Innovation bearing fruit Lessons from Israeli AgriTech

32 Pages·2017·3.31 MB·English

Innovation bearing fruit
Lessons from Israeli AgriTech
Growing opportunities for Australia and New Zealand
August 2018
Innovation bearing fruit | Section title goes here
Foreword 01
1. Our objectives 02
2. The case for change 04
3. AgriTech 07
4. Why Israel? 10
Theme 1 –The legacy of history: struggle turned to advantage 12
Theme 2 – Israeli culture: 'Yozma', 'Chutzpah' and 'Kibbutz' 14
Theme 3 – R&D in Israel: investment and ingenuity 18
Theme 4 – The military “hub”: recruiting the best and
developing the brightest 22
Theme 5 – Think global: a global vision from the start 24
5. Conclusions for Australia and New Zealand 27
2
Innovation bearing fruit | Foreword
Foreword
In May 2018, we were fortunate to be part of a delegation from Australia and New Zealand
to visit Israel, ‘the start-up nation’, to learn about how the country promotes growth in their
tech sector, and in Agritech in particular.

Our group was organised and managed by the Trans-Tasman Business Circle in partnership
with the The Israel Trade Commission, Australia and led by Miles Hurrell, Chief Operating
Officer Farm Source, Fonterra. Hailing from over 25 different organisations in Australia and
New Zealand – including producers, farmers, service providers, consultancies, government,
Marco A. Ciobo academia and banking – our delegation was representative of the various points in the large
Partner, Consulting agribusiness value chain.
Deloitte
Israel provides us with an excellent case study in nation-wide innovation. Despite significant
political, historical and environmental challenges, it continues to successfully leverage its
people and culture into meaningful business success through innovation.

Our challenge as a delegation was how to distil our learnings from the Israeli experience and
apply them in the context of our own relatively benign social and business landscapes in
Australia and New Zealand.

Agritech is vital to the future of both our countries. Collectively, our efforts to date have
Xavier Rizos focused mainly on excellence of execution in agricultural volume plays. But the game
Innovation Entrepreneur is changing, and the demands of the globe are rapidly shifting value to more innovative
in Résidence products that better meet consumer needs. Since both Australia and New Zealand are
Westpac dependent on primary production, it is a strategic imperative for us to capture these
emerging opportunities. We are certain Agritech is one lever in achieving this goal.

In this report, we identify and explore many central themes that we could consider for
Australia and New Zealand to help accelerate innovation in the agricultural sector. It
captures our observations and insights as a team, with the intent to act as a catalyst for
further debate and discussion.

