The agritech sector, with its relatively low investment in R&D and sales and marketing, is ripe for transformation and disruption, says the latest Technology Investment Network (Tin) Agritech Insights report.
The report, which coincides with the Government's release of an industry transformation plan for the primary sector, profiles the 20 agritech companies which featured in the 2019 Tin200 report.
The companies were surveyed in late March and early April this year.
The report says like everyone else, they're grappling with the impacts of Covid-19, but with 42 per cent of their revenue already coming from New Zealand sales, they had a strong base from which to recalibrate and refocus export efforts this year.
Also, backed by New Zealand's strong global reputation as a reliable food producer, agritech companies had opportunities to help primary industries leverage this.
The top 20 agritech companies' investment in sales and marketing and R&D totalled a low $268.7 million - $97.3m for R&D and $171.4m for sales and marketing.
"While this is likely a reflection of the mature nature of the companies and their focus on existing customers and fine-tuning of products, it does also hint that the sector is ripe for transformation.
"Now is the time for disruption. As has been seen in comparable sectors like HealthTech, collaboration will be more crucial than ever if disruption is to take place.
"There are promising signs with significant foreign investment in emerging companies such as Robotics Plus and Halter. In addition there is an extensive pipeline of agritech firms indicating we have an expanding eco-system, with the skill set and capacity to nurture them.
"We have also seen early stage companies attract the attention of both domestic and international investors, a critical ingredient for growth. The path forward for the agritech sector may not be as clear at present, hence the importance of an industry transformation plan to progress a clear forward vision ..."
The report says high-tech manufacturing companies generated just over two-thirds of the Tin-qualifying sector's total $1.4 billion revenue, with large, long-established companies like Gallagher Group, NDA Group, Compaq Sorting and Tru Test dominating the category.
Biotech firms contribute 29 per cent of the sector's revenue, much higher than the Tin200 benchmark of 7.1 per cent, demonstrating the relative strength of this sub-sector.
The challenge for the sector was how to rapidly scale these businesses. It appeared the general focus for new tech companies was shifting towards ICT solutions. This was reflected in nearly half, 47 per cent, of early-stage companies represented in the report.
The combined growth of agritech companies in the Tin200 slowed to 2.3 per cent, notably down from a 15 per cent growth rate in 2018.
Despite this, profitability of the Tin200 agritech companies last year was strong, with a combined ebitda of 13.2 per cent, up 10.2 per cent on 2018.
The report noted considerable changes in company ownership in recent years, with several of the biggest agritech companies being acquired by large offshore interests, particularly from Europe. The considerable consolidation and acquisition activity likely helped slow growth in a traditionally high-growth market 2019.
Together the 20 firms generated $1.4 billion in revenue last year, 11.6 per cent of the total Tin200 revenue and slightly higher than some other sectors with more companies.
This reflected the size and maturity of the companies, with only two under 15 years old, and six with revenues over $100m. Average company age was 31.
ICT companies in the sector were represented by just three companies (15 per cent) in the Tin200. This was in stark contrast to the 47.5 per cent of all Tin200 companies that fell into the ICT category, which generated 38.7 per cent of Tin200 revenue.
However, said the report, it was worth noting that just under half (47 per cent) of the early-stage companies - those that fell below the Tin200 revenue threshold - in the agritech sector were ICT companies - a clear reflection of the evolving nature and continual modernisation of technology being used in agriculture.
To qualify for inclusion in the Tin200, companies must originate in New Zealand, have a meaningful presence here, operate in the high-tech manufacturing, ICT or biotech primary sectors, have developed their own tech-based IP and generate at least 10 per cent of their revenues overseas.
Agritech firms earned $833m in exports (Tin200 $8.7b) and showed export growth of $30m (Tin200 $881m.)
In the Tin agritech rankings, Gallagher Group was number one, followed (in order of rank) by Livestock Improvement, NDA, Compac Sorting, Argenta, Tru Test, Waikato Milking Systems, Simcro, BBC Technologies, Lonza, Wyma Engineering, and Dairy Technology Services.
Compaq, Tru Test, Simcro, BBC, and Lonza are foreign-owned.