Higher demand pushes Investment in Local Foods

While everyone eats food, not many think about food. But as people around the globe are getting more and more health and community conscious, they are beginning to assign increasing importance to the idea of ‘Local Food’.

They want to know how their food was grown and where is it coming from? They also want to know how is it made and by whom? They are even okay to pay somewhat higher for their food purchases if it promotes local economies, safeguard the environment, preserve farmlands, and advocates proper animal treatment.

This means that a lot of us, who have some land, have a huge business opportunity sitting under our noses right now. In fact, the investors too are encouraging patient capital investments in food and farming enterprises that can make positive social impacts. They are able to pull decent returns on their investments and can create value for other stakeholders.

But the world is riding high on a technology wave and entrepreneurs aren’t really talking about the food. That’s why, we are!

For many of us, farms and food processers are just not the places to put our money and effort in. But at a time, when the functional kitchens in the modern homes are getting smaller, food processing holds immense scope in the times to come. Also, the rising health consciousness among people has been making them less dependent on packaged foods and consume more of the locally grown food.  

Some investors have recognized this potential. The investment funds in the food sector have proliferated. The incubators and accelerators are also backed by venture firms and crowd-funding projects. Meanwhile, the list of food business accelerators, including initiatives sponsored by universities and corporations, continues to grow.

In 2016, the venture capital funds in the US processed 66 food-and-beverage deals. This was a 20 percent growth in the number of deals over the year 2015.

Growing food

Producing food is real hard work. But the room for errors is slim.

Because of these two reasons, whole many agriculture businesses and family farms have succeeded; others have got disappeared too. According to USDA, the net farm income across the entire sector is declining for the fourth consecutive year.

Still, the demand for healthy, locally grown food has never been bigger. The local food sales in the India grew to $12 billion from $5 billion (2008) in 2014. The local food sales in 2019 may outpace the country’s total food and beverage sales and reach to $20 billion.

Shouldn’t the entrepreneurs and innovators jump in to meet this demand?

Challenges

Though simple, the chain of local foods is quite challenging.

In many of the Indian regions, there is no adequate infrastructure that can connect the farmers to the growing demand for local products. There are no aggregators, processors, distributors, and marketers. The regional markets lack such organizational structure.

The food entrepreneurs need financing and strategic assistance to help them accelerate their growth and scale their businesses for a long-term success.

Then comes the challenge of network of farmers. It is not possible for one farmer to grow all kinds of food in a region.

They also need appropriate consumption channels to easily find the demand patches and sustain revenues. Since the local food chains purposively evade cold chain logistics, their shelf lives are limited and hence must be consumed at the earliest.

A local food initiative in the US titled ‘Five Acre Farms’ has partnered with over 25 farms. It is now the official milk supplier of Kellogg’s NYC cereal café in Times Square. Its products are featured on more than 50 Delta Air Lines flights.

Many other local food aggregators in India are also actively bringing fresh produce straight to the restaurant tables. And, why not. After all good food has the power to change everything.

Scope of local food

The sound investments in local food systems will reap personal gains. It will also lead to reliable incomes for family farmers and the other communities which will engage in allied activities. This would build stronger local economies, more stable communities, and of course a healthier environment.

Although it has been cautioned not to invest in a business which you cannot understand, food is something that everyone can understand.

And now, investors too are increasingly understanding the power of local-food entrepreneurship and are hopeful of delivering meaningful returns.