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By Uday Garg, Founder & CEO, Mandala Capital

Do AI, IoT, and Big Data in Food and Beverage Sector help the bottom line for companies?Uday Garg, Founder & CEO, Mandala Capital

Uday Garg is the founder and CEO of Mandala Capital which focusses on sustainable and scalable investments across the food value chain in India and South East Asia. Mandala Capital managed c. $350 million across its Funds and relevant investments in the food and beverage sector include Jain Farm Fresh Foods Limited, the world’s largest mango processer and second largest onion processor and Keventer Agro Limited, East India’s leading dairy processor with 400,000 litres/day of processing capacity and a franchisee of Frooti and Appy, two leading juice beverage brands in India.

Over the last 10 years we have seen a rising trend of ag tech startups on AI, Augmented Reality, IoT, Big Data and so on. 

Several of these have also received significant funding and have achieved unicorn status in the agriculture sector. In the Food and Beverage sector these upstarts hope to disrupt supply chains and traditional retail models and cater to the new consumer. Broadly speaking, we remain sceptical on how these startups will fare over the next decade as we see the larger technology companies and industry incumbents ready for the challenge. One of big issues with ag tech startups that we see is that the message is muddled and their value add unclear – does AI, IoT and Big Data in Food and Beverage hope to solve Environment, Social and Health and Nutrition issues or does it actually help the bottom line for companies? How does it do either in a sustainable and scalable manner? Big Data ag tech startups would like to be valued as Software as a Service (SaaS) businesses and demand valuations that match. SaaS companies are recurring revenue, high margin and highly scalable businesses with significant operating leverage. The Big Data ag tech startups on the other hand struggle to find pricing power and people willing to pay for the services. The story tends to move away from technology then and into the social and health and nutrition side. The lack of early adoption also means lack of funds for proper R&D which allows new competitors to enter and create additional pressure on businesses.

Instead, we see larger, established companies in the sector keenly aware of the opportunities offered by technology and are taking a practical approach to implementing Big Data, IoT and AI where applicable with a focus on bottom line and consumer demands. For example, we are seeing supply chains using data and AI more and more – largely being pushed forward by leading global and local logistics suppliers. Startups in this space have caused a splash but have not really taken much market share from the leaders. The retail industry has already become sophisticated with sales data driving their own supply chain decisions. Packaging companies are innovating to design improved RFID based packaging that allows traceability back to the source. There are many examples and in almost all cases we don’t see the industry leaders asleep at the wheel but instead they are readily embracing new technology.

Suffice it so say, success in the food and beverage industry will be determined by some basic tenets of a quality product, strong distribution, focus on unit economics and brand creation where technology is more of an enabler and not the driver of the business. The technology might be generated outside or might be simply provided by their current technology provider or 3rd party service providers – but the real power will remain with the industry leaders.

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