Explosive growth of AgTech sector boosts global fresh food supply

Farming is easy, said no one ever; and today, farming is even more complex. The fresh food supply chain has long been challenged to deliver highly perishable products to market, by forces including weather vagaries and labor shortages. Our industry grew more complex as the supply chain grew more global. It is now harder for producers, retailers and consumers to see the path from farm to fork – at a time when consumers are demanding a greater variety of tastier, fresher food, delivered faster, safer, more sustainably and transparently. And year-round!

So, food production must change. The industry’s future is about more than just food. We need an intersection of farming, logistics and technology to transparently deliver nutrition-dense, safe food to a growing world population, accessible to all demographic segments while conserving resources and respecting the planet.

Disruptive technologies have arrived. A cross-section of technologies and disciplines, from sensors, artificial intelligence and big data to biotech and robotics are being developed by progressive startups. Progressive startups are developing a cross-section of technologies and disciplines - from sensors, artificial intelligence and big data to biotech and robotics. But too often tech shows up on our doorstep in an unusable heap. The often-cited McKinsey quote about food and ag being the least digitized industry is mostly true because technology is not yet solving ag’s real problems, increasing ROI—or just making life easier along the supply chain.

On the Farm

Challenges: Growers are stressed by rising costs of inputs: seed, fertilizer, chemistry and labor. Meanwhile, breeders, input companies and producers are pressed to bring superior products to market to meet increasing consumer needs. Opportunities: Technology will play a significant role in our ability to meet consumer demands. Venture capital invested $5.0B in 518 deals in on-farm tech in 2018. Agtech companies are developing farm solutions including plant biology, crop protection and input management, precision agriculture, data analytics, automation, and indoor agriculture.

Long term, actionable intelligence through machine and deep learning will likely have the biggest positive impact on food production

For example, new genetic breeding tools are producing plants that require fewer inputs and produce more nutritious foods. New technologies that improve crop yield and soil health while reducing crop inputs are well funded by VCs and strategics. Indoor agriculture—growing crops under special lights driven by software, usually near urban centers—is well-funded by VCs and private equity. While the sector hasn’t consistently turned a profit yet, it is developing cool technologies that will help indoor and outdoor production. While our labor-starved industry is ready to automate repetitive tasks such as picking and packing, developing robots requires large capital investments with slow ROI. Family offices and strategics have more patient money and maybe the best investors. Precision agriculture is delivering software suites with data management and analytics tools for improved farm management to measure crop inputs, soil, moisture, weather and inventory. Analyzing data collected by drones, robots, satellites and sensors is currently more confusing than insightful.

Long term, actionable intelligence through machine and deep learning will likely have the biggest positive impact on food production.

Along the Chain

 Challenges: After the farm gate, the first mile of food logistics and transport to the packer, shipper and processor is challenging and could be improved by better integrating logistics, freshness monitoring and processing. This segment is driven by labor shortages, food safety risk and a global call to reduce food waste –80 per cent of which occurs from farm to retail.

Opportunities: Investment in midstream technologies is a fraction ($852M) of the funding of consumer-focused food startups ($8B). Yet technical solutions are needed between farm and store to connect ag to food for a more secure food system to reduce waste, monitor quality and improve profitability.

 To the Consumer

Challenges: Rising consumer expectations and the explosion of online shopping, including meal kits and home delivery, have hurt traditional food retailing. In 2017, Amazon sold $2B in groceries in the U.S., up 59 per cent over 2016. Millennials, soon to be the largest U.S. demographic, will continue to increase online food purchases and want to be connected to their foods’ story. Traditional retail is fighting to stay relevant and find more ways to delight and retain consumers while lowering costs.

Opportunities: Investors are excited about this sector, to the tune of $8B in 2018, with much of the investment focus on consumer convenience. To the right retail’s ship, retailers and their suppliers need technology to tie them together and to aid prediction of supply and demand.

Over the next decade, retailers will begin opting for small-format, convenience-oriented concepts targeting urban locations with heavy foot traffic. Amazon, among others has been piloting this concept with its Amazon Go cashierless stores. Walmart, Kroger and Costco are all working on ways to speed up the checkout process by doing away with checkout lines.

The Bottom Line: Opportunity

The fresh food supply chain is ripe for technology disruption. But to gain broad adoption, new technologies must provide value across the chain, reducing loss and overhead while adding more predictability and profit.

Soon, when a late rain hits the Salinas Valley, grocery stores will know the effect on leafy greens supply and prices and can adapt their shelf displays and online ordering systems instantly. When the food and ag industry can experience the ROI of AgTech, it will be more willing to adopt technology, which will have a game-changing effect on the production and delivery of safe and nutritious food