Foodie City
Happy 2022! I hope you and your loved ones had a wonderful holiday season. If you’re like me, you partook of (too?) many delectable dishes during the festivities, whether homemade, delivered, or picked up / eaten at a favorite restaurant. That got me thinking about foodtech and the ways in which it has rapidly evolved over the past few years. So that’s our focus today: major foodtech trends, key Atlanta startups operating in the space, and — as an added treat — some predictions from a local foodtech guru. With that, let’s dig in.
What is foodtech?
Let’s get definitional. Foodtech generally refers to the ecosystem of companies using technology to innovate on food product development, production, marketing, and distribution. The concept encompasses everything from using tech to improve agricultural yields to plant-based burgers, digital restaurant platforms, and food delivery apps.
The global foodtech market was estimated at $220B in 2019 and is expected to grow to nearly $343B by 2027 — driven by the acceleration of new technologies like robotics and food-centered software as well as by consumer demand for healthier, safer, and cheaper food.
COVID has shaped foodtech’s rise. The pandemic led to restaurant closures, worker layoffs, and food and material supply chain disruptions. The National Restaurant Association estimates that 110,000 restaurants temporarily or permanently closed. Restaurant sales were $240B below expectations at the end of 2020 and there were 3.1M fewer restaurant workers than anticipated. To stay open and in the face of demands from consumers stuck at home, restaurants built online presences, transitioned to digital ordering and payment platforms, and partnered with third-party delivery services. 2020 became the first year since 1994 in which restaurants’ share of food expenditures dropped relative to at-home consumption. Further, the share of US food transactions initiated via app more than doubled from 2019. Restaurants continue to face a severe labor shortage, forcing them to cut operating hours, raise prices, and offer higher wages and other benefits.
Foodtech trends
COVID’s economic effects have spurred foodtech innovation. Among the hottest trends in the space are:
eCommerce and Delivery
Unless you’ve been living under a rock where Uber Eats, DoorDash, Grubhub, or Postmates aren’t available, you’ve noticed or contributed to the growth in food delivery. Third-party delivery apps have thrived during the pandemic as homebound consumers shifted to ordering meals online. Global installs of food delivery apps increased 25% in 2020 over 2019 and were up another 21% as of September 2021. Growth in usage was even more impressive, with on-app sessions spiking 88% in 2020 and a further 44% by fall 2021. McKinsey estimates that mature food delivery markets like the US, UK, Australia, and Canada have grown four- to sevenfold since 2018. This growth is only expected to continue as new entrants (like Lyft, which just announced last month that it will be partnering with online ordering giant Olo to launch food delivery) enter the market.
Food delivery’s expansion is partly attributable to the rise in “ghost” or “cloud” kitchens — commercial kitchens detached from dine-in restaurants and designed for delivery or pick-up only. Some ghost kitchens make food for just one restaurant, while others cover multiple brands and menus. Models vary from having multiple kitchen units occupy one space, to housing a kitchen in a container or trailer, to operating out of an existing restaurant’s kitchen. Leading ghost kitchen players include former Uber CEO Travis Kalanick’s CloudKitchens, Miami-based REEF (which operates its kitchens in trailer-size containers in parking lots), and virtual food hall-focused Kitchen United. Established brands such as Wendy’s, Chipotle, SBE (known for its fine dining restaurant collaborations with chefs like José Andrés and Wolfgang Puck) and chefs like Momofuku’s David Chang have all gotten in on the ghost kitchen game too. As they’ve expanded, ghost kitchen operators have navigated challenges like safety incidents, shutdowns due to permitting and regulatory violations, and higher-than-expected costs.
The 15-minute grocery delivery space has also undergone rapid growth. Ultra-fast grocery delivery startups like Buyk, Gopuff, JOKR, Gorillas, and Fridge No More have attracted capital and quickly expanded both domestically and internationally, particularly in Europe. These services use a network of micro-hubs (“dark stores” not open to customers) that stock a limited number of products and tend to limit deliveries to a mile or less. The surge in 15-minute delivery disruptors has led players like DoorDash and grocery delivery leader Instacart to enter the space. Instacart plans to launch a trial version of its 15-minute delivery service as early as February as a variant of its existing model (delivering goods from grocery and convenience stores that the company already partners with).
Restaurant Digitization
Restaurants are turning to tech platforms for things like customer engagement (e.g., online marketing, bot-enabled Q&A), reservations, digital menus, online ordering, self-service kiosks, cashless payment (including via web-based payment processors and QR codes), order management, and worker tracking. They have also increased their adoption of food-focused robotics like those offered by DoorDash-owned Chowbotics, “Flippy” maker Miso Robotics, and pizza-centered Picnic. These solutions are helping restaurateurs operate more efficiently and gather valuable data on their customers and employees across the meal preparation and dining processes.
