FoodTech - Shaping the Future of the Food and Agriculture Industry
2 September 2020
Authors: Elisabeth Vestin (Partner), Sarita Schröder (Managing Associate), and Itai Coleman (Associate)
The development of new technologies has fundamentally changed the landscape of many industries. The food and agriculture (“agrifood”) industry is no exception; in fact, its intersection with technology has given rise to a new booming market and business area – FoodTech.
In short, FoodTech refers to the ecosystem of entrepreneurs and start-ups, innovating on how technology, such as Artifical Intellgience (AI) and the Internet of Things (IoT), can be leveraged in every element of the food value chain – from production to distribution and, ultimately, consumption. In recent years, the implementation of technology in the agrifood industry has brought solutions to consumers’ demand of convenience by means of, among other things, e-grocery commerce and food delivery services. However, the aim of FoodTech is to address the approaching global challenges, such as climate change and population growth, and guide the agrifood industry towards a more sustainable and efficient future.
The potential of FoodTech has not escaped the investors. According to State of the European Foodtech 2020 report, investments in European FoodTech start-ups skyrocketed from EUR 0.9 billion in 2018 to EUR 2.4 billion in 2019, with primary beneficiaries in the grocery and restaurant delivery sector. However, the European start-ups currently only account for approximately 14% of the total funding received by FoodTech start-ups globally.
What is fuelling the boom?
Alternative and engineered foods
The FoodTech evolution has generated multiple unique concepts. Due to consumers actively trying to reduce their consumption of animal products, FoodTech companies are taking the lead on meeting their costumers’ new appetite for nutritional substitutes, such as alternative protein and alternative dairy. In 2019, Impossible Foods and Beyond Meat provided fast food giants Burger King (US) and McDonalds (Canada) with their respective plant-based burgers, causing the topic of engineered foods to gain new relevance. Through new methods of genetically engineering organisms, it is possible to produce alternative products with a taste, texture, and scent similar to the original product. Innovating on substitutional products, whether in-lab or not, will most likely remain a hot topic in the upcoming decade.
With consumers growing conscious about consuming nutritious, organic, and locally produced products, providing transparency is currently another highly prioritised matter. Food traceability is a critical component of the food supply chain. In order to verify product quality and health, a number of companies, such as Carrefour and Nestlé, have already deployed blockchain technology, i.e. a shared method of record-keeping via a distributed network of nodes. By using blockchain technology, data can be securely shared between different players along the food value chain, thus allowing consumers to trace the product back to its origin through an accountable system.
Furthermore, in an increasingly digitalised world, personalisation is a key ingredient in creating good user experience. The food industry is facing a challenge in adapting mass production to the demand of personalised products. However, more companies are finding ways of adapting their brands to the preferences of specific consumers. Personalised nutrition is a concept predicted to have a great impact on shaping the food industry in the 2020s. Based on individual factors, such as genetic profiles, age, and physical activities, companies and start-ups have the potential to offer products and diets that are scientifically tailored to an individual’s nutritional requirements.
What are the regulatory issues?
The aforementioned State of the European Foodtech 2020 report states that the Swedish FoodTech ecosystem is impressive and continuously growing, with Stockholm acting as one of Europe’s FoodTech hubs. However, the implementation of new technology in the food industry equals new challenges in terms of complying with the applicable law.
In 2016, the Swedish Government introduced a National Food Strategy with the objective to lay the foundations of a long-term sustainable and competitive food supply chain. The Strategy highlights that rules and regulations should be designed to support the overall objective of a competitive and sustainable food supply chain. Competitiveness and profitability may be strengthened by means of, for example, appropriate taxes and charges, regulatory simplification, and a reduced administrative burden.
The national legislation on food, including statutes, ordinances, and the Swedish Food Agency’s regulations, is largely harmonised within the EU. Navigating through the complex and integrated system of EU legislation is probably one of the main challenges for FoodTech companies, as it covers rules on the entire food chain, from production and animal welfare to distribution and storage. Furthermore, companies adopting measures for data sharing and data collection must also comply with privacy regulations, such as the General Data Protection Regulation (GDPR).
The general principles of European food law are set forth in the General Food Law Regulation. The purpose of the regulation is to ensure a high level of protection of human health within the food industry, while guaranteeing a smooth operation of the single market.
Embracing new technology is essential for companies who wish to keep up with changing consumer preferences. However, the legal intersection of food and technology is delicate. In our following blog posts, we will dive deep into some of the current regulatory issues that FoodTech companies and start-ups may face when innovating on shaping the future of the food industry.
Stay tuned for our next blog post featuring an analysis of novel food authorisations and e-commerce.