Further to this intent, any member of the delegation would be happy to further discuss our
experiences and observations from this memorable tour.
Publication facilitator
Deloitte and Westpac would like to thank Trans-Tasman Business Circle for
their coordination of research, data, analysis and insights that have made this
publication possible.
1
Innovation bearing fruit | Our objectives
1
Our objectives
In May 2018, a delegation from Australia and New Zealand
visited Israel, ‘the start-up nation’, to learn about how the country
promotes growth in their tech sector and, more specifically, to
examine developments in Israeli Agritech. The delegation was
organised and managed by the Trans-Tasman Business Circle
with the support of the Israel Trade Commission.
The delegation included representatives We distil this down to five central themes,
from over 25 different organisations from which we believe have particular relevance
both countries. Representing producers, for us in transforming our innovation
farmers, service providers, consultancies, sectors as they relate to AgriTech.
government, academia and banking, the
participants came from various points in These themes are:
the large agribusiness business value chain.
1
This report explores our delegation’s The legacy of history:
observations during our time in Israel, and Struggle turned to advantage
how these may be applied to the Australian
2
and New Zealand agriculture industries to Israeli culture:
drive the innovation and R&D to increase Yozma, chutzpah and kibbutz
our respective countries’ global presence
3
in the sector. In particular, we focus on R&D in Israel:
how we can grow our AgriTech culture and Investment and ingenuity
make the right investments in AgriTech to
4
breed success. The military “hub”:
Recruiting the best and developing the brightest
In the spirit of chutzpah, we intend to
5
be provocative. We intentionally ask Think global:
challenging questions to spur the New A global vision from the start
Zealand and Australian agriculture and
innovation sectors to consider how we
might do things differently to improve the
outcomes, not only for our two nations
but also more generally for the global
agriculture sector.
1 ‘Chutzpah’ in Hebrew this has historically meant “insolence”, “cheek” or “audacity” however in modern
business parlance this is taken to mean the amount of courage, mettle or ardour that an individual has.
2
Innovation bearing fruit | Our objectives
3
Innovation bearing fruit | The case for change
2
The case
for change
Today, our planet produces enough food to nourish
the entire global population. Yet, not everyone in the
world has access to adequate nutrition on a sustainable
basis. The issue is one of access and waste.
Our current supply chain for food Figure 1: Energy loss in food (harvest to home)
production leads to over 30 percent of the Our current supply chain for food production leads to over 30 percent of food
being discarded between harvest and consumption.
food produced being discarded between
harvest and consumption.2,
Edible crop
harvest
4600 kcal
Our current rate of food wastage is
After
unsustainable as the population continues harvest
to grow and naturally occurring resources 4000 4000 kcal
Harvest
required for food production become losses
increasingly scarce.
Meat and
dairy
3000
The world’s population is expected 2800 kcal
to plateau in 2100 at an estimated 10 Animal
billion people3. Population growth of this feed Food
consumed
magnitude will intensify the struggle for 2000 kcal
2000
food unless we can transform how we Distribution
losses and
produce and consume it. waste
1000
0
Field Household
Sources: UNEP, GRID-Arendal
2One-third of the world's food goes to waste, says the FAO: https://www.theguardian.com/global-development/2011/may/12/food-waste-fao-report-security-poor
3Our World in Data: World Population Growth: https://ourworldindata.org/world-population-growth
4
Figure 2: World population growth, 1750 – 2100
Population growth at its current rate will intensify the struggle for
food unless we can transform how we produce and consume it.
2.1% 11.2 billion
2% 10.8 billion
10.2 billion
1.8%
9.2 billion
1.6%
1.4%
7.4 billion
1.2%
1%
4.4 billion
0.8%
Annual growth rate of the world population
0.6%
3 billion
0.4%
1.65 billion
0.9 billion
0.2%
0% World Population 0.6%
1760 1780 1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 2060 2080 2100
2015 Projection
(UN medium fertility variant)
Sources: Up to 2015 OurWorldInData series based on UN and HYDE. Projections for 2015 to 2100: UN
Population Division (2015) – Medium Variant. The data visualisation is taken from OurWorldinData.org.
There you can find the raw data and more visualisations on this topic.
Figure 1: Energy loss in food (harvest to home)
Our current supply chain for food production leads to over 30 percent of food
being discarded between harvest and consumption.
Edible crop
harvest
4600 kcal
After
harvest
4000 4000 kcal
Harvest
losses
Meat and
dairy
3000
2800 kcal
Animal
feed Food
consumed
2000 kcal
2000
Distribution
losses and
waste
1000
0
Field Household
Sources: UNEP, GRID-Arendal
Innovation bearing fruit | The case for change
The effects of population growth will also Figure 2: World population growth, 1750 – 2100
likely be exacerbated by increasing natural Population growth at its current rate will intensify the struggle for
food unless we can transform how we produce and consume it.
resource scarcity.
2.1% 11.2 billion
2% 10.8 billion
