Food and agribusiness industry formed a US$5 trillion global industry based on a 2015 McKinsey report.
With the growing population of 7.8 billion as it stands today to the 10 billion projected by the United Nations in 2057, the market size of this industry will only get significantly bigger as demand for food worldwide increases.
This massive opportunity has, in turn, generated tremendous global investment interests throughout its value chain.
Innovation via technology and digitalisation are seen as pragmatic solutions to help address some of the greatest challenges facing the global food system. Food demand is increasing and suppliers are seeking greater distribution and access to the regional or global supply chain.
Customers are asking for food traceability, greater price transparency, as well as faster, round the clock access to information. New digital platforms have emerged in an attempt to address these market needs.
According to AgFunder’s Agri-FoodTech Funding Report 2019, US$786 million of funding – or four per cent of total investment in the agri-foodtech space – across 104 deals with a median deal size of US$1.5 million was invested in agribusiness marketplaces last year as global agribusiness moves quickly to catch up with the e-commerce trends globally.
Also Read: Here are the key challenges facing Indonesia’s agritech sector
Where are the digital agribusiness marketplaces and platforms
Two major organisation profiles emerged when we analysed the existing agribusiness marketplaces and e-commerce platforms.
First are startups, primarily based in emerging markets, seeking to disrupt the industry via digital transformation. They aim to improve and streamline procurement processes, provide greater price transparency, and enable provenance via blockchain technology. Second, are large multinationals or leading regional food service companies such as Cargill, US Foods, Bayer and Nestle.
Agribusiness marketplace startups are gaining the buck
The 2019 AgFunder report reported that the nine out of the top 20 agritech marketplace funding went to Asian startups engaged in marketplace and e-commerce operations – Six Chinese (Xinliangji, Qdama, Yimutian, Dafengshou, Just Free and Guoquan Shihui), two Indian (Ningacart and Agrostar) and one Japanese (Sorabito).
Many of the top 20 invested marketplaces are located in developing countries with a strong agricultural economy. These agribusiness startups engaged themselves to offer different products and services within the agriculture or foodservice value chain:
- Trading platforms to facilitate sale, leasing and/or rental of agriculture machinery and equipment;
- Farmers-to-farmers or farmers-to-restaurants/retailers networks;
- B2C retail and distribution of food and equipment;
- B2B procurement of wholesale food, grocery and/or equipment marketplaces;
- Direct sales platform for agriculture inputs, machinery and replacement parts;
- Agriculture insurance and/or procurement financing; and
- Crowdfunding or financing for farmers.
Traditional multinational and regional players investing in e-commerce
Multinational or regional agriculture and/or food service players are also investing into e-commerce and marketplace platforms to augment their existing operations and increase their B2B customer offering, although the number is significantly less than those of the agribusiness marketplace startups.
Also Read: (Exclusive) Agritech startup iFarmer in talks to raise US$500K investment
In the US, major players such as Cargill and US Foods have invested in deploying their own agribusiness e-commerce and/or marketplaces last year.
Cargill launched a digital platform called myCargill.com in March 2019 with a pilot group of Cargill’s edible oil customers in the US with the intention of expanding into other food areas, as well as to its global customers and supplier base.
US Foods, a 24 multi-billion dollar distributor, has done significant business through e-commerce with 350,000 SKUs and more than 250,000 customers. It has engaged in online selling for the last 20 years, which was back then prompted by major hotel chains who needed 24/7 access to products ranging from food products and cooking equipment for their hotel and restaurant operations, and subsequently to other restaurant chains and outlets which they service.
Multinational Bayer also launched an agro marketplace called Orbia last year in October, combined with a loyalty programme for farmers called Impulso Bayer. Under the model, a rural producer accumulating points at Impulso Bayer can exchange them for products and services on Orbia.
Although Asia supports the food needs of 60 per cent of the global population with roughly 23 per cent of the world’s agriculture land, it is surprising that we have yet to see many mid- to large-sized Asian-based traditional agriculture organisations investing or launching online agribusiness marketplaces or e-commerce sites.
