Spain: Agrifoodtech market overview

NutritionInvestor takes a closer look at the Spanish market to identify consumer trends, key features of its food supply chain, and the agtech and foodtech companies to watch

By Murielle Gonzalez

Spain is home to 400 start-ups operating in the agtech and foodtech arenas, and this agrifoodtech landscape is growing quickly. Companies are producing next-generation food and drink products that deliver flavour and texture sensations without damaging the planet, and there’s also cutting-edge technology and innovative services up and down the supply chain set to change conventional practices in the industry – from seed to fork.

Some companies, such as Foods for Tomorrow, are already a commercial success. Hailing from Barcelona, it brought to the Spanish market a range of plant-based chicken and beef products through the Heura Foods brand. Founded by Marc Coloma and Bernat Añaños in 2017, the company reported a turnover of $9.69 million last year, up from $3 million in 2019.

Foods for Tomorrow revealed in January that its Series A funding round could close in April. The company was seeking fresh capital to support further R&D work and boost international expansion – the UK, France, Italy, and Mexico are Heura’s best-selling markets after Spain.

While the vast majority of Spanish start-ups remain off the radar for most investors, a handful of brands have been in the spotlight due to their game-changing technology, building up the expectation for when products hit the market. Novameat is a good example. The company is developing 3D-printed beef steaks made with a mix of cultured mammalian adipose cells and plant-based biocompatible scaffold.

Founded in 2018 by Giuseppe Scionti, Novameat received a €250,000 investment in January from the Spanish government in a funding round that coincided with the showcase of its prototype. Until then, New Crop Capital, the alternative protein fund managed by Unovis, has been Novameat’s only investor.

Measuring 22.5 cubic centimetres, Novameat’s 3D-printed steak is the world’s biggest whole cut of beef ever made.

Scionti is bullish about its path to scale-up production and is gearing up for an investment round in the coming months. Proceeds will be used to expand its technology beyond 3D printing to reach a production speed of 100kg per hour.

While remarkable, these two examples in the alternative protein space don’t tell the whole story of the new agrifoodtech space in Spain.

NutritionInvestor takes a closer look at this market to identify consumer trends, the companies upstream, closer to the farm, and the new ingredients and solutions to help companies offer more sustainable food and drink products powered by cutting-edge technology.

Consumer profile

Beatriz Jacoste, director at KM ZERO Food Innovation Hub, tells me the Spanish consumer is used to having access to high-quality products at a low price. “Private label consumer goods represent an important part of total sales in the market, and with the current crisis, the habit of purchasing inexpensive products is increasing,” she says.

Jacoste also notes that corner shops are highly appreciated by the Spanish consumer. “Many shoppers prefer the human touch these type of establishments provide, as opposed to big supermarkets.”

José Luis Cabañero, founder and chief executive of business accelerator Eatable Adventures, concurs, noting Spain is a tough market for CPG brands because most of the market share is taken up by private labels and the brands of large food corporations.

“Nevertheless, local start-ups are differentiating by embracing functionality, offering products that are more sustainable,” he says. “Spanish start-ups are also tapping into niche areas where big food companies are not really there,” he adds.

Cabañero says local start-ups grow in the segments they are by expanding to other countries – and he notes Heura Foods is an extraordinary example. “Heura Foods has reached a very interesting penetration in the Spanish market. It secured strategic agreements with corporations and incorporated its products into others – in pizzas, for example.”

The increase of health-focused food and drink products is another feature of the Spanish market. “We see an increase of consumer goods with health benefits, as well as snacking,” says Jacoste, noting the latter is new consumer behaviour in the Spanish market.

Jacoste also notes the plant-based trend is widening its presence in Spain as well as demand for ready meals – both from retail and food delivery channels. “Moreover, the number of dark kitchens is growing these days significantly,” she reveals.

A dark kitchen, also known as a cloud or ghost kitchen, is a professional kitchen designed to cook products for delivery – and this segment is already booming in cities like Barcelona, Madrid, Valencia and Zaragoza.

NutritionInvestor can reveal that at least nine dark kitchens are operating in Barcelona, notably under the umbrella of two holding groups – Food Haven and Cook Room, the dark kitchen offering of food delivery giant Glovo. Another feature of this emerging segment is the gastronomy on offer. Most businesses offer Italian, Mexican or Korean cuisine.

