The pandemic-spurred growth of food tech
Deals in the food tech space have been picking up lately, with Scandinavian food tech startups like Curb, which was founded by Delivery Hero's former executive Carl Tengberg, and Danish food platform Superb, being the latest in a string of recent growth equity investments in this space.
Curb secured EUR20 million in funding at the beginning of June, while Superb raised EUR12 million in a Series A round backed by a group of investors in the hospitality, online reservation, and Point of Service sector, including Swedish investment company Kinnevik.
Based on recent deal flow it does looks like the market for online restaurants is set for substantial transformation in the next few years, as new tech-driven approach to the food and restaurant industry is a theme that will be able to thoroughly disrupt the market.
Curb for example, a Nordic dark kitchen startup which uses tech and data in order to improve customer experience, creates its food concepts by building each brand from the ground-up using insights and data, in order to cater to fast-changing consumer needs.
Sandra Malmberg is a Stockholm-based venture lead at EQT Ventures – the venture arm of Nordic private equity giant EQT – who worked on the Curb deal. She believes that although the delivery platforms have experienced substantial digital transformation lately, the supply side is still behind.
“With Covid-19 accelerating consumers’ comfort using home delivery services, this leaves a massive opportunity for dark kitchens, an industry predicted to become a USD1 trillion market by 2030,” said Malmberg.
She continued: “As much as technology has played an important role transforming delivery, it will also transform production. Data will be used for everything from optimising the supply chain to iterating food concepts and disrupting the customer experience.”
Food tech entrepreneur Carl Tengberg, founder & CEO of Curb, spent years on the frontlines at Foodora and Delivery Hero together with his colleagues Felipe and Camilla disrupting food delivery.
And according to Malmberg, it was their vision and ambition regarding how to leverage technology and data to transform the supply side which made EQT take the leap and team up with Curb.
In terms of Malmberg's insights regarding investment decisions during the global condition of an ongoing pandemic, she says that she has realised the importance of agility when it comes to catering to consumers' needs.
“With so much competition in every aspect of life, speed is everything. Customers seek companies that can give them what they want fast, and the speed of responding to customer’s signals will determine the likelihood of success,” she explained.
So what does the future hold for the burgeoning food tech sector? Jambu Palaniappan, managing partner at Omers Ventures, says he expects to see innovation mainly in three areas in the next ten years: what we eat, how food products get to us, and within the brands themselves.
“I think there will be a huge increase in areas like lab grown meat/fish and cultured products that replace environmentally unfriendly alternatives. Vertical farming, already finding traction, will also be on the rise,” he said.
Palaniappan continued: “Today we rely on a massive global food supply chain, but then we still largely go to shops to pick up our food. There is a structural shift towards more localised supply chains happening which was accelerated by the pandemic. However, at the same time we are seeing innovation in food-stuffs and what we eat, coupled with a more customer-oriented delivery approach. Ultimately this will probably mean that access to food won’t be limited by the opening hours or location of a restaurant or shop.”
Omers Ventures is the venture capital arm of OMERS, the pension plan for Ontario’s municipal employees, and its portfolio companies include social media management platform Hootsuite, Hopper and ecommerce platform Shopify.
When it comes to new food brands, the barrier to creating them is lower than ever in Palaniappan’s view, with innovations like dark kitchens, micro-fulfilment and quick commerce, as these are lowering barriers for foodmakers to create and market their products to an entirely new group of customers.
“I think we’ll see a continued evolution of the delivery apps and increased frequency of use. The products will be more accessible in more towns and cities across the world, have more breadth with more products on offer — from pharmacy to grocery to restaurant branded meal kits and there will be more vertical integration. We’re starting to see FMCG companies own and operate their own dark stores to reach customers directly, bypassing the traditional retail model,” commented Palappian.
According to the Omers Ventures MD, private capital will be important in funding this growth — both in terms of traditional food businesses that are owned by private equity firms looking to grow and innovate, and from venture investments in emerging companies and tech to support that scale and growth.
“As the overall private markets grow, food tech is an area that stands to benefit significantly from that increased focus and investment,” he added.