Sunday, 16 August 2020

By Foo Boon Ping

In this first part of the Wealth and Society Dialogue Series, Andrew D. Ive, founder and general partner of Big Idea Ventures, discusses the growing appetite for meat alternatives amid the COVID-19 pandemic and how the company’s two funds are working to accelerate this trend.

  • Alternative meat consumption demand is increasing dramatically around the world, driven by entrepreneurs and large food companies
  • The COVID-19 pandemic has shown that the global food manufacturing system we rely on is more fragile than we thought
  • Large shareholders of food producers risk being left disappointed, unless food producers can bring clean technologies in house and start changing their production capabilities

Plant-based foods are not just incremental evolution of an existing category, but a revolution, according to Andrew D. Ive, founder and general partner of Big Idea Ventures (BIV).  Driving this shift is a new breed of agritech startups that are developing culturally relevant, local foods that integrate into people's ongoing consumption habits.

Leveraging this trend, BIV launched   the $50 million  “New Protein Fund and Accelerator” programme that is focused on reducing animal factory farming by investing in early stage companies that are bringing plant-based and cell-based foods to market.  The programme helps these companies to build, test and prepare for growth and are currently based out of New York and Singapore.

Its second fund, with $250 million in capital, is focused on developing technologies to meet the key challenges in the food production chain related to its carbon dioxide (CO2) footprint, water use, plastic use and waste.

 

The following is the transcript of the interview:

Foo Boon Ping (FBP): Alternative protein and agri-food technology is  getting a lot of attention lately because of COVID-19. What opportunities are there for the impact investor sector as a whole? Please also provide us a profile of Big Idea Ventures.

Andrew D. Ive (AI): Plant-based foods are not just incremental evolution of an existing category. Ten years ago, the plant-based category was one or two very small brands that were relegated to the periphery of the grocery store. In the last five, maybe 10 years at most, there's been a complete revolution of that category. It's absolutely a revolution.

We're seeing entrepreneurs and large food companies working together to create whole new product categories within this plant-based space. So, you're seeing alternative dairy, you're seeing alternative meats, you're seeing alternative seafood. If you think about it, the meat industry is a $1.5 plus trillion industry, and it's potentially being competed with by more efficient, less environmentally impactful plant-based versions, which more consumers around the world are opting for.

FBP: There are geographical differences in terms of the consumption of plant-based alternatives to meat, how do you view these global trends?

Alternative meat consumption demand is increasing dramatically around the world

AI: The growth of the demand from a consumption perspective is increasing dramatically around the world. I would say in the US, it’s more mature. It is increasingly mature in Europe as well, and I’m starting to see really good signs of that growth also in Asia. But the interesting thing is, what's allowing that consumption to happen and the speed of that is driven very much by the entrepreneurs and by the large food companies working together to bring new foods to market. It's not about encouraging people to eat more burgers around the world and adopt a Western diet, what it is about is developing culturally relevant local foods that integrate into people's ongoing consumption and habits.

The global food manufacturing system we rely on is more fragile than originally thought

FBP: How has the COVID-19 pandemic brought into awareness some of the issues with the traditional meat industry such as zoonosis, for example, with the intense farming of animals for meat and the cross contamination with humans?

AI: We've discovered with COVID-19 that our food supply chain is not as strong or as predictable, as we've always come to believe. It's actually a lot more fragile than we expected. That means from a food security perspective, the supply chain is critical. But also, as a country, we are reliant even more than we ever imagined on our neighbors to provide us with the ingredients we need to manufacture the products that we consume. And if those neighbors, because of COVID or any other shock to the system, stop providing the raw ingredients, then the kind of core manufactured food manufacturing system that we've come to rely on is not necessarily as predictable.

FBP: What is the rationale for having offices in the US and Singapore and how much of the $50 million Fund 1 has been invested already?

