Food tech comes back down to earth

As venture capital dries up, food-tech leaders drop the hype and get real about what’s on the horizon.

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Happy Friday, and welcome to Food Fix! Today’s dispatch – the 150th edition! – comes to you from San Francisco where I’m attending Future Food-Tech, a large gathering of global food-tech leaders.

Food Fix across the pond: This week, I appeared in an episode of Eat This Podcast to discuss a trending topic in the UK: folic acid fortification. Host Jeremy Cherfas is delightful – I recommend checking out the podcast, which covers everything from stuffed crust pizza to honey adulteration. 

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Food tech comes back down to earth

SAN FRANCISCO – Here at one of the nation’s largest annual gatherings of food-tech leaders, you can feel that venture capital is now much, much harder to come by. 

There’s still plenty of buzz in the air, but gone are the days of over-the-top hype about racing to revolutionize the food system. You’re now more likely to hear startup founders and investors talk about the need for patience, humility and discipline – and an increased focus on a path to profitability.

It’s a marked shift from the last time I was at Future Food-Tech, back in 2022, after a record year of venture capital investment into food tech. Since then, funding has basically fallen off a cliff as interest rates rose and money became more expensive. Last year, investment plummeted by nearly 60 percent – according to PitchBook’s latest Foodtech Report – the second consecutive year of free fall. 

Food tech reality check: The fact that money is now harder to come by has forced an industry-wide reality check. One prime example is how much the conversation has shifted around alternative proteins, which were once pitched as a fast-track to replacing animal protein globally. In past years, cell-cultivated meat and seafood companies were all the rage at this event – lots of companies, lots of fresh cash, and no shortage of go-to-market projections. This year, however, the cell-cultivated presence is noticeably scaled back. Even the best-funded leaders in the space – Upside Foods and Eat Just, which have both slogged through FDA and USDA approvals – aren’t even on the market anywhere right now as they struggle to scale production. 

Alt-protein bust: On the mainstage Thursday, Scott Horner of DSM Venturing, the venture arm of ingredients giant DSM, asked a panel of leading investors what they’re most excited about in the alt-protein space. The panel fell silent, clearly not wanting to answer the question. 

“Next question?” joked Richie Gray, vice president and global head of SnackFutures, a venture hub at Mondelēz. The audience laughed – in a sort of uncomfortable way – and the panelists ultimately dodged the question. 

Less money, more problems? It’s not just the vibes that have shifted; it’s also the money. Venture funding has fallen dramatically in the alt-protein space, according to an analysis presented on Wednesday by Alex Frederick, a senior emerging-tech analyst at PitchBook. In 2021, venture deals in the alt-protein space peaked at nearly $6.8 billion. Last year, they totalled $2.3 billion. 

Though there are some exceptions. Cell-cultivated protein may be on the downswing, but precision fermentation – using biotech microorganisms like yeast to grow or “brew” various molecules – is having a real moment. Several companies have recently entered the market with animal-free dairy options, and investment in precision fermentation protein companies actually rebounded in 2023 – bucking the overall trend, per PitchBook.

Silver linings: It’s not all bad news, of course: There are some real benefits to the massive drop in venture funding. It has forced a reckoning that’s probably healthy for the industry. 

“It’s been a hard time, but I think of the quote: ‘the rumors of my demise have been greatly exaggerated,’” said Ryan Shadrick Wilson, founder and CEO of Boardwalk Collective, an advisory and investment firm, on the mainstage Thursday. “There are market cycles. The fact that we had round after round that was oversubscribed … it was a little bit absurd. I have a bit of optimism because I think there needed to be a little bit of a reset.”

She added: “Some of the good companies are even better now because of the discipline that’s been required over the last couple of years.”

On the sidelines of the event, I talked to Steve Young, managing partner at Manna Tree Partners, a private equity firm focused on food. He compared the current funding contraction to a wildfire – wreaking devastation initially, but ultimately leading to a healthier forest. 

“It’s like we had a forest fire go through,” said Young, a food industry veteran and alum of General Mills. “There are companies that were not strong enough to make it that did not make it – the ones that are left have got a more rational environment.” 