Cabañero concurs with Jacoste’s view of a booming era for ready meals. “I believe that we will see a lot of activity in this category in the coming year,” he says. “This is a very well-established category in other markets, and it has been so for many years. In Spain, the ready meal category existed, but was dormant – it woke up in the past couple of years.”

Data from the Spanish government shows that in 2019, the food home delivery service grew by 16.8%, driven by increasing consumer demand.

Jacoste observes a knock-on effect on e-commerce platforms, which are gaining traction among consumers of all ages. She notes the shift to online is remarkable in a country where brick-and-mortar shops have been the norm.

Challenges and opportunities

The 400 Spanish start-ups in the agrifoodtech sector are far from the numbers of Israel and the US, the world’s most prolific countries in terms of entrepreneurship, but similar to that found in France and the UK.

The Spanish government estimates that more than 60% of the country’s start-ups in the agrifoodtech space are under three years old – and 13% of them have been created during the Covid-19 pandemic.

“The number of start-ups is continuously growing, and we think this is the perfect moment for investing in them,” says Jacoste.

Founded in 2018 and headquartered in Aldaia, Valencia, KM ZERO Food Innovation Hub focuses on promoting talent, products, and solutions for the food ecosystem. As a foodtech innovation hub, it co-develops projects providing start-ups with experience, seed funding and knowledge of the industrial and corporate sector.

“A major challenge for many start-ups is to industrialise production to reach the market, and that is precisely why we exist – to help start-ups with our industry know-how,” says Jacoste.

She notes there’s a great deal of innovation in the country, but the weak link in the agrifoodtech space is that R&D outcomes do not always reach the shelves.

“There is a lot of innovation in universities, but many of these spin-offs do not become sustainable projects,” says Jacoste. “On the other hand, we think there’s still space for more collaboration between start-ups and the food industry.”

Cabañero concurs, and notes that despite start-ups emerging close to universities and technology centres, the challenge lies in transferring the technology to industry. “For that to happen, you need to have the right policies to allow research to be exported, either by having a shared IP or by issuing licenses,” he says, noting this is a practice fairly common in countries like the UK.

Cabañero notes the Spanish government is playing its part and has committed to promoting Spain as an agrifoodtech nation. Several initiatives are under way, including a promotion programme at Wines and Foods from Spain, which is run by ICEX Spain Trade and Investment.

He also tells me about FoodStart.CAT, a project by the Catalonia government and developed in partnership with Eatable Adventures and four other food and drink-related clusters in the region. It seeks to promote innovation among companies by identifying possible business opportunities with start-ups from around the world.

Based in Madrid, Cabañero founded Eatable Adventures in 2015. The organisation has become the go-to partner for large food corporations wanting to work with start-ups in the country and further afield. “We understand the corporations’ pain points and how innovation can apply to them,” he explains.

Eatable Adventures connects an average of 20 to 60 start-ups with corporations every year.

Agrifoodtech landscape

Spanish start-ups are run by experienced entrepreneurs with the average age being 39 years.

Start-ups are distributed across the country, and mirroring the landscape of the food industry, Catalonia has become the most fertile territory – it’s the home to 22.4% of the Spanish agrifoodtech scene. Madrid accounts for 20.2%, and Andalusia 14.2%.

Data from the Spanish government shows that 17% of the start-ups are operating upstream, closer to the farm. Crop automation solutions account for 33% of the start-ups in agtech, closely followed by new cultivation systems with 28%.

Early-stage business in the food production and transformation sector represent 39% and CPG companies marketing products developed with novel ingredients account for 42% of this sector. Here, plant-based technologies, fermentation processes, and cellular agriculture are leading areas of innovation.

Companies in logistics, distribution and retail take up 29%. Glovo is the leader in the distribution category, becoming a unicorn last year.

Founded by Oscar Pierre and Sacha Michaud in Barcelona six years ago, Glovo is an on-demand courier service that purchases, picks up and delivers products ordered through its mobile app. Food delivery is Glovo’s most popular offering. The company operates in Spain, Italy, Portugal, France, Argentina, Chile, Bolivia, and Peru.

Glovo has raised $1.2 billion from 31 investors over 12 funding rounds to date. Last month, the company closed a Series F round totalling €450 million at a pre-money valuation of €1.6 billion.

In all, businesses with a direct-to-consumer model represent 85% of the Spanish agrifoodtech ecosystem.

Start-ups in the foodservice technology sector represent 15% of the market. The biggest vertical in this sector is back-office management and digitalisation platforms. Other leading categories are robotics for optimising kitchen operations and the booming dark kitchen business model.

