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Barking up the right tree?
Rob Leclerc of AgFunder wrote a call to arms (How food and agriculture giants are sleepwalking into irrelevance, Sept 11 2025) for agriculture and food industry incumbents to do a set of things based on some observations on investments in R&D, acquisitions, talent, VC investments in agriculture and food etc.
Rob Leclerc is the co-founder of one of the earliest venture funds in agriculture and food, AgFunder. Agfunder has about $ 300 million assets under management, and has invested in 100 companies.
The data show a sector that spends a fraction of its revenue on innovation, files relatively few patents, and captures only a sliver of venture interest. Start‑ups that should help transform the industry are dying from neglect. Meanwhile, tech giants and nimble outsiders are quietly building the intellectual property, data platforms and talent pipelines that will define the next era of technology and outsiders will come for this industry.
And ends with the following warning for the incumbents in the food and agriculture space.
The Great Disruption isn’t a future threat; it’s already underway. Companies can either invest aggressively and shape the future of food, or they can do nothing and become cautionary tales. The clock is ticking.
Even though I agree with many of Rob Leclerc's conclusions (“What should incumbents do?”), there are many challenges on how he builds his case.
Long time incumbents
Before we get into the details, we have to acknowledge that the current incumbents in agriculture (and food) have been around for a long time. In my post “A dominion of incumbents” (March 2023), I had created a table to show how long some of the current incumbents have been around.
Industries which require heavy infrastructure and developing strong physical supply chains are more resilient to anti-incumbency (for example, Tesla is the only new car company which has formed in the last few years, though given the large number of car manufacturers, there is a strong competition among the rest of them).
In my post “Lindy Effect in Agriculture” (May 2025), I had identified four main reasons for these companies to have survived for so long. 1. Distribution 2. Physical infrastructure 3. Fragmented markets 4. Tech innovation and scaling
If you want to disrupt the incumbents, a new player will have to go after one of these four strengths to have a chance to disrupt them, with technology innovation being the most promising.
To go back to Rob Leclerc’s essay, he does make all his points along the technology innovation dimension, and so he assumes (I am not 100% sure about this) that the incumbents will be difficult to disrupt along the first 3 dimensions of distribution, physical infrastructure, and fragmented markets.
Rob Leclerc provides a set of data or makes claims to make his point that incumbents are not doing enough and they carry the risk of becoming obsolete in the future.
Claim 1: R&D Investment is too low
The article makes the claim that the R&D investment by food and agriculture companies by comparing them to tech giants like Alphabet and Amazon by using R&D investment as a percentage of revenue across tech and food, and agriculture.
First off, the food and agriculture industries could not be more different than the tech industry, especially when you use Alphabet as an example. Alphabet and Facebook have the most amazing and one of the most profitable business models the world has ever seen in its history. The margins at internet companies are very different (much higher) and many of them operate in winner-take-all markets.
In a winner-take all market, the risk of lower investment is to lose the entire pie. Food and agriculture incumbents do not operate in winner-take all markets. On top of that, the total addressable market for the tech companies is massive and most importantly it is growing bigger, whereas the food and agriculture total addressable market is not growing at the same rate.
There is only so much food we can eat, and there is only so much land we can farm on. Growth comes from a growing population, though population growth is slowing down, and from people getting richer and eating different types of food. Fiber follows the same logic, and fuel is going to shift to other types of sources in the future.
Also, the current AI era is unlike any other era, when it comes to the size and pace of investments. For example, OpenAI’s recent deal with Oracle is worth $ 300 billion over 5 years, which is almost two and half times the total market cap of John Deere.
A better analysis would be to look at cross-sector R&D investment rates, and look at industry R&D investment rates over time, and then try to benchmark the R&D investment rates of food and agriculture incumbents.
Based on industry level data, the food and agriculture industry is not far off, but obviously they can do more.
As evidence that tech giants are going after a much bigger prize than is offered by the food and agriculture industry, and the timelines to a smaller prize are longer, we have seen a retreat from food and agriculture by technology giants. I covered this issue in “The Retreat of Tech Giants (from Agtech)” (August 2024)
The adoption rates are slow in agriculture. If you are doing a marginally better product, then your revenue potential will not be commensurate with your investment level and your ambition. The opportunity cost for a large tech giant is very high, and so it creates its own investment allocation challenges.
Gross profit margins are very different in tech companies like Alphabet, compared to agrochemical and equipment companies. Alphabet’s gross profit margins are in the 55% to 59% range, whereas they are in the 32% to 37% range for OEMs, and agrochemical companies. With this in mind, it is not a great way to compare R&D investment percentage between agriculture and technology companies.
The article states,
Tyson Foods spends less than one‑third of one percent. PepsiCo and Coca‑Cola report essentially zero R&D expenses.
Coca Cola’s strategy relies on M&A to tap into new markets, new product categories, and new innovations. For example, Coca Cola has acquired companies in alcoholic beverages (Bilssons in Australia in 2024), Body Armor (premium sports drink in 2021), Costa Coffee (Coffee retail and vending technology 2018) and more.
The bottom line is that even though I agree that incumbents could probably spend more on R&D, the comparisons provided in the article are not the best way to build a case, as different companies follow different strategies to get access to new production innovation.
On the incumbent side, the book “Lords of the Harvest” details the story of Monsanto scientists who brought GMO crops to life. Whatever your political stance is on GMOs, you have to admit that GMOs have been one of the most significant innovations of the last 40 years. Given the efficacy of GMO crops, they have been adopted rapidly within the United States.
