Elysabeth Alfano is the CEO of VegTech™ Invest, an Advisor to a food innovation ETF. She is a consultant to multi-national companies focused on sustainability and an Advisor to C-Suite interested in understanding the growth and whitespaces in the food industry. She is also the host of the podcast, The Plantbased Business Hour on iTunes and vegconomist.
In this guest post, Elysabeth Alfano discusses why investing in food innovation will take center stage before 2030. She explores the inefficiencies and externalized costs of the current global food system, the role of alternative proteins in addressing these challenges, and the growing investment opportunities within the sector.
Top Three Reasons Investing in Food Innovation Will Take Center Stage Before 2030
Why would the food system ever change? We walk into Costco, and everything looks fine…or is it? As we saw during Covid, the global food system, even in wealthy countries such as the US, fell apart quickly. Let’s take a deeper dive into reasons behind and the investment opportunities of a global food systems transformation.
The global food system today: A snapshot
According to the Food and Agriculture Organization of the United Nations, the food system’s destructive, inefficient and long supply chains are an expensive endeavor. It notes that in 2023, the damage from the overall food system, of which animal protein plays a major role, represents approximately $12.7 trillion in externalized costs to the consumer and society. Roughly 74% of that presents itself in an unwell labor force slowed down or unable to work. Approximately 20% of that is due to environmental clean-up. In total, the impact to society is a whopping 10% of global GDP. It gives new meaning to Make America (and the world) Healthy Again.
Further, as many already know, the food system emits 30% of the world’s greenhouse gases, and 60% of that is from animal protein. Add growing food insecurity due to the pressures of a growing global population and limited natural resources like land and water, and it is no wonder that our current global food system is in trouble.
On a hopeful note, food innovation, such as diversifying proteins to complement animal agriculture and take the pressure off natural resources, would mean reducing greenhouse gas emissions, addressing the system’s inefficiencies and rendering the food supply more resilient. The latter would help to avoid food disruptions such as the one we saw during Covid.
Yet, despite the growing necessity of sustainable food innovation, currently, the sector receives only 2.5%-4.8% of climate funding, according to the World Bank.
This is a huge opportunity for the Investor.
Where there is inefficiency, there is innovation with mass adoption potential. This creates an investable opportunity for high-potential upside.
The path forward
So, what is currently transpiring in the shift to a more efficient and resilient food supply system?
Blended capital investment (philanthropic, government, VCs, and public markets) is beginning to flow into food system transformation. Family offices, governments, and investors around the world are looking to make money and impact, and understand that food innovation, even more so than other green technologies, such as novel energy or transportation, is an attractive way to do so. Why?
- Inexpensive: The World Bank expects $450-$650 billion investment in food system transformation each year for the next 10-15 years. By contrast, according to Senior Energy Analyst Robert Barnett at Bloomberg Intelligence, novel energy innovation needs $3 trillion a year for the foreseeable future. $650 billion yearly is a lot less than $3 trillion. As a simple example, fermenting proteins (using techniques similar to fermenting beer and other foods) isn’t that much of a leap, whereas re-electrifying the grid for EVs is a much larger undertaking. Thus, compared to other green technologies, diversified proteins, for example, are a less expensive innovation.
- Easy(ier): A foundation for much of the technology of complementary proteins already exists in scalable old-school techniques, such as fermentation, as well as in more novel bio-med innovations from the pharmaceutical industry. Yes, improvements to bring down prices and further advancements are constantly occurring, and we need more of this. However, there is a solid base from which to grow, making food innovations easier to implement than other green technologies.
- Quick impact: Inexpensive and easy solutions mean faster impact compared to other green sectors. For this reason, the Boston Consulting Group found that diversified proteins are 3x-40x more impactful at reducing greenhouse gas emissions than other green technologies.
The investment case
At VegTech™ Invest, we see food innovation as an enormous investment opportunity, providing diversification and high-potential growth. Through our public markets ETF, we invest in 35+ innovative, sector-leading companies (screen in methodology) along the entire supply chain: AgTech, Biotechnology, regenerative ingredients, flavor and texture innovations and consumer packaged goods; a total addressable market of $9.1 trillion according to Statista.
These VegTech™ companies are innovating for a more efficient and regenerative food system, positively impacting food insecurity, Climate Change and biodiversity loss while presenting a tremendous growth opportunity.
As a Cargill executive shared with our CEO, Elysabeth Alfano, after the company changed its name from a meat company to a protein company, in paraphrase, ‘We don’t know when the food system will shift, but when it does, it will go quickly.’
Mahesh Roy of IIGCC, an investor organization focused on climate change, noted that capital will flow from the private and public sectors into food transformation as it has into the energy sector. As paraphrased, ‘Keep it simple. Show people the data around the inefficiency of the current food system, and they will find the opportunity to make money. Show them the added benefit of impact, and the trillions will flow.’
