The current pandemic causes us to think a lot deeper about many things, but deeper still to our essential needs. Eating is one of them.
When we eat something we never stop to think about the massive industry there is behind every bite. Who planted the tomato slices in our pizza, the warehouse workers that stored the flour for the dough and even the truck drivers that drove days to reach the nearest grocery stores. All pieces of the puzzle have to fit perfectly so we can enjoy our favorite dishes.
The problem, and also the opportunity, in all massive industries is that there are inefficiencies all around. Large incumbents have the ability to fund initiatives from within to tackle inefficiencies and improve the bottom line. However, generating innovation from within requires specialized knowledge, a culture that welcomes innovation and an internal environment that allows for speed. Most of which no large organization has, thus creating great opportunities for startups to solve the unaddressed, big, pressing problems.
On one hand incumbents can fund projects and solve for scale; on another, innovative startups have the speed and ability to disrupt entire sectors – but not without the right partners, enough funding and all the intangible assets incumbents can bring to the table. This dynamic poses ample opportunities and benefits for both to partner up.
In order for food products to show up on the shelves of grocery markets, the heavy lifting work is performed by food distributors. These companies are mainly responsible for aggregating and buying food produced by farms and manufacturers to then supply to retailers and food service operators. In the U.S. alone, this industry generates $280 billions in sales in 2017 and is projected to grow to $334 billions by 2023. It is fragmented with over 16,500 companies.
The current pandemic has shifted consumer and business shopping to be much more digital. While there is no report on what percentage of sales in the distribution industry is done online, we have reasons to believe that there’s correlation with how much retail consumers shop for grocery online. For retail consumers, only $13 billions (a tiny 2%) of online grocery sales happened in 2017. However, it is growing very quickly. Sales doubled to $26 billions in 2018 and is projected to grow to $117 billions by 2023.
Online business shopping in the food distribution industry likely lags that of retail, but we can safely expect a similar trend to follow suit. Keep in mind that all of the above projected growth numbers are pre-pandemic. We expect digital business in the industry to grow even higher than these previously projected rates.
With Amazon making deeper advancement in the food space, we recommend incumbent distributors take note and:
Technology and innovation is occurring rapidly in this space. In this massive industry there’s also massive venture capital activity. In the past 5 years, over 3,200 deals were made by venture capital funds. This represents over $45.6 billion invested in foodtech startups.
In this report we mapped out prominent startups in three different regions of the world – North America, European Union and Asia.
We split the companies into three clear segments:
Click here to download the full report to read an in depth analysis of the Foodtech industry, including a funding and valuation analysis, the landscape broken down by B2B and B2C enterprises, and the profiles of notable startups.
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