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Thanks to the pandemic, foodtech booms during Q2
28 Aug 2020The foodtech ecosystem was already evolving rapidly, but when the pandemic shifted business across the globe, technology-driven growth became even more vital to the CPG ecosystem. Plant-based products, cellular agriculture, online grocery and VC investment are all key areas that a new report from PitchBook identified as segments that will be redefined by the appearance of Covid-19 in the market.
Foodtech companies raised $3.7 billion in funds during Q2 2020, a 27.6% increase from $2.9 billion raised in Q2 2019. Median deal sizes rose overall as well, climbing 34.7% year over year to $4.2 million. PitchBook identified online grocery services and delivery as a primary driver behind this surge in investment. Xingsheng Selected, a Chinese online grocery startup, inked the largest deal this quarter with a $400 million price tag.
![Thanks to the pandemic, foodtech booms during Q2](/img/ingnet-logo.png)
The market research company said that there will be continued positive growth in the online food service retail market for the foreseeable future; PitchBook also said that there is a long runway for growth in this sector, especially for early-stage startups. While online grocery sales remain a minimal share of the total grocery market—currently representing only 2.0% to 4.0% of total sales—the industry is expected to grow to 20% of total grocery retail by 2025.
Already, growth has been impressive, with the market research company reporting that sales grew 450% since August 2019 and monthly U.S. online grocery sales now reaching $6.6 billion as of May 2020.
Bio-engineered and plant-based foods also received a lot of attention this quarter. The global bio-engineered foods market is expected to be valued at $65.5 billion in 2020, and PitchBook forecasts the segment to grow to $104.6 billion by 2025. Part of this enormous jump in valuation is due to the company’s prediction that cellular meat and dairy products will arrive on the market by 2022. The caveat to this prediction is that a regulatory framework for cellular agriculture needs to be established in governments worldwide. Despite the dilemmas resulting from the lack of regulatory structure – this includes lawsuits over labeling requirements and persuading consumers of the safety of bio-engineered meat – companies like Perfect Day, Impossible Foods, Beyond Meat and Memphis Meats are forging forward with significant success.
As evidenced by the money pouring into the space and the continued market growth, consumers are interested in alternative ways to nourish their bodies.
In fact, the Chinese government has been promoting a reduction in meat consumption which coincides fortuitously with Beyond Meat’s choice to expand into China's retail market with its initial launch into in 50 of Alibaba's Freshippo grocery stores. In other parts of the world, Covid-related plant closures and questions about the hygiene of consuming animal-based products produced in plants with a history of Covid-19 cases has pushed the growth of plant-based alternatives.
Going forward, PitchBook anticipates that many of these forced changes to the food ecosystem will become permanent. Analysis of the data “revealed the vulnerabilities of the traditional food supply chain and highlighted technology's critical role in providing a safe and efficient avenue to obtain food.”
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