Greater Good Blog

Investing to Strengthen the Good Food Supply Chain

Eric Kessler and Humaira Faiz

As Americans’ desire for healthier, more sustainable food options increases, the good food marketplace is rapidly maturing, creating opportunities for investors to drive social, environmental, and financial returns.

 

At Arabella, we believe the recipe for a Good Food system has three essential ingredients:Good Food Logo Image_500

  1.  A culture that demands good food
  2.  An infrastructure that supplies good food to meet that demand
  3.  A policy environment that enables a good food system to take root

Developing the infrastructure to supply good food will require more than philanthropy alone can deliver. Most of the solutions we need must come from private-sector commitments—specifically, from investments in companies across the food supply chain that can bring more sustainable, healthy, and affordable food to market.

Already, entrepreneurs and innovators are hard at work developing solutions designed to meet the good food market demands of the future. Below, we identify current opportunities across five areas of the good food supply chain—places where we believe capital investments can yield both compelling investment returns and meaningful impact in expanding the supply of good food. We’ve also packaged these opportunities into a platform we’re calling “On the Road to Good Food,” and in a brief report, “Investing to Strengthen the Good Food Supply Chain.”

Sustainable Agriculture

wheatpngToday’s agriculture too often uses synthetic chemicals and industrial products that compromise soil fertility, biodiversity, and food’s nutritional benefits. Currently, 38 percent of arable land worldwide is degraded by poor natural resource management. Investing in sustainably managed farmland can help drive a shift toward more holistic and regenerative approaches to food production, even as it produces strong financial returns.

Investment Opportunities:

Sustainable Seafood

Advances in fishing techniques and rising consumer demand now seriously threaten seafood supplies. Approximately 70 percent of the world’s fisheries are exploited, overexploited, or have already collapsed. Scaling sustainable seafood practices will enable us to replenish our seafood supplies, improve health and diversity in seafood, and protect marine ecosystems. So far, the transition to sustainable fisheries has been supported primarily by philanthropists and the public sector, but we believe the rate and scale of transition needed requires an infusion of private-sector capital with a long-term return timeline.

Investment Opportunities:

Healthy Food

Current crop and protein production too often delivers unhealthy food options for consumers. Without convenient and affordable access to good food, Americans often rely plateon substitutes that are far less nutritious. This contributes to disastrous health issues, including the epidemic that has left one in three American adults obese. Consumers’ tastes are changing. Demand for organic products jumped 11 percent in 2015 and now accounts for $39 billion, or five percent of total US food sales. Meanwhile, innovators continue to pursue new technologies with the potential to disrupt the food sector.

Investment Opportunities:

Access and Equity

Access to good food is a serious problem in the United States. The lack of healthy, fresh, affordable, and convenient food options has led to 48 million Americans living in food-insecure households. Another 23.5 million people live in so-called “food deserts,” where access to affordable and healthy food options is limited or nonexistent. While much of the change in food consumerism must be driven by education and awareness, there are business opportunities that specifically address these issues of convenience and access.

Investment Opportunities:

Food Waste

Roughly 40 percent of all food produced in the United States is wasted. About 30 percent of consumable produce never makes it into retail stores due to cosmetic standards. Often, this “ugly produce” is plowed back into the ground or sent to landfills, creating additional food waste and hurting farmers’ already thin profit margins.
trashtruck

Meanwhile, 33 million tons of food end up in landfills every year, driving $1.3 billion in disposal costs and creating methane, a potent greenhouse gas. In the last few years, multiple stakeholders have brought significant attention to this issue: The USDA and EPA set out the nation’s first food waste reduction goals; foundations and the private sector are increasingly committing investment capital; and grocery stores, restaurants, and consumers are more aware than ever of the impact of food waste. Investors can capitalize on these trends.

Investment Opportunities:

Investment Pipeline

Arabella’s commitment to building a better food system—and our ongoing work with policymakers, entrepreneurs, investors, and philanthropists—has afforded us insight into the rapidly developing good food supply chain. As we continue to monitor the investment landscape, we are very excited by the volume and diversity of direct investment deals that are emerging, and the potential for both social and financial returns. We look forward to hearing from and speaking with our clients and other partners about these opportunities for impact.

Please email us at goodfood@arabellaadvisors.com to learn more about specific investment opportunities that work to build a good food system that provides access to healthy, sustainable, and affordable food for all.

Click here to download a copy of this report.

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