Covid-19 How the crisis is affecting the food system of the future A REPORT FROM AGFO, 26 MAY, 2020

© 2020 AGFO2

In the future, we will refer to the world in terms of pre or post-corona. The 2018 summer drought in Sweden, the financial crash of 2008, the Chernobyl disaster of 1986 and tsunami of 2004 are all crises that had an impact on Sweden. But this

pandemic is global, the economic consequences are enormous and it’s affecting everyone on the planet in a way we have never seen before with previous crises.

At the time of writing, restaurants are going bankrupt, smaller food producers and the entire tourist industry are under threat while at the same time, supermarkets and e-commerce retailers are having difficulty keeping up with demand.

What can this crisis mean for innovation, sustainability and companies working with future food systems, after the coronavirus has been resolved? In our continuous analysis of the crisis, we’ve asked hundreds of companies from start-ups to small and medium sized enterprises as well as large corporations throughout the value chain. We’ve researched news articles, interviewed around thirty different actors in the industry from researchers, entrepreneurs and investors and we’ve gathered insights from this work.

No. We don’t have all the answers on how this crisis is going to affect a future food system but with the insights we’ve gained in this report, we have been able to highlight the questions worthy of discussion and what we have learnt so far, so that we can be better equipped to face new future crises. We have based our analysis on two main questions: • What have we learnt from the crisis so far? • What are the potential long-term effects?

Thanks to everyone who has contributed to this work in different ways and thanks also to the interviewees and companies that answered our survey.

Sincerely, Team AGFO

Author, Frida Jonson hello@agfo.se, 26 May, 2020

Introduction

1. Executive summary

2. Immediate insights

3. One hundred companies on what they have learned from covid-19

4. The pandemic’s effect on

Investments

Changed consumer behaviour

e-commerce, automation and digitalisation

Research and innovation

Production, delivery and access

Sustainability

5. Unexpected effects from covid-19

a)

b)

c)

d)

e)

f)

Contents

© 2020 AGFO3

© 2020 AGFO4

AGFO Weekly – The Nordic region’s most read newsletter on the food systems of the future.

AGFO.se – Perspectives, trends and insights

AGFO Talk – Knowledge, meet-ups and new perspectives.

AGFO Insight – helping companies and organisations with sustainable change.

About AGFO

Since it’s start in 2017, AGFO has been gathering perspectives and insights for sustainable change. With agriculture, research, production and trade all on the same platform, we are able to identify business and development opportunities in a food system in upheaval. AGFO is an insights company with a focus on tomorrow’s sustainable food system.

Together we can create a sustainable food system for the future.

© 2020 AGFO5

Executive summary

‣ It has become clear how dependent the food system is on the movement of labour for seasonal work, what kind of monumental impact the crisis has on the hotel, restaurant, cafe and tourist industry as well as how the consequences of this crisis will affect the food system for a long time into the future. Swedish food exports have been severely affected. Within the EU, the food trade has been prioritized despite closed borders and food has been able to reach its destination in most cases. At the same time, it has shown up how fragile cooperation within the EU is when countries set up trade barriers.

‣ In the US and Europe, food service has gone down 40-80% while supermarkets have increased 5-12% according to Rabobank’s figures.

‣ Trends that will be strengthened from this crisis include the desire for locally-produced foods. Even health-foods and plant-based foods may benefit.

‣ It is too early to know what kind of long-term behavioral changes will take place. It will be interesting to see if the crisis affects consumer values in relation to their economic situation.

‣ Investments have been affected short-term but are expected to increase in the longer term and become more focused on issues such as sustainability and resilience.

‣ E-commerce, automation and robots have the potential to gain ground as consumer and corporate perception moves from seeing them as being interesting to being necessary.

‣ The crisis can lead to a change in thinking amongst the general public regarding the importance of food’s role for any national crisis prevention measures. It may also strengthen the understanding for creating greater self-sufficiency within Sweden.

‣ According to the World Health Organization, epidemics and pandemics will increase due to climate change, globalisation and urbanisation. The largest societal cost will not be for those who are ill but rather the changes in human behaviour that will be required.

The crises has affected the food systems and countries in different ways. In Sweden, the food industry has been categorized as essential to keep the country running – a turning point for the sector.

© 2020 AGFO6

Practical insightsWhat are the main issues so far for companies and other actors in the food system?

‣ The crisis is contributing to certain trends such as locally-produced foods and these trends can be strengthened further or accelerated. Even health-related and plant-based foods can emerge stronger. How well positioned are you in these areas?

‣ E-commerce is increasing rapidly and this consumer behaviour may remain, depending on the outcome of the crisis, how concerned people are over their health as well as their future financial situation. How can you meet customers different needs?

‣ Technology and other initiatives to help us manage the crisis may make us vulnerable in other ways. For example, automation will make us dependent on advanced technology and e-commerce can make logistics vulnerable. What are the main risks and how can you minimize them?

‣ Strong cooperation is an important factor for getting ourselves out of crises. How can you use this for success even after a crisis?

‣ A diversified business can save us in a crisis. What measures are you taking to be prepared for the next one?

‣ Initiatives that include sustainability and make us less dependent on the rest of the world are particularly interesting. For example, how fossil-free fuels such as local biogas from waste can make us less dependent on imported diesel.

‣ The question is not if there will be another pandemic but rather when. We have difficulty in thinking about the unthinkable - such as a pandemic. How can your company be more resistant and robust for the next crisis. And how can you build up a reasonable risk awareness that is relevant from different perspectives?

‣ Crisis management creates engagement - for a while. How can we ensure that our experiences result in actions and don’t end up as an archived document?

