Startup Nation Takes a Stab at Launching the Next Green Revolution

Coca-Cola has a problem. The company may still be very profitable – but thanks to painful cutbacks, not rising sales. More and more people all over the world are realizing that this form of black gold isn’t healthy.

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Coke’s biggest rival, PepsiCo, has felt similar troubles and is nearing the point where it will have to reinvent itself and its market. Similarly, multinational food giants like Nestle, Danone and Kraft are being forced to find new ways to feed the planet.

Meanwhile, that planet, at least its western half, is more aware of the risks of artificial ingredients in processed foods. Then there’s the steady growth of the world’s population, which is forecast to reach 9.7 billion people by 2050, according to the United Nations. The result is a sure recipe for problems for all food manufacturers.

In their attempts to gird for this future, food companies are turning to technology in manufacturing and agriculture, which have earned the names “foodtech” and “agritech.”

The goal is to find new ways to grow raw materials and create food, while preserving the health of consumers.

This trend has created many new opportunities for startups in these industries. Yes, the classic example of agricultural technology is drip irrigation developed at Kibbutz Hatzerim in the 1960s. But it’s actually the Startup Nation that could find itself lagging the rest of the world in these sectors.

“This is the opportunity for Israel to diversify its high-tech investments,” says MK Erel Margalit (Zionist Union). Margalit, along with local governments, investors and the nonprofit group Israel Initiative, is promoting the establishment of a food-innovation center in the eastern Galilee.

“In recent years, most of the investments concerned the Internet, mobile telephony and communications, and in the case of a recession in the industry, Israel could suffer a great deal,” he says.

By comparison, demand for food will remain high even during a global economic crisis. In addition, the health trend will lead to demand for healthier foods.

“The world is undergoing a health revolution, and the sector is constantly growing,” Margalit says. A healthy-foods center in the Galilee would not only benefit the economy, it would strengthen the outskirts of the country in the north.

Large food manufacturers are investing in answering the demand for healthier food. They still have a hard time admitting publicly that the food they now sell isn’t healthy, but they’re acquiring small companies, supporting the foodtech industry and trying to improve their image.

Coca-Cola, for example, is now selling mineral water and has invested in a company that produces devices for making carbonated beverages at home. It sells reduced-sugar drinks with the sugar substitute stevia, though success here has been limited.

20 teaspoons of sugar

Israeli food companies advertise that some of their products are made “without any added sugar” and do not contain preservatives. Behind these slogans is an effort to reduce both sugar and salt; the latter adds flavor but is also a key chemical in manufacturing.

The head of the health and wellness department at the Tnuva dairy group, Noga Schwartz Meshulam, lauds the company’s “nutritional compass” program launched three years ago. She says it has let her reduce sugar in the company’s products by 816 tons, not to mention 72 tons of salt.

“We don’t use artificial sweeteners as a sugar substitute, or salt substitutes – and that presents challenges for us. It’s not easy to remove so much sugar, so the reductions have been very gradual in order to adapt to the consumer’s taste. In Britain they did it too drastically and people simply didn’t buy the products. Our reduction of sugar took three years,” she says.

“The recommendation in Israel is to consume [a maximum of] one teaspoon of salt a day for an adult, but the actual consumption is about two teaspoons a day. For sugar recommended consumption is five teaspoons a day, and according to the Central Bureau of Statistics we consume 20 teaspoons of sugar a day.”

Still, it appears regulatory processes are forcing food companies to change. In the United States, it will be forbidden to sell products with trans fats, so the food industry have to find healthier alternatives.

To actually do this, and not just boost their products’ marketing value, Tnuva approached a technological-social startup accelerator, Tech For Good Rally in Tel Aviv.

“We saw technology-rich initiatives there that can help the food industry encourage healthier eating. But these entrepreneurs come from different industries and they don’t know the food sector too well,” Schwartz Meshulam says.

