Alexandra Health FOREWORD 2 Foreword The Asia Food Challenge report Rabobank reflects a shared view within It is our shared responsibility and our three organisations that the interest to help accelerate the shift significant challenges facing to a more sustainable agri-food Asia’s agri-food industry create economy through climate-smart an outsized opportunity for ecosystems. With our strong innovation. Simply put, Asia is global network and growing a at a crossroads: huge growth in better world together mission, demand creates an attractive Rabobank strongly believes that opportunity for investment; but partnerships are an essential collective action is required to link in the innovation process in unlock this opportunity. solving Asia’s food challenges. In a nutshell, our shared ideals, shared PwC knowledge and ability to work Now is the time to take concrete together is key to creating a strong steps to address the major food sustainable agri-food chain. challenges we are facing; an issue that hits close to home Diane Boogaard and is central to PwC’s purpose Chief Executive Officer, to build trust in society and Asia, Rabobank solve important problems. Asia is poised to take advantage of Temasek this "perfect storm" although With the growth of the middle- investment currently lags income population in Asia, we behind other markets like the at Temasek see a corresponding United States and parts of demand for more safe, nutritious Europe. Greater collaboration and sustainable food sources. between governments, the We can put our capital to private sector, innovators, good use across the whole financial investors and academia agri-food value chain, from across the food and agriculture increasing farm yields, reducing industry can turn the tide, and the environmental impact of ignite this game-changing farming, to improving the safety, opportunity for all of Asia. traceability and nutritional value of food. Together we can do well, Ong Chao Choon do right and do good for our Deputy Chairman and Advisory current and future generations. Leader, PwC Singapore Robin Hu Head, Sustainability & Stewardship Group, Temasek International 3 Executive Summary Asia’s food and agricultural industry will undergo significant change over the next decade in response to population growth and changing consumer requirements, coupled with the major challenges presented by climate change and environmental degradation. For the purposes of this report, Asia is defined as China, India, Southeast Asia, Japan and Korea. 4 The Asia Food Challenge These are real challenges that require urgent By 2030, 65% of the world’s middle-class 2 action and shared responsibility. Technology population will reside in Asia. will be essential in helping to solve this food These consumers will ask more of their food challenge, although this requires investment supply chains, seeking highly nutritious, fresh and collaboration across the food and and safe produce delivered conveniently and agricultural industry, including corporates, on demand. They will also pay a premium to start-ups, investors, academia and businesses able to deliver on this. government. While the requisite investment However, the agri-food industry is has not yet materialised, it represents a struggling to keep up. Current trends show large-scale opportunity for those able to that growing populations and urbanisation foster innovation successfully. Together, we have led to high wastage and poor quality can help to solve the Asian Food Challenge, as supply chains are stretched and broken. and ensure a healthy, sustainable future for Taken as a whole, Asia is unable to feed itself, all Asian citizens. relying on imports flowing through long Asia is experiencing far-reaching supply chains from the Americas, Europe and demographic change. By 2030, Asia’s Africa. Climate change and environmental population will be 250 million larger, the degradation will hit Asia hardest, impacting equivalent of another Indonesia. The available arable land, yields and farm output, growing population will increasingly reside in exacerbating these production challenges. megacities: Asia is urbanising faster than any other region and will house all of the world’s expected three 30 million+ cities by 2030.1 1 United Nations 2 Global Economic Development at Brookings: The Unprecedented Expansion of the Global Middle Class, https://www.brookings.edu/wp- content/uploads/2017/02/global_20170228_global-middle-class.pdf 5 EXECUTIVE SUMMARY Limited Investment In Asia To Date Lack of investment is a key barrier to There have been some major the uptake of new technology across Asian success stories, notably in the the food and agricultural ecosystem. downstream segment. China is a Investment comes from many sources; global leader in e-commerce, food principally corporates, but also investors, delivery and other consumer-facing governments and non-governmental platforms. Significant investment has bodies. All of these will play a key role, focused on these areas in response to often in collaboration, if the sector is to consumer demand for convenience. overcome the key challenges it faces. But the supporting food infrastructure A number of key factors have driven — allowing for just in time, consistent, this lack of investment. The food and high-quality production — has not agricultural industry is large, complex and received the same attention and could diverse, creating a challenging investment hold back the roll-out of consumer- environment but also significant facing innovations. opportunities for knowledgeable investors. The immaturity and pre- commercial nature of many technologies can mean longer timelines for investment returns. Furthermore, there is a range of specific challenges for Asia, including the diversity of countries, levels of economic development, regulatory systems, currencies and dietary preferences. Asian farms are also typically much smaller than their American or European counterparts, with lower capacity or capability for investment in technology. As a consequence, many innovations from other markets have proven less relevant in the Asian context. 6 7 EXECUTIVE SUMMARY Ripe for Innovation Asia will not solve its food challenge inputs, farms, processing, production, through a continuation of traditional distribution, retail and food service; all farming practices nor through linear critical and intertwined. modernisation. New technologies We estimate a cumulative will need to be deployed to increase investment requirement of US$800 yields, reduce the environmental billion above existing levels over the impact of farming, improve the safety, next 10 years. The majority of this traceability and nutritional value of (around US$550 billion) will help to food, reduce waste, shorten the supply satisfy demand for better-quality food chain and bring food to consumers (including safer, healthier and more in their increasingly urban settings. sustainable food). The remainder These technologies will reflect the (around US$250 billion) will drive diversity of the farming environments increased quantities of food to feed and populations they serve; some Asia’s growing population. high-tech and high-cost, others Overall, these numbers imply a involving better farm practices to raise total annual investment requirement standards, improve yields and reduce of US$290 billion in 2030 across Asia, waste as well as disintermediation a significant increase from the current to reduce price volatility. Innovation US$130 billion. This investment would must stretch across the whole food unlock market growth of around 7% and agriculture supply chain — per year, with the region more than doubling its total spending on food to over US$8 trillion by 2030. The scale of this transformation represents a significant commercial opportunity for investors, given the broad requirement for development and adoption of new technologies. The economic prize for the innovators who are able to meet the food requirements of 45% of the world’s population in 20303 should serve as a powerful motivator for increased activity in the space.4 3 World Bank (this refers to China, India, Southeast Asia, Japan and Korea) 4 World Bank, IMF, OECD-FAO, USDA, Capital IQ, PwC analysis 8 Unlocking the Opportunity The magnitude of this opportunity Government-coordinated will draw interest from investors ecosystems and the development and corporates; but a concerted of regional agri-food tech hubs are effort will be needed to fully critical catalysts for investment and unlock the investment potential. innovation. By creating space for This will include greater innovation, encouraging public- collaboration between corporates, private sector interaction and investors and academia; the drawing in entrepreneurs, such establishment of corporate hubs will play an outsized role in venture capital teams and driving investment and innovation incubators; greater acceptance in the region. of new technologies and food We have identified many of the products by large corporates; characteristics that make these and greater support from global hubs successful; applying governments, including coherent these to the Asian context provides legislation and supportive examples of cities that we believe policies to foster technology have the potential to be Asian development and support agri-food tech hubs. These include investors. The key underlying Bangalore, Beijing, Hong Kong, theme is greater collaboration Mumbai, Shanghai, Shenzhen, and shared responsibility. Singapore and Tokyo. We believe