© 2020 AGFO7

Cyrille Filott global strategist, consumer foods

at Rabobank, a global world-

leading bank within food and

agriculture.

Interview with AGFO april 2020.

” It’s about future risk and opportunities. I think companies will start thinking about resources and automation in the future.

The crisis will accelerate digitalisation for the consumer and the value chain. People will then get used to this and stay with this behaviour. We expect nutrition and locally-produced foods to climb further up the agenda. The sustainability trend will remain but as the economy struggled, a tension will emerge for consumers between their values and their wallet.

© 2020 AGFO8

What we can learn from covid-19

13%

4%6%

19%

25%33%

8%

10%

19%

22%

41%

Approximately one hundred companies answered the survey we sent out.*

Where in the food system is you company? Which category applies best to your company?

Supermarket

Processing

Consumer servicesRestaurant

Primary production

Other

Over 50 employees

Startup

11–49 employees

6–10 employees

1–5 employees

Source: Answers receive April 2020.

Approximately 100 companies from across the value chain share their experiences.

© 2020 AGFO9

”Enormous pressure in our stores. Just as much, if not more pressure in online sales.”

”Unreliable deliveries, don’t dare to order due to concern for the future, somewhat fewer customers.”

”Our investors left. Changed user and customer behaviour.”

””We’ve lost more than 15% of our turnover in less than one month, when the HoReCa segment collapsed.”

”The food companies we work with are less likely to take risks and less willing to make decisions - decisions that are critical for our future.”

How have you been affected by the crisis?

1 = mildly affected 5 = very heavily affected

To what degree?81% of companies that answered the survey claim that they have been affected. Of those, 32% have been affected a lot and about 10% have been mildly affected. Companies are reporting liquidity problems, delays in delivery due to closed borders as well as staff shortages.

A drop in turnover, cancelled farm activities and delayed expansions have also been mentioned. In addition, changed consumer patterns, events and educational courses that have disappeared as well as machines sold to China that have not yet been paid for.

Source: Survey with approximately 100 companies across the value chain.

5

4

3

2

1 10%

15%

22%

22%

31%

”All personnel furloughed, several restaurants shut, 90% loss in

turnover.”

© 2020 AGFO10

”Try to predict the user needs brought on by a crisis.”

”We have few fixed costs (we rent a kitchen facility, only take online orders and have no physical restaurant) which meant we could quickly change. Our hypothesis to create a flexible and scalable model has turned out to be a very good one.

”Yes, spread the risks more and have a large enough economic buffer to manage future crises.”

”Our start-up is crisis-aware as part of its foundation. We’re ready to deal with crises within transport systems as well as environmental disasters and natural catastrophes. But we hadn’t completed that work before this pandemic broke out.

”Be more digital. Rely less on making sure our customer demands match with our calendar. Make it possible for customers to start up and use products without our help.”

”Secure the supply chain further with the possibility of taking more steps in-house.”

Will you change anything to be better equipped for the next crisis?

”We will probably keep the home/workplace delivery service so that we can have several business-streams and be more flexible as well as go over to portioning instead of buffet-restaurants.”

Spreading the risks and increasing the economic buffer are two points mentioned by several companies. Widening the business by selling directly to consumers, having customers within both the supermarkets and food service as well as workplace deliveries have also been mentioned.

Clearer routines for dealing with potential infection risks, securing the supply chain and reviewing contracts are other aspects brought up in the survey.

Approximately 100 companies from across the value chain share their experiences.

Source: Survey with approximately 100 companies across the

value chain.

© 2020 AGFO11

”Increasing domestic production when international supply routes are shut down. Managing the land and crop growth without casual workers from other parts of the world, how to automate more.”

”A lot of companies have no economic buffer. That became clear during the drought in 2018 and it’s become clear again.”

”Perhaps we should be looking at new ways of measuring business risk.

”What happens 2021 when the next pandemic hits us?

”Resistance, local solutions for the entire chain, ability to change, cooperate and innovate.”

”Logistics, storing and goods supply are three important issues that will be discussed after

the crisis.”

”I think Sweden can benefit in the long-term. There is a lot of support now for local cafe’s and restaurants. It creates a closer relationship to the food we produce.”

What will be the main questions for actors in the food industry to think about or change after the crisis?

Increased Swedish food production, warehousing of foods and products and issues surrounding preparation for the next crisis, were raised by many companies in our survey.

Improved resilience, profitability and securing the right skill sets were also raised. Creating shorter and robust distribution chains to manage shut-downs is another aspect as well as more long-term thinking regarding different types of cooperation.

Source: Survey with approximately 100 companies across the

value chain.

Approximately 100 companies from across the value chain share their experiences.

Compared with other sectors, where all the different components are shipped in from different countries, food is actually more local than most people realize. But today, one of every five calories have crossed at least one international border.* Our increased mobility, globalization, climate-change, urbanization and loss of biodiversity are also reasons why the WHO is predicting an increased rate of epidemics and pandemics in the future. This crisis has put half a billion* people at risk of poverty and hunger - a breeding ground for instability, migration and conflicts. At the same time, food is being thrown out or warehoused in other parts of the world where more is being produced than needed.

Low and middle-income countries account for a third of the world’s food trade which translates as income and welfare in those countries. ”If you want to reduce the damaging effects of a crisis like this, then trade barriers are not the solution right now. We know this from experience,” says Patrik Tingvall, the chief economist at the National Boards of Trade in Sweden, in an interview with AGFO.