Alternative Proteins
Consumers are increasingly seeking out alternative protein sources due to health and environmental concerns, as well as discomfort with conventional treatment of livestock. Alternative protein encompasses not only plant-based meats from players like Impossible Foods and Beyond Meat but also edible insects, myco (i.e., fungi-based) protein, and “cultured” or cell-based meats. In this last category, startups like Upside Foods, Mosa Meat, Finless Foods, and BlueNalu are using molecular biology and tissue engineering to create lab-grown chicken, hamburgers, and seafood that they bill as cleaner, more sustainable, and more humane than traditional meat.
Nutraceuticals and Wellness
With the increasing focus on health and wellness has come greater interest in “nutraceuticals.” The term refers to medicinally or nutritionally functional foods. The category includes everything from “bio” yogurts and fortified breakfast cereals to vitamins, herbal remedies, and gut microbiome enhancement foods like prebiotics, probiotics, and postbiotics. According to the NIH, such foods can be used to improve health, delay aging, prevent chronic diseases, or support the structure or function of the body.
ESG and Food Waste Reduction
Concerns about climate change and social fairness have also spurred greater emphasis on ESG (environmental, social, and governance) in the food industry. Food waste is a particular focus area. The FDA estimates that 30-40% of the US food supply is wasted. Food represents the single largest category of material in municipal landfills — particularly tragic because discarded food could help nourish needy families. Startups and large corporations alike are working to reduce food waste to minimize environmental footprints and save costs. Monitoring and zero-waste approaches are helping food producers, restaurants, grocery stores, and cities reduce their food waste and avoid producing excess to begin with. Upcycling and food waste reuse are helping companies make money and increase loyalty among sustainability-focused customers. Notable startups in the space include Apeel (a developer of plant-derived shelf life extension coatings for produce), Imperfect Foods (a company that allows consumers to select surplus, discontinued, and other food products that would have gone to waste for delivery), and Winnow (which builds digital tools to help chefs measure, monitor, and reduce waste).
Venture capitalists get hungry
These trends have been a magnet for capital. In 2020, investors plowed $23.5B into nearly 1,300 foodtech deals according to CBInsights. The total capital invested within the first half of 2021 alone nearly surpassed that total. Delivery and alternative protein companies saw particularly high deal activity and valuations.
Atlanta: food metropolis
Atlanta and Georgia more broadly are food industry hubs. Atlanta boasts a thriving restaurant scene and is widely considered a “foodie” destination. Georgia’s agriculture industry contributes around $73B annually to the state’s economy and the Georgia Restaurant Association (GRA) counts over 18,000 eating and drinking establishments in the state with total sales of nearly $25B.
The pandemic acutely damaged the industry though. An estimated 160K (or ~40% of all) Georgia restaurant workers were forced out of their jobs in the weeks after the pandemic first hit in spring 2020 as the state and local governments implemented shutdowns and social distancing protocols. The GRA estimates that 4,000 restaurants closed permanently. Today, the Georgia restaurant industry employs 39K fewer workers than before COVID. The restaurant labor shortage remains an issue, with more than 50K open restaurant positions across the state. Most (90%) of Georgia’s restaurants have 50 or fewer employees so can ill afford to lose people. Like their counterparts around the world, many Georgia restaurateurs began doing things differently during the pandemic — adopting to-go, delivery, cashless payment, and outdoor dining options — changes that remain in place and are becoming the norm.
ATL’s foodtech trailblazers
Atlanta’s food industry prowess — and the pandemic’s disruptive force — have stimulated a burgeoning class of foodtech startups, spanning food and restaurant-related software solutions, tech-driven restaurant models, transformative food products, and ESG-centered services. These innovators include:
Food- and restaurant-focused software platforms
Multiple Atlanta startups are building software to help food industry businesses become more customer-friendly and tech-forward. Revel Systems (founded in 2010 and now majority-owned by PE firm Welsh, Carson, Anderson & Stowe) is one of the space’s OGs, offering iPad-based POS systems and associated online ordering, delivery tracking, and analytics solutions to restaurants and retailers. Newer entrants Popmenu and Sunday have been making recent waves. Popmenu, founded in 2016, provides a platform aimed at helping restaurants digitally engage and retain their customers. Popmenu offers restaurants website hosting and design, digital menus, commission-free online ordering and delivery, and marketing offerings like review management and email, text, and social media tools. In July, the company raised a $65M Series C led by Tiger Global Management and in October, Popmenu acquired fellow Atlanta foodtech startup and Techstars Atlanta grad OrderNerd.
Sunday — started in Europe and originally tested at Big Mama Group restaurants run by two of Sunday’s co-founders in Paris, London, and Madrid — opened its US headquarters in Atlanta last spring. The company makes QR code payment solutions for restaurants, giving diners time back at the end of their meals and restaurants the ability to turn over tables more quickly. Sunday has been on a fundraising tear over the past year, raising $24M in a Seed round last April and a $100M Series A only months later in September, both led by Coatue, as the company expands across North America.
