A look at the global industrial food system and how the changing landscape is impacting CPG startups and big brands.

1. Food Trends and the Impact
on CPG Companies
By Collaborative Fund

2. COLLABORATIVE
Food and Agriculture
Investment into food and agriculture can have
an outsized impact on food production, the
environment, and rural poverty.

3. COLLABORATIVE
Much of the food we grow is wasted…
One-third of of all food grown is wasted, which amounts to
about 1.3 billion tons per year and one-quarter of all calories.
FoodandAgriculture
Source: Food and Agriculture Organization of the United Nations
20% wasted in
supply chain
13% wasted
during
consumption

4. COLLABORATIVE
800
million
people are
hungry
…but millions are hungry and malnourished
FoodandAgriculture
2 billion people
suffer from
micronutrient
deficiencies
>20% undernourished

5. COLLABORATIVE
We’re not investing enough in food and agriculture
FoodandAgriculture
Agriculture
6.4%
Industry
30.4%
Services
62.6%
$0.4 $0.5 $0.5
$0.9
$2.4
$4.6
$3.6
2010 2011 2012 2013 2014 2015 2016
Agriculture is 6.4% of global GDP but represented only 3.5% of
investments in VC-backed companies in 2015.
Global GDP by Sector, 2015 Food & Ag Investments ($bn)
Source: CIA World Factbook Source: TomKat Foundation
3.5% of $129bn
invested in VC-
backed companies

6. COLLABORATIVE
As a result, crop yields are steadily falling
FoodandAgriculture
Source: Cargill
100
125
150
175
200
1975 1980 1985 1990 1995 2002 2007 2013
+2.4% per year
+0.7% per year
Crop yields grew 2% per year from 1975 to 1985, but growth has
slowed due to land degradation and lack of investment.

7. COLLABORATIVE
And farmers are struggling
• There are 1.5 billion smallholder farmers in the world
• Farmers have the highest incidence of poverty of any sector in
the global economy
• Over 60% of people living in extreme poverty work in
agriculture
• Helping small farmers raise yields by investing in
technological improvements could decrease rural poverty
FoodandAgriculture

8. COLLABORATIVE
The Industrial Food System
The food system is one of the world’s largest
industries, but is extremely concentrated and
inefficient.

9. COLLABORATIVE
The Food System is enormous…
• $7.8 trillion revenues
• 10% of global consumer spending
• 40% of employment
• The world’s poorest spend 60% of their income on food
TheIndustrialFoodSystem

10. COLLABORATIVE
…but highly concentrated
TheIndustrialFoodSystem
Top 10 companies control: Factory farms raise:
• 76% of seed market
• 41% of fertilizer market
• 95% of agrochemical
market
• 99.9% of chickens for meat
• 97% of laying hens
• 99% of turkeys
• 95% of pigs
Big brands represent 54% of consumer product sales
Big brands
54%
Midsize
22%
Small
15%
XS
10%
Note: Company size is based on 2015 sales, excluding private-label sales. Large = more than $5B in sales
Source: IRI, MULO C database; BCG and IRI analysis

11. COLLABORATIVE
Millions of Americans don’t have access to freshfood
23 million Americans live in food deserts with no grocery store
within 10 miles*.
TheIndustrialFoodSystem
*10 miles for rural areas, 1 mile for urban areas
Source: United States Department of Agriculture Economic Research Service

12. COLLABORATIVE
Consumer Trends
Consumers increasingly care about social
impact and health versus traditional value
drivers like price and taste.