© 2020 AGFO12

One of every five calories have crossed at least one international border

”I am most worried that this will have consequences for global cooperation and move us towards increased protectionism. My hope is however that we instead realize that we need each other, for example, when it comes to global trade, and we instead strengthen our tendencies towards cooperation. Every country wants stability and a positive development which can in turn drive the development of a well-functioning and maybe even transparent global cooperative system.”

Johan Kuylenstierna vice-chair, Swedish Climate Policy Council and Adjunct

Professor at Stockholm University

* Source: FAO, Oxfam, UN, EU-Commission, We Forum.

”Countries often want to promote exports and protect imports. But it’s been different during the crisis. Countries want trade to work and are instead stopping exports. There’s a self-sufficiency perspective with food and medical supplies, that is very evident here.

Patrik Tingvall Chief Economist, National Boards of Trade, Sweden

13 © 2020 AGFO

The Pandemic’s effect on…

© 2020 AGFO14

Analysis by AGFO based on interviews with Marthas Explorer and Global

AgInvesting. Also CB Insight report, Moneytree report Q1, news articles and

questions to Gullspång Invest, GU Ventures och Kale United as well as survey

answers from start-ups.

Investments in all sectors globally are down 10% in the first quarter of this year compared with the same period in 2019 and the Covid-19 crisis has been highlighted as the reason. Within food tech and agtech, there are indications that investments

haven’t been affected as much. In the first quarter, Indigo Ag and Impossible Foods have received significant investment money. Startups in Sweden however are describing investors as cautious and holding off on investments for the time being.

Of the investors we spoke to, a number have responded saying that they are likely to make fewer but larger investments. In the long-term, it’s hard to know how the investment climate will be affected but most believe that investments will increase within food, production and agricultural land.

New York-based incubator Food-X has so far brought in eight start-ups to direct tackle weaknesses in the food system that have arisen due to this crisis.

See the chapter on innovation for specific future business opportunities.

Investments

Short-term effect: • Fewer new investments but more follow-up investments in existing

portfolio companies and financier’s backing out. • Harder for untested start-ups to find capital. Investment processes taking

longer as people can’t meet physically.

Insights so far: • The importance of a plan-B even if a start-up has a clear business model. • As a start-up, it’s important to differentiate between what is related to the

current societal shut-down, what systemic changes will take place long-term and how the customer’s needs will change as a result. • The narrative created in the aftermath of the crisis can set the tone for what

people perceive to be relevant in the future.

Long-term effect: • A more risk-aware market, the price of risk will rise. • Increased investments in the food sector. • AI and supply chain tech on the rise.

Pandemins påverkan på investeringar

© 2020 AGFO15

”Volatility on the financial markets should increase the interest for investments in agriculture and food; something fundamental and not a part of the gig economy. We believe the crisis will accelerate investments in the sector. New technologies such as gene-editing, AI and robots within fruit and veg are interesting as well as the demand for locally-produced food. Risks for more zoonoses* will probably accelerate investments in new proteins, plant-based and cultivated meat. We continue to monitor how the political arena manages problems with food safety and how they affect trade-flows.”

Philippe de Lapérouse Managing Director, HighQuest Partners, running

Global AgInvesting

”It’s clear that the quarantine is fueling e-commerce within food to record levels and my guess is that a lot of people will continue to purchase online even after the quarantine is lifted. The shift from physical stores to e-commerce will quite simply accelerate. This shift is relevant for all companies in the food sector.”

Gustaf Brandberg Founder, Gullspång Invest

”The desire to invest is likely to increase. Food tech has become a hot topic amongst investors. The interesting segments to invest in could be smart and effective production systems; intelligent and eco-friendly packaging; anything to do with the protein shift; new and cultivated crops, eg. wheat that can be grown in soil that consists of more salt.”

Tore Sveälv Business Development Manager, GU Ventures

”Investors unfortunately have a tendency to follow the herd. We’re already hearing that investments have been put on hold or won’t go ahead now and a lot of startups are without any capital. Investors will end up investing more in projects that are going well despite the crisis. This doesn’t change Kale United’s plan or investment policy. But it’s possible that we do fewer but larger investments so that the projects we invest in, have more capital but also that we will want to know what crisis-management plans they have.”

Måns Ullerstam Founder, Kale United

”We see that our investment strategy is relevant in spite of the pandemic and we continue to focus on early investments in the Nordics and how we can contribute to faster developing a sustainable food system. Globalization is going to slow down and that will lead to an increased focus in locally-produced food. People will be less likely to create complex supply chains. The potential for domestic production is large. The companies that have come furthest with digitalisation and that can make swift structural change will be the ones that come out of this best.”

Carolina Sachs Investor and founder, Marthas Explorer

* A zoonosis is an infectiousdisease that can spread naturally between animals and people.

Pandemic’s effect on investments

© 2020 AGFO16

Changes in Consumer Behaviour

Restrictions and new patterns of behaviour mean that the restaurant business dropped lost 23%* of its sales in

March. Companies have been forced to change their sales channels, for example, restaurants now selling vegetable

boxes. For restaurants, hotels and café’s, the return to ’normal’ may take much longer than the period of time that restrictions are in place and will depend on how confident the public is and how social interactions take place. This will, in turn, affect our vacation habits, commuting and business trips.

We are adapting our behaviour to new conditions; ordering home-delivery and baking bread. It remains to be seen which of these new behavioural habits will continue long-term. Consumers are not a homogenous group, making it hard to predict behaviour. The wallet in relation to values will be important.What kind of purchasing power will the consumer have and will the crisis lead to changed values, which in turn will be reflected in the food we buy? Helping the consumer feel safe with measures in place such as contactless payments, hygiene and clear risk awareness can become more important. Analysis of AGFO based on interviews with researchers, analysts, supermarkets, the restaurant business as well as

news articles. *Source: Statistics Sweden, compared with the same month in 2019.

