Analytical Flavor Systems (AFS) announced it has closed on a $4 million Series A co-led by Leadwood Venture Capital, and Global Brain. Additional investors participating in the round include Hyperplane Venture Capital, Bits X Bites, and Cornes Technology, among others.
The newly gained capital will support Gastrograph AI, the company’s first-of-its-kind predictive AI platform that models human sensory perception of flavor, aroma, and texture to predict consumer preference for food and beverage products.
“The Gastrograph AI platform can help CPG companies big and small create better, more targeted and healthy products for consumers,” said Jason Cohen, founder and CEO of Analytical Flavor Systems. “Too many consumer demographics are underserved by the food and beverage products currently on the market.”
Data science has widely been used by companies to help guide product development, however, flavor perception and preference has been an elusive factor to quantify. With the use of Gastrograph, food and beverage companies can eliminate their reliance on market research or consumer panels. The AI platform enables companies to quickly predict how their product compares to others on the market, and which consumer groups will like and buy their items.
“Flavor has always been the forgotten sense,” said Rob Trice, partner at Better Food Ventures, an investor in AFS. “Companies would use qualitative research, opinions really, to inform product decisions. Now they can see accurate predictions for what any target consumer around the world will taste in their product and how much they’ll like it. AI-powered product development is creating super competitive products that people would never have come up with.”
Flavor is Big Business
The global flavor industry has been rife with deals over a wave of consolidation in recent years. Pressure on the industry is coming from players outside the space as global traders position themselves to expand beyond commodities up the production chain to gain a foothold in higher margin businesses, while other companies and investors seek to capitalize on consumer demands for flavorful, but healthy foods.
One of the most notable deals in the category happened in July 2014, when U.S.-based Archer Daniels Midland (ADM) beat a field of rival bidders to acquire Wild Flavors, a producer of flavorings for cereals, ice cream, dairy, and confectionery items for $3.1 billion from the U.S.-based private equity firm Kohlberg Kravis Roberts and Dr. Hans-Peter Wild. Once complete, the combination of ADM and Wild Flavors was expected to result in global sales of $2.5 billion.
ADM went on in October 2015 to expand its flavors portfolio with the addition of the natural and organic flavors company, Eatem Foods, which is backed by Linsalata Capital Partners, for an undisclosed amount.
Private equity also has taken note of the growth potential to be seized in the flavors industry, as leading food and ag-focused investment firm Paine Schwartz Partners announced it made an undisclosed strategic investment in Lyons Magnus Inc. – a top developer and manufacturer of fruit-based flavor solutions for the dairy, foodservice, and healthcare industries – in November of 2017.
More recently, in May of this year, ADM built up its flavors business even further with the acquisition of Amazon Flavors – Brazil’s top producer of natural extracts, emulsions, and compounds. Additionally, International Flavors & Fragrances Inc. (IFF) announced its agreement to acquire Israel-based, global flavors giant Frutarom Industries for $7.1 billion including debt.
Applying AI
For food and beverage companies, having the ability to apply predictive AI to flavor – something so critical yet so nebulous – would certainly offer a competitive advantage.
“Enterprises that invest in quantitative decision making, and empower their teams with the best platforms have a compounding strategic advantage over their competition,” said Trice. “We invested because Analytical Flavor Systems is already helping the world’s best CPG companies to make better products for everyone.”
With a current client base of 20 CPG companies across the U.S., France, Holland, the UK, China, and Japan, AFS has already been behind the launch of multiple successful products. With this new capital, the company plans to attract new talent and expertise for its team, expand its existing capabilities, and further extend its technology and platform across the food and beverage industries.
“This industry needs a platform capable of predicting consumer preference today and into the future,” said Cohen. “We are extremely pleased at how effectively we’ve been able to enable our customers to optimize existing brands and to create new competitive products that meet changing consumer preference in target markets.”
-Lynda Kiernan