Say hi: If you’re attending Future Food-Tech, drop me a note! I’ve already met a bunch of Food Fix readers here, which is always a delight. Today, at 2:25 PT I’m moderating a mainstage panel on innovation partnerships with Florian Schattenmann of Cargill, Robert Scott of Kraft Heinz, Karina Zimerfeld of Mars, Cathy Doucette of Tate & Lyle & Jeff Turnas of Whole Foods Market. 


What I’m reading

Did grocery chains take advantage of COVID shortages to raise prices? FTC says yes (USA Today). “Large grocery store chains exploited product shortages during the pandemic by raising prices significantly more than needed to cover their added costs and they continue to reap excessive profits, according to a Federal Trade Commission report,” writes Paul Davidson. “The grocery giants also used their marketing power and leverage to widen their advantage over smaller competitors, according to the report. … ‘As the pandemic illustrated, a major shock to the supply chain have cascading effects on consumers, including the prices they pay for groceries,’ FTC Chair Lina Kahn said in a statement. ‘The FTC report examining US grocery supply chains finds that dominant firms used this moment to come out ahead at the expense of their competitors and the communities they serve.’”

Two years ago, we had a baby formula crisis. Let’s hope lawmakers remember. (Washington Post). “More than two years after safety concerns at a major infant formula manufacturing plant sparked a nationwide shortage, two Democratic lawmakers are introducing a bill aimed at creating a more competitive, stable market for this essential product,” Alyssa Rosenberg writes in a column this week. “The legislation from Rep. Rosa DeLauro (D-Conn.) and Sen. Bob Casey (D-Pa.) is aimed at the marketing-concentration half of the safety-and-supply equation. It would allow companies that sell less than $750 million in formula annually to choose between two tax credits, one aimed at expanding their manufacturing operations and another for increasing their output. One would be worth 30 percent of the cost of building new factories or adding production lines to an existing facility up to a limit of $150 million. The other, inspired by the green-energy provisions in the Inflation Reduction Act, would pay $2 per pound of formula produced, up to 18 million pounds per company per year, for five years.”

The biggest takeaways from Oprah’s Ozempic special (The Cut). “On Monday night, Oprah Winfrey aired her latest prime-time special, Shame, Blame and the Weight Loss Revolution. The special focused on the recent wave of weight-loss drugs like Ozempic and Wegovy and saw Oprah talk candidly about her own experience trying to lose weight,” writes Olivia Craighead. “Back in December, Oprah revealed that she had been taking weight-loss medication. She has not named which medication she’s taking, but she spoke about the experience as nothing short of revelatory. ‘All these years, I thought all of the people who never had to diet were just using their willpower, and they were for some reason stronger than me,’ the media mogul said. ‘And now I realize, y’all weren’t even thinking about the food! It’s not that you had the willpower; you weren’t obsessing about it!’”

The next big climate deadline is for meat and dairy (Vox). “For years, climate scientists have called for a phase-out of fossil fuels to avoid catastrophic global warming. Now, according to a first-of-its-kind survey of more than 200 environmental and agricultural scientists, we must also drastically reduce meat and dairy production — and fast,” reports Kenny Torrella. “According to the new survey’s respondents, these industry-touted practices won’t do nearly as much to cut pollution from cow burps and chicken poop as raising and eating fewer animals. Around three-quarters of respondents said reducing livestock production and consumption would make a large or very large contribution to shrinking the livestock sector’s carbon footprint. Less than half of respondents said the same about the practices often promoted by industry.”

School meals participation declined in 2022–23 school year (FERN’s Ag Insider). “The number of students eating meals at school declined in 42 states and the District of Columbia during the first year since the expiration of pandemic-era waivers that allowed all students, regardless of family income, to eat for free,” writes Bridget Huber. “But eight states — all of which continued to serve meals for free to all, or used the Community Eligibility Provision to offer free meals at a significant number of schools — bucked the trend and reported increases in participation, according to a new report from the Food Research & Action Center (FRAC).”


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