Short-term effect: • Redundancies, furloughing and bankruptcies within the restaurant, cafe

and tourist businesses. E-commerce continues to grow, movement of products from food service to food retail. Fewer new product launches.

Insights so far: • Values, fear for individual health as well as economic development, are

factors to look at in order to understand whether consumer change and behaviour will be long-lasting. • Values-driven companies have an advantage. Smaller, more unknown

brands have an opportunity to reach the market faster if they are well positioned within the values that consumers end-up prioritising, such as health.

Long-term effect: • Restaurant, cafe and hotel businesses will go through an overhaul with

more bankruptcies. Supply and demand will be a bit different. • Some already strong trends will accelerate, such as locally-produced foods.

Low-price alternatives will become more important. Even health and plant-based foods may enjoy benefits.

© 2020 AGFO17

.

Changes in consumer behaviour

”The future will depend on how fast the government acts. If companies and jobs can be saved, then we will have a different starting point after the crisis. If people lose their jobs, they won’t be able to pay for sustainable, locally-produced, ecological food. They just won’t be able to afford it.”

Tareq Taylor Restauranteur and chef

”Consumers are making more meals and making sure to have a bigger pantry of food stored at home. Another interesting consequence is that customers appear to be willing to try new foodstuffs, particularly if their usual goods are sold out. A lot of people have been positively surprised by owned-brand products and may even change their purchasing behaviour in the long-term. It’s now about trying to understand the long-term needs. Will we continue to consume more at home and even work from home more often after the crisis and eat more lunch at home as a result?”

Åsa Wickholm Head of owned-brand products, Coop

”It’s hard to predict how our behaviour will be changed by this crisis. The consumer reacts in so many different ways. Take mad-cow disease for example. Confidence in British meat plummeted in Great Britain but after a few years, confidence had risen again. We take on new behaviours but often fall back to our old habits, regardless of whether there’s a crisis or not.”

Anna Post PhD in human ecology

senior lecturer at Gothenburg University

© 2020 AGFO18

Sweden’s food retail e-commerce business grew by 101.2 percent* in April 2020. Normally, the monthly average is 25%. The purchases made this month were bigger than normal and the flow of new customers increased according

to the Swedish Food Retailers Federation. Last year, two percent of Sweden’s food was purchased online but by the end of this year, the figure could be closer to 10% according to several experts.

The supply of services for home-delivery has not been able to meet the demand and logistics has been singled-out as a bottleneck for increasing capacity.

This is a clear sign that we haven’t built flexible enough routines within food retailing and that there is more to do when it comes to digitalisation, according to Johan Magnusson at Gothenburg University. Reliability and flexibility are important success factors for e-commerce after the crisis abates.

The e-commerce initiatives to meet the crisis can, in turn, create new vulnerabilities within logistics including the risk for waste as well as dependence on new technology.

E-commerce, digitalisation & automation

Short-term effect: • E-commerce companies, supermarket online purchasing solutions and

delivery companies experience a swift upswing. Companies changing their offerring to meet customer and consumer needs, eg. shifting from having a restaurant with customers to direct consumer sales via e-commerce.

Insights so far: • The extent to which people worry about their own health affects how they

shop - online or in store - and what they purchase. • The crisis can be an indication of how digital an organisation is. Larger

delays and interruptions can suggest an immature level of digitalisation.

Long-term effect: • More food is purchased online. • Stress-tested e-commerce capacity results in company’s improving

logistics to meet future e-commerce needs. • Robots and automation that reduce labour requirements and human

involvement can see a boom.

Analysis by AGFO based on interviews with e-commerce experts, researchers, analysts, food

retailers and news articles. *Source: Swedish Food Retailers Federation food retail index.

© 2020 AGFO19

”Our older generation is increasing in numbers. One new behaviour which may change and may last is that more are forced to buy online during a crisis and therefore avoid help from others for their food purchases. This can improve individuals’ independence. For e-commerce stores, it will be important to think about availability and a good e-commerce service may mean that we are no longer loyal to the particular store where we used to buy our food before the crisis.”

Anna Post PhD in human ecology

senior lecturer at Gothenburg University

E-handel, digitalisering och automation

”What we’re seeing is that digitalization is particularly important in sectors where you see fluctuations of personnel as well as new consumption habits as an effect of the restrictions.

This crisis will now drive innovation in the future. It’s an eye-opener for actors that haven’t come far enough when it comes to digitalization and a watershed for success.”

Johan Magnusson University lecturer, Information Systems,

Gothenburg University

”E-commerce will slowly increase all the time and the crisis will make things go faster but maybe not as fast as many would think. What’s primarily driving this development is that it saves time and is handy. By the end of 2020, e-commerce will still be less than 10% of the total share.

Which model will succeed in the future? home delivery or click and collect, dark stores or pack-in-store? It remains to be seen. It means that companies need to be flexible and meet the consumer demand wherever it takes us.”

Johanna Allhorn Editor-in-chief, Ehandel.se

”A food system that is completely dependent on industrial technology solutions from companies in other countries, is very vulnerable. Suddenly, you have no spare parts or advanced management technologies if countries shut down. Having machines that can start manually, with good old levers, is important. In the aftermath of the crisis, people will end up looking inward and buying domestic technological solutions even if they are neither better nor cheaper.”

