The prevailing inflation and recent bank failures have significantly affected investments in the food and beverage sector; however, resilient brands that prioritize strengthening velocity, sales, and margins have managed to maintain their competitive edge.
“Rates have gone up significantly over the last year. You are going to expect to pay more, but the way I would look at it compared to equity is you’re taking a short term hit against your margin to leapfrog to [where] you can potentially raise at a much higher valuation, not diluted funding,” Erin Wall, partner/CRO, Lunr explained during BevNet Live’s panel discussion in New York City.
“It’s all about finding ways to make sure you’re profitable and as early as possible…I would say continue focus on differentiation…and find new ways to create new markets,” Wall added.
“I think as brands and businesses look forward they need to recognize that they have a path to profitability," explained Elliot Begoun, founder, TIG Brands. He underscored that in order for brands to remain competitive, it’s essential “to understand and be realistic about where they are right now."
Despite the volatility of the economy over the last several years, the industry is seeing “more of a sense of calm” and regardless of the economic timing, “it’s always difficult to raise capital,” emphasized Michael Burgmaier, managing director, Whipstitch Capital.
Food and technology continue to drive investment
In response to climate change and the resource-heavy agricultural industry, food and technology continue integrating to generate progressive and sustainable solutions. According to a Hartman Group study, consumers show a strong purchase interest in science and technology to address challenges facing the global food system, including sustainability, ethics, health and food security.
These innovative approaches not only address pressing issues but also cater to consumer preferences for taste, novelty, and nutrition. Consequently, this convergence of food and technology is significantly shaping investment trends in the industry:
Earlier in June, Chamberlain Coffee raised $7 million led by Blazar Capital to launch into retail with RTD options and expand its appeal, distribution and consumer base through usage occasions.
While earlier this week, cultivated meat company, Omeat launched out of stealth mode after raising $40 million in Series A funding in 2022, backed by VCs S2G Ventures, Google ventures, Bold Capital Partners and Tyson Ventures.
Mycelium producer, MyForestFoods is prepping to expand its mycelium bacon portfolio across the East Coast after raising $15 million in Series A-2 funding, highlighting the interest from investors on food sciences as a viable sector to strengthen the food industry's positioning in a challenging economic and environmental time.
“Being aggressive in a challenging environment”
Wall emphasized that finding ways to utilize credit and debt financing in earlier stages outside of the banking sector, including fintech, although regardless of financing optionality, requires an agile and aggressive business strategy from entrepreneurs.
“I think being aggressive in a challenging environment is absolutely the way to go,” she added. “If you’re the one that can win right now, you’ll have a much longer path to growth and success. Aggressive can mean a lot of things. It might mean you’re aggressive about hitting a broad wide set of retails in an omnichannel environment and figuring out ways to package your products so it ships cheaper than the competition.”
Begoun emphasized that brands should focus on strengthening its velocity, sales and margins rather than building a business for a buyer, as “new buyers are always going to emerge.”