Food Technology and Innovation
A total of just $14 billion was invested in about 1,000 food systems-focused startups between 2010 and 2018, according to the World Economic Forum report Innovation With a Purpose: the Role of Technology Innovation in Accelerating Food System Transformation. By way of comparison, $145 billion was invested in approximately 18,000 healthcare-related startups over the same period.
Fragmented rural markets, poor infrastructure, and heavy regulatory burdens raise costs for food systems firms, while revenue is often constrained by customers’ limited ability or willingness to pay. In addition, much of the food systems startup activity to date has been concentrated on improving production in developed countries - which can result in less access to new solutions in developing countries.
Until recently, the food and agriculture sectors were slow to adopt technologies driving the Fourth Industrial Revolution like the Internet of Things, artificial intelligence, and blockchain; there have been low levels of related investment, inspiring relatively few related startups.
Technology innovation can help transform global food systems. Billions of people around the world are poorly nourished, millions of farmers must live at a subsistence level, enormous amounts of food go to waste, and poor farming practices are taking a toll on the environment.
The WEF, in collaboration with McKinsey & Company, has highlighted technology applications that present emerging opportunities to improve consumer nutrition, increase supply-chain efficiency and transparency, and boost farmer productivity and profitability. While many are in early stages, they could deliver significant positive impacts for food systems by 2030. For example, if consumers were able to replace between 10% and 15% of the meat they consume with alternative proteins by 2030, total greenhouse gas emissions from agriculture could drop by between 5% and 8%, freshwater withdrawals for agriculture could be reduced by between 7% and 12%, and between 5% and 10% of the total land used for agriculture could be freed up for other uses.
Achieving United Nations Sustainable Development Goals will require the transformation of food systems, so that they become more inclusive, sustainable, efficient, and nourishing. This calls for improved policy, increased investment, and expanded infrastructure, in addition to building more capacity for farmers, changing consumer behavior, and improving resource management.
Demographic Changes and Agriculture
About 140 million people are joining the middle class every year, according to a 2017 report published by the Brookings Institution, and that number should grow to 170 million in about five years - creating more consumers with more disposable income to spend in supermarkets and at restaurants. In addition, by 2050, a dramatically greater number of these consumers will be elderly and living in cities, portending significant changes in related consumption patterns; according to figures published by the United Nations, more than 2 billion people in the world will be older than 60 by 2050, and about 66% of the global population will probably be living in urban areas - compared with 54% as of 2014.
Demographic shifts are creating an older, wealthier, and increasingly urban-dwelling global population, and dramatically affecting the agriculture, food and beverage sector.
The food and beverage sector is expected to be highly impacted by trends including an increased demand for personalization, and for automatic replenishment via technologies like the Internet of Things, according to the WEF’s 2017 report Shaping the Future of Retail for Consumer Industries.
As people get older and wealthier, expectations for food and beverage offerings will change.
Expectations for how products are delivered will evolve, as these demographic shifts bring about changes in how individuals consume, and what they consume.
According to the results of a survey published alongside the WEF’s report, more than one third of respondents wanted services that automatically send them food and beverage products when they are running low.
AGRICULTURE, FOOD AND BEVERAGE
The global population is expected to increase from roughly 7.7 billion to nearly 10 billion by 2050, and demand for cereals to be used as food for both humans and animals may grow to roughly 3 billion tones by that point from about 2 billion tones as of 2009.
Agricultural systems must better address climate change, water and land resources that are becoming scarce, and increasingly volatile food prices as they seek to feed a growing global populace. Meanwhile food companies must adapt to shifting consumption patterns, and play a greater role in promoting health and wellness.
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Global Food Systems
The world’s population is projected to increase from about 7.7 billion as of 2019 to roughly 9.7 billion by 2050 - and then to 10.9 billion by 2100, according to the United Nations. This increase, coupled with an expanding global middle class that is demanding higher-quality food, will require a near doubling of current food production levels, according to the Food and Agriculture Organization of the United Nations (FAO).
