Industry Insights | 3 Trends on China's Sustainable Agriculture
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What Are the Next Steps of Sustainable Agriculture in China?-Author: Zhiqing Chen, International Affairs Officer, China Alliance of Social Value Investment While veganism and plant-based diets are ramping over the Internet, customers prefer innovative food options -- more organic, fresher, and more fun to consume. According to the China Consumer Report 2020 at McKinsey & Company, Chinese consumers continue to increase their spending on commercial products by a considerable margin. Namely, total sales on all platforms reached RMB 410 billion (US $58 billion). The temptation of boosting sales is almost irresistible for any enterprise, along with China’s rapid economic development nowadays. Venture capital and private equity investors have flowed into the agricultural market unprecedentedly,as the public continuously favors this future trend. Revitalizing food innovation and agricultural system gear towards the implementation of new technologies in recent decades. Several characteristics are highlighting the next steps of sustainable agricultural development: Increased Deals in Downstream SectorsStatistics don’t lie. Downstream Sectors have been rapidly accumulating capital and investments in recent years. There are 34% and 66% of deals accountable for agricultural e-commerce and supply chain among the 122 sustainable agriculture deals between July 2018 to July 2020. Two primary sectors, including agricultural e-commerce and supply chain, are favored by investors. From July 2018 to July 2020, deals in agricultural e-commerce and supply chain accounted for 34% and 66%. Although the downstream agricultural e-commerce and supply chain are essential in the agricultural industry chain, they cannot facilitate a fundamental green transformation in sustainable agriculture. “The real transformation of agricultural production methods and the ecological sustainability of agricultural empowerment require changes in the upstream of the industry chain.” The diagram below shows the amount distribution of sustainable agricultural investment and financing events in each fields from July 2018 to July 2020:
New Technologies and Smart Solutions:Science is always evolving, so is technology. New technologies drive sustainable development in agriculture by applying smart irrigation, computer software, and bioplastics. These agricultural biotechnologies increased the on-farm inputs of crops and animals. Tech-based agricultural production nurtured smart solutions of sustainable agricultural services. Smart Solutions enable agricultural production processing with artificial intelligence, big data, and the Internet of Things (IoT). From July 2018 to July 2020, the quantity and size of deals in smart solutions are 56% and 40% of the total. The diagram below shows the distribution of different types of deals in sustainable agricultural services between July 2018 and July 2020 (Quantity):
Moreover, cloud retail infrastructure promotes at-home services, boosting marketing sales in food consumption. Retail Infrastructure stimulates the emergence of startups, including food retailers and restaurants that offer at-home services. According to the 2019 AgFunder Agri-FoodTech Investing Report, Cloud or ghost kitchen is a new business strategy to promote food delivery in a further step. This method directly encourages the rise of startups, as well as technological innovations like autonomous food delivery robots and courier matchmaking services. Likewise, the digital era gives a perfect nurturing ground for e-commerce, integrating with traditional brick-and-mortar businesses and grocery malls. E-grocery and online shopping have become exceptionally popular in Chinese households. With a busy work schedule, people tend to switch their shopping habits from in-store to at-home services dramatically. For those with heavy workloads, time-saving e-grocery delivery seems like an inevitable choice. To that extent, delivery companies are on-demand and occupy a significant share of the Chinese food market. New Agricultural System and Food InnovationAs commonly recognized, alternative dairy and meat options are the top two favorites for consumers, especially for vegans and vegetarians. The western trend of plant-based diets swept over the Chinese society when enthusiastic followers are gradually emerging. Especially after the outbreak of the COVID-19 pandemic this year, people have instilled a high awareness regarding physical health and balanced diets. Food innovation mainly focuses on emerging domestic plant-based meat enterprises in China. Plant-based diets induce new sustainable agriculture concepts in China. There are several emerging domestic companies in this field, including Vesta, Starfield, and Zhen Meat.
Eco-friendly planting and breeding are the next steps of formulating future agricultural transformation, along with a new agricultural system and food innovation. From July 2018 to July 2020, the food innovation and new agricultural system account for 22% and 33%, respectively. By involving new agricultural models, sustainable agriculture enables further extensions in various fields, including rice planting, organic vegetable incubation, desert agriculture, and aquaponics' ecological agriculture. The usage of agricultural biotechnology facilitates novel crop protection. Indicated by an industrial report at the Croatan Institute, new agricultural system can be accelerated through investments and international microfinance, which will directly benefit the small and mid-cap companies working on agricultural technological innovations. Nowadays, field agricultural robotics have been deployed to help with daily farming operations, such as measuring, mapping, and optimizing water and irrigation. Lightweight robots are compatible alternatives to replace traditional high mass tractors and improve soil function. Food innovation mainly focuses on emerging domestic plant-based meat enterprises in China. Plant-based diets induce new sustainable agriculture concepts in China. There are several emerging domestic companies in this field, including Vesta, Starfield, and Zhen Meat. In conclusion, the innovative food category experienced explosive growth in 2019 by doubling the funding from previous year. Agricultural and food innovation are undoubtedly guiding the Chinese sustainable agricultural market to establish, grow, and excel. Reference:
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Research Insights 研究洞察
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