Other Atlanta startups in the software platform category include early-stage Skipli, which also offers online ordering, delivery, marketing, and contactless payment solutions for restaurants, and Bottle, a platform enabling food and drink makers to provide online and SMS ordering and digital comms to local customers. Also notable is Ome, backed by local investors Outlander VC and Zane Venture Fund. The company sells a “smart knob” device that syncs with users’ smartphones, allowing them to remotely monitor and control stove burners.
Tech-driven restaurant models
Certain Atlanta food purveyors are themselves building models based on technology. Take Recess. What started as a food stall at Krog Street Market run by Castellucci Hospitality Group has spun out as a fast-casual, good-for-you restaurant concept that is deliberately tech-centric. Recess describes itself as building the first “digitally native restaurant brand for everyday dining.” Citing the pandemic’s lasting impact, the company is integrating off-premise operations and delivery, pairing pick-up and delivery-focused cloud kitchens with its dine-in restaurants (including a new flagship location opening in Buckhead), and building homegrown commerce technology to enable these functions. The Recess tech platform is expected to serve as a foundation to expand the concept throughout the Southeast.
Epic Kitchens is also focused on take-out and delivery. The ghost kitchen / fast-casual hybrid prepares meals for multiple brands like BurgerFi, 800 Degrees, Pokéworks, Blue Ribbon Fried Chicken, and Lawrence's Fish & Shrimp in one kitchen. Epic takes orders via its own online ordering portal and partners with third-party services like DoorDash, Grubhub, and Uber Eats for delivery. Last fall, the company moved into physical dining by opening a storefront for its partner brands in Chicago. Epic maintains its focus on off-premise dining, however, with the new Chicago location offering limited seating and maintaining separate entrances and parking spots for pickup and delivery. The company is planning on expanding to other geographies — including its home market of Atlanta — in the future.
Sifted, which was founded in 2015 as a caterer for tech companies looking to offer in-office lunch as a perk for their employees, expanded to virtual team-building experiences during the pandemic. The company now provides customers the ability to order curated kits for virtually guided activities focused on everything from holiday cocktails to candy making and charcuterie.
Inventive food products
Then there are the Atlanta startups developing new types of food. This group includes decade-old energy drink maker Kill Cliff; Lemon Perfect, which sells cold-pressed and organic-friendly lemon water and has raised money from pro athletes like Blake Griffin, Kyle Kuzma, and De'Anthony Melton; and Béla, an herb-based wellness drink created by a husband and wife founder team. It also encompasses Revolution Gelato, which sells plant-based, dairy-free gelato.
ESG and food waste services
Finally, there are Atlanta’s environmentally-conscious foodtech players. Inman Park-based Goodr is the most notable startup in the space. The company, which is backed by Atlanta-based Engage and investors like Backstage Capital and Capital One Ventures, provides tech-driven food waste and hunger relief solutions. Goodr picks up companies’ surplus food and donates it to local non-profits and works with organic food haulers to recycle inedible items. Organizations can also work with Goodr to sponsor healthy food options in their communities, provided via Goodr’s pop-up grocery markets, grocery and meal delivery services, and student snackpacks. Through the Goodr app, businesses can schedule their food waste pickups, monitor delivery, track community and environmental impact, and monitor tax deductions and diversion data.
Foodtech investors
While the companies mentioned above are all located in Georgia, Atlanta investors are also betting on foodtech startups located elsewhere. For instance, Buckhead’s Noro-Moseley Partners (NMP) is an investor in Charlotte-based Ekos, which develops business management software for craft beverage makers like breweries, wineries, and cideries. NMP participated in Ekos’s $21M Series B in December, for instance, and led the company’s 2019 Series A. Similarly, Atlanta’s Outlander participated in the August Series A round for Santa Monica, CA-based Coco, a startup building human-operated sidewalk robots for last-mile delivery of food and other products.
What’s in store for Atlanta foodtech in 2022?
For insight on what to expect in Atlanta’s foodtech scene in the year ahead, I turned to foodtech expert and co-founder and CEO of Recess Erik Göranson.
Erik predicted that in 2022, more restaurant brands will embrace their websites as digital storefronts. In order to compete with aggregators like DoorDash and Uber Eats and win back customers, restaurants will need to offer a seamless digital ordering experience, especially via mobile as “photoless PDF menus just won’t cut it.” The static menu is moving online and guests need to be able to order on their phones, whether they’re on the couch or at a restaurant.
As we look to this year and beyond, Erik also expects more restaurants to reimagine their physical layouts and change how they approach real estate to better serve off-premise ordering. Many restaurants will prioritize smaller footprints, drive-thru windows, dedicated to-go areas, and outdoor patios over large dining rooms. For Recess, he indicated this means “selecting real estate that complements ongoing investments in the digital guest experience: dedicated parking, hot/cold food lockers, and to-go windows for quick and easy pick-up.”
These are changes aimed at making the dining experience easier, quicker, and more frictionless for diners and restaurant workers alike. While they might not all happen right away, they’re certainly something to chew on.
