We have witnessed many exciting new trends in the food industry over the last five years, particularly in foodtech. Despite the seismic impact of COVID-19, investment in foodtech in Southeast Asia is on the rise as consumers in the region pay more attention to environmental sustainability, food sustainability and healthy living.
Changes in consumer behaviour are driving a shift in the demand for this new wave of startups as consumers are concerned about the spread of the virus. There is also a demand for nutritious ingredients, product transparency and ecologically responsible sourcing in product creation. These desires create a tightrope walk for investors in the industry, leaving many uncertain about which innovations to back. How can foodtech startups take advantage of these trends in order to attract early-stage funding?
The rise of foodtech disruptors
There are a lot of current products and up and coming developments to get excited about in the food technology sector currently. It’s no secret that, especially during the beginning stages of the pandemic, food delivery businesses such as GrabFood and FoodPanda were regarded as the sole ‘winners’ of the COVID-19 outbreak. Between 2019 and 2020, food delivery saw a 183% increase, with its GMV expected to hit $11.9 billion USD by the end of the year. With the increasing need for digitisation and changes in consumer behaviour post-COVID-19, we can expect a major portion of this growth will remain a permanent fixture in the market.
We look at the emerging foodtech trends during the pandemic
As the virus continues to wreak havoc, digitisation of the supply chain is a top priority for most startups. The next wave of challenges is focusing on direct-to-consumer (D2C) food distribution channels that will lead to the growth of a new breed of eCommerce business known as digitally native vertical brands (DNVBs). With changing consumer expectations and the increased adoption of eCommerce, D2C marketing appears a viable option. Omitting multiple levels of intermediaries helps to facilitate trading in produce, minimise food waste and mitigate losses to farmers’ profits. Among the many advantages, D2C channels allow businesses to establish loyal customers, allow room to pivot, shift and accommodate rapid changes in consumer behaviour in the most effective manner.
The plant-based industry, which was already gaining traction before the pandemic, is another promising area of growth in foodtech. As COVID exposes a regional dilemma on food scarcity, and as consumers increasingly choose eatery options that align with their moral values, lab meat and indoor greens are stepping up to the plate, quite literally. When you consider that it takes up to 1,800 gallons of water to produce one pound of meat, lab-grown meats appear to be a more viable option to meet increasing global demands for protein.
It doesn’t stop there. Companies are also looking to manufacture algae, vegetable and insect-based food, resulting in the emergence of a new market for animal-based alternatives that will soon become the tipping point.
Emerging foodtech trends
The three largest food delivery markets in Southeast Asia—Singapore, Thailand, and Indonesia—raked in $2.4, $2.8 and $3.7 billion USD GMV in 2020, respectively. A dominant player in the industry, Grab, made up around half of the region’s food delivery GMV in 2020, leading five out of six markets. Meanwhile, Foodpanda, which operates in four markets, comes in a close second.
In December 2020, Singapore became the first country to allow the sale of “cultivated chicken”, approved for sale by Singapore’s Food Agency as chicken nuggets. This cultivated protein is now under the agency’s “novel food” working group, which comprises outside experts in fields relating to food science, nutrition, toxicology and epidemiology, among others. Singapore’s dive into lab-grown meat and alternative proteins is part of a larger effort to strengthen the country’s food security after witnessing an inadequacy of food supplies due to the outbreak.
Food security threats have escalated throughout Asia and the Pacific as a result of the COVID-19 pandemic since tight quarantine measures and export bans on basic food items have impacted all levels of the food supply chain. To address concerns, a lot of investment dollars are going upstream opening up the possibility of more funding pools in the region.
Clearly, there’s an opportunity for foodtech startups in the region to step in and help tackle these near and long-term challenges in the industry. Moving forward, this new industry in Southeast Asia will see a focus on food chain resilience and sustainability solutions, developing innovative food and ingredients, while addressing significant concerns such as food waste, decarbonisation and more as part of these growing trends.