13. COLLABORATIVE
Consumerpreferences are changing
More consumers care about evolving value drivers like social
impact and health than traditional value drivers like price.
Evolving
• Health
• Safety
• Social Impact
• Experience
• Transparency
Traditional
• Price
• Taste
• Convenience
ConsumerTrends
51%49%
Source: TomKat Foundation

14. COLLABORATIVE
Consumers have more choice and information
ConsumerTrends
Thanks to internet research and the prevalence of online reviews,
consumers can find products that perfectly suit them.
0
5,000
10,000
15,000
20,000
25,000
1965 1975 1985 1995 2005 2015
Source: Mintel (left), Deloitte (right)
How Consumers Use Technology
When Buying Products
29%
48%
55%
Try products basedon
onlinereviews
Compare prices
Conduct product
research online
Total Number of New Food and
Beverage Products in the U.S.

15. COLLABORATIVE
Startups vs. Big Brands
As the food system and consumer trends
change, startups are competing more with big,
legacy brands.

16. COLLABORATIVE
Startups are taking market share from big brands
Startupsvs.BigBrands
56.3%
54.0% 53.6%
2011 2014 2015
Note: Company size is based on 2015 sales, excluding private-label sales. Large = more than $5B in sales
Source: IRI, MULO C database; BCG and IRI analysis
Small and medium companies have taken 2.7% of market share
from big brands since 2011, equivalent to $18 billion in sales.

17. COLLABORATIVE
What’s driving this shift from big to small brands?
Lower
barriers to
entry
More startups
competing with
legacy brands
M&A is
increasing
Uptick in VC
investments
Startups are
winning
Startupsvs.BigBrands

18. COLLABORATIVE
Lower barriers to entry for startups
Production
Third party manufacturers have become ubiquitous (especially at smaller scales).
Marketing
Digital marketing and social media have made it easier to reach a mass audience.
Distribution
Startups can now sell products online or through increasing number of retailers
who don’t charge slotting fees.
Financing
VC investors are providing more capital to early-stage food & beverage companies.
Startupsvs.BigBrands

19. COLLABORATIVE
How startups are better positioned than big brands
Startupsvs.BigBrands
1. Consumer trends are shifting
Consumers are demanding more authenticity, personalization, and simplicity, and
startups are better able to meet those needs than mistrusted legacy brands.
2. Big brands aren’t thinking local
Big brands have been focusing on globalization over the past few decades, so
startups are able to capture market share on a local level.
3. Startups are more innovative
Experimentation is discouraged among successful big brands, whereas startups are
incentivized to make bold innovations to disrupt the status quo.
4. Customers have more information
It’s easier than ever to find info and reviews online so customers can find products
that are perfectly tailored to fit their needs.

20. COLLABORATIVE
Appendix
"Poor nutrition is responsible for 45 per cent of deaths in children under
five. The world’s 1.5 billion smallholder farmers have the highest incidence
of poverty amongst all sectors of the global economy. Better technology in
smallholder farming through aggregation, extension services, access to
capital and other levers could increase yields and productivity, which would
lower poverty rates. Halting all deforestation and reversing forest
degradation could mitigateup to 10 per cent of total emissions globally by
2030. Product reformulation and other levers have the potential to lower
obesity levels in 2030 from projected 41 per cent of global population to
around 5 per cent, the level in Japan.”
- Valuing the SDG Prize in Food and Agriculture

21. COLLABORATIVE
Contact Information
Collaborative Fund
Web: www.collaborativefund.com
Twitter: @collabfund
Sophie Bakalar
Email: sophie@collaborativefund.com
Twitter: @sophiebakalar
Appendix

22. COLLABORATIVE
Resources
“Valuing the SDG Prize in Food and Agriculture.” A paper from AlphaBeta commissioned
by the Business and Sustainable Development Commission. Oct 2016.
“Food Systems at a Glance.” Tomkat Foundation.
Stent, Jeff, et al. “Is M&A the new innovation.” Exane BNP Paribas. 21 Oct 2016.
Brennan, Jim, et al. “How Healthy Foods Are Nourishing Growth in the CPG Industry.”
BCG Perspectives. 20 Apr 2016.
“Food loss and waste reduction.” Food and Agriculture Organization of the United
Nations. www.fao.org/food-loss-and-food-waste/en/
Appendix