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Revitalizing the Food System through Impact Investing

By Michele Demers Blog, Uncategorized

The $867 billion Farm Bill for 2018 has been touted as the largest source of conservation dollars for privately owned land in the United States, 40 percent of which is farmland. The farm bill shapes our national, regional and local food systems, yet the House and Senate are in conflict about the renewal of a package that includes tougher work requirements for recipients of the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, and relaxes the Clean Water Act’s provision on releasing pesticides into waterways. This provides impact investors with the opportunity to fill this void and drive capital towards regional food systems, which provide access to nutritious, sustainable food in the communities that need it most.  

Research outlined in the new Boundless Sustainable Food Systems Market Overview shows that consumer preferences towards local and sustainable foods are rising, along with opportunities to create regional food infrastructure (i.e. Azoti, Local Bushel, FarmLogix). Through interviews with food systems experts, we found that regional food system investment provided a strong opportunity for financial returns alongside social and environmental impact. The report includes insights and recommendations from regional food systems industry leaders across distribution models, technology-based models, regional food hubs, as well as information on market trends, risks, impact measurement techniques and emerging opportunities.

Food and beverage deals have made up over $3.5B in equity funding in the past year and many of these involve healthier, more sustainable choices. Local food sales in the U.S are predicted jump to $20B in 2019, outpacing the growth of the country’s total food and beverage sales. Impact investors can help accelerate the growth of these businesses, promoting a healthier, more efficient and environmentally sound food systems.

Dan Pullman of Fresh Source Capital — a firm investing in companies that are rebuilding regional food systems in the Northeast – stated, “driving our investment strategy is the strong and well-established consumer demand for fresh, healthier, regional products. These innovative and sustainable companies are generating jobs, driving economic development, and boosting community vitality.”

Impact investors can look to brands that buy farm products directly from local farmers at a fair price can provide investment opportunities for impact investors looking to create sustainable regional food systems. Example business models include Maple Hill Creamery, a NY-based 100% grass-fed yogurt company, Vital Farms, a company specializing in humanely produced eggs and butter, and Organic Valley, a farmer-owned cooperative focused on farmer livelihoods.

Technology-based models, such as aggregators, focus on coordinating the connection and transaction between buyer and seller. These operations are intended to improve efficiency of the food system and help move products, which are better suited for venture or early-stage impact investors. Examples of technology-based aggregators include Field Goods, a company out of the Hudson Valley that aggregates and delivers locally sourced fresh produce from small farms, and Traverse Foods, a SaaS provider, that facilitates “intelligent food brokering” across the distribution chain from farmers and small batch producers to food hubs, farmers markets, and restaurants. Distribution models such as  Angello’s Organics or Zone 7 provide value by creating brick and mortar distribution centers that collect produce from farmers and sell that produce to retail or restaurant outlets.

Regional food systems are a crucial piece to developing healthier communities and more sustainable environmental practices. These business models provide opportunity for social, environmental and health outcomes while driving impressive returns. In recent years, consumers have become increasingly interested in where their food comes from and how it is produced, thereby creating a need for capital addressing regional food systems, improving farmer livelihoods, and increasing access to sustainable, healthy food.

You can purchase a copy of the Boundless Sustainable Food Systems Market Overview Here