Indian food innovation tech start-ups attract $798.6 m investment since 2015 – The Hindu BusinessLine

Capital flows into the Indian food innovation technology firms stood at $798.6 million across 103 companies between 2015 and 2021, a latest report by Think Ag has said.

The Food Innovation Technology Investment Landscape Report 2022 reveals that new-wave food and beverage firms attracted over 70 per cent of these investments, followed by the functional food segment at 25 per cent and the nascent alternative protein and dairy segments garnering a mere 1 per cent of the investment since 2015.

Food innovation technology in India has been dominated by start-ups capitalising on consumer demand for novel, healthier, more convenient, clean-label, sustainably packaged food products. About eight of the ten largest food innovation technology fundraisers are in this segment, which has cumulatively raised $570 million since 2015.

Leveraging tech advancements

Food innovation technology refers to any innovation that leverages technological advancements to expand the scope or improve the characteristics of food and beverage products, ranging from biotech and engineering to digital and food science advancements that, together with agri-tech can be leveraged to create healthier, more efficient, inclusive and sustainable food systems.

The food innovation technology solutions currently account for just 12 per cent of India’s overall food processing market of $263 billion in 2019-20, indicating abundant room for expansion. Identifying this potential, diverse types of investors and capital have backed innovations in this space, it said.

The ThinkAg report said India’s innovative food landscape will stand to benefit not only from the growing entrepreneur and investor interest in food innovation technology but also from the innovations and improvement in the agriculture sector. ThinkAg is a platform focused on agtech and food innovation technology and aims to bring together innovators, corporate entities, and investors to improve outcomes in the sector.

Unique potential

Functional food and nutraceutical innovations, which accounted for 24 per cent of the deals in 2021, have a unique potential in India given the rich knowledge of ayurvedic wellness therapies as well as the cultural heritage of adopting plant-derived home remedies. A growing number of companies are now entering the food innovation technology segments to formulate plant-based extractions and create functional products.

Though innovations in alternative proteins and dairy have been happening for a few years, they only began to take off in 2021 and over half of the cumulative investments of $11.5 million were raised during the year.

India’s food innovation technology investment landscape, though relatively new, is already attracting diverse sources of capital. Reflecting the dominance of consumer product companies in the sector, consumer brand VCs such as Fireside Ventures, DSG Consumer Partners and Sixth Sense Ventures, are the most active investors in this space. Sector agnostic funds such as Sequoia Capital India, Saama Capital and Matrix Partners are other major investors in this space.

The major capital raised by Indian food innovation and technology firms since 2015 include Bira 91 Beverages ($126.13 million), Bright Lifecare ($62.31 million), PaperBoat ($60.88 million), Epigamia ($49.15 million) and Veeba ($43 million).

Top investor

Among the investors, Sequoia Capital topped the list of investors in Indian food innovation and technology firms with an investment of $101.58 million since 2015, followed by Sofina ($66.55 million), Verlinvest ($48.61 million), Everstone Capital ($31.20 million) and Saama Capital ($28.20 million).

Many food corporates have also been making strategic investments in the Indian food innovation and technology space and significant deals include the Japanese integrated beverage company Kirin Holdings picking up a stake in Bira 91 Beverages and NewYork-based venture arm of French yogurt brand Danone in Epigamia. Indian companies that have made such investments include Rebel Foods in Slay Coffee, Jubilant Ingrevia in Mister Veg, Lasons in OneLife, and Jubilant Foodworks in Wellversed. Crucially, large FMCG conglomerates have been less active in engaging with food innovation technology start-ups, with the notable exception being Tata Consumer Product’s acquisition of millet food product brand, Soulfull, the report said.

The report said looking ahead, the sector’s growth and outlook will be contingent on food innovation technology ventures’ ability to expand their offerings and reach beyond the limited premium segment.

Currently, start-ups developing consumer brands are predominant, with few upstream innovations in novel ingredients, equipment, or processing techniques. Until the end-product solutions achieve sufficient scale, upstream innovations that supply these consumer brands will continue to face an uncertain market in India. “We are beginning to see global markets as an important piece in this puzzle, with many research-led ventures (upstream and end-product) expanding into or forming partnerships in more developed ecosystems for the larger markets and sector expertise,” the report said.