Most of the new entrants are deployed by Asian-based startups and spread across China, India, Indonesia (iGrow), Vietnam (MimosaTek), Malaysia (Cityfarm), and the Philippines (Cropital), with China and India dominating.
Also Read: Top-funded agritech startups in Indonesia
Where is the next wave of evolution in agribusiness marketplaces?
It is without a doubt that marketplaces will continue to grow in dominance as a business model in various stages within the value chain of the agriculture industry.
So, what are the next wave of trends impacting this marketplace platform technology?
We believe there are at least four areas where we expect increasing focus, investments and deployments:
B2B user expectations are moulded to those of B2C
There is a great upside to being one of the slower market sectors to embark on B2B marketplaces. At least 80 per cent of B2B buyers are not only looking for but expect a buying experience like that of a B2C customer.
Given many B2B buyers are interacting with B2C marketplaces in their day-to-day private lives, we will expect the B2B customer demand for user experience to grow more similar to those of B2C with every day passing.
Omnichannel communication and a personalisation experience to deliver a convenience and seamless purchasing process seem will gradually become an essential differentiator to acquire new customers and drive customer retention and loyalty.
Increasing adoption of blockchain agriculture
Blockchain agriculture is predicted to grow in importance as food quality is fast becoming an issue of concern globally. Imagine the journey our food takes after it leaves the farm as it passes through numerous hands and processes before getting onto the dinner table.
Also Read: Meet the 15 startups competing for SustainableAg Asia Challenge by Rabobank
Through blockchain technology, we will be able to attain both provenance and traceability from food source to destination via one single source of the truth. This empowers all buyers to have greater supply chain transparency and increase consumer trust in the food purchased.
Foodshed and Agrimp are two examples of blockchain-enabled agribusiness platforms. Foodshed uses blockchain technology to create transparency supply chain, reduce supply chain inefficiencies by connecting local sustainable and independent producers to local wholesale markets, restaurants and grocery stores on via its mobile marketing and logistics app.
Agrimp is a B2B cloud-based digital marketplace for transactions of food crops with complementary services including logistics, quality inspections, secure payments, and legal support. Agrimp has introduced blockchain technology to improve food traceability and sustainability, and insurance coverage for all the major risks known in the agri-business.
Despite blockchain’s apparent benefits, it will take some time for the blockchain technology to be truly affordable and scalable, especially for adoption in the developing countries where agribusiness is significant to the overall economy.
Expansion of complementary ecosystem products and services to agribusiness marketplaces
Today, most agribusiness marketplaces started off being relatively specialised in their value proposition to address specific pain points within the food chain. As they scale, they can’t rely on being a niche player.
Ecosystem partnerships become a critical competitive advantage with partners providing augmentative products and services to the different users within the agribusiness marketplace.
Also Read: Indonesia’s agritech industry is at an inflection point
The large captive user base of a successful marketplace offers massive opportunities for monetisation with limited marketing investments.
Continuing investments in online marketplaces with future consolidation
The development of agribusiness marketplaces is still in its infancy stage compared to other industry sectors (e.g. retail, consumer goods and industrial) which has been affected and reshaped by marketplace technology advancements.
We will see a greater number of new startups being founded and investment funding poured into promising startups as they address technology and supply chain inefficiencies along the food chain.
Future acquisitions are also likely to occur as larger-sized traditional agriculture organisations take an increased interest in these online agribusiness marketplaces and leverage acquisitions to gain faster market entry vs. building their own in-house digital platforms.
However, we do not foresee such consolidation efforts in the immediate two years as the general conservative nature of these businesses will more likely trigger a monitoring behaviour to identify the optimal acquisition candidates for the right time, right place purchase further into the future.
–
Register for our next webinar: How startup founders can become thought leaders
Editor’s note: e27 aims to foster thought leadership by publishing contributions from the community. Become a thought leader in the community and share your opinions or ideas and earn a byline by submitting a post.
Join our e27 Telegram group, or like the e27 Facebook page.
Image credit: Richard Bell on Unsplash
The post Why agritech startups will call for the next e-commerce revolution appeared first on e27.