Q&A with Gil Horsky, Founding Managing Partner, Flora Ventures
Q&A with Gil Horsky, Founding Managing Partner, Flora Ventures
How would you describe your value proposition and strength in the world of Agri-food?
AgriFood is a $8bn industry and historically can split it into two parts:
The first are consumer brands (Pepsi, Mondelez, etc.) where the name of the game is innovation, brand building, and distribution power.
The second is the B2B side of the value chain (ingredient players, flavour players). What happened over the last few years is that we’ve seen the technological revolution disrupting so many industries. But we’re still in the early stages of reinventing the food and Agri world. If these B2B companies can bring technology, Intellectual Property, and proprietary ingredients…they can then differentiate themselves and make themselves more value-added players.
We’ve seen an avalanche of many new startups in the field. Consumers now understand more than ever about different ingredients, food value chains and what comes from where.
Much of it is driven by sustainability and impact. Consumer preferences are changing, with much more focus on health, sustainability, and planetary health.
The digital revolution has started disrupting the agrifood value chain in three ways:
Firstly, all agricultural processes are going through automation. Agriculture became less sexy for young families. The younger generation don’t want to work in farming so there’s a huge decline n in the labor force available to farms/agriculture- especially in the more developed countries like the EU.
Covid has made this situation much worse – it caused a huge labor shortage in that space that never came back. Moreover, the war in Ukraine put huge pressure on supply chains, increasing shortages.
All of these things have led to an avalanche of companies saying, “You can be a farmer today with an autonomous tractor” (you can have for example a farm with 3 tractors running in parallel with 1 person managing them).
Other examples include companies reinventing dairy farms, so you don’t need to milk and Robotics/autonomous elements, which we hear a lot as consumers, are also a big thing in today’s agriculture space (especially in big farms to justify costs).
Secondly, AI / Big data / ML / Image recognition… all have gone into the Value Chain of agriculture. From shortening time to developing new biologics and new specific seeds with specific traits to unique fertilizers.
It impacted processes such as supply chain and procurement. Mondelez was the biggest buyer of cacao in the world, now it’s a banking problem – hedging – all of that is being automated.
Lastly, in the Product-side we see the biotech revolution and synthetic. It comes from pharma and a lot of entrepreneurs have been taking it into food. Plant-based, cell-based milk, meat… We see a switch from pharma and biotech, with long lead times (10-15 yrs. to go into the market), to functional food, that’s much more agile.
As a VC, where do you see the highest opportunity in terms of investment?
We see opportunities in many areas. Some I can list are: Food as medicine; Planet First (circular economy; food- waste reduction, sustainable packaging); Digital transformation; Sustainable agriculture; Food security (Crop yields, irrigation); Tailored to “My tribe” (Personalization; personalized supplements/nutrition); and Discover, Distribution & Pay (Digital marketplace, discover, payment).
Food trends are constantly influenced by other arenas and vice versa.
We saw the whole process behind the scenes for lab-grown meat. As a consumer, I was scared and felt that it was too much science, and not food. How is this impact in terms of food safety (health, sustainability, etc)?
Frankenstein food (biotech/fermentation) created in a lab is bringing into light 2 contemporary conflicting trends: a stronger desire to stick to the natural ingredients we know versus the hopes and positive perspectives on biotech to industrialize food.
People are open to eating biotech food, but also depends on what benefits you bring; communication is key to also minimize the main concerns for consumers: price & food safety (am I going to get a disease from this chemical?).
Overall, we see lots of consumer openness. These two trends will continue to live together.
How do you see the different challenges of the Taste Arena for legacy/established brands? And for startups?
Many legacy brands in the last few years have lost relevance with consumers and Covid was a big savior for them (after losing share from startups)
Mondelez has been a great example, with Oreo. The brand isn’t stopping to grow. They are entering new markets. Oreo put itself out there as a brand that stands and wants to stay culturally relevant.
They are active in discussions of LGBTQA+, sponsors different celebrities and interact live online in big events like Superbowl.
A lot of work is done on limited editions and specific flavours. Much of their strategy is having the traditional Oreo and constantly innovating products and packs around it. Sometimes it looks stupid but if you build a real story around your brand and it’s relevant, it becomes something that consumers love. In theory, Oreo shouldn’t have ever been that successful: it’s a Black cookie, looks weird, 3 layers.
One brand which didn’t seize its potential is Toblerone. It hasn’t done a good job of staying culturally relevant. It’s the brand with highest awareness in the Mondelez portfolio, and 2nd brand after Coke that has un-aided awareness on an unbranded packaging structure (Power of packaging – coke is 1, Toblerone is 2).
Toblerone has so much awareness. Everyone knows it, everyone tastes it, but nobody buys it. When they get it, it’s because someone bought it for them in the airport.
You need to be culturally relevant, reinvent product pipelines, and stand for something. It’s about playing with your core vs flex assets: What are the things around it that you can change and refresh constantly, and which you can’t.
What’s the threshold for moving into a category?
Many companies are giving up in a lot of spaces that aren’t “big enough” for their criteria. Companies give up on a lot of spaces because they think it’s not a big consumer need or a big trend.
This leads to large spaces that are untapped and then smaller brands focus on building businesses in them.
Big companies can operate by trying to invest in start-ups (CVC), through M&As (the main solution for corporations) or incubation.
For example, our team in SnackFutures really believed in vegetable snacks, we didn’t find anyone to invest/buy so we set up and incubated a new business by ourselves. But then you have the scale problem. As big companies lose patience quickly (what’s $10m vs. $150m for a legacy brand?).
Consumer needs are changing faster than the offers. Consumers are becoming more powerful; they have a lot of supply and choice in how to spend money. How can big established groups thrive in this reality if they’re not agile?
I’m not sure. Not sure to where it’s going to evolve. All big companies want to become more agile – but very few of them succeed. This view is also tied to expectations. With our incubator, in Mondelez, we were very agile. Even if you get quickly to the market, it takes time to scale and grow those new brands. If something doesn’t move the needle quickly, the business loses patience quickly. You suffer the Stock market effect. That’s part of the story between public and private companies. For instance, Ferrero, on the one hand, that is privately held, is not the most agile, but on the other hand, they have a long-term perspective and lots of patience. They can lose money YoY for products’ innovation. This could be a difference: between public vs private. 9 out of 10 innovation projects for Ferrero take more than 10 years and don’t see the market.