DigitalFoodLab shines a light on the food tech industry and unicorns in 2023

December 26, 2023

French consulting firm DigitalFoodLab’s FoodTech in Europe Report for 2023 examines the state of the market and the road ahead. It has found that, although investments are decreasing, “things are still looking quite good for the future of Europe’s FoodTech”.

So, what exactly is FoodTech? DigitalFoodLab summarises it as “the ecosystem made up of all the agrifood entrepreneurs and startups (from production to distribution) innovating in terms of products, distribution, marketing or business model.”

According to the report, sponsored by Nestlé, after a boom year, FoodTech investments decreased by 36% between 2021 and 2022. Still, €5.9bn was invested in European FoodTech startups in 2022, almost twice as much as in 2019 and 2020.

The report said that in such a context, one could think that investments would concentrate in a handful of big and already profitable startups. And, indeed many startups without any realistic prospect to reach profitability were left behind.

DigitalFoodLab shines a light on the food tech industry and unicorns in 2023
Source: DigitalFoodLab

“These will have a hard time financing themselves in 2023 and beyond. As some already have, we expect many of them to simply go bankrupt,” DigitalFoodLab said.

On the other hand, the the DigitalFoodLab study went on to claim that the number of deals and the amounts invested in early stage startups decreased only slightly.

“In short, this means that investments in the ‘future of the ecosystem’ are preserved, with many new ventures being well-financed. Even more importantly, this also means that investors, many of them corporate VCs, are still seeing FoodTech startups as long-term profitable bets.”

2021’s boom was mainly correlated to the explosion of grocery delivery startups. It is no surprise then that this has been the most affected FoodTech category with a 68% decline in investments in delivery startups (with still almost €2B invested in these startups).

On the other hand, the report went on to add that 2022 had been positive, with investments in the FoodTech ecosystem rising by 21% when delivery startups are excluded. This increase was notably driven by investment in AgTech, foodservice, and supply chain startups, the report claimed.

As for categories, the DigitalFoodLab report stated that not all countries were affected to the same extent. While the British and French ecosystems kept growing and confirmed their position as leading hubs of European FoodTech, investments in German startups were severely affected with a decline of almost 90%.
The investment boom stretched over five quarters and ended in Q1 2022.

Since then, investments have continued to decline quarter after quarter. “Hence, the question now is how deep the bottom will be, when we’ll reach it, and how strong an eventual rebound could be. Considering all the positive indicators displayed in this report, we think that we may not be too far from it and that the rebound could be quite powerful.”

In terms of why FoodTech is important, DigitalFoodLab said that ‘megatrends’ such as climate change, changing demography and inequality would shape the future of food, that technology to help facilitate positive change is now “available and ready to scale” and that evolution would not be slow, but “messy and gradual, but fast.”

Elsewhere the report examines the current state of the FoodTech ecosystem, highlighting its significant players and constituent parts, and offering some valuable industry insights, as well as exploring innovation hubs around Europe.

Alongside this report, DigitalFoodLab also launched its FoodTech Unicorns report for 2023. It said that the “gloomy funding environment” that had defined recent years “is specifically affecting unicorns”.

However, the report added that while they have lost some of their mythical status in the past couple of years, these startups act as beacons of an ecosystem comprising tens of thousands of ventures. Together, they create a fascinating snapshot of what is happening in the world of FoodTech.

Regarding categories, delivery is still the most well-represented category, with 58% of the unicorns. However, this is 9 percentage points below last year’s distribution. Indeed, 12 new startups became unicorns in 2022, mostly around digitalisation, both in the retail supply chain and the foodservice industry.

The idea of FoodTech startups becoming unicorns and then competing or replacing legacy businesses took a serious hit, DigitalFoodLab said. Indeed, investments are declining, and with them the number of new unicorns. In the short term, we are going back to a few years ago when startups were mostly created to test new business models and technologies, to be then acquired by established companies.

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