«Food Revolution» - Investing in the sustainable food production of the future

The new role of food production

In contrast to earlier eras in which a lack of food represented the greatest problem, we now live in a world where overeating is having a negative impact on life expectancy. The trend of healthy eating has already reached mainstream society. However, it is not just our eating habits that are changing, but also the way we produce our food. This is all the more urgent because food production worldwide accounts for approximately 10% of gross domestic product, but fully 25% of greenhouse gas emissions. In addition, it requires 50% of the earth’s habitable land and uses around 70% of available fresh water. All that must change if we are to have a sustainable future. And the necessary restructuring offers investors attractive investment opportunities. For this reason, we invest in the megatrend «sustainable food production» for the portfolios of our clients as well as for our own pension foundation.

Investing in the three pillars of the agri-food value chain

In our analysis of this megatrend and in the search for interesting companies, we have observed three main areas in the agri-food value chain: production, transport, and consumption. With regard to production, it is clear that the global food system suffers from inefficient use of resources. This makes innovative technologies that boost efficiency indispensable. Owing to the growing world population and the disproportionately large increase in protein consumption, we will have to produce approximately 50% more food by 2050. To plug this «food gap» and ensure global food security, there need to be technologies that significantly increase the efficiency of land, energy, water and labour further. These include precision agriculture, intelligent irrigation technologies, and automation and robotics. In these areas, there are very interesting companies that offer just such technologies.

The fight against food waste

Food waste is another critical factor. More than one-third of all food produced lands in the rubbish. However, food waste is not just an issue in the home – it is generated along the entire transport chain. In developing countries in particular, interrupted cold chains or insufficient storage lead to major losses. Artificial intelligence (AI) can help make food transportation and storage more efficient, for example through improved supply chain management. In this way, AI will play an important role in the fight against food waste in the future.

Trends in food consumption

Exciting trends are also emerging when it comes to consumption. Alternative protein sources are growing in popularity. Although there is still much work to be done in this area, we could soon find food on supermarket shelves that is grown in laboratories in addition to the established food items made from plant protein. The market for healthier and functional food, as well as less processed products, is growing steadily. Food products that are healthier, functional and contain less sugar, as well as so-called clean label (i.e. less processed) items, are the latest trend.

Challenges and opportunities for large corporations

Major food companies such as Nestlé, Unilever and Danone are faced with the challenge of modernising their legacy portfolios, which are often heavy on sugary and highly processed products. This offers enormous investment opportunities. In the case of Nestlé, alternative protein accounts for only 0.8% of its product portfolio. The potential here is therefore significant.

Conclusions and investment options

In summary, it could be said that the megatrend of sustainable food production has gained considerable momentum from various global developments. These long-standing trends have been massively accelerated, especially in recent years, by the COVID-19 pandemic, a global water shortage, diminishing agricultural land and geopolitical developments.

An investment in the future

Various attractive options are available to investors who want to contribute to the further development of food production through their investment, for example in the form of our client portfolios. Here, we are also investing in this megatrend in addition to our core positions. Other options include direct investments in companies operating in this area, such as SIG Group AG, DSM-Firmenich AG and Carbios SACA. Another possibility is to invest in low-cost ETFs, such as the RIZE ETF, which are not expensive to buy but do not actively select the companies in the fund. The last option is to leave stock selection to the experts and invest in actively managed funds, such as «The Food Revolution» from Picard Angst. Such investments are a way to diversify a portfolio and invest in both «old food» companies and the more sustainable and healthier food production of the future.

Whichever option is taken, investing in sustainable and future-oriented food production is not only a smart financial move, but also an investment in a healthier and more sustainable world – exactly the way Hippocrates would have wanted it.