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April 28, 2021updated 21 May 2021 3:52pm

Agri-food tech investment soars with notable emergence of SPACs – study

Investment in agri-food tech companies almost doubled to US$22.3bn last year and is expected to accelerate further in 2021, according to a report from Finistere Ventures, which noted a particular interest in indoor-farming technology firms and the rise of SPACs.

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The US-headquartered venture-capital investor in agri-food tech said last year’s “record” deals in the space, which rose from $12.5bn in 2019, were dominated by the food sector, which amounted to $17.3bn, compared to $5bn on the agricultural side. Investments in agri-food tech as a whole continued to increase at compound annual growth rate of 50% from 2010 to 2020, according to its annual review.

“We are on the precipice of a decade of vital agri-food tech advancements as investments and profits boom – the roaring 20s just earned a new meaning,” Arama Kukutai, a co-founder and partner of Finistere, said in a statement to accompany the report.

“We expect 2021 to dwarf 2020 numbers as capital continues to flood into the technology categories with absolutely massive disruption potential like indoor ag, supply-chain technologies, animal health, novel ingredients and alternative proteins.

"Valuations, deal totals and market sizes will continue to climb thanks to low interest rates, free-flowing capital and trillions of dollars of pent-up consumer spending power. However, as the market inevitably right sizes and new categories of innovation emerge to meet these monumental shifts, we also expect substantial consolidation and the rise of distinct market leaders."

Investment into indoor agriculture more than doubled to $1.3bn in 2020, from $601m the previous year, "driven by supply chain and sustainability factors, as well as growing consumer preference for local, fresh produce with superior taste and quality".

Vertical-farming businesses, which grow crops indoors in a controlled environment requiring fewer water resources than regular farming and without the need for soil or pesticides, are starting to turn to special purpose acquisitions companies (SPACs) as a means of raising funds.

Typically, they are seeking mergers with SPACs as a route to an IPO. Infarm in Germany is one such vertical-farming business, which announced a proposed SPAC this month. And AeroFarms in the US is another, with a deal revealed in March.

Finistere expects a "wave" of SPACs from agri-food companies in 2021 seeking a stock-market listing. "With a growing cohort of later-stage companies in the sector, we expect to see both more M&A activity by corporates and traditional IPOs – a major departure from historical patterns in agri-food where exits have been driven mainly by corporate buyouts," the venture capital firm said in the report.

Other notable investment areas included alternative proteins, e-commerce and meal-kit firms.

"With valuations in the stratosphere, even at early stages of company development, alternative protein made a break for the mainstream," Finistere noted, adding deals in the space amounted to $3.1bn versus $859m in 2019.

Investment in meal-kit businesses and delivery start-ups climbed to a "record" $6.2bn from $4.6bn a year earlier, while the food-tech e-commerce segment attracted an unprecedented $5.3bn.

"While 2020 presented some interesting and, at times, surprising outcomes for the agri-food sector, we saw fear turn into fear of missing out, with favourable results for start-ups, particularly those in later stage situations with meaningful revenue and strong growth stories," Finistere co-founder Kukutai said.

"Low interest rates and a soaring equity market have provided a backdrop unseen in the relatively short history of the sector. Investors attracted to the potential disruption of massive total addressable markets fuelled increases in investment across all stages and segments."

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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