Agri-food is seen by many investors as a good space to park their money for the first time in a very long while, at least in the United States. Now we need to find a way to spark the same interest in Canada.
Uber, once hailed as the largest initial public offering (IPO) of the year, is now known as a Wall Street flop. The stock remains below its IPO price of US$45 (all prices in U.S. dollars) and many people have heaped fault on the bankers who believed Uber could be worth $120 billion. The stock is struggling to stay at US$40 a share. The market is telling us its real value.
Meanwhile, the good news is piling up for Beyond Meat.
The alternative protein maker’s stock price skyrocketed by 163 per cent during its IPO on May 2. It rose from $25 a share to around $65 in one day. And its shares have been climbing ever since. The stock climbed to as much as $87 after coffee chain Tim Hortons announced it would use some Beyond Meat products in its breakfast menu.
Many investors seemed to be in search of unicorns when they bet on disappointing tech-based IPOs in recent months. The likes of Lyft and Uber failed to reach expectations.
Now those investors are finding solace in American agri-food, which for years has been considered a tired, boring, overly predictable sector by many. This could give much-needed hope for a sector in desperate need of cash, especially in Canada.
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Capital has always been available in the U.S. for most sectors. Not a week goes by without hearing about a major U.S. private investment dedicated to agriculture and food. AppHarvest announced this week that it has closed an $82-million deal with Equilibrium Capital to build a 60-acre greenhouse in Kentucky. That’s 2.6 million square feet to grow tomatoes and cucumbers, creating 285 full-time jobs.
That’s a dream by Canadian standards. Controlled-environment agriculture in greenhouses and vertical farms will be key for Canada in the future as it optimizes its abundant resources such as energy, space and water. Canadian urban centres and northern communities could benefit from controlled-environment technologies that include hydroponics, aquaculture, aeroponics and aquaponics.
But capital is needed to make these projects happen.
In Canada, unless you intend to grow cannabis in a greenhouse, it’s close to impossible to get any attention from capital investors looking to make a quick buck. Compared to highly-driven sectors like clean-tech, financial-tech, ocean-tech, or artificial intelligence and robotics, getting returns in agri-food requires a lot more patience. That’s the nature of the sector, which remains largely misunderstood on Bay Street.
Furthermore, putting public investments aside, most of the wealth in the sector is held by a handful of very powerful, resourceful and at times territorial families. Anyone outside these networks with great ideas often faces the major cultural headwinds that have affected the sector for decades.
Coupled with the risk-averse nature of most Canadians, it’s not easy to make a dent in agri-food.
But there is hope. Beyond Meat not only moved the dial on how quickly an agri-food business can become scalable, it also may have changed the narrative on capital investments in the sector.
After a few failures in tech, investors are looking elsewhere. It’s uncertain whether this trend will extend outside the U.S. and into Canada, but let’s hope so.
Nonetheless, an ecosystem to accommodate more capital is desperately needed.
Private capital will need careful discipline to support agri-food ideas. These projects require marketability and a meaningful connection with companies directly involved with consumers, in both food service and retail.
Established agri-food players also need to launch innovation programs, for all to benefit. Such programs have been launched by the Weston Foundation and Agropur, but we need much more.
We also need to think of ways to engage non-agri-food giants. These organizations can instil in the agri-food sector a will to grow in Canada and beyond.
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University, and a senior fellow with the Atlantic Institute for Market Studies.