Top Upstream Supply Chain Issues in Food Tech and How to Overcome Them
By: Udi Lazimy
Foodtech companies are as varied as the foods they are trying to create. Some companies rely on agricultural production of raw materials, while others rely more on off-the-shelf ingredient solutions from ingredient manufacturers. Lastly, some companies are innovating ingredients and products entirely in their own labs through fermentation, cell culture and other technologies. All of these companies face rather different supply chain challenges.
Companies whose product is a protein isolate (or who makes products from protein isolates) rely on raw material agricultural production systems and supply. Geographical, climate, economics of yield and price per pound at farmgate, quality control, processing, and shipping challenges are all very real for such companies.
For companies focused on fermentation of yeast-based cultivation, sourcing glucose for the fermentation process is an issue. Corn, for example, is in many cases the source of glucose for protein production and sourcing a sustainable, high quality product can be challenging.
Here are some of the most common supply chain issues faced by food tech companies:
Sustainability in sourcing ingredients
Sustainability and ensuring that your ingredients reflect the mission and values of your brand is an important factor to focus on.
My motto for alternative protein brands is “it’s not only what’s NOT in your products that’s important, but also what IS in your products”. Meaning, if your products present consumers with meat or dairy-free options, what is in the products and how healthy and sustainable are those ingredients? Many companies overlook this because they just want to bring a viable product to market that displaces the conventional product. But consumers are becoming increasingly discerning about ingredients and supply chain matters.
Lack of diversity in the alternative proteins available for plant-based foods
Almost all of the plant-based foods on the market rely on soy or yellow pea for protein concentrates or isolates. There is very little availability at large commercial scale, especially functional protein isolates (with the protein still intact), other than soy, pea, rice and a few other common items. This causes challenges for companies that need different protein functionality than what is offered on the market in large volumes, or if they simply want to differentiate themselves.
Proteins like mung bean protein isolate, lupin proteins, oilseed proteins, and many others are very hard to come by especially in the US in large volumes to meet specific needs of food tech companies. Mushroom-derived proteins are also gaining traction as they are highly functional and offer many of the sensory characteristics that food tech product developers are seeking, but they are also difficult to source commercially.
How to overcome these sustainably:
- Plan ahead and build strong supply partnerships early on. Supply issues, though extremely complex, can be addressed with forethought and building partnerships with farmers and first-purchasers of the crops or ingredients you know you’ll need. You don’t need to commit to tremendous volumes to benefit from early contracts, but you can avoid market fluctuations by securing forward contracts, and your suppliers will benefit from the security of predictable sales
- Don’t over-complicate the tech. Sometimes the best products can be made without astronomical investment in technologies that might not be sustainable in the long-run (for financial, supply or other issues). Think about how you can make your products as simply as possible, with as many natural/raw ingredients as possible. In the end, consumers aren’t buying technology, they’re buying what tastes good and what works for their pocketbook.
- Diversify your ingredients. Look at proteins outside of the usual culprits (soy, pea, rice, etc) and you might find some phenomenal functionality and other benefits that can differentiate your products.
- Create your own proteins (protein isolate, mycelium, etc). This is the long-game, but can pay tremendous dividends in the near future. Invest in the manufacturing of novel proteins for your products and for the commercial market, or partner with other brands and manufacturing facilities to share production space and technology (and expenses).
- Focus on regenerative agriculture and support ingredient sourcing that supports sustainable and regenerative food production
- Get as close to the ground as possible with your supply chain origins. Get to the top of an upstream value chain and dig into the sources of challenges that farmers or freight operators or ingredient formulators are facing and collaborate with them in order to address these challenges.
In conclusion, there are a myriad of challenges facing innovative brands and makers of tomorrow’s foods. Supply chain issues present logistical, financial, technological, ethical and other problems that most companies in foodtech must face. By keeping an eye on sustainable sourcing, diversification, simplification, building lasting supply relationships and thinking about how to collaborate in creating unique ingredients, companies can navigate these obstacles in the product development process. Indeed, the future of food depends on it.
Udi Lazimy, an expert Sustainability and Sourcing Consultant with 21 years of sustainability and sourcing leadership experience, is a mentor for the Big Idea Ventures Accelerator Programs run out of our New York, Paris and Singapore offices. Twice a year, we select the best pre-seed companies for our five month accelerator program, where we help break down barriers to scaling an alternative protein start-up successfully. As part of the program we make a total investment of US$200K, with the potential for up to US$2.5M in follow-on investment.
The Big Idea Ventures team is always on the lookout for innovative alternative protein companies. If you are an early-stage startup looking for investment and support, reach out to us here. If you are a corporate or an investor interested in investing in the space, reach out to us here.