Zoe Chew

July 14, 2022

Future of Food: Opportunities & Monetization

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Issue #18

Software is feeding your stomach. The future of food is transforming the way we eat, nourish, and shop for food products.

Today, food technology is more than just ordering food from DoorDash, getting your recipe-in-a-box from HelloFresh, hiring a personal shopper from Instacart, or finding your favorite restaurants from Yelp

New startups are entering the lucrative food industry through unique differentiation, solving valid problems, and becoming a huge success. 

We’ll examine top startups that are reinventing the food industry and unlocking exciting opportunities for builders and backers to capitalize on the food space.

1. Key trends

(1) Foodtech is gaining investors’ attention:

  • The global foodtech market size will be worth $342.52 Billion by 2027.
  • $39 billion funding poured into 1,358 food tech startups in 2021. Q1 2022 funding saw a decline: total $6.9 billion invested across 359 deals, down 40.8% quarter-over-quarter. 
  • Top categories for foodtech investments: online food delivery, online grocery, and alternative animal-based products.

(2) Companies that produce “plant-based meat/dairy” are seeing IPO exits:

(3) Biggest foodtech funding round in 2022:

  • Getir (an online grocery retailer in Turkey) closed $768M
  • Swiggy (food delivery giant in India) closed $700M
  • Bolt (an Estonia-based super app that offers on-demand food delivery) closed $628M 
  • Plenty (vertical farming based in San Francisco) closed $400M

(4) Rise of APAC foodtech:

  • India will be the 3rd largest consumer market by 2030; food sector growth rate will double by 2025 with an estimate of $13 billion GMV (gross merchandise value).
  • Notable examples: India’s Zomato went public at a valuation of $12 billion. Swiggy, a food delivery unicorn is preparing for a $1billion IPO.
  • China is becoming the hotspot for online grocery unicorns: Womai.com (online grocery company) valued at $1 billion; Meicai (online agricultural products) at $7 billion valuation, Jiuxian (online liquor retailer) at $2.8 billion yuan.

(5) Consumers are demanding more than just convenience from food services:

  • D2C food companies are aligning value propositions with these shifting consumer preferences: no allergens (soy, GMOs, gluten); no chemicals (hormones, antibiotics, artificial ingredients); and environmentally sustainable (plant-based, ethical).
  • Magic Spoon replaces sugar-based cereals with low-carb and keto-friendly cereals. 
  • Elite Sweets sells low-sugar, gluten-free, keto-friendly donuts.
  • Sids Farm sells grass-fed milk without added hormones and antibiotics straight from the farm.

(6) Food science companies are producing animal products without harming the animals:

  • New companies leverage bioscience in food by introducing “cultured meat”--producing real meat without slaughtering animals through in vitro cell culture processes.
  • Mosa Meat ($85M Series B in 2022) produces real beef from cellular agriculture technology. 
  • Singapore’s TurtleTree ($32.9M in 2021) produces clean and fermented milk products without involving animals. 
  • Finland’s Solar Foods ($11.9M in 2021) uses natural fermentation and renewable energy to deliver the most sustainable protein in the world. 
  • Barcelona’s Cubiq Foods ($5.5M in 2020) produces real animal fat solutions such as Omega-3 for industrial clients using cell-based technology. 

(7) Plant-based and vegan food categories are booming:

  • New startups are rushing into the $22 billion vegan food market.
  • Singapore’s Next Gen Foods makes chicken burgers from plants. The company's latest funding round closed $100M Series A in 2022.
  • Israel’s Redefine Meat makes beef and lamb cuts from plants. The company recently closed $135M.
  • UK’s allplants ($52M funding in 2021) is an online vegan meal delivery platform.

(8) Online food delivery is tapping into corporate food ordering service:

(9) D2C food companies are innovating in the snack market:

  • Perky Jerky is creating all-natural ingredients meat-based snacks.
  • Peckish is making hard-boiled eggs snackable.
  • Mindright is creating nootropic-infused snack bars that can improve mood and mental health.
  • Truss Beverages is producing cannabis-based sparkling water, beverages, and tonics.

(10) The “fall and rebound” of meal kit subscription:

  • Low customer retention and high operational costs are the main factors for many meal kit startup failures. 
  • During COVID-19, meal kit services were brought back to life. Restaurants adopted meal kits to survive. Consumers turned to meal kits for at-home dining. Companies are reinventing new offerings to thrive.
  • Home Chef meal kits are focusing on weekly recipe rotations for all levels and dietary preferences.
  • Gousto is an ‘ingredients-and-recipes-in-a-box”.
  • Plateaway curates UK’s best restaurants, turns them into meal boxes, and ships directly to you.