Systems are inefficient at the best of times, even without the impact of a spreading pandemic. As global food systems become increasingly interconnected, effective coordination among a diverse set of stakeholders will be required. This need for coordination is highlighted during times of crisis; as the COVID-19 pandemic spread to hundreds of countries and territories in early 2020, for example, people in many places began clearing out the shelves at local food stores in order to prepare for the worst. According to a presentation published by the FAO in March 2020, there were no evident supply shocks yet in terms of availability - though the beginnings of supply shock in terms of the logistics of movement of food were becoming evident.
That in turn was likely a “big problem” for import-dependent countries, according to the presentation. Even without the effects of a spreading pandemic, food systems have suffered from significant inefficiencies. About one third of all the food produced in the world is lost or wasted post-harvest, according to the FAO, while hundreds of millions of people around the world remain chronically undernourished. A lack of storage and infrastructure, and a dearth of market information for small farmers, are key reasons for food losses that occur before goods can reach consumers.
The potential to craft new, systemic approaches to food systems that include a diverse array of stakeholders presents opportunities to help sustainably feed the world well into the future. One related effort, a US government program called Feed the Future, has appealed to businesses and universities to get involved - according to Feed the Future, it has enabled more than 3 million children to live free from stunting, and helped farmers to generate more than $10 billion in new agricultural sales between 2011 and 2017.
Health and Wellness
The problem of chronic hunger is growing worse; the estimated number of undernourished people in the world rose to 815 million as of 2016, from 777 million in the prior year, according to the United Nations Food and Agriculture Organization’s 2017 report The State of Food Insecurity and Nutrition in the World. The recent increase actually followed a steady decline, according to the report, and reflected worsened situations in sub-Saharan Africa, South-Eastern Asia and Western Asia - particularly in conflict zones affected by drought or floods. Stunting, or impaired growth as a result of poor nutrition, affected 155 million children under the age of five, according to the report, and wasting, or the lack of appropriate weight, affected one out of every 12 children as of 2016. The private sector plays an important role in fighting malnutrition and obesity.
The world is generally becoming more health-conscious. However, people continue to struggle with hunger, “hidden hunger” (a lack of vitamins and minerals one may not be aware of), and “overnutrition” (obesity).
A number of companies are finding that delivering healthier products makes good business sense. Nestle, for example, created a Health Science unit to develop nutritional products, while sales in general of sugar- and salt-heavy packaged foods have declined. In the US, large sellers of consumer packaged goods (including packaged foods) saw their collective market share decline between 2011 and 2015, while small and mid-sized firms, including healthy food producers like protein bar maker Quest Nutrition, saw their collective market share increase during the same period, according to a report published by the consultancy BCG.
Excessive weight is also a global problem. Childhood obesity is increasing in most regions of the world (41 million children under the age of five were overweight as of 2016), according to the UN Food and Agriculture Organization’s report, and adult obesity is increasing everywhere. Non-communicable diseases, driven by risk factors including a poor diet, will lead to a cumulative loss of global economic output equal to $7 trillion between 2011 and 2030, according to a report released by the Harvard School of Public Health and the World Economic Forum.
The roles that agriculture and the food and beverage industry can play in addressing health and undernourishment are significant. Through increased coordination and collaboration, there are opportunities to reduce malnutrition and create a positive impact.
Sustainable Consumption
Efforts to encourage sustainability therefore need to expand beyond a focus on production, and pay greater attention to this growing consumer group. Only about 13% of consumers are willing to pay more for green products, according to the results of a study published in 2017 by the Network for Business Sustainability. Meanwhile about one third of the food produced for human consumption is lost or wasted globally (or about 1.3 billion tons per year), according to the Food and Agriculture Organization of the United Nations.
Consumers need encouragement to make more sustainable choices.There were about 3.2 billion people in the middle class as of 2016, already spending a total of roughly $35 trillion annually - and roughly 140 million people are now joining the middle class every year, according to a 2017 report published by the Brookings Institution. Nearly 90% of these new entrants are in Asia, according to the report. Consumers in emerging economies in Asia and elsewhere aspire to high-consumption, western lifestyles.
