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A combination of tradition and innovation makes Argentina fertile ground for agribusiness and food startups to grow. Find out what opportunities this sector represents and why it could solve the problems of the future.
Consumer habits have changed, and that is clear. They look for organic certification labels at the supermarket, get angry if there is no vegetarian option on the menu, and protest in the streets demanding sustainable policies from corporations. Unfortunately, all these steps forward will not be enough if an urgent problem is not solved: by 2050, feeding a planet of 9.5 billion people will require an estimated 50% increase in agricultural production and a 15% increase in water extraction.
According to data from Deloitte, by that year, 2 billion people on the planet will suffer some form of malnutrition, meaning that we need to start thinking about how to feed the world to come. And the clock is ticking.
This is the great dilemma: many, many people will have to eat, but how can we produce the necessary food without continuing to pollute? An increasingly thriving group of companies are looking for solutions to this and other problems.
This is the AgTech sector or, more extensively, AgriFoodTech, which seems to go unnoticed by many, but in Latin America, there are more and more entrepreneurs who are pioneering scientific-technological innovations.
Specifically, Argentina’s historical past pushes for the creation of this type of companies. The country has more than 50 million inhabitants and the capacity to generate food for 400 million people. In addition, it has a deep knowledge applied to the field and is one of the main producers and exporters of cereals, oilseeds, flours and oils in the international market.
This, added to the capacity of its human resources, could empower the country as a key player in the future scenario. The opportunity is there, but first, there are some obstacles to overcome.
On the hunt for opportunity
In this context, innovations have already penetrated the field, and they do so in ways that involve high technology, such as processes to improve crop efficiency, drones to monitor pastures, or even systems that allow dosing irrigation and water use. The supply chain is being transformed thanks to the use of new technologies such as blockchain, IoT, biotechnology, sensors, big data, management software, robotics, or satellite technology.
According to Marcos Bazán, Lead Partner of Financial Advisory at Deloitte Argentina, the AgriFoodTech universe takes into account everything that allows the generation of sustainable technological innovations and, on the other hand, guarantees traceability in products. “The consumer is becoming increasingly aware and, at the same time, regulations are favoring this. Everything that is produced from the field and reaches the table can be traced because technology allows it. And Argentina is a great laboratory for this type of startup,” he says.
Bernardo Milesy is the founder and managing partner of Glocal, a fund specializing in AgriFoodTech based in Rosario, Santa Fe (one of Argentina’s agricultural areas par excellence), with 15 startups of this type in its portfolio. Milesy highlights that there are several verticals within this universe where the country is working hard. Traceability is one of them and allows consumers—nowadays avid for information about their food dish—to know the entire path of a product. There is also a clear focus on all biotechnology developments, but we must not forget those who are working in the marketplace or e-commerce verticals, which could also enter this world.
And, without going any further, what is known as ClimateTech is closely linked to generating sustainability solutions for agriculture. “Even in fintech for agriculture, we also see a lot of potential. In this area, I think we will have some unicorns in Latin America,” Milesy predicts.
The sector includes much more than companies that work with land and seeds. A relevant case made in Argentina is Frizata, a frozen meals foodtech that sells online directly to the consumer, that defines itself as flexitarian (vegetarians with flexibility) and is committed to quality and sustainable products. The company develops the largest meat-free line in the Argentine market, with products that recreate the experience of eating meat but based on plants. The founders’ vision is to bring Frizata to all the big cities in the world.
Adolfo Rouillon, the company’s co-founder, believes it is a good time for the sector. “Today, more than ever, two major factors are combining for which I see an opportunity. On the one hand, geopolitical and energy problems and a strong rise in commodities and value-added food products. On the other, the a growing concern for health and the environment. If we understand the complexity of these two aspects, we realize that AgriFoodTech and the bioeconomy become key factors in the global agenda, and Argentina has the resources to be a key player: not only extensions of land, climate, and water but also the entrepreneurial and creative potential of our people,” he says.
This year the company is on track to finish with a portfolio of nearly 100 products, and with a vision to double that number in the next two years.
A leap in talent
According to a report published by the Inter-American Development Bank in 2019, Argentina is, after Brazil, the Latin American country with the most AgTech startups in the region. And for these entrepreneurs, the market is the world.
“What differentiates the Argentine entrepreneur is that from the beginning, he or she does not want to rely only on Argentina. Perhaps a Brazilian has the advantage of being in a huge market and can be a unicorn without leaving Brazil, but the disadvantage is that it is difficult for them to leave the country. On the other hand, the Argentinean is born knowing that he has to expand and not depend only on that market”, explains Milesy about what can represent, then, a foreign currency lifeline amid a crisis.
In addition, he clarifies, it is a sector that can maintain a certain independence from economic cycles: “We are investing in startups that make more food available, that transcends crises. I hope I am not wrong, but if there is a crisis in the coming years, this sector will suffer less because it is something strategic for the world”.
This is precisely why the sector is attracting increasingly diverse profiles, as in the case of Franco Martínez Levis, CEO of Puna Bio, a company dedicated to making biostimulants from bacteria. This economist did not have a background strictly related to the industry but decided to immerse himself in it when he understood the size of the problem to be solved: “When I was in the US, there was talk that biotechnology is the next computing. When I got into it, I saw things that seemed like science fiction, but they were possible,” he admits.
The company’s first product is a soybean seed treatment that is applied to the seeds before planting and is based on bacteria that provide different nutrients and beneficial substances that promote, on the one hand, higher yields and, on the other, greater tolerance to stressful situations.
Their main innovation is that instead of using the typical bacteria, they opt for extreme bacteria isolated from the highest salt flats of the Argentinean Puna (in the South American altiplano, in the Andes Mountains).
These bacteria overcome drought and salinity conditions and promote plant growth under these conditions. They are even now working on new products for other crops, such as wheat and corn, which will have the potential not only to improve yields but also to reduce the use of chemical fertilizers and supplement them with biological solutions. This will imply not only a reduction in the cost of very expensive inputs but also a very important reduction in carbon emissions.
And although the talent is there, Argentines must face a series of challenges that slow down their processes. “On the one hand, the economic framework does not help much. Especially the gap and exchange controls to be able to attract and promote investments. And on the other hand, something that still needs to be deepened is the integration between the scientific system and the private environment. There is a great potential for application and co-investment between the private and public sectors that today, due to regulatory restrictions, are not happening as much as they should”, claims the CEO of Puna Bio, while mentioning that in countries such as Brazil, approvals have more streamlined processes and this facilitates the work of startups.
According to Rouillon from Frizata, these conditions hinder access to capital: “Argentina’s political and macroeconomic problems make the world’s investment capital avoid us, going to countries with greater legal security and predictability.”
In this sense, Bazán, from Deloitte, adds: “There must be more and more funds that can add larger investment rounds. A lot is achieved in the first rounds, but when more money is needed, there is a threshold that affects the AgriFoodTech sector and the industry in general”.
The differential, then, will go through the ability of Argentines to move in a context like the current one. “There is a phrase that says: ‘Brazil has the size, Chile has the ecosystem and the economic framework, and Argentina has the talent.’ While it is a phrase that is said from a very Argentine point of view, I think it is true to a large extent,” reflects Martínez Levis. “In Argentina, we are used to growing in very uncertain economic environments. Although it is difficult, it generates resilience and a willingness to do a lot with very little that sets us apart. That we can focus on increasing exports and adding value to our agriculture through technology. That is what we work for every day.”
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