Navigating the Investment Landscape in India's Food Tech

Investment trends in the food tech industry have been fluctuating over the last 5 years. During the last 5 years, the year 2021 attracted the highest amount of investment in the food tech industry in India with 2019 attracting the lowest. Meanwhile, in 2022, USD 2.4 billion was invested in the food tech industry.  The industry's growth, driven by innovative start-ups and bolstered by significant government support, and interests from venture capitalists reflects a broader shift towards more efficient, sustainable, and technologically advanced food production and distribution systems. 

Food tech is an ecosystem made of all the food entrepreneurs and startups (ranging from production to distribution) who innovate the products, distribution, marketing, or business model. This field is essential in ensuring food safety and improving food products for the public. In India, the investment landscape in food technology is a dynamic and evolving arena, spanning the comprehensive food value chain. This chain is segmented into three distinct categories: upstream, focusing on the initial stages of agriculture and food production with a thrust on innovative farming technologies; midstream, which bridges the gap through processing, logistics, and food safety technologies; and downstream, the consumer-facing end involving retail tech, online marketplaces, and advanced home cooking solutions.

Investors in Food Tech

The Indian food tech industry, pivotal in connecting farmers to consumers, has been significantly bolstered by government initiatives and investments from different venture capitalists. The government of India has approved a budget of over USD 3.164 billion under different schemes and initiatives.  

The Ministry of Food Processing Industries (MoFPI) has been actively encouraging investments across the entire value chain through key initiatives like the Production Linked Incentive (PLI) Scheme, the Pradhan Mantri Kisan SAMPADA Yojana (PMKSY), and the Pradhan Mantri Formalization of Micro Food Processing Enterprises (PMFME) scheme. These schemes are instrumental in elevating the industry to meet global quality and safety standards. The PLI Scheme, introduced on March 31, 2021, aims to uplift micro-enterprises in the unorganized sector of the food tech industry, with about USD 588 million invested and a total budget of around USD 1.4 billion planned until FY 2027. The PMKSY, running since 2017-18 with a budget of USD 564 million, focuses on developing infrastructure for a seamless supply chain from farms to retail outlets. Under PMKSY, Tamil Nadu alone has 96 approved food processing projects, part of the wider national sanctioning of numerous projects, including Mega Food Parks, Cold Chain projects, and Food Testing Laboratories. Additionally, the PMFME scheme, launched in June 2020 with a budget of about USD 1.2 billion, provides comprehensive support to enhance micro food processing enterprises. Launched in 2016, the "Start-up India" initiative allocated USD 140 million to support start-ups, including those in the food tech sector.

Fueled up by the government’s initiatives and schemes, Venture Capitalists (VCs) and angel investors have shown tremendous interest in this sector, pouring in capital especially to support the growth of promising startups. Prominent venture capital firms that have the highest number of deals completed like Omnivore, Ankur Capital, Matrix Partners, Accel Partners, NAB Ventures, and Sequoia Capital have been actively engaging in the industry and providing funding to food tech startups. Their investments are not just financial; they also provide mentorship and guidance, helping these startups scale their operations by developing marketing strategies. The mentorship and guidance can also take the form of exposure to international markets, connection to potential partners, and access to a talented workforce. In 2022, Omnivore emerged as the top investor with 11 deals, followed by Ankur Capital with 6 deals, and Matrix with 5 deals. 

Investments across various stages of the value chain

In the last 5 years, the downstream category garnered the highest investments while there was a significant increase in investment in the upstream category over the years. In 2022, the breakdown of investments in the supply chain revealed that upstream activities, encompassing food production on farms, attracted USD 617 million, while midstream processing, including mills and factories, received USD 178 million. Notably, downstream activities related to consumption and distribution, such as e-commerce, delivery, and restaurants, attracted the highest investment at USD 1.7 billion.

