Showcasing the Future of Agriculture & Food Technology in South Korea

The popular Korean Wave

According to the Global Cultural Influence Ranking of the US News & World Report Wharton School, the international influence of Korean culture ranked 7th out of 85 countries in 2022, up from 31st in 2017.

As Korean culture has spread around the world, exports of consumer goods closely related to the Korean Wave, such as cosmetics (K-Beauty) and processed foods (K-Food), have also risen significantly. From 2017 to 2021, the average annual export growth rate of Korean Wave products was 13.7%, which was about 2.5 times higher than the national average annual export growth rate of 5.4% during the same period. By sector, the growth rate of cultural content was 5.7% (including 11.9% for music, 11.8% for broadcasting program, etc.), 16.6% for cosmetics, and 7.8% for processed foods.

In the past, no one could have imagined that the Korean Wave, such as K-movies, popular music, and dramas, would rise to the top of the world beyond K-manufacturing such as semiconductors, shipbuilding, and mobile phones. Now, the era of agrifoodtech (agriculture+food+tehnology) is beginning, where K-Agrifoodtech, such as K-Food, food material, food culture, and service, is active on the world stage and leaps forward as a new growth item beyond information and communication technology (ICT) and biotechnology.

The importance and growth of agrifoodtech

Agtech is a compound word of agriculture and technology, meaning agriculture that combines data and ICT. Another concept that people may have encountered a lot is foodtech, a compound word of food and technology, which refers to food industry that applies advanced technology. Since agtech and foodtech overlap to a large extent, it is called agrifoodtech when putting these two industries together and referring to the application of cutting-edge technology in the agri-food sector. Agrifoodtech generally consists of five specific areas: Access to Farm Input, Precision Agriculture, Market Linkage, Farming as a Service (FaaS), and Financing.

In fact, agrifoodtech is not a traditionally popular investment field globally. However, the situation is changing as food security emerges as a major issue due to climate change and geopolitical tensions. Food crises are rapidly becoming a reality due to not only the recent chaotic international situation, but also grain fluctuations caused by global warming, inflation caused by supply chain disruption, and the decline and aging of the agricultural population. The recent outbreak of COVID-19 has created a big topic to the agricultural world and investors. More specifically, it will be a problem of consciousness and a focus on solutions, ‘Can food security be ensured with advanced agrifoodtech?’

Legendary investor Jim Rogers says agriculture has become the most promising industry in the 21st century, on the other hand, population growth and abnormal climate change have forced the food industry and food experts to shine. Amid a growing sense of crisis, scientists say that for one reason or another it is impossible to sustainably produce 60% more food using current farming practices.

Rather, in order to respond to climate change and reduce greenhouse gases, they say that farmland twice the size of India must be returned to forests and 70% of greenhouse gases emitted by the agrifood sector must be reduced to survive the climate disaster. An innovative solution is needed to increase agricultural production by 60% while reducing the use of farmland and agricultural inputs.

In a nutshell, “Production More with Less” Future agriculture must accomplish this difficult task. What is this innovative solution? The answer lies in agrifootech, and this is why agrifoodtech is attracting attention.

Fortune magazine reported on 1st December 2022 that as of the fiscal year 2022, agrifoodtech startups around the world raised a total of USD 4.6 billion. In terms of investment volume, it is the largest ever, with India in particular overtaking China to become the country that has financed the most agrifoodtech investment in the world.

According to Asia-Pacific AgriFoodTech Investment Report of AgFunder, the Asia-Pacific region generates roughly 30% of global agrifoodtech financing activity. But given estimates predict the region will account for 60% of global consumption by 2030, much more investment and industry development are needed. As a region that is home to some 450 million smallholder farmers contributing up to 80% of its food supply, it is important that technology development and investment is channeled to delivering solutions that cater to the needs of this user base.

The agrifoodtech industry in South Korea

The Agri-Food Technology K-Startup Expo (AFRO 2023) took place from 26th July to 28th July at COEX in Seoul’s Gangnam district, bringing together innovative startups in the agrifoodtech sector to showcase their cutting-edge technologies and attract crucial investments. It was the largest event of its kind in South Korea, with approximately 250 participating companies including emerging startups in the agrifoodtech industry, prominent corporations, investment firms, and public institutions. The exhibition hall was organized around the central themes of future technologies, encompassing intelligent agriculture (smart agriculture), advanced food technology (food technology), and eco-friendly biotechnology (green bio).

During a side event called 2023 Global Foodtech Startup Conference, a new foodtech approach was presented for the Environment, Social and Governance (ESG) problem that the society needs to solve in the future. In particular, ways to secure sustainability in various fields, from food and technology to making food ingredients to reducing food waste, were discussed.

In the conference, Choi Dong-wook, COO of Reharvest, suggested recycling to reduce discarded food and increase value. In South Korea, about 33% of food produced in the food & beverage industry is thrown away without being on the table, and about 40% of food thrown away is known to be in the form of by-products. He pointed out that about 70% of by-products produced locally are being disposed of and the environmental burden of this discarded food is recognized as a social challenge. However, there are very few large-scale and continuous upcycling companies in the country. Even if suppliers try to solve the problem, they cannot sustain if this does not lead to consumption in the market. Fortunately, the younger generation is open to this problem and willing to spend.