2. Market Players, Competitors List & Databases

👉 View the database here

3. What problems do they solve?

(1) Addressing dietary needs:

  • 68% of the world’s population is lactose intolerant. About 6% to 7% of the U.S population have gluten sensitivity or celiac disease. Food allergy affects 2.5% of the global population. 
  • New companies are entering the food tech market by offering allergen-free food products.
  • Example: JUST Egg’s products are suitable for those who’re allergic to eggs. Ripple sells plant-based milk packed with richer protein, calcium, and Omega-3. Melt Organic makes butter from plants. 

(2) Climate change is affecting livestock production:

  • By 2025, the global demand for livestock products is expected to grow 2x. The warmer climate is limiting livestock production due to reduced corp yields. Livestock also adds 14.5% of greenhouse gas emissions.
  • Companies are creating eco-friendly meat production technology without sacrificing the animals, environment, taste, and authenticity.
  • Example: ENOUGH (fka 3F Bio) ($51M Series B in 2021) ferments fungi with natural sugar from grains to produce meat. Remilk manufactures real milk without using cows that are free of cholesterol, lactose, hormones, and antibiotics.

(3) Increase workplace engagement:

  • Attracting and retaining top talents is becoming more challenging for employers–about 57.3% turnover rate in 2020; and 4.4 years of tenure per employee. One of the top reasons why talents leave is company doesn’t care about the employees.
  • Some food startups are approaching the food industry using employee engagement strategies, i.e. employer-sponsored meals, virtual meeting meals, and Zoom happy hours.
  • Example: Fooda shows that paid meal programs increase employee happiness and engagement rates. eatNgage allows virtual meeting hosts to offer their guests a meal of their choice, delivered just in time for the meeting.

(4) Food delivery apps are killing restaurants’ income and profit margins:

  • The rise of online food delivery allows restaurants to partner up with apps like Uber Eats, DoorDash, and Deliveroo; tap into their customer base, and increase order revenue.
  • However, high take-rates, packaging costs, and delivery fees are hurting the restaurants’ margins and might be putting restaurants out of business.
  • New food tech companies are helping restaurants to bypass expensive rent, expand into new areas, decrease operational costs and increase profit margins by creating virtual kitchen solutions.
  • Example: CloudKitchen offers kitchen spaces, staff, facilities, delivery management, and software to help businesses launch a restaurant in weeks, not months. Yummykitchen offers meal prep, packaging, employees, and an on-demand ordering system.

(5) Increase discovery of food products through digital platforms:

  • Demand for online groceries in the U.S. will grow another 20.5% in 2022.
  • Apart from Walmart, Amazon, Kroger, and Instacart, new startups are building niche-focused food, grocery, and ingredient discovery to satisfy unique consumer needs.
  • Yummy Bazaar sources authentic food and ingredients globally. 
  • Asian Food Grocer sources unique Asian goods, including food, candy, beverages, etc. 
  • Supermarket Italy gives you the highest quality Italian groceries. 
  • Nuts.com sells premium nuts and dried fruits.

(6) Reducing food waste:

  • We waste 1.3 billion tonnes of (edible) food every year. That’s an equivalent of $750 billion/year of economic losses and 3.3 billion tonnes of CO2 emission. 820 million people are starving globally.
  • New startups are going after the food waste business by redistributing underutilized food across the food supply ecosystem.
  • Misfits Market “rescues” fruits and vegetables from stores and sources organic groceries at cheaper prices for consumers.
  • Too Good to Go collects leftover food from restaurants and helps businesses monetize surplus food.
  • Goodr partners with organization and help enterprises deduct tax expenses by picking up edible food waste and donating it to a local non-profit. Goodr also provides real-time technology to track food donations and their impact.