While funding to startups in downstream and midstream categories decreased 37% and 65% respectively, investment in upstream categories is on the rise, with a 50% year-over-year increase in 2022. Shifting the focus to investments made in 2022, the key highlights within the value chain in the food tech industry are discussed below.

Within the upstream category, the total investment made was USD 617 million in 2022 with Agribusiness Marketplaces and Fintech raising USD 428 million. This category was the most active in terms of securing several deals, closing 32 deals in 2022. Key players in this segment included DeHaat, raising USD 106 million in investment, Captain Fresh raising USD 50 million, Shop Kirana raising USD 45.1 million and Far Mart raising USD 32.2 million.

The midstream category also witnessed noteworthy investments in 2022 of USD 178 million, with Waycool raising the biggest investment with USD 117 million followed by Bijak with USD 19.3 million, and Ecozen with USD 15 million. However, the investment in the midstream category was 61% less than in  2021. The substantial growth in total investments from $150 million in 2020 to $460 million in 2021 was primarily propelled by Ninjacart and Jumbotail, which secured $255 million in funding together in 2021.

Downstream categories in the supply chain, e-grocery, online restaurants, and meal marketplaces stood out. Out of USD 1.7 billion invested in the downstream category, E-Grocery attracted a total investment of USD 776 million, featuring notable contributions from Zepto (USD 200 million), Licious (USD 150 million), and Country Delight (USD 108 million). Online restaurants and meal marketplaces secured USD 775 million, with significant investments in Swiggy (USD 700 million), CureFoods (USD 50 million), and Bigspoon (USD 12.6 million).

Opportunities and Future Trends

As the food tech industry in India is closely observed, the nation’s abundant raw materials, government support, and evolving consumption habits collectively position India as an ideal hub for sustained growth and investment in the food tech industry.

The Indian food tech industry, propelled by government support and growing trends in various sectors, offers attractive investment prospects. Key sectors to invest in include fruits and vegetables, and fisheries, sectors that have displayed significant growth and high production values. Meat and poultry have been supported by a substantial livestock population and favorable FDI policies. Dairy, a sector where India is already the global leader in production, and breakfast cereals, a sector which has witnessed growing demands. These key sectors, paired with emerging sectors like confectionery, soft drinks, and plantation products, depict a promising landscape for the future of food tech in India. 

‘World Food India 2023’ witnessed the signing of 16 MoUs between MoFPI and key industry players like Kellog, ITC, and General Mills, which accumulated an investment of around USD 2.1 billion. Global events like these signify a robust and expanding investment landscape in India’s food processing sector, as the country positions itself as a global food hub. 

As the food tech industry in India expands, so does the consumer base and their consumption habits. Platforms like online food ordering and delivery have emerged as prominent players as the consumer base moves towards a more digital space. A survey conducted by Rakuten Insights in 2023 revealed that there was a predominant trend in consumers shifting towards preferring online food delivery post-Covid, particularly among those aged 25 to 44 years. 

Conclusion

As we navigate the multifaceted landscape of India's food technology sector, it becomes evident that this industry is growing fast and a beacon of opportunity for investments. This growth is fueled by a confluence of factors - robust government initiatives like "Start-up India," "PLI Scheme," "PMKSY," and "PMFME," alongside the enthusiastic participation of venture capitalists and angel investors. From advancements in farming technologies to innovations in food processing and distribution, the entire food tech industry is evolving, with significant investments and expertise pouring into every stage of the value chain. The active involvement of key players such as Omnivore, Ankur Capital, and Sequoia Capital, among others, has not only provided financial backing but also invaluable mentorship and market exposure to burgeoning startups. Looking ahead, the Indian food tech industry is poised for even greater expansion and innovation. Government-supported sectors like fruits and vegetables, fisheries, meat and poultry, dairy, and cereals present a rich tapestry of opportunities for both domestic and foreign investors. The abundance of raw materials, coupled with favorable government policies and a burgeoning consumer market, positions India as an attractive and strategic destination for investment in food technology.

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