The percentage of arable land per capita
10.2 billion
on the earth is nearing capacity.4 This 1.8%
suggests the paradigm of land-based 9.2 billion
1.6%
agricultural farming will have to change,
putting the availability of food at risk. It is 1.4%
7.4 billion
imperative that we find new and innovative
1.2%
ways to improve productivity, while also
improving the efficiency of supply chains 1%
and reducing, and eventually eliminating, 4.4 billion
0.8%
waste. Annual growth rate of the world population
0.6%
3 billion
Underlying these trends is the increasing 0.4%
1.65 billion
scarcity of water as a resource5. Presently
0.9 billion
0.2%
water shortages are a significant concern
around the globe and, according to climate 0% World Population 0.6%
1760 1780 1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 2060 2080 2100
change projections, this will worsen over 2015 Projection
(UN medium fertility variant)
time. The issue stems from both the
physical availability of water and also its Sources: Up to 2015 OurWorldInData series based on UN and HYDE. Projections for 2015 to 2100: UN
economic use across a range of competing Population Division (2015) – Medium Variant. The data visualisation is taken from OurWorldinData.org.
industries. There you can find the raw data and more visualisations on this topic.
Figure 3: The seesaw of growth in protein demand, and decline in available arable land per capita
Growth of protein demand against decline of arable land
Driven by arable land limitations and increased demand for protein, agricultural commodity
prices will continue to be strong overall, although there will be periods of market volatility.
Consumption kg/capita/year
50
1970
40
0.38
ha/capita
30
Available arable land 20
per person declining
10
0
1964-66 1997-90 2000
2050
Poultry Pig meat Sheep & Beef
0.15 goat meet
ha/capita
Protein demand grows… Livestock production is increasing to meet
the growing demand for meat.
Source: Future Directions International
4The Future Prospects for Global Arable Land: http://www.futuredirections.org.au/publication/the-future-prospects-for-global-arable-land/
5 The United Nations World Water Development Report 2017. Paris, UNESCO
Figure 4: Projected water scarcity in 2025 5
Physical water scarcity Little or no water scarcity
Note:
Indicates countries that will import more than
Economic water scarcity Not estimated
10% of their cereal consumption by 2025
Source: International Water Management Institute - www.iwmi.cgiar.org/
Figure 3: The seesaw of growth in protein demand, and decline in available arable land per capita
Growth of protein demand against decline of arable land
Driven by arable land limitations and increased demand for protein, agricultural commodity
prices will continue to be strong overall, although there will be periods of market volatility.
Consumption kg/capita/year
50
1970
40
0.38
ha/capita
30
Available arable land 20
per person declining
10
0
1964-66 1997-90 2000
2050
Poultry Pig meat Sheep & Beef
Innovation bearing fruit | The case for change 0.15 goat meet
ha/capita
Protein demand grows… Livestock production is increasing to meet
the growing demand for meat.
Source: Future Directions International
Figure 4: Projected water scarcity in 2025
Physical water scarcity Little or no water scarcity
Note:
Indicates countries that will import more than
Economic water scarcity Not estimated
10% of their cereal consumption by 2025
Source: International Water Management Institute - www.iwmi.cgiar.org/
Water availability and accessibility are the linear growth in crop and livestock All challenges are
dominant constraining factors for crop production (on a per hectare basis).
opportunities. In this
production. Therefore, it is imperative What has underpinned this is the creation
that water is both secured and put to its and uptake of new technologies, the context, Australia
best use in areas affected by scarcity. targeted use of these technologies, and the
and New Zealand are
However, the full range of different increased use of inputs. In parallel to this,
applications coupled with the needs of there have been deliberate strategies to presented with an
growing populations means there will be extract economies of scale and the focused
opportunity to become
considerable competition for water. In the substitution of labour with capital. Future
future, the right and ability to irrigate will productivity gains will rest on continuing world leaders in
be fiercely contested between agribusiness improvement in per hectare production
agricultural innovation,
and other sectors of the economy. and be reducing the percentage of waste
per hectare, making the need to address helping to meet the
The challenges posed by these trends in both productivity and efficiency in the
increasing food needs of a
global food supply will continue to drive sector is of paramount importance for
technological innovations in the agriculture Australia and New Zealand. growing global population.
and food sectors.
All challenges are opportunities. In this
While Australia and New Zealand are context, Australia and New Zealand are
minor contributors to world food presented with an opportunity to become
production in general, we do contribute world leaders in agricultural innovation,
significantly to world wheat and dairy helping to meet the increasing food needs
exports6. In the last 40 years, agriculture of a growing global population.
in both countries has sustained
6https://www.grassland.org.nz/publications/nzgrassland_publication_11.pdf