Per Frankelius Innovation Researcher, Linköping University

© 2020 AGFO20

Case: Automation

The Spanish strawberry robot, Agrobot is being tested in the US. Challenges with field robots are price, accuracy and speed.

”We need to have robots and the development needs to go faster since we’re finding it more and more difficult to get foreign labour. But robots cost money and you need a certain size of land area to work with. You can’t have a small production operation and an expensive robot. We have had machines for some time now, like the cabbage harvesting machines that emerged in the 1990’s and we still haven’t found a good solution to prevent damage to the food, due to knocks. The question is whether it’s possible to have a solution that works with growing crops.”

Anette Borgström Business Area Manager, Mellansvenska Odlare

Estonian Starship, which has a food delivery robot, is seeing an increase in demand.

Closed borders are preventing labour movements which can accelerate the development of automation particularly with fruit and vegetable growers. The development is already being driven by a lack of labour. In the US, slaughterhouses have been shut down after staff have fallen ill. There is an increased desire to see less human contact with food which can also lead to an increase in the need for robots, but this will depend on the conditions. ”The crisis’ economic influence is negative for the robot sector since unemployment will mean cheaper labour. The best situation is when nobody wants to work on a farm. Using robots will reduce the virus risk but it’s not enough to make the move to robots. We’re looking for good working conditions in the community and an economic crisis is not going to help our sector, ” says Juan Bravo, founder of the field robot company, Agrobot, speaking to AGFO.

Automation solves one area of vulnerability - labour - but creates others such as dependency on advanced electronics, components and expertise from other countries. There are large costs associated with investing in machinery and this can lead to larger units. Technical challenges remain for field robots. Certain things that only take a millisecond for a human to understand, such as how ripe a cucumber is, are technically advanced for a robot to manage.

Ecommerce, digitalisation and automation

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: STAR

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© 2020 AGFO21

Research and Innovation

In the short term, research and development projects will be forced to wait and stagnate as companies make use of money from furlough. In the longer term, there is an expected innovation push and focus on the food system as more are realizing it’s an

extremely important sector. Innovation researcher Per Frankelius says it’s worth noting that after every crisis comes a flurry of innovation.”The cold war resulted in much of the agtech that we today still depend on.”

Sweden’s innovation agency Vinnova, the Swedish Research Council, Formas and SciLifeLab as well as the EU’s Research and Innovation program Horizon 2020 are all offering funding for covid 19-related research. One area that is expected more research on is how the destruction of ecosystems is linked to the spread of infection. The potential business opportunities ahead is the awareness of having a strong immune system, plant-based products, food with positive health benefits, traceability and robots. The issue of poor livestock management as a risk for spreading infection and resistance to antibiotics has also been raised as well as the export of Swedish know-how within good livestock management.

Short-term effect: • Companies forced to change and invent new business models. • Certain innovation projects on hold. Research from companies may

stagnate, especially in ones forced to furlough their staff. • Accelerators/incubators run their businesses digitally. Some of the

Swedish food retail companies have less or no new startups into their innovation programs.

Insights so far: • During times of crisis, companies tend to drop long-term initiatives even

though they will be important in the long-term. • Alternative stipendiums or contributions can become more important for

startup’s as venture capitalists stop their financial rounds.

Long-term effect: • New needs emerge, priorities change and will result in new startups and

new business ideas. • Research and development money at risk of declining in a recession.

Analysis by AGFO based on interviews with researchers and administrators within innovation, investors, food retail

innovation, incubation and accelerators as well as news articles.

© 2020 AGFO22

”I think we’ll see a bigger focus on transparency and traceability in the future, from farm to table. Food safety will now be firmly on the political agenda. The crisis is leading to food waste so technologies to reduce waste or improve sustainability are interesting from an investors perspective. The crisis will also increase the speed of automation through the food value chain, from production, distribution and to consumption. Technologies that can give early warnings for pandemics exist today but not for zoonoses*, so that’s an opportunity.”

Daniel Skavén Ruben Independent Consultant, Adviser at The Rockefeller

Foundation

”In times of crisis, we tend to drop long-term initiatives. People usually say that after every crisis comes innovation, but I would say that it’s mainly short-term solutions such as using face masks, as it’s necessary for the moment. However, it’s also clear that these kind of X-factors can result in enormous success for companies for a limited period.”

Per Frankelius Innovation Researcher, Linköpings University

”I think we can say that product development equals innovation in the food industry. Companies want to quickly turn research results into new products. But innovation is and can be so much more. Perhaps we’ll realize that it’s not always about a product but rather a service, a process or know-how. For example, Sweden has been very good at animal management.”

Joanna Franzén Programme Manager, Innovation Management, Vinnova

´

”There are more incentives for companies to make themselves independent of the rest of the world. That larger parts of Western Europe depend on labour from the Eastern part increases the interest in automation with the purpose of improving self-sufficiency. Having a local presence will mean more in many ways such as an increased willingness to pay for local alternatives like spare-parts, components and machines.”

Jonas Engström Research, Research Institute RISE

* A zoonosis is an infectiousdisease that can spread naturally between animals and people.

Research and Development

© 2020 AGFO23

Delivery, Access and Production

Generally speaking, trade has worked with some minor disturbances. The fruit and vegetable sector’s dependence on foreign labour is a clear difficulty. The EU-commission has invested in warehousing to remove

the excess on the market. Higher crop prices and export bans from certain countries mean that certain goods will be harder to get a hold of. Spices and some aromas are two examples.

