Navigating the Trade War: Agrifoodtech Industry Braces for Impact
As markets roil amid a trade war triggered by President Trump, agrifoodtech investors say portfolio companies should reassess their business models, with some better placed than others to weather the storm as issues such as food security move into sharper focus.
PeakBridge founding general partner Nadav Berger told AgFunderNews: “This isn’t just about tariffs but about the greater global economy, and on that front the macroeconomic implications are still far from clear.”
Reevaluating Business Models in a Turbulent Market
Foodtech companies based outside the US will need to “reevaluate their ability to be competitive in the US market, based not just on tariffs but also on regulation, which is still unclear,” he noted.
“The food industry traditionally has small margins, which doesn’t allow for swapping ingredients at a premium. Tariffs on ingredients, for example, can have a significant and immediate effect on a company’s ability to reach price parity. So successful companies across the sector will need to assess their business models to ensure such a target is still realistic.”
Opportunities in the Midst of Chaos
However, like COVID-19, it will “make food security an urgent priority for many more countries even faster than previously thought,” he noted, which could present opportunities for some food startups. “Foodtech is in many ways about reforming the flawed supply chain, and in that sense the startups who play their cards right have an opportunity here to truly be part of the future food system.”
The Resilience of Domestic Biomanufacturing
Liberation Labs, which is building a biomanufacturing facility in Richmond, Indiana, is better-placed than many to weather the storm, predicted CEO Mark Warner.
“As destabilizing as the tariffs appear to be for many, we are very fortunate to be shielded from much of their impact. In fact, some could argue that it reinforces our core thesis that domestic biomanufacturing is essential,” he told us.
Impacts on US-based Emerging CPG Brands
For US-based emerging CPG brands, a trade war could be grim, said consultant Dr. James Richardson. “Like the entire world, early-stage brands do not have clarity on how permanent these tariffs really are, so some early-stage brands are planning to push through price increases but executing first online because it’s low friction to do so, and reversing is also easier,” he told AgFunderNews.
Preparing for the Future
At early-stage investor Fifty Years, founding partner Seth Bannon shared an email he had sent to portfolio companies two weeks ago urging founders to:
- If possible, get to 18 to 24 months of cash on hand
- Consider temporary hiring reductions or freezes to preserve cash
- Cut non-essential or discretionary spending
- Expect valuations to decline
- Evaluate supply chain dependencies
Conclusion
As the trade war continues to unfold, the agrifoodtech industry faces challenges that require strategic thinking and adaptability. While there are uncertainties ahead, companies that proactively assess their business models, evaluate supply chain risks, and prepare for potential market shifts may find opportunities amidst the disruptions.