6
0 20 40
km
Haifa
Innovation bearing fruit | Agritech
a
e
S
n
a
e
n
a
r
r
e
t
i
3 d
e
M
Average annual Jerusalem
precipitation (mm)
Gaza
> 500
AgriTech
200 - 500
100 - 200
Beersheba
< 100
Kibbutzim
Globally, AgriTech is the small but growing segment of
(rural settlements)
the start-up and venture capital universe that is aiming State border
to improve the global food and agriculture industry.
Some observers call AgriTech the new FinTech.
Before 2012/13, investment in AgriTech Figure 5: Evolution of AgriTech Investment
was relatively stagnant. At the time, the Global AgriTech investment is up, despite lower farm income.
vast majority of innovation had a sharp
focus on improvements to the Biotech
($billions)
sector and had a strong weighting towards 3.0
3 150
plant genetics. Further, the investment
activities and innovation efforts were
124
primarily conducted by players within
114
the agricultural industry with minimal
involvement from outside the sector.
96 2.0
2 100
Then, in late 2013, there was a genuine shift 77 93 81
80%
in momentum. AgriTech investment grew
CAGR
75 percent to reach $860 million across 119
deals globally. It is estimated that AgriTech
subsequently increased 170 percent in 1 0.9 50
2014, and continued to show strong growth
in investment in 2015. 0.5 0.5
0.4
The momentum shift in 2013 is attributed
to a confluence of three underlying trends
0 0
that are still relevant today: 2010 2011 2012 2013 2014 2015
1. A set of macroeconomic trends that Global Agtech investment Net farm income
tipped the balance between supply and
demand in agriculture; Sources: US Department of Agriculture, August 30, 2016; AgFunder
2. Shifting consumer tastes; and
3. A convergence of new hardware
technologies that freed computation
from the desktop and automated
collection of big data.
7
Innovation bearing fruit | Agritech
Figure 6: Agriculture is the least digitised ers
of all major areas work ning
LROEWLATIVE DIGITISASTEHICIOGTNHOR OVERAL Digital Spending Digital asset stock Transactions Interactions Business processes Marking making Digital spending on Digital capital deepe Digitisation of work
Information & Knowledge--intensive
communications technology
sectors that are high
Media
1 digitised across most
Professional services dimensions
Finance & insurance
Wholesale trade
Advanced manufacturing
B2B sectors with the
Oil & gas
potential to digitally
Utilities
4 engage and interact
Chemicals & pharmaceuticals with their customers
Basic good manufacturing 2
Mining
Real estate
Transportation & warehousing
Education
Labour-intensive
Retail trade sectors with the
Entertainment & recreation 3 5 potential to provide
Personal & local services digital tools to their
Digitisation of workforce
Government
major sectors Health care
Quasi-public/highly
Hospitality 6
Agriculture is the least localised sectors that
Construction
digitised of all major areas lag across most
Agriculture & hunting dimensions
ASSETS USAGE LABOUR
Capital-intensive sectors Service sectors with
with the potential to potential to digitise
Source: Data Analysis and Expert Interviews Conducted further digitise their customer transactions
by the McKinsey Global Institute physical assets
In 2017/18, mega funding rounds from agriculture is the least digitised of all major New Zealand and Australia both benefit
Figure 7: Shift to foreign funding of ventures in Israel
companies like Farmers Business Network, areas of the economy, according to the from the quality of scientific research,
GCainpgiktoa lB riaoiwseodrk bs,y I nIsdrigaoe lAi gh iagnhd- tPelcehn tcyo mpanieHs,a $rvbanrd Business Review. free and open markets, proximity
aThreer ree isd aenfi noninggo inthg es hAifgt rtoiTweacrhd si nfovreesigtnm seonurtc ing of venture funding in Israel. to Asia and ideal growing conditions
landscape. With the first wave of AgriTech Against this backdrop, the need for with ample arable land. Despite these
Total capital Foreign funds and other investors
start-ups mraaisteudr, i$nbgn, companies are looking AgriteIscrahe ali nvedn itnurneo -v caatpioitanl finun tdhse agricultural favourable circumstances, the pace of the
to scale in a sector that now has around sector is higher than ever before. The commercialisation of ideas seems to be a
2.5
a $3 trillion value at the farm gate. Across lack of digitisation is evident, and change slowing. The culmination of all these factors
the value chain, this sum expands to $7.8 is critical if the challenges of our growing represents a significant opportunity for
trillion across the entire agri-food sector, global population are to be adequately both countries to leverage their strengths
2.0
responsible for feeding the planet and addressed. and potentially position themselves at the
employing well over 40 percent of the forefront of global Agritech innovation and
global population1..5 In N3.e1w Zealand and Australia, AgriTech commercialisation.
start-ups have been focusing on challenges
2.6
However, despite this recent push and the such as CO2 emissions, chemical residues
undeniably crucia1.l0 role that technolog2.y1 and run-off, drought, opaque supply
plays in the operation of the Agri-Food chains and distribution inefficiencies, food
1.6
sector and the pace of innovation has safety and traceability, farmer welfare, and
not kept up with 0o.5ther 1in.1dustries. Today sustainable meat production.
8
0.0
2002 03 04 05 06 07 08 09 10 11*
* Jan 1st – Sept 30th
Source: Israel Venture Capital Research Centre