For Swedish food-export companies, the first quarter of 2020 has been the weakest in a decade according to the Swedish Food Federation. This is due to orders from food retailers in Europe being cut off in March and also because IKEA shut its stores globally. Swedish primary production has been less affected so far, where imports of fertilisers and fuels have worked.

Sweden’s self-sufficiency levels is often cited as a measurement of the country’s crisis preparedness. In a new report, a new goal has been proposed - self-sufficiency capability - as it better captures the complexity and dependence of today’s food system. In the report, warehousing, more innovation and increased domestic production are suggested.

Short-term effect: • Transport of goods are stopped when some countries shut their borders.

Outside the EU, closed ports and cancelled flights have affected deliveries. Consumers squirreling away goods has initially led to empty shelves. Food prices have gone up, such as fruit and vegetables. At the same time, there is price-pressure from food surpluses from export countries.

Insights so far: • Uncertain delivery of goods can create business opportunities for local

actors. • There is currently no food emergency system in Sweden.

Long-term effect: • A changed view of food production and a greater awareness and

preparedness for a potential emergency can lead to an increased understanding for building a civil defense. • Risk for more protectionism, more countries will want to increase their

own food production. • The crisis will put food-safety, transparency and traceability in focus. • Risk for food shortages such as fruit and vegetables. Food surplus for other

goods. Analysis by AGFO-based on interviews with researchers, EU-commission, The Swedish Food Federation, Rabobank,

National Board of Trade Sweden, Wholesaler Menigo, Swedish Board of Agriculture, Mellansvenska Odlare

(growers association) and the National Institute of Economic Research April report.

© 2020 AGFO24

Leveranser, tillgång och produktion

”We are ultimately dependent on commodities from abroad and this is where we see potential problems in the future. Even before the crisis, we saw protectionist tendencies globally and we are concerned that these may be strengthened. We are trying to push things in a ’free-trade friendly’ direction.”

Rasmus Bäckström Head of Exports, the Swedish Food Federation

”From a Swedish perspective, we need to start talking about the long-term issue that we are so dependent on food imports and production chains. It makes any future sustainable food system very shaky for us. There are a lot of aspects to bear in mind such as self-sufficiency but also the environment and how crops are grown. We need to find a food system that is more a part of our natural environment and not just chase high yields all the time.”

Christel Cederberg Researcher, Sustainable Food, Chalmers Institute of Technology

”Things have worked very well when it comes to transport and logistics with the exception of some minor disturbances. I think we will see more protectionism in the future. We have no significant safety and security laws in Sweden and I believe we need to start working on this. For food and drinks suppliers like us, delivering to hospitals and the military, we have a duty to deliver even in a crisis. We’re dependent on a functioning system. For us, the corona crisis has led to a drop in sales especially in the restaurant and hotel sector. But since we have our business split into both the public and private sector, we have been able to take different measures to keep our business running.”

Fredric Andersson Head of Supply Chain, Menigo

”We have been quite naive when it comes to self-sufficiency within the food sector and I think Sweden should have a greater capacity for self-sufficiency. This is not an argument for increased protectionism. It’s better to have open borders. But a Swedish food strategy needs to cater for a range of scenarios and should include a crisis-management plan."

Johan Kuylenstierna Vice-Chair, Swedish Climate Policy Council

”We didn’t expect EU countries to make their own decisions about closing borders from other people. Free movement has been put under the spotlight. What we will eventually need to evaluate is how robust our production is from reserve products to spare parts to machines. If something breaks down on a tractor’s GPS or a milking robot, then we have no supply available. It’s somewhat worrying that we are so dependent on imported products and supplies.”

Håkan Henrikson Chief Economist, Swedish Board of Agriculture

Improved self-sufficiency and shorter, local value chains in contrast to the just-in-time economy that many adopt. In Sweden, an additional 600,000 hectares could be used to grow crops*. Several of those interviewed, both in Sweden and abroad, note a shift from global to local thinking and that there is business opportunities associated with such a shift. Growing more for local markets can also reduce vulnerability and contribute to more diversified production.

The crisis can bringa desire to know where and how food is produced. In France, the population is encouraged to choose French products and in Sweden, there are reports of increased numbers to REKO-rings**. The food retail business is however controlled by a handful of giant actors with a lot of influence and this is seen as an inhibiting factor for more locally produced food. Similarly, the increased share of own-brand goods in stores is reducing the variety of products and market actors. The trend towards locally produced food has been strengthened by the crisis. Many small-scale producers such as cafe owners, bakers, butchers have lost between 50 and 80 of their sales.***

© 2020 AGFO25

Case: Local production

Leveranser, tillgång och produktion

”Rural areas will become more important than ever. We need to be able to provide for ourselves in a crisis. If food retailers are open for closer cooperation with smaller food producers, then it can be good business for the Swedish food industry but also for the community at large. Large players like the state-run off-license Systembolaget, should be able to show more flexibility with all the new innovations in the drinks business for example.”

Kajsa Leander Entrepreneur och pomologist, Berga Bruk

”We have had a focus on Swedish products for some time now and we’re seeing a rise in demand. It’s going to become increasingly important for us to extend our Swedish and local range.When Lidl established itself in Sweden 16 years ago, we had very few Swedish products and now about 30% of what we offer comes from Swedish suppliers.”

Miriam Thunborg Head of Sustainability, Lidl Sverige

* According to the Swedish Federation of Farmers. ** A REKO-ring is a way of buying locally produced products

without a middle-man. *** According to a survey by the Swedish Food Federation.

© 2020 AGFO26

What About Sustainability?

