The COVID-19 pandemic has caused a global health and economic crisis like never seen before. S2G Ventures conducted an extensive research about the implications for our food system. Their report is now avaible (click ‘read more’ below to read the full article and download the report).
The coronavirus is reshaping industries, catalyzing innovation and encouraging resilience in business planning. Although the lasting impact on many industries is unknown, we see exciting innovation accelerating across automation, telemedicine, virtual reality and transparency systems (i.e., blockchain or similar technologies).
In the grocery store, private label market-share gains are poised to accelerate, as consumers tighten spending and look for value-focused alternatives. However, they researchers expect consumers to prioritize a balance of value and better-for-you brands instead of a complete tradeoff to value, consistent with the consumer megatrend towards better-for-you products.
Taking a step back, and observing the broader food value chain, there are three primary delivery vulnerabilities in the food system:
1. Agricultural inputs to farms (e.g., seeds, animal feed, fertilizer, et al.)
2. Farm products to processors, packagers, spot markets and export markets
3. Food to retail distribution
This is important, because the global food system relies on a just-in-time economy, where inventory levels are intentionally kept low. Meaning, that regardless if there is enough supply in existence, it may not be able to reach its proper destination if the supply chain is disrupted.
Consumer purchasing behavior coupled with innovation may drive changes in market share and pressure existing players in the market. Although COVID-19 is not creating a new trend, there are several trends that were in motion pre-coronavirus further accelerated by the pandemic, including alternative protein, indoor agriculture, digitalization of agriculture and grocery and food as medicine.
Although animal agriculture remains a large and growing market, the pandemic has exposed challenges with the industries long production cycles, centralized production and limited processing facilities. It has allowed for faster consumer adoption of alternative proteins, including plant-based protein, fungi, algae and other biomass concepts including cellular meat. Notably, some of these technologies are further along than other, for example plant-based protein has been a trend for several years, while cellular meat remains in a research and development phase. Whatever the next generation of protein is, it will be driven by production speed, price and taste.
A second trend that is accelerating is food as an immunity. The convergence of food, science and technology may unlock this sector and usher in a new era in microbiome, functional ingredients, precision and personalized nutrition and medical foods. Prior to COVID-19, this was largely driven by nutrition-related disease, but the pandemic has exposed at-risk populations, with approximately 90 percent of hospitalized patients having one or more underlying condition, with the most common underlying condition being obesity.
Beyond specific trend acceleration, several themes emerge throughout this research that are believe to be catalyzed and emerge in a post-COVID-19 world. Digitalization will likely be driven by dis-intermediation to allow for new relationships with the consumer and to reduce risk throughout the supply chain. Decentralized food systems allow for the automation of local (alternative protein and produce) and the reshaping of complex perishable supply chains to reduce shrink and waste. They are also more omnichannel congruent as e-commerce, specifically online grocery, adoption accelerates. De-commoditization in the food supply chain, coupled with technologies that place deflationary pressure on the industry, may help catalyze breeding for attributes beyond yield (taste, protein content, et al), a return to polyculture farming and a shift from a strict focus on yield to profit per acre.
Lastly, food as an immunity has the potential to bridge healthcare and food production and consumption for treatment of specific nutrition-related chronic lifestyle diseases, as well as change the future of brands to focus on unique, functional ingredients.
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