AI: We're looking to build what we call value chains and an ecosystem in key markets all around the world. That will allow us to build relationships with the beginning of the supply chain – the ingredient providers through to the country-level manufacturers, the producers and ultimately through to the distributors, and then finally through to the retailers, food services, other outlets, convenience stores and so on. We're finding the best partnerships with the best companies in these key regions: North America, Asia and eventually it will be Europe and South America.

In terms of the ratio of Asia-based companies and North America, it's probably about 60% are on the New York side and about 40% are on the Singapore side.

In terms of the fund, we set out to raise $50 million. We're most of the way there, but the fund is still open. We have had our first two or three closes since we started. Because this category is growing so quickly and there's such a lot of interest in it, every two or three months, we've been able to have a sizable close already. We already got some great limited partners (LPs) on board and we'd be happy to get family offices, high-net-worth individuals (HNWIs) or large strategic investors to support the growth of this category.

FBP: You also have another $250 million Fund 2, which is targeted at the whole food producing supply chain. Is that fund more targeted between the two? Is there a difference in terms of how they might appeal to impact investors?

Large shareholders of food producers risk being left disappointed

AI: The first fund is focused specifically on reducing animal factory farming - which is number one or number two in terms of its detrimental impact to climate change - by bringing delicious plant-based and cell-based foods to market. The second fund is specifically focused on the key challenges in the food system related to CO2 footprint, water use, plastic use and waste.

So, for example, when we went and had conversations with some of the largest food companies about the first fund, they came to us as part of that discussion and said, “The plant-based category is probably one of our top three strategies for growth in the next five to 10 years”. But what's really important to us and our shareholders right now is, how do we as large food companies reduce plastics in our supply chain? How do we produce the great products that we produce today using far less of a CO2 footprint? How do we reduce waste? And how do we reduce the water consumption that we're using? Those four key performance indicators (KPIs) are commitments that many of these companies are making to their biggest shareholders for 2025 and 2030.

However, the technologies that they have in house today aren't allowing them to achieve those objectives, which means some of their biggest shareholders who are waiting for these changes to occur, and for their businesses to be retrofitted, are going to be disappointed, unless they can bring those technologies in house and start changing their production capabilities.

FBP: With funds today increasingly environmental, social and governance (ESG) rated, is it relevant or does it make sense for your two funds as a venture capital to be ESG rated?

If any [of our portfolio] companies over the next five to 10 years change their business model, tweak their business model, get acquired by a food company or in some way change the impact that they're going to have – whether it's for the positive or the negative – it's about tracking all of the changes that occur with every single portfolio company and seeing what that has changed from an ESG perspective. So, it’s very difficult to do on an ongoing basis with any real transparency and accuracy.

We are bringing on board at least one [ESG rating company] to examine the investments we are making from an ESG perspective and report on that. They will need to track those companies on an ongoing basis with us to make sure that they are delivering on their commitments from a packaging and production perspective.

FBP: It was reported that you're looking at entering China in the next two years. What is your view about China as a market?

AI: We've already made at least two investments in our portfolio in the Chinese market with Zen Meat and Future Food. Both of those companies are focused on the Chinese market and many of our companies are starting to consider the Chinese market. They're using Singapore as the innovation base, because it's an incredible place to innovate.

I would anticipate that we will have an office in the Chinese market probably within 12 months’ time. The Chinese market itself is showing signs that they're increasingly moving to plant-based and cell-based foods, and I think we're going to see a unicorn or two in the Chinese market in the next three years. I believe some of our companies have the potential to be Chinese unicorns in the next three to five years. What's going to happen is that the Chinese government sees that plant-based and cell-based foods are great ways of producing more efficient protein for their people.

FBP: You have currently invested in 25 companies. What are the opportunities that you are seeing?

AI: We are also interested in the use of fungi as a protein source, a kind of micro protein. We are looking at microbe fermentation and other technologies that are coming through that will give us some really interesting products and ingredients. We got some really interesting companies coming through on the algae side that are making significant strides in terms of ingredients. So, there are a lot of exciting things going on, both in the food and innovation space of ingredients.



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