The Fourth Industrial Revolution, which is being fueled by converging strains of rampant technology innovation, is enabling business models that can better drive sustainability - such as the so-called sharing economy model exemplified by Uber’s ride-hailing service, or Airbnb’s rental service. The sharing economy is expected to grow in value from $14 billion as of 2014 to $335 billion by 2025, according to the Brookings Institution.
Companies must try to shift consumer behaviour towards greater sustainability. The World Economic Forum’s Engaging Tomorrow’s Consumer project spawned the “Collectively” digital platform, which featured founding companies including Coca-Cola and Unilever and was designed to inspire young people with stories about a more sustainable future. According to data published in the Forum’s Engaging Tomorrow’s Consumer Project Report 2015, 93% of millennials say they would buy a product because it is associated with a cause.
Empowered Consumers
Data, social networks and mobile technology are granting greater power to consumers. In 2018, the European Commission adopted new rules on the labelling of primary ingredients in food, which require that the origin of primary ingredients must be indicated if different from the origin of the food itself, in order to not deceive consumers. The new rules are expected to go into effect in 2020.
Legislation has been crafted to enforce requirements related to consumers’ right to information, including a labelling requirement for genetically-modified ingredients passed in the US in 2016, and a European Union regulation on the provision of food information (including through labelling and advertising) to consumers, which went into effect that same year. Companies are under greater pressure to establish responsible and traceable processes, and to share them openly with the public.
Companies must now accommodate more digitally literate consumers, while also managing misinformation about their brands that can occasionally spread online.
People can now instantly compare prices, review products, and share information on social networks about prospective purchases using their mobile phones. Mobile broadband prices have declined sharply during the past three years, while the number of mobile-broadband subscriptions has increased by more than 20% over the past five years, according to a 2017 report published by the International Telecommunications Union.
Advances in technology have led to increased scrutiny for the food and beverage industry.
Resource Sustainability
Rising demand and climate change are threatening global food systems. The combined effect of climate and carbon dioxide change is as likely as not to increase food prices by as much as 45% by 2050, according to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change published in 2014.
There will also likely be a significant increase in related packaging; the production of plastics used in the packaging of food products is expected to nearly quadruple by 2050, according to the WEF’s 2016 report The New Plastics Economy. Developing more sustainable systems could have significant social and economic impacts, particularly in developing economies poised to leapfrog traditional, “take-make-dispose” approaches already prevalent elsewhere. In general, the plastics and agribusiness sectors must work together with multiple stakeholders, in order to maximize resource sustainability.
The global food value chain, including growers, producers and sellers, accounts for roughly 30% of global energy consumption, and generates greenhouse gases estimated at 10 giga-tons of carbon dioxide equivalent every year, according to the Food and Agriculture Organization of the United Nations’ 2017 report The State of Food and Agriculture. Agriculture uses 11% of the world’s land surface for crop production, accounts for 70% of total freshwater withdrawals, and is responsible for about 80% of global deforestation, according to the report.
A growing global population and expanding middle class are increasing demand for food, and placing agricultural land, forests and water resources under greater amounts of strain. At the same time, farm systems are increasingly vulnerable to climate change and related weather volatility. As temperatures and sea levels rise at an accelerated pace, experts suggest that failing to limit global warming to 2°C above pre-industrial temperature levels would lead to irreversible damage.
Greater efforts at increasing sustainability are also called for when it comes to food produced in the oceans. Nearly one third of global fish stocks are being overfished, according to the Food and Agriculture Organization of the United Nations’ 2016 report State of World Fisheries and Aquaculture, jeopardizing economic and environmental security.
Improved fishery management could both help to address overfishing, and create significant economic opportunity; research published in the Proceedings of the National Academy of Sciences of the USA in 2016 estimated that strong fisheries management techniques could increase the annual global catch by more than 16 million tones, while creating $53 billion in additional profit.