U.S. consumers, businesses and government entities spent an estimated $1.62 trillion on food and beverages in stores and on away-from-home items in 2017, according to the Department of Agriculture. Annual spending on food far surpassed other essentials such as healthcare and personal insurance for the average American that year, according to the Bureau of Labor Statistics.
As such, this massive opportunity in food has been attracting tech investors to the sector at a growing rate. These investors who put their money in food companies say the enormous size of the opportunity in food is what makes it so attractive. Kimbal Musk has been shouting that for close to five years. But recent disasters for meal kit services and delivery-only restaurants are forcing these investors to think twice.
Venture capitalists have taken note of the huge opportunity: Venture funding for U.S.-based food tech companies grew from about $60 million in 2008 to more than$1 billion in 2015, according to PitchBook, which collects funding data. The money is coming from more and more sources, as the number of unique investors, including VCs and private equity funds, has doubled from 223 in 2015 to 459 in 2017, according to research firm CBInsights.
Where’s the shift happening? A couple of years ago it was in meal kits, and we saw how well that did.
Now the money is going into grocery and food service delivery, which I frankly think is already oversaturated. The Wall Street Journal reported that online food delivery found $3.5 billion from venture capitalists to food and grocery delivery services in roughly the first 10 months of 2018, based on PitchBook data. Uber said in December it was operating UberEats in 165 cities and was profitable in nearly 40 of them.
But the biggest opportunity I see is the money being diverted into the plant-based and meat alternative area. The meat substitutes market was worth an estimated $4.63 billion in 2018 and could reach $6.43 billion by 2023, according to research firm MarketsandMarkets.