F&B needs VC funding to enable the next phase of sustainability

Venture capital investments in the food and beverage industry have taken a hit lately, as a result of ongoing geopolitical uncertainty. In 2023, Pitchbook reported that the median deal size for food tech fell for the first time in seven years – down 12.4% from the previous year, to USD $3 million. But in the same quarter there were a total of 268 deals – up 13.1% from the same quarter in the previous year. 

VCs may be investing less-per-startup in food tech, but a larger number of startups are making smaller deals. 

And this is particularly important in the F&B sustainability space – as highlighted in a new report by Ceres, a sustainability advocacy nonprofit based in the US. The report adds to the ongoing conversation around sustainability goals in the industry – because although F&B firms show great willingness to improve their sustainability practices and reduce emissions, progress is slow. One report by Engie Impact, for example, suggests that only 15% of businesses in the sector are on track to meet their targets. 

What does the new research show? 

The Ceres report identifies strategies that food companies can use to drive innovation in agriculture in order to meet their own ambitious climate targets. Critically, it says, strategic investments are needed to develop new technologies that can help the sector move beyond what’s currently possible, and cut emissions more dramatically. 

Meryl Richards (Program Director at Ceres) told Agriculture Dive: 

“We wanted to look at how they are planning for the next phase of emissions reductions, beyond available practices, because there are some sources like enteric methane, like nitrous oxide from fertilizer, that are a little bit more difficult to address and will require technological innovation.” 

Notable examples cited in the report include: 

• Zelp, a startup developing wearable technology for cattle that can capture methane and convert it into water and carbon dioxide – with funding from Danone.
  
• Additives made with red seaweed, used by F&B companies including Ben & Jerry’s, which are believed to have the potential to cut emissions from cattle by 82%.
  
• Agrivoltaics – a new system for producing renewable energy on farms, by installing solar panels above crop growing land and livestock land.
  
• An agricultural innovation accelerator program, the 100+ Accelerator, that tests solutions to help F&B meet its sustainability and climate targets. The program is co-sponsored by Anheuser-Busch InBev, Coca-Cola, Colgate-Palmolive, and Unilever – and provides each startup pilot it funds with up to $100k (so far it has funded 116 companies in 30+ countries). 

We need tech that can increase the pace of change for sustainability in F&B

As it stands, sustainability targets are hard to achieve – because the solutions to transition organisations quickly enough simply don’t exist (or at least, not on a large scale). 

So increased investments in tech are really important to increase agriculture and F&B’s ability to reduce emissions, while protecting production levels and profitability. 

According to the UNDP in 2022, the vast majority of investments in food systems are “misaligned, and driving negative outcomes, generating $12 trillion in hidden social, economic, and environmental costs.” In particular, $1.8 trillion is allocated to environmentally damaging subsidies. So “it is imperative we align public and private investments with scientific priorities and guardrails for healthy, sustainable food systems.” 

Investing in problem-solving food tech could help to expedite the pace of change – turning ambitious goals into realistic and achievable ones.