Investment landscape

The Spanish Federation of Food and Beverages has reported the industry is growing steadily, having reached production of €119.2 million in 2019. The agrifood value chain contributes more than 9% to the country’s GDP  and represents 19% of the Spanish manufacturing industry. The sector employs about half a million people.

Despite the role it plays in the economy, investment in the sector remains low.

Most founders in this space bootstrap their businesses or seek public funding through fixed-term loans with public companies like ENISA and the Centre for the Development of Industrial Technology (CDTI).

Start-ups that take the venture capital route tend to be at the seed stage, with funding rounds typically below €500,000.

Private investment in the Spanish agrifoodtech space is led by angel investors and a handful of venture capital funds, including Caixa Capital Risc, Faraday Venture Partners, BStartup, and Inveready. Accelerators like KM Zero and Eatable Adventures also provide seed funding.

“The local investment community has started to recognise the potential of agrifoodtech as an investment asset class,” says Cabañero. “Investors are coming to this market little by little – and this is growing,” he adds.

Cabañero notes the vast majority of venture capital investment in Spanish agrifoodtech companies comes from global funds. “We’re seeing quite a good number of international investors coming to see what’s in Spain to add to their portfolios, and that’s very promising because it will trigger interest in local venture capital to continue to invest in this market.”

Brinc, Artesian Ventures, Blue Horizon Ventures and New Crop Capital are among the international venture capital funds with stronghold investments in Spain.

Food corporations in Spain are keen to collaborate with start-ups too, and Pascual Innoventures is a testament to this trend. The organisation is the open innovation vehicle of Spanish dairy giant Pascual, a €700 million turnover business operating in 60 countries.

In February, Pascual Innoventures launched Bisplash, a CPG brand offering plastic-free fruit juice. The product is wrapped in an edible wrapper made from seaweed and developed by Spanish start-up Notpla.

Start-ups to watch – agtech

Soil treatment, analysis, and regeneration are leading segments in the agtech space. In Spain, this sector is represented by companies like Plant Response, Agrasys and Agroptima.

For NutritionInvestor, Xtrem Biotech is one of the start-ups to watch in the soil treatment category. Founded by Borja Torres in 2013, the start-up develops, produces and markets biostimulants and pesticides based on microorganisms. The company has built a proprietary library of extremophile microbes and operates a small fermentation plant in Andalusia.

CDTI and EASME, the EU executive agency for SMEs, are Xtrem Biotech’s most recent investors.

Biome Makers is another Spanish agtech start-up to watch in the soil health space. Alberto Acedo and Adrian Ferrero founded the company in 2015.

Biome Makers commercialises BeCrop, a solution that uses DNA sequencing technologies and proprietary intelligent computing systems to deliver crop-specific insights. BeCrop detects what the soil needs to be healthy for any crop and any soil. In November, laboratory giant Eurofins acquired the first worldwide license of BeCrop.

The company has also developed Gheom, a technology platform that measures the effect of fertilisers, treatments or farming practices to build a more accurate and comprehensive understanding of the soil microbiome interactions.

Biome Makers operates from offices in West Sacramento, California, and Valladolid, Spain. The company has raised $8.4 million in disclosed funding rounds and Spanish venture capital funds Seaya and JME Ventures have invested in the company.

Start-up to watch – ingredients

Based in Salamanca, Tebrio operates a mealworm farm and produces insect-based products, offering nutrient-dense proteins for pet food, animal feed and agriculture.

“We are obtaining high-quality protein meal and oil rich in oleic and linoleic fatty acids for nutrition purposes,” says chief executive Adriana Casillas, who co-founded the company in 2013.

Tebrio’s core market is the feed and agriculture sectors, but Casillas notes its ingredients can be used in food applications such as pastry, pasta or energy bars.

“Mealworm protein is also a soluble protein and can even be applied directly in salads or cookies, as a crunchy protein ingredient,” she says. Casillas also sees opportunities for Tebrio ingredients in functional food for elder people or athletes. “Our oil could be used like olive or sunflower oil due to its characteristics,” she adds.

Tebrio started working with a 2 kg lot of mealworms, and now the company manages several tonnes of insect products per day. Casillas says the short-term target is to produce 100,000 tonnes a year.

“Our farming and production output is only limited by building capacity because we have designed our technology to be fully scalable,” explains Casillas, noting that’s a key advantage for the business.

