S2G Ventures expects the pandemic to accelerate trends that were already in motion and create lasting change in the following five areas as the world looks ahead to emerge from COVID-19.
Here are some of the report's findings:
Decommodification of Protein
Cost inflation and complex, global supply chains paired with labor intensive processing facilities have challenged animal-based producers. Innovation and consumer preference make the alternative protein industry more attractive by lowering product costs and improving taste, nutrition and functionality. Investment in the sector is expanding to include traditional meat industry participants — with many corporates putting together a game plan to compete. Investment risk is also shifting from high-risk, single-product opportunities to include lower-risk ingredient systems and production facilities. Further changes in consumer behavior will become more established and widespread by developing superior tastes, fats, proteins and nutrition.
Channel DigitizationA forced transition to fewer in-person purchasing decisions amid the pandemic drove consumers to engage with companies through digital access points. Consumers responded by educating themselves on nutrition and food selection through available online resources. Authentic relationships between consumers and businesses developed and opened an opportunity to build these relationships at scale. Grocery retailers have also identified the importance of building digital relationships with consumers and look to vertically integrate and "own" more components of their product offerings from germplasm to supply chains. Grocers will also be looking to incentivize specific product-type purchases through differentiated inventory between their physical and digital presence.
Food & Agriculture DigitizationThe pandemic exposed a fragile supply chain as complications rippled through the industry from farm to fork. With the lack of digital infrastructure illuminated, an opportunity emerged for public and private sector investments to build a more resilient food system. An influx of data supported by investment and entrepreneurship now unlocks an opportunity for connected data systems that are incentivized by policy and supported through rural broadband initiatives.
Connectivity in rural areas has the potential to drive economic development; digitally connected businesses earn two times the revenue per employee and are three times more likely to create jobs. This will improve production, logistics, transparency and consumer experiences, while also connecting farmers and underpinning the digital infrastructure for rural America.
Controlled Environment Agriculture ("CEA")CEA is experiencing a period of rapid growth propelled by infrastructure development, biological advancements, decreasing unit economics and growing food nationalism. As the development of CEA infrastructure expands, the shortened proximity of grow facilities to large percentages of the population will enable compressed supply chains, reducing logistics costs, resource intensity and food waste. Continued research and development around flavor and yield optimization will allow CEA companies to grow a broader selection of crop varieties while maintaining a profitable business and providing customers with high-quality, differentiated and affordable products regardless of geography.
COVID-19 exacerbated the disconnect between food and health. Looking forward, it is predicted that food will play an increasingly important role in healthcare as advancement in science and technology opened channel access previously uninhabitable by food for several reasons. One key reason is that food's impact on specific human health conditions remains difficult to measure in terms of direct impact and cost savings. Many organizations, both private and public, are working to improve and solve this difficult barrier. An accelerated transition to telehealth is helping remedy this problem and unlocks opportunities for food to be treated as a healthcare tool.
"This crisis has created immense human and economic loss. But this research gives us renewed hope that we can build better systems for humans and the planet," said Sanjeev Krishnan, S2G Ventures managing director and chief investment officer. "It's not going to be easy, but there's a huge opportunity and recognition among corporates, policy-makers, capital market actors and, most importantly, consumers that we need this food transition."