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| | | While one is a booming $11.3 trillion economy, the other is just a $2.1 trillion upstart. Somewhere over the years, China surpassed India, and holds a lead that most would say is too big to catch-up to.
But how has this growth impacted the agriculture and food sectors of these two Asian giants and how does it translate to the state of affairs of the agritech and foodtech domains? In this post, we aim to provide our perspective on the how they stack up against each other, based on insights gathered all along the last years of visiting the populous metropolitans and remote rural villages in both countries.
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| This November 2011 TIME magazine cover, relays the sentiment building at the time when China was the "factory floor of the world" and the manufacturing capital, and the Made-in-China label had become affixed to everything from underpants to consumer goods. India, on the other hand, was the infotech giant, and a giant back-office.
Over the last decade embracing and in some cases forced adoption of technology across sectors has seen many industries being disrupted. Once unknown names have emerged as market leaders and some household name stalwarts are going bust.
Asia has its own face of leaders in tech disruption, and unsurprisingly the Big 3 are from China – Baidu, Alibaba and Tencent. These three tech conglomerates provide a distinct advantage to China, and their experience and data has also helped the agritech and foodtech sectors. As an example, Alibaba has leveraged its data, technology skills to develop a solution for pork traceability in China, which remains the world’s largest consumer of pork products. And it is not only these large tech companies trying to address this market, Future Food Asia Award 2017 finalist Smart AHC is also levering sensors, Internet-of-Thing (IoT) and computer vision technology to enhance the traceability of pork. |
| Digital Penetration and R&D Investments: The Building Blocks of Disruption
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To tackle the inefficiencies plaguing the agri value chain, making investment in R&D to develop new technologies and investment in infrastructure to aid the implementation of digital solutions pivotal to the cause.
Between 2013 and 2016 the percentage of adults in China using the internet rose from 55% to 71% whereas in India the number only grew from 18% to 21%. This disparity in adoption rate is also the result of contrasting investment in the digital agriculture space in both countries.
India has about 300-400 agripreneurs solving multiple problems in the agri supply chain but their combined revenue is less than US$100MM. Agritech has received only about 130 MM in approx. 60 early stage venture deals representing less than 1% of total VC investments in the country. On the other hand in China, Maihuolang, a platform for agriculture products that is focused on rural communities raised US$ 150M alone in their Series A round back in May 2017. |
| | While agri-specific figures are for R&D investment are unavailable, China is now the 2nd largest spender in R&D after the US, accounting for 21% of the world. Even more impressive is the fact that China has overtaken the US in terms of total number of science publications. Beyond the border, India’s gross research spending tripled in the last decade, yet total R&D expenditure remains below 1 per cent of its GDP. While China is spending about US$ 400 billion India is only spending close to US$50.
However even after millions of investment in R&D and digitization, investors remain cautious in both countries, since IP continues to remain a perpetual cause of concern for them. While English as a dominant language and the backbone of the Common Law helps India’s image among many foreign investors, the lack of enforceability of their laws continues to keep investors wary. While China faces similar problems of enforceability, entrepreneurs and investor alike recognize that the pace of implementation and scale up is the best barrier to entry, and in that respect China is seen as a country where the scale up potential is far higher and easier.
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| Bangalore and Beijing are at Different Stages of the Agri Food Value-Chain
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| | As we write China is a country where (almost) anything can be delivered within 24 hours, a result of billions worth of investment into infrastructure. Specific to agriculture China has cleared the way for private investment in large-scale farming, which heralds a new era where consolidation of land plots takes place, helping address one of the biggest pain points of agripreneurs today – reaching small holder farmers. In India, the story is different. About 58 percent of the Indian population is dependent on agriculture and core technology is lagging in that industry. However, with the country beginning to get its act together, a renewed strategy of putting rural India as the front runner could usher in a new era for the nation. But as of now potential investors in agritech start-ups see large scale implementation as a challenge agripreneurs may not be able to address to reach break even point. |
| These contexts pave the path for two different set of innovations. While Chinese entrepreneurs are focusing more towards improving the output and yield, many Indian entrepreneurs realize they need to first churn out more structural innovations and focus on market linkages and mechanization. To highlight this difference we can see Future Food Asia 2017 finalist Farm Friend which acts as a connection platform for farmers and drone operators. Meanwhile in India, while drones are yet to garner the trust and understanding of farmers, start-ups like 2018 applicant Distinct Horizon, are building innovative hardware to substitute hours of manual labor in rice farming for small holder Indian farmers.
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This difference can also be seen in the numbers of the 2018 applicants for Future Food Asia Award. While both countries contributed similar number of total applicants – India saw 80% of applicants under Streamlining Supply Chain, Precision Agriculture and Sustainable Farming Practices categories. These included some indigenous solutions such as the one from NewLeaf Dynamics, which has developed an off-grid, renewable energy based refrigeration system which uses cow dung and agri biomass to provide safe storage and cooling of perishable agri produce. For China on the other hand single largest contribution was the category of Enhancing Nutrional Value, which focuses more around developing novel methods to process food and ingredients and improving their nutritional value and functionality, contributed 36% of Chinese applicants. This featured companies such as StartupSG grant winner, Shenzhen Xiaozao which is carrying out mass cultivation of natural microalgae and extracting derivatives such as Omega 3.
While China now begins to rival the US in agtech – and this phenomenon starts to be visible through funding trajectories that mirror (and at times surpass) those of the West - India still has to first tame its domestic challenges. If a good understanding of the overarching pain points of the F&A industries can guide VC investors toward high potential startups, risk assessment is more of a country-specific part of the due diligence. Syndicated investments help bring around the table the right expertise on critical nodes of the supply chain, and we are glad to contribute to this with the Future Food Asia platform.
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