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Investment tip: healthy lifestyle and sustainable development on a steep rise

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The Innovative Investing in Food Chain seminar, organised jointly by Sitra and the European Network for Financing Food Innovation (ENFFI) at the end of November, gathered together representatives from international venture capital companies and experts in the field to discuss the food industry as an investment target. The participants agreed that Europe must adopt a more active role in investing in the food industry. They also concurred that health was the most significant trend in the field. The liveliest debate was on how to retain natural purity, and combine it with functionality and efficiency in the food chain.

Nature, fairness, and a return to smaller units

The seminar opened with a thought-provoking address by Michael Lee, Principal of Unilever Ventures UK, who also moderated the morning session. In his talk entitled “The Zeitgeist of Food”, he mentioned three groups of people, naming them the Have-nots, the Haves and the Have-mores, and discussed how each group’s needs and values differed from those of each other. Growth of the latter group, in particular, will mean that “the current wave of industrial food appears to be coming to an end, and much of the new development is taking place back at the farm. This new era has been defined as ‘Ecological’”.

“This new era food aims to be not just ‘good for me’ but simply ‘good’,” Michael Lee said. He believes that thanks to this group, the Have-mores, who are calling for sustainable development, the structure of agriculture and trade will be simplified, and favour locally and organically-produced food.

The natural and local food ethos is still facing its fair share of challenges in Europe. The agricultural policies of the EU and the current trend for intensification are not in its favour. Another obstacle is the fact that tomatoes produced under the Spanish sun and delivered to the north are substantially less expensive than those cultivated in a heated greenhouse in the north of Europe.

Healthy Living Index 142.2%!

The health trend is going from strength to strength. The markets built around healthy food and lifestyle and looking after yourself are growing at a rate of nearly 15% per year in the US,” says Mark Braman, President of the US-based company Efficas, who has had a long career in the industry and has extensive knowledge on the trends in functional food.

“The volume of functional products, and natural and organic products, is growing faster than food markets on average,” says Mr Braman. “The great pace at which the field is developing at the moment is indicated by the Healthy Living Index, which describes the success of listed companies in the field. This index has grown 142.2% in the past five years, while Dow Jones Index has risen 59.6% over the same boom period.”

Investors and entrepreneurs are more alert

Venture capital investments in the food industry are mainly flowing into the rapidly-growing Eastern European markets. The US is traditionally heavily oriented towards its own domestic market. The European food industry and investors in the field have begun to contribute to the development in Europe. The seminar introduced various funding models and experiences of, for example, ENFFI, the EU body developing innovation funding in food industry, and Sitra’s Preseed activities. Sitra’s ERA programme is also prepared to make venture capital investments in enterprises in the field to the tune of €10-15 million.

Food industry must be attractive to international investors

“By organising this seminar, we wanted to contribute to the development of the food business within the EU,” says Anu Harkki, Executive Director of Sitra’s ERA Programme. “Our aim is to raise discussion on the important role of investment activities in launching new food business in Finland. Finnish SMEs in the food industry should sharpen their competitive edge and be able to attract international investors.”

Harkki also points out that in addition to healthiness, clean food and the transparency of the entire food production chain are clearly Finland’s forte: “Although we can easily lose this advantage if investments in the field do not grow and our competence in commercialisation is not improved.”

She continues: “It is surprising how slowly the global trend in growing organic has been acknowledged in Finland, compared to, for example, the US. One reason for the growth figures in the US may be that trade plays a major role in the development of new lines of business.”

Sitra is now joining the discussion with the key operators in the global network of food industry investors, which aims to encourage international investment in the Finnish food industry.

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