Tebrio is a revenue-generating company and raised $54.6 million in a Series A funding round in June last year. Caixa Capital Risc is among the investors.

Agrosingularity tackles food waste. It produces raw materials and powdered ingredients for the food and nutrition industry using by-products from agriculture. It entered the market in 2019 and is currently supported by the Spanish government and EIT’s Climate-Kic, an EU funded programme.

The company utilises a decentralised business model that reduces the carbon footprint of logistics while empowering local producers. It also operates a foodservice channel, Powder4, where it commercialises ready-made mixes for flavour, colour and texture applications.

Start-up to watch – foodtech

Upcycled food company Moa entered the market last year, founded by an entrepreneurial trio – Bosco Emparanza, Susana Sanchez, and Jose Maria Elorza.

The company uses waste and by-products from the food industry to create new sources of food and proteins with a high nutritional value. Products are plant-based and developed through fermentation and artificial intelligence.

Moa has received seed funding from Eatable Adventures.

Zyrcular Foods also entered the market last year with a comprehensive supply chain platform for producing plant- and cell-based protein – it offers support from R&D to commercialisation.

In March, Zyrcular’s manufacturing plant began operations. It’s a 1,500 square-metre facility powered by solar energy. Located in the town of Seva, the factory will produce plant-based protein in an initial phase. Operating a single shift, the plant can produce up to one million kilograms of product a year.

Zyrcular has already secured commercial deals with Beyond Meat, Gardein and Green Vie. It supplies retail companies, including Spanish chains La Sirena, Sánchez-Romero, and Aldi. The company also taps into the foodservice sector and has partnered with Pad Thai Wok and Fosters Hollywood.

Equipment manufacturer Cocuus develops 2D and 3D laser and inkjet bioprinters. Chief executive José Alfonso García says the company offers scalable solutions addressing 3D printing of alternative protein that suits plant- and cell-based applications.

“Our bio-inks underline our core technology, offering precision printing at nanolitre scale as well as blazing speed. This allows the use of these solutions at an industrial scale,” explains Garcia. He notes Cocuus bio-inks work with various ingredients, from cell cultures and food compounds to hyaluronic acid and collagen. “Our bio-inks are engineered to the specific needs required by our clients.

García doesn’t disclose financial data but claims Cocuus, which is based in Navarra, is a profitable business with a global reach. “Our forecast shows a triple-digit growth in the coming fiscal year,” he says. “The market is still at an early stage, but it’s growing fast. Our solutions will be part of the growth in the 3D-printed food market.”

García also reveals that Cocuus is working on shorter-term applications of its technology for personalised nutrition to the elderly. “These solutions are being tested for scalability and reliability. We expect to hit the market with this new offering later in the year,” he warns.

Cocuus received seed funding from SODENA, Navarra’s development organisation, as well as R&D grants from the Spanish government. The company is gearing up for a funding round, seeking €2 million.

“We’re looking for funding to accelerate R&D work and help companies transition to plant-based protein and cultured foods,” says García.

Aldous Bio sits on the premium end of the CPG space. Founded by Antonio Pellón in 2018, the company develops products for health-conscious consumers who also value the provenance of the food they buy – products are made with only organic ingredients.

In March, the company launched Organic & Ready to Eat, a new range of gourmet vegetable creams made by Michelin star chef Jesús Segura. Available in Spain at organic and gourmet shops, the new range comprises five SKUs. The range will also be available on Amazon.

Pellón is bullish about the business. “In two years, we have multiplied our turnover by 10 times,” he says, noting the company has plans to build new facilities to double its production capacity.

Aldous Bio is currently looking for a strategic partner to expand the business further.

Notpla is the brainchild of Skipping Rocks Lab, a design engineering company founded by Rodrigo Garcia Gonzalez and Pierre Paslier in 2013. Based in London, the company produces Ooho, an edible sachet for sauces and beverages.

The sustainable packaging solution is made of seaweed, and if not eaten, the material biodegrades within four-to-six weeks.

The company also produces seaweed-based bottles, cups, and liners. The latter is water- and grease-resistant.

Notpla has raised £5.4 million in disclosed funding over three rounds. Astanor Ventures and Lupa Systems participated in a seed round which the company announced in January last year.

This month, the company engaged online food ordering and delivery company Just Eat with a trial of its compostable seaweed food boxes.

The Spanish agrifoodtech scene is prime for seed and early-stage investment, and all the signs in the market indicate that the country has great potential for becoming an agrifoodtech nation.