Short-term effect: • Risk for increased food waste at wholesalers and restaurants

when consumer behaviour changes. Measures have made in the EU to store food surpluses. Bankruptcies and economic difficulties for companies. Environmental meetings postponed.

Insights so far: • Sustainability falls down the agenda when human health is in

focus and companies struggle with liquidity. • Fossil-free fuels such as local biogas and electricity reducing the

need for imported diesel. Initiatives to increase sustainability and reduce dependence on the rest of the world is worth monitoring. • Sustainable packaging not prioritized when companies are under

pressure. The company that can offer cheaper sustainable solutions wins.

Long-term effect: • Risk for increased property development. • Elimination of smaller food producers can lead to reduced variety

of products and actors on the market.Analysis by AGFO based on interviews with researchers, entrepreneurs, supermarkets, analysts, grower

associations, EU-commission as well as news articles. * Källa: According to a survey from the Swedish Food

Federation** EU-Commission 20 May

Half a year ago, sustainability was top of the agenda for companies and politicians. What’s happened now when it comes to economic, social and environmental sustainability? A big difference compared with the

financial crash of 2008 is that renewable energy is much cheaper and within the EU, there is an agreed ’Green Deal’ with a goal to become the world’s first climate-neutral continent.

When the economy is rebuilt, there are opportunities for change and support measures when it comes to sustainability. But these initiatives may be shelved as companies and nation-states struggle with their economic situation. A lot will depend on political action and actors who have managed the situation well. The EU-commission’s new strategy* from the middle of May has been cited as an important part of the EU recovery plan. The strategy proposes goals to tackle the loss of biodiversity and climate-change, but they are not yet connected to any proposed legislation.

Food-waste has previously been in focus. Some stores are experiencing more waste while Lidl for example, claim to have less. It is generally believed however that food waste has gone up.

© 2020 AGFO27

”This changes our consumer habits and we can assume that it will lead to greater mismatch between supply and demand and with that, increased food waste. Right now, we’re looking at using neural networks (a technology within AI) in school kitchens to predict how many students are coming to school. If we have lack of data, it doesn’t matter how good our analysis tools are. AI is good at seeing patterns in what has already happened, but regardless of what algorithms we’ve had, they make little difference since we have no experience of this new situation.”

Mattias Eriksson Food-waste researcher at SLU

”After the financial crash of 2007/2008, people tried to connect green investments together with rebuilding the economy and it worked at least in the area of renewable energy. It’s generally easier to drive proactive sustainability initiatives when times are good but there are sometimes opportunities for larger state-funded investments when an economy needs to be stimulated. What’s interesting then is how investments can be steered in such a way that they are also part of driving a societal shift. However, I am more worried about sustainable land use than I am about the shift to becoming fossil-free. Biodiversity is still harder to get on to the political agenda. There are some overarching risks here. People in different countries see land exploitation as a way out of the crisis and for example, invest in using land for growing palm oil or soya. It’s about seeing other alternatives to increasing agriculture and forestry, for example looking at the growing eco-tourism market. This could, in the long run, create more opportunities.”

Johan Kuylenstierna Vice-Chair, Swedish Climate Policy Council and adjunct

Stockholm University

”We have to be able to earn more money than we are today. The stakes are high and the weather patterns are more difficult to manage. If I sell to a wholesaler for 10 Swedish crowns, then we’ll usually find it in the stores for 24.90. The difference between the producer’s price and the consumer price has increased from two times the price in the 90’s to 2.5 times the price. Their margins are higher while the producers price remains the same. We can see that we haven’t managed to command a higher price for our goods but have instead been price-pressed and have had to become more efficient to stay in the market. Our companies are getting bigger and at the same time we’ve become more vulnerable.”

Anette Borgström Business Area Manager, Mellansvenska Odlare

What about sustainability?

© 2020 AGFO28

Unexpected things with covid-19

New priorities. Plastic has moved from being an object of hatred to a question of security and hygiene.

Headline reads: Furloughed hotel staff given jobs at vegetable-growing company.New cooperation. When hotel and restaurant Sånga-Säby was forced to furlough staff, the neighboring company Svegro was able to take them on.

Headline reads: Wholesaler opens temporary food stor in GärdetNew business models. Wholesalers like Axfood Snabbgross who’s customers, restauranteurs, have little demand, now open up for consumer sales.

Headline reads: Large demand for vodka transformed to hand sanitiserNew focus areas. The vodka companies Reppe and Absolut Vodka reposition and start delivering hand-sanitiser.

Will well-known brands win? The tendency towards well-established brands are winners in a crisis. A sense of security?

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© 2020 AGFO29

System perspectives, practical insights and sustainable change

AGFO Insight helps companies and organisations navigate our changing food system. We work closely with clients with a unique mix of thorough research, trends, inspiration and business acumen. From insights and overview to strategy and execution.