(7) Helping consumers reduce decision fatigues:

  • Consumers spend 72 hours/month (2.4 hours/day) browsing and ordering food online in 2019, up from 32 minutes per month in 2017. Individuals typically spend 30 min to 6 hours per day on cooking.
  • Startups are solving the “time constraint” issues and figuring out the “what to eat” questions by combining food data, content, and recipe-as-a-service.
  • Open Table offers fine dining restaurant reviews and an online reservation system.
  • Tasty app uses media to offer bite-sized videos, step-by-step cooking instructions, personalized recipes, and customized recommendations for users.
  • Hungryroot offers an all-in-one recipe and grocery delivery service

4. Business models & monetization

(1) Kitchen-As-A-Service (KAAS):

  • Cloud kitchen (aka dark kitchen, ghost kitchen) companies may provide real estate, facility, human resources, marketing, logistic fulfillment, and software to help restaurant owners run delivery-only businesses virtually. 
  • Kitchen United charges 15% of all the restaurant’s revenue but 0% if the order comes through third-party delivery. 
  • NextBite pays fulfillment partners 55% and earns 45% of gross sales (includes ordering fees, training, and marketing) that promises 20% to 30% profitably for partners.
  • Karma Kitchen offers kitchen renting to brands that cost £40 to £80 per eight-hour shift and private kitchens for £81 to £160 per eight-hour shift.

(2) Take rates from platform participants:

  • Online food marketplaces typically generate multiple revenue streams from different participants (e.g. drivers, restaurants, partnered merchants) via transaction cuts, referral fees, and commission revenues.
  • Grubhub charges restaurants 5% to 20% per order in the form of marketing commissions — including listing and promotion costs.
  • DoorDash charges restaurants 25% delivery commission and 6% pickup commission in the Plus plan.
  • ezCater costs $0 to list on the marketplace but takes 15% commission for each order received by the merchants plus a 2.75% credit card processing fee.
  • EatClub charges restaurants a $2 fee for each guest EatClub brings into the restaurant and takes less than 30% to 40% commissions or levied by third-party delivery apps.

(3) Enterprise model:

  • Company lunch delivery (Fooda, ezCater, EatClub) can yield higher profit margins because it delivers multiple meal orders to workplace buildings, rather than one meal to one person across different times and locations.
  • Another way to sell to organizations is through employee benefit programs. 
  • Peach offers “lunch-as-benefits” — delivers employees meals from curated daily menus and offers a company-subsidized “Lunch Card” which employees can spend on food.
  • Juno gathers all employee benefits in one hub including food, grocery, gym membership, meditation classes, and other wellness areas. Juno costs £2.50 per month per employee or a monthly employee wellbeing allowance, starting at £30 per person. Organizations can access Virtual Juno Card, analytics, and reimbursement features.

(4) Renting out ad space:

  • Food/grocery delivery apps are starting to implement advertising to expand revenue streams other than earning marketplace commissions.
  • Instacart Ads help businesses reach more customers using paid search, delivery promotions, coupons, sampling, and marketplace ads. Its cost-per-click (CPC) model costs between $0.35-$1.50, depending on the product category. 
  • DoorDash launched Search-Page Ads where restaurants can purchase ad placements to promote free delivery or food discounts. DoorDash is also building another ad product, “featured listings” to help CPG brands gain visibility.

(5) Subscription:

  • Meal box delivery and D2C food brands (e.g. HelloFresh, Blue Apron, Freshly, and Hungryroot) typically adopt a weekly subscription model; monthly subscription (Sakara starting $139/week, Candy Club $29.99/mo); or hybrid goods + community access (Baked In £8.25/mo).
  • While the subscription model is popular among food e-commerce companies, it can also be applied to food delivery platforms in the form of “VIP features”.
  • Zomato Pro Plus allows consumers to access ​​free delivery on all orders, exclusive discounts, and exceptional dining privileges. Grubhub+ costs $9.99 per month and consumers get unlimited free delivery on orders of $12+ from restaurants listed on Grubhub.

5. Next Big Things

(1) Group buying across different food product categories:

  • Group shopping or group buying is already happening in the e-commerce space — demonstrated successfully by China’s Alibaba, JD.com, and Pinduoduo. Shoppers can access bulk buying discounts and social interactions.
  • In food tech, we’ve seen group order options in DoorDash, Grab, and Uber Eats. Multiple families, friends, and colleagues can place a single order to save time and delivery fees. 
  • The group buying model could also work in grocery shopping (think Nextdoor for grocery), sourcing fresh produce, or local farmers-to-consumers purchase. Startups can provide social communities, rewards, fintech solutions, and review features on the platform.

