In our recent Master Class, Samuel Gibbon dives into five innovation trends that are guiding the future of the food industry. During the call, he explores:
- The effects of lockdown on food waste and delivery companies
- What areas of the food industry are attracting VC investment
- The relationship between a person’s diet and COVID-19, and more.
Five takeaways from the conversation follow. Download the slides from the presentation.
Trend 1: Lockdown Drives Food Wastage
When lockdown first began, causing the shutdown of schools, restaurants, bars and many other institutions that typically order food in bulk, farmers were left with an “unprecedented amount” of surplus produce. Since fresh produce cannot stay fresh for long, most of it was dumped. According to Gibbon, “some analysts predicted America’s food wasted is set to rise 10 percent, from 30 percent to 40 percent, this year as a result of COVID-19.” As a result, food insecurity also increased as the supply chain faced disruption on a global scale and unemployment soared.
So, what’s the solution? Large companies and food providers like Nestle and Tesco have joined a food coalition, which means they have agreed to try to meet objectives like significantly reducing food waste by 2030. In addition, there have been innovations introduced by startups, like vertical farming and repurposing “superficially” damaged food.
Trend 2: Delivery Companies are the Clear Winners of Lockdown
While food delivery apps like Uber Eats and Grubhub were already popular before COVID-19 hit, many have reported huge spikes in revenue during the pandemic, mainly as a result of bans on dining in restaurants. In June, Grubhub reported a 50 percent growth in revenue year over year, in April Uber Eats reported an 89 percent revenue increase over the previous year, and Doordash reported that order numbers increased by 94 percent in the second quarter when compared to last year, according to Gibbon.
In light of this recent surge in revenue and relevancy, food delivery companies are turning to mergers and acquisitions to acquire a market share, Gibbon says. In June, the British food delivery service Just Eat acquired Grubhub for $7.3 billion, creating the world’s largest food delivery service outside of China and giving the company its first presence in the US. This merger is still in progress, Gibbon notes. A month later, Uber acquired Postmates, another delivery service, for $2.65 billion.
Innovations that companies like Doordash are exploring are contactless ordering and delivery options, as well as on-demand grocery delivery. Self-driving grocery delivery cars are also being tested on a smaller scale.
Trend 3: Investments into Fresh Food and the Delivery Industry
Unsurprisingly, VC funding into food delivery apps and services is climbing. By mid-June, Doordash had raised $400 million, the grocery delivery service Instacart raised $225 million. The Southeast Asia based Gojek app reported raising $375 million by the first week of June as well. These investments show a wider trend emerging, Gibbon says.
For example, the reliance on food delivery apps is also forcing restaurants to digitize if they haven’t already to stay afloat. Furthermore, as people become more health-conscious, healthier food alternatives like Impossible and oat milk will continue to increase in popularity, Gibbon predicts.
Innovations that have resulted from these trends include the startup Deliverect, which integrates food delivery apps with the point-of-sales systems at restaurants, and Minnow, which operates as a “pick-up box” for food delivery, similar to Amazon’s Hub Lockers.
Trend 4: Diet and Lifestyle Affecting COVID-19 Severity
“There’s also a huge amount of work that’s being carried out to understand what impact…factors such as diet and lifestyle, in terms of how active people are, has on COVID-19 patients,” Gibbon says. He highlights a recent study that shows a correlation between obesity and COVID-19 mortality rates as one example.
“You can see here some of the headlines: Krispy Kreme gives away free doughnuts to frontline workers, and all healthcare workers. First Responders get a free meal at McDonald’s. Burger King encourages people to be heroes and stay at home and order fast food,” Gibbon reads. “These companies which produce food which, when consumed at a high level, can lead to obesity… It does place them in almost an opposition to the research that has been carried out by some individuals within the scientific community. This can be paired with a global study that indicates that unhealthy behaviors actually became more prevalent during lockdown. So, people were more likely to eat an unhealthy diet and food in terms of a self report survey. They’re also often more likely to find that eating was out of control.”
The result, Gibbon says, is pressure being placed on food manufacturers to try to create healthier options and to “adjust their approach to help people to manage their own weight and their own lifestyle.”
Trend 5: The Rise of Meat Alternatives
Another trend that has been incrementally increasing, but has surged during the pandemic, is diminishing meat consumption. “The UN Food and Agriculture Organization reported that global per capita meat consumption is projected to fall to its lowest level in almost nine years,” Gibbon says, while plant-based “meat” consumption is increasing. Companies like Impossible Foods and Beyond Meat are piquing the interest of investors.
According to research from Nielson, sales of plant-based meats increased by 264 percent between the end February and beginning of May when compared to the nine previous weeks.
“Many are citing…restaurant and hospitality closures, problems [with the] supply chain [due to] slaughterhouses [closing]… People who are also becoming unemployed or don’t have as much money are trying to reduce their food bills,” Gibbon says. “There’s a myriad of different factors that may have contributed to this decrease in meat consumption. What’s interesting is that sales of plant-based meats have been skyrocketing during lockdown.”