The Missing Plate at the Table: The Startups’ Revolution in the Food Industry in Latin America

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In an era marked by unprecedented challenges in the food industry, Village Capital stands out by identifying and fostering emerging trends in entrepreneurship that have regional impact.

Given the urgent need for innovative and effective solutions and an ecosystem that is frequently fragmented and isolated, we organized a series of strategic meetings to bring together experts and change agents in Brazil, Colombia, Chile, and Mexico during March and April 2024. These meetings highlighted key challenges and paved the way for new opportunities that could transform the relationship between addressing food waste and impact entrepreneurship.

Eager to listen to stakeholders with more profound knowledge of this ecosystem, two crucial aspects caught our attention: the scarcity of knowledge about alternative financing options for entrepreneurs beyond traditional venture capital and the urgent need for collaboration among different ecosystem actors to build a better landscape in Latin America.

By positioning ourselves at the intersection of technological innovation and strategic collaboration, we seek to foster an environment of collaboration and continuous learning, keeping the ecosystem in constant evolution.

However, startups in this industry face enormous barriers in securing capital, a fundamental pillar for their growth. Three factors stand out among these barriers: 1) lack of sector understanding, 2) complexity of the business model, and 3) return on investment expectations.

The complexity of the business model in the food industry is largely due to the cyclical nature of sales, leading to fluctuations in revenue flow. Additionally, the use of perishable products demands that they be marketed and sold quickly to avoid losses. Development and piloting processes can be highly demanding in terms of time and resources. On the other hand, the logistics of collecting, storing, and distributing these foods can be particularly challenging in regions with poor supply chain infrastructure. These combined factors make it difficult for businesses focused on food waste to scale and make them less attractive to traditional venture capital, which seeks exponential growth and market dominance.

It is essential to reconsider how we produce and distribute food. According to the Food and Agriculture Organization of the United Nations (FAO), more than 220 million tons of food are wasted annually in Latin America and the Caribbean, equivalent to 330 kilograms per person, or USD 150M in losses. This immense waste not only generates significant economic losses for farmers and raises prices for consumers, but also exacerbates food insecurity in a region where 131 million people lack access to adequate nutrition. Reducing these losses is crucial to improve economic efficiency, mitigate environmental impact, and strengthen the food security of vulnerable communities. It is imperative to understand that there is no lack of food production but rather a lack of efficiency in its harvesting and supply and inequity in its distribution.

From Waste to Innovation: Collaboration and Mutual Understanding

The solutions developed by startups in the food industry are not only desirable but essential. The early investors who bet on these innovations will play a key role in breaking a cycle of investment not designed with this industry in mind, facilitating the growth of these companies and, therefore, their impact. To overcome these obstacles, we need to foster an environment where collaboration among startups, investors, large corporations, and governments is the norm rather than the exception. Solutions to the food crisis will not come from a single actor or intervention but from a collective and multifaceted effort, including contributions that transcend monetary capital such as support from actors who understand the problem, its barriers to entry, and, most importantly, benefit from supporting such ventures.

Let’s imagine a row of dominoes: food waste is the first domino. If it fails and falls, it triggers a series of challenges at the social and ecosystem levels, such as economic losses, food insecurity, and increased environmental impacts. However, this issue also presents numerous opportunities to find innovative solutions.

In this context, Latin American startups like Origino, Urban Farmers Pro, and TuPlaza, who were part of Village Capital’s Reshape Consumer Behavior 2023 program, in partnership with Posner Foundation of Pittsburgh, are examples of how these challenges can be addressed.

Origino introduces supply chain traceability to capture information about agricultural products from origin to retail sale. Their solution has potential applications for reducing food waste by providing end-to-end visibility to all stakeholders, including consumers, retailers, suppliers, and producers.

Meanwhile, Urban Farmers Pro reimagines vertical farming on a medium and large scale by recycling cargo containers to develop sustainable farming solutions. This approach not only optimizes the use of resources, but also applies scalable technology and innovation.

Finally, TuPlaza is transforming food distribution channels in Colombia by digitizing and facilitating the marketing of agricultural products from producers to urban centers. This startup connects households, restaurants, and local stores with fresh, healthy, and sustainable offerings, aiming to become the primary alternative for grocery stores throughout Latin America with products directly from the fields.

These startups are challenging the common perception in Latin America that expansion in the food industry depends exclusively on traditional business models and conventional operational practices. By innovating in how they handle production, distribution, and waste reduction, they open up a wide range of opportunities for entrepreneurs to scale their operations more sustainably and efficiently.

In addition to innovation in business models and operational practices, another crucial lesson from our discussions is the need to foster a culture of non-waste in societies where abundance prevails. Thanks to its abundant ecosystems, Latin America is responsible for 12% of global agricultural production. Startups are uniquely positioned to lead this mindset shift, not only through technologies that improve supply chain efficiency but also by educating consumers and businesses about the importance of minimizing food waste.

This cultural shift is essential to address the vast imbalance between consumption and sustainability. By integrating conscious consumption practices and more efficient production techniques, we can responsibly use our resources. Startups like CurubaTech, Urban Farmers Pro, and TuPlaza are redefining production and distribution methods while shaping consumer behavior of what it means to consume responsibly.

Building a Sustainable Future: A Collective Commitment

The fight against food waste in Latin America is strengthened by collaboration among various actors in the food ecosystem, including those who participated in meetings organized by Village Capital, such as foundations, government, investment funds, and entrepreneurs. These meetings are in preparation for the Reshaping Consumer Behavior program. This initiative is a cornerstone of our sustainability endeavors, returning this year with applications open until June 14.

This program seeks to contribute to addressing the two identified challenges. It prepares startups to address challenges in a self-aware manner by offering mentoring, financial advice, and strategic connections, enabling startups to scale their solutions sustainably and face future challenges. In parallel, Village Capital’s tool, Capital Explorer, seeks to close the knowledge gap about alternative financing options, providing entrepreneurs with an interactive platform to explore the wide spectrum of financing options. This empowers them to make strategic and informed decisions that align with the mission and vision of their business.

Additionally, participants in our meetings have begun implementing innovative approaches in their respective fields. Some are executing advanced technologies to improve traceability and efficiency in the supply chain, while others are developing new platforms to facilitate access to more sustainable and ethical markets. Within the supply chain meetings, we had the assistance of Arvita’s CPO, Aline Azevedo. This startup revolutionized retail operations using artificial intelligence to order fresh food, avoiding waste due to excess inventory or lost sales due to lack of stock. These actions demonstrate their commitment to waste reduction and promoting greater awareness about responsible consumption.

Every contribution is vital – from enhancing production processes to adopting sustainable practices by consumers and producers alike – in addressing the food crisis’s social, economic, and environmental challenges. Only through collective and sustained efforts can we hope to make a meaningful impact on our ecosystem and forge a sustainable future.