(2) Food apps for the Gen-Z market:

  • Gen-Zs make 14.6 billion restaurant visits; spend 23% of their income on food; follow creators on TikTok, YouTube, Instagram, and Snapchat for food discovery; make purchase decisions based on social media feeds; and prefer plant-based, fresh, organic, sustainable, and authentic foods.
  • New startups will connect Gen-Z consumers with restaurants to increase online food delivery volume or dine-in revenue.
  • Potential use cases: (1) Airbnb’s Online Experience but specifically for connecting foodies with influencers. (2) TikTok for recipes and allow creators to monetize their cooking tutorials/recipes. Here’s how TikTok is tapping into this market. (3) group-dining where people find a tribe with similar food preferences, get socialized, and dine together to save.

(3) More fintech solutions in the food industry:

  • Fintech is a huge enabler for online food/grocery shopping, digital banking, contactless payment, QR pay, and BNPL (buy now pay later) purchase installments.
  • The future of food tech will tap into the fintech space, expand the addressable market, capture more values and generate multiple revenue streams.
  • The most obvious path is to become a super app. Grab offers rides, food, grocery, payment, insurance & BNPL in SEA. 
  • It’s also possible to enter the food space as an investment tool. Bumped converts your spending on Starbucks, Chipotle, and Walmart into stock rewards you can own. Peach ($20M Series A in 2021) offers Lunch Card, an employer-subsidized digital card made just for lunch. 

(4) Business-facing platforms will begin to catch up:

  • While most foodtech unicorns are consumer-facing (Takeaway.com, Instacart, Deliveroo, DoorDash, Grubhub, Swiggy, HelloFresh), B2B food tech is catching up.
  • Example: French’s unicorn Swile is a smartcard for all employee benefits in one place, including meal vouchers. Infarm (fastest growing AgTech) sells fresh produce through its vertical farming solutions to retain chains. DayTwo is a metabolic health meal planning for organizations.
  • New startups can adopt the enterprise model to enter the food space. They can position themselves as employee benefits, loyalty programs, corporate catering services, etc.

(5) Foodtech will become social:

  • Recipe and cooking apps will continue to become a popular category in the food space. The success of Allrecipes (acquired by Meredith), Kitchen Stories (acquired by BSH Hausgeräte GmbH), and Spoon University (acquired by Scripps Networks) support this thesis.
  • We’re also seeing new recipe apps going social. Pepper is a social cooking app. MyGreatRecipes is the Pinterest for recipes. Whisk all-in-one app for recipe saving, meal planning, grocery shopping, and recipe sharing with online communities. 
  • New startups will look at the intersection of media (cooking content), foodtainment (livestream shopping), creators (help creators monetize), and social media (communities, feeds, and interaction).

(6) Consumers' demand for health will drive nutraceuticals into the food space:

  • We’re seeing new food solutions taking the bioscience route–Renaissance Bioscience (bioengineered foods for nutritional boost), Brightseed (using AI to detect plant compounds in relation to human health), Kaffe Bueno (functional coffee beans),
  • As consumers have a heightened demand for healthy and nutritious foods, this trend will trigger new waves of nutraceutical startups.
  • One category to look at is personalized biological foods. As the personalized nutrition market reaches $3.56 billion by 2030, startups can provide at-home test kits to help users discover allergy triggers and formulate alternative dairy, meat, protein, and greens that are perfectly suited for the user.

(7) Adoption of smart kitchens and connected devices will see new solutions:

  • Smart refrigerators (LG ThinQ), smart cookware (Tasty On Top), smart dishwashers, and smart ovens (Amazon Smart Oven) are entering the smart connected home market. 
  • While most smart appliances are helping people to save time, there could be products that focus on pressing problems–e.g. saving grocery costs, and improving food quality, and safety.
  • If we look at the rising food trends that create successful companies, i.e. plant-based and alternative meat, there could be opportunities for smart kitchen that produces cell-based meat or non-dairy milk using “at-home fermentation device”.

(8) More solutions are needed to focus on improving the food supply system: 

  • Companies that solve environmental sustainability and food supply crises are starting to gain traction. Example: Impossible Food (valued at $4 billion), Infarm (valued at $1 billion), and Plenty ($400M Series E in 2022).
  • The next wave of food tech will focus on solving adjacent problems that arise from the exploding food & grocery delivery trends, i.e. food waste and growing food demand.

One category to look at is reducing food waste through upcycled food solutions. The approach is to use bioscience or bioengineering to repurpose, procure, and recreate nutritious food from ingredients that would otherwise go to waste.