Read more here

© 2020 AGFO30

Reports/Research/Statistics (Sweden): SLU: Livsmedelsproduktion ur ett beredskapsperspektiv Konjunkturinstitutet: Konjunkturläget april 2020 UC: Konkursstatistik MSB: Människors förhållningssätt till risker, olyckor och kriser Postnord: E-handel i Coronatider (april) Livsmedelsföretagen: Utan stöd försvinner hundratals småföretag Svensk Dagligvaruhandel: E-handeln 2019 Svensk Dagligvaruhandel: Dagligvaruindex samt E-handeln 2019

Reports/Research/Statistics (international): Global Aginvesting: Rankings and trendreport 2019 PwC, CB Insight: Venture Capital Q1 2020 Bloomberg commodity outlook (may 2020) Rabobank: Foodservice Shutdown Impacts All F&A Sectors We Forum: Outbreak readiness business impact EU-kommissionen: Covid 19 och livsmedelssäkerhet Google: Mobility report 2020-04-11 WHO: Global influenza programme 2018, A checklist Rabobank: China’s gradual recovery from coronavirus Kantar: Purpose 2020 report EU-kommissionen: Agricultural outlook dec-2019

Webinar: F&A Next Foodbytes: Impact on food and ag companies

ATL: Hamstring ökar efterfrågan på lokalproducerad mat Brist på svenskt kött i butikerna Så slår coronakrisen mot maskintillverkare Lantbruksföretagare: Så tacklar vi coronakrisen Höga mål för miljövänligare jordbruk

Breakit: Så drar du in kapital under coronakrisen Bästa månaden någonsin för maträddarappen

Land Lantbruk: Marknadskrönika: Risk för torka men utan uppåtgående priser Så mobiliserar EU-länderna mot coronapandemin

Market: Ministern står stadigt mitt i krisen

Fri Köpenskap: Hemköpshandlare igång med E-handel Så har corona påverkat handeln

Sveriges Radio: Uppsving för rekoringar

E-handel: E-handel med mat exploderade

Jordbruksaktuellt: Ökad efterfrågan driver upp vetepriser

Dagens Nyheter: Stängda gränser kan leda till dyrare livsmedel

International sources: The Counter: President Trump announces 16 billion dollar farm payments Forbes: How to reinvent your business to thrive after corona CNN: WHO pandemic report Business Insider: McDonald’s designed a new type of restaurant Maskinbladet: Valtra stoppar produktionen tillfälligt

Bloomberg: Countries are starting to hoard food threatening global trade Bloomberg: Banana supply from Asia’s biggest exporter set to fall on virus Politico: Coronavirus demand for local farms We Forum: Biodiversity loss is hurting our ability to prepare for pandemics Marketwatch: CEO preparing for touchless future The Counter: How Covid-19 is disrupting the most time-sensitive industry Forbes: 10 examples of how covid-19 forced business transformation Precisionag: 3 ways covid-19 is pushing ag data transformation Bangkok Post: Agriculture after covid 19 Food Navigator: Startups in Food X accelerator offer solutions Food Navigator: US Online grocery sales surge Sifted: Robots post pandemic The Spoon: The phone soon it will be your restaurant's menu CBI: Supply of spices and herbs seriously affected by COVID-19

Corporate pm: Icagruppen: Ica påskyndar möjligheten för fler att få mat hemlevererat Livsmedelsverket: Säkra livsmedel och bra djurskydd även i coronatider Livsmedelsverket: God livsmedelsförsörjning kräver satsningar Martin och Servera: Korttidsarbete införs Sodexo: Robust Sodexo q1 2020 SLU: Forskare om pandemin EFSA: Coronavirus: no evidence that food is a source or transmission route SLU: Coronapandemin som matkulturens timme noll Kommerskollegium: Utrikeshandeln på nedgång i coronavirusets spår LRF: Ökad självförsörjning EU-kommissionen: Farm to fork strategy and biodiversity

Page 5. Estimates by Rabobank.

Bibliography

© 2020 AGFO31

Anette Borgström, Business Area Manager, Mellansvenska Odlare (a Swedish growers association)

Johan Kuylenstierna, Vice-Chair, Swedish Climate Policy Council and adjunct Stockholm University

Per Frankelius, Innovation Researcher, Linköping University

Anna Post, Senior lecturer, Department of Food and Nutrition, Gothenburg University

Fredric Andersson, Head of Supply Chain, Menigo

Philippe de Lapérouse, MD, HighQuest Partners (running the investor event Global Aginvesting)

Kajsa Leander, Entrepreneur, Berga bruk

Carolina Sachs, invester and founder, Marthas Explorer

Patrik Tingvall, Chief Economist, Kommerskollegium

Rasmus Bäckström, Head of Exports, Livsmedelsföretagen

Håkan Henrikson, Divisional Director, Swedish Board of Agriculture

Cyrille Filott, Global Strategist, Consumer Foods, Rabobank

Jonas Engström, Research RISE

Gustaf Brandberg, Founder, Gullspång Invest

Tore Sveälv, Business Development Manager, GU Ventures

Måns Ullerstam, Founder, Kale United

Johanna Allhorn, Editor-in-chief, Ehandel

Mattias Eriksson, Researcher, Food waste, Institute of Energy and Technology, Swedish University of Agricultural Sciences

Johan Magnusson, Lecturer, Information Systems, Gothenburg University

Åsa Wickholm, Head of owned-brand foods, Coop

Joanna Franzén,Programme Manager, Swedish innovation agency Vinnova

Daniel Skavén Ruben, Independent Consultant and Adviser to the Rockefeller Foundation

Tareq Taylor, Chef and Restauranteur

Christel Cederberg, Researcher, sustainable food and bioenergy production, Chalmers University of Technology

Joakim Gullstrand, Professor, National economy, Lund University

All companies throughout the value chain that have answered our survey. Photographers:

Petrus Iggström (photo by Måns Ullerstam)

Johan Bodell Chalmers (photo by Christel Cederberg)

Ingela Vågsund (photo by Tore Sveälv)

Peter Rutherhagen (photo by Frida Jonson)

Additional photos are private or press images.

Cover Illustration plus photos page 13:Shutterstock.com. Photo page 32: Istock.com

Graphic design: Johan Rutherhagen

Linds Linnskog Rudh, reporter AGFO, carried out a number of interviews

Thanks to

32 © 2020 AGFO

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