Reharvest mainly uses beer by-products for upcycling, because it is competitive in terms of sufficient quantity, cleanliness, ingredients and regulations. 'Renergy flour' made from this is competitive with twice the protein content and 21 times the dietary fiber content compared to wheat flour. It is said that production of 1 kg of Renergy flour reduces 11 kg of carbon emissions, 3.7 tons of the water used, and 3kg of food by-products.

According to the report of Korea Rural Economic Institute, as of 2020, the global foodtech market size is estimated to be approximately USD 554.2 billion, in which the Korean market is estimated to be approximately KRW 61 trillion (about USD 46.4 billion). From 2017 to 2020, it is showing a high growth rate exceeding 30% every year, and it is expected to become a new way for the domestic agrfoodtech industry. Foodtech is evaluated as a field in which South Korea, which has high technological power in information and communication, artificial intelligence and robots, can have sufficient global competitiveness.

In addition, while South Korea has more than enough rice supply, its self-sufficiency rate of other agricultural products is insufficient. South Korea imports and eats almost 60% of all agricultural products. That seems to be enough reason to move toward an advanced agricultural country through agrifoodtech.

The boom of Korean startups

Numerous young Korean startups are entering the foodtech industry. Many are about to leap forward as unicorn companies (companies with a corporate value of over KRW 100 billion, i.e. about USD 76 million), such as Kurly and Oasis, which became unicorns in 2022. Accordingly, the Ministry of Agriculture, Food and Rural Affairs plans to strategically nurture foodtech in order to utilize it as an opportunity to expand youth entrepreneurship, create jobs, and vitalize domestic companies' overseas expansion. With this plan, a foodtech-only fund of KRW 100 billion (about USD 60 million) will be created by 2027 to support foodtech companies with necessary funds for each business stage. The Ministry has promoted a total of 25 foodtech company meetings and expert research to develop experiential policies. 'Foodtech Industry Development Plan' was established in December 2022.

Simple Planet, a Korean foodtech startup developing functional future food ingredients based on animal cell culture technology, won the Fantastic Award at the AFRO Agricultural Food Tech Startup Entrepreneurship Fair award ceremony. This cultivated meat technology is a key technology for establishing a sustainable food production and consumption system and meeting the vision of the National Food Plan in South Korea. It is also applicable to cell agriculture, which is a high-tech convergence of future agricultural technology.

Another Korean startup Aguni operates a smart farm and cultivates soil in the form of an air dome. It has made it possible to grow Korean yams and Cynanchum bungei Decne, which are high value-added plants that cannot be grown in general hydroponic smart farms. Inside this air dome, multi-stage facilities and systems for modular crop cultivation are included. About 18,000 modules fit into an air dome measuring 3,300㎡, which is 7 to 8 times the amount that can be harvested in general farmland.

Among the areas of agrifoodtech, the one with the most women startups was found to be an innovative food-related field called ‘Innovative Food’. This category is related to novel ingredients (“novel food”) such as alternative proteins (alt-protein). Female entrepreneurs in the field include Air Protein's CEO Lisa Dyson, The Mushroom Meat Co.'s Kesha Stickland, and Helaina's Laura Katz. The second largest number of female entrepreneurs are online food businesses and meal kit businesses. Representative companies in this field include The Vegan Kind in the UK and Sakara Life in the US.

Kurly is a Korean online dawn delivery food market company. It has been recognized for its corporate value of KRW 4 trillion (about USD 3 billion) and is about to go public. Seulah Kim, CEO of Kurly, is also a woman, and in 2015, at the young age of 31, she succeeded in starting a business and introduced a new concept distribution method called ‘dawn delivery’ to the industry. In addition to her, female founders representing the field of agrifoodtech include Bora Kang, CEO of Sweet O, and Hyunji Kim, CEO of Delicious Salt.

The Ministry of SMEs and Startups categorizes unicorn companies and lists them and potential companies at the lower stage, calling “baby unicorns” and then “preliminary unicorns.” There are about 29 in the food sector, the largest of them in online food trading, which is about KRW 43 trillion (about USD 32.7 billion). And care food category is worth about KRW 12 trillion (about USD 9 billion), convenience food is KRW 4 trillion (about USD 3 billion), and alternative food is still about KRW 20 billion (about USD 15 million), still a bit small sector. The 29 preliminary unicorn companies in the foodtech field have an average age of 39 and an average experience of 7 years.

Like elsewhere, agrifoodtech startups in South Korea stress the environmental and health value of their approach. When trying to attract investment, they often argue that their approach is innovative and unique, rather than providing a breakdown of the figures to be spent on labor costs, marketing etc. However, startups even in the Proof of Concept (PoC) process need to persuade investors based on numbers. The claim that “we are making eco-friendly products, please buy them” is not persuasive enough.

Edited by Joanna Wong and Axel Harneit-Sievers (hbs)