amazon’s acquisition of Whole Foods.