“You need a good relationship with the industry, and entrepreneurs don’t always have these resources. That’s why we opened our labs to them, let them analyze our products and put a team of dietians at their disposal.”

The accelerator’s first round, which ended last year, focuses on apps for maintaining a healthy lifestyle. “In the second round we aimed more at improving manufacturing processes,” Schwartz Meshulam says. “The link with industry is very important.”

Despite such initiatives, some people warn that the use of advanced technoflogy in Israeli food manufacturing still isn’t advanced enough, and the country’s food industry might lag that in other countries.

“The Western world’s approach to food has changed in the past 20 years,” says Dr. Ofir Benjamin of the food sciences department at Tel Hai College. “In a great number of areas such as smart packaging, methods for heating food and the treatment of food-industry waste, the innovations haven’t been implemented here yet.”

Benjamin is a partner in the dream for that food center in the eastern Galilee, which would focus on research and development. Tel Hai College has signed a memorandum of understanding to develop the food sector with Rutgers University in New Jersey. The two institutions will run an initiative for the development and manufacturing of medicinal foods.

“The agreement with Rutgers creates a framework for cooperation that’s meant to enter a business track in the end,” Benjamin says.

“The final goal is to establish a national institute for food and nutrition that would be the bridge between academic knowledge and its implementation in industry. It can provide momentum for the entire region.”

How to feed 10 billion people

Alongside innovative technology for manufacturing, there’s an urgent need to improve the way crops are raised. That’s what the Trendlines Agtech accelerator aims to do.

Modern agriculture, which developed in the second half of the 20th century and was designed to handle steep population growth, created environmental and health problems that can no longer be ignored, says Trendlines’ chief executive, Nitza Kardish. The next generation will have to provide new solutions, she says.

“The Green Revolution that started in the 1950s had to deal with a world food shortage after World War II. The solution was threefold. First, they introduced chemicals. They simply flooded the globe with agrochemicals, and that allowed the creation of huge amounts of food,” Kardish says.

“Second, they grew one agricultural variety, monoculture, on a unit of land, and didn’t allow the growth of a larger variety of crops with a natural balance between them. In doing so they disrupted the equilibrium and agriculture stopped being balanced. The third solution, which isn’t problematic, is mechanization – introducing tractors and so on.”

Today it’s impossible to continue to grow crops the old way. “Regulatory agencies don’t allow the polluting of the groundwater and the ground anymore,” Kardish says.

“And we need to return to a natural equilibrium. I’m not talking about organic farming, which is still a niche, but sustainable agriculture.”

The accelerator looks at technology and examines how it improves the yield in a way that takes all this into consideration, she says.

All this must be done while constantly improving yields; after all, the world population continues to grow.

“We need to see how to reduce food wastage when today more than 40% is thrown in the garbage,” Kardish says. “Our goal needs to be making food production more efficient, and to grow it from fewer resources.”

A tour of the accelerator, which is supported by the agriculture and economy ministries, looks very different than the norm for high-tech accelerators. Instead of 20-year-olds trying to develop the next hot app, most of the entrepreneurs are in their 40s.

Or they’re even older. And they’ve come from agriculture or traditional industry. They’re trying to address a problem that bothers them in their daily lives.

A few months ago reports were published on the big sectors in agritech. The fields that attract most of the investments are protein substitutes, plant protection, robotics and functional food, Kardish says.

In all these areas, Trendlines has set up companies, and in recent years agritech investments have taken off. “If in 2010 investments in the sector were about $400 million, in 2015 they reached some $4 billion,” she says.

So where is Israel in this industry?

“When we started there were no startups; today there are a lot. In addition to Netafim, the drip-irrigation company, some the world’s leading seed companies grew here. So Israel has experience in it, but still not enough. We need to create the next Netafim,” Kardish says.

“It’s good the social environment here respects entrepreneurs and doesn’t reject failure. It contributes to achievement, and this doesn’t happen in a lot of places around the world, where if you fail, woe unto you.”