Global food commodity production is one of the biggest drivers of deforestation and climate change that we’ve identified. The team at Meridia have built the data infrastructure necessary to address deforestation reduction due to global commodity demand, and they have done so by engaging smallholder farmers in the global cocoa and coffee supply chains in an unprecedented way.
After years of perfecting their technology for documenting and analyzing smallhold farm plots in developing and emerging economies, Meridia has found strong product-market fit with the world’s largest CPG and commodities companies. They have entered a product development and software licensing agreement with the world’s second largest commodities trader, ICE (Intercontinental Exchange is the leader in trading commodities originating with smallholder farmers). Meridia will develop ICE’s data platform for certified deforestation-free products as mandated by the EU Deforestation Regulation (EUDR), poised to come into effect in 2024.
The EUDR mandates that traders of cattle, wood, cocoa, soy, palm oil, coffee, rubber sign digital due diligence statements a) attesting to the origin of the commodity and b) certifying that it did not result in deforestation. This is a tall ask, but given Meridia’s unfair advantage in this market, we were compelled to back the team.
Market Opportunity & Impact
The coffee market was valued at $102.15 billion in 2019 and is projected to grow at a CAGR of 4.22% to reach $155.64 billion by 2026. Meanwhile, the cocoa market was worth $9.38 billion in 2020 and is expected to grow at a CAGR of 3.44% to reach $11.43 billion by 2027.
ICE controls 90% and 60% of trading across the cocoa and coffee markets respectively, constituting $70B in trading value annually, which Meridia’s products will audit, analyze and verify.
Smallholder farms, defined as farms under 10 hectares, produce around 80% of the world's coffee and 90% of the world's cocoa. This presents a significant opportunity for Meridia to positively impact the lives of tens of thousands of people directly and hundreds of thousands in smallholder farming communities. Meridia’s focus on leveraging technology to lessen or eliminate the burden of global compliance from smallholder farmers is supported by creating value for trading markets participants like ICE, but also its ability to sell deeper analytics and supply chain insights to the major commodity aggregators.
Market Fit for Meridia's Solutions
The global coffee and cocoa markets represent a substantial opportunity for Meridia and leverages years of technology development on agricultural data and land monitoring systems. Further, Meridia's innovative field data solutions can revolutionize the trading, processing, and sourcing of additional commodities markets (e.g. Palm Oil) by enhancing transparency, compliance, and sustainability without introducing cost burdens on smallholder farmers.
Meridia's solution addresses key challenges faced by commodities buyers like Barry Callebaut and Cargill, who need to ensure their sourcing, processing, exporting, shipping, and logistics, importing, and distribution are compliant with a range of regulations related to traceability, sustainability, labor rights, and anti-deforestation. Moreover, increasing consumer demand for transparency and sustainability puts additional pressure on these companies to ensure their supply chains are ethical and sustainable. Meridia's field data solutions enable companies to verify the provenance of their products, monitor and manage risks, and report accurately to consumers and regulators. Importantly, the Meridia solution set is not dependent on field level implementations or processes that create time and cost burdens on smallholder farmers.
In addition to the ICE contract, Meridia has a significant pipeline of customers for its data and supply chain solutions, including contracts with Barry Callebaut (signed), Unilever (signed), Cargill, and active discussions with Mondelez, Louis Dreyfuss OFI, Mars, Nestlé, ETG, Fairtrade, Rainforest Alliance, RSPO among others.
With a beachhead market established in cocoa and coffee, there are still five remaining opportunities carved out by the EU anti-deforestation Regulation (EUDR)—soy, cattle products, wood, rubber, and palm oil. With ICE as a partner driving the adoption of these commodities into EUDR-regulated commodities trading, the market for Meridia’s solution will radically expand in the coming years. With land provenance data, they will also be able to monitor changes in land management practices that can then enable them to assist with environmental asset origination, e.g. carbon credits derived from insetting. The market timing is impeccable.
Unfair Advantage
By focusing on land titling through their early traction and building a revenue model around it, they were able to build one of the richest datasets in existence on land ownership in developing economies, which now has a large market created for it by the EUDR. Meridia has built an unfair advantage in this market through its years building a solution for land title in emerging markets. This was their initial product that gained traction with municipalities across Africa and Latin America, which enabled them to get one of the richest proprietary data sets in the world for origination of commodities. This was a clear benefit for municipalities who would pay for it (e.g. Kenya), as well as the landholders.
This rich data set is opening a massive and impactful market opportunity today. By combining publicly available geographic information system (GIS) data with Meridia’s on-the-ground primary land title (ownership), they company engaged enterprise customers in CPG and Ag Commodities with live demonstrations that proved the enterprise’s provenance of their commodities were faulty up to 80% of the time.
Product & Roadmap
Meridia has a powerful path to deliver increasing value to commodities markets, including:
- Supply Chain Transparency and Accountability: Traders and their customers, the buyers at large CPG must establish full traceability throughout their supply chain to ensure that their commodities are not linked to deforestation. This can involve geospatial monitoring, working with third-party auditors, or using blockchain technology for traceability.
- Implementing and Enforcing a Zero-Deforestation Policy: Traders can create strict policies that mandate no deforestation by their suppliers. These policies should be regularly reviewed and updated.
- Promoting Sustainable Farming Practices: Encouraging suppliers to adopt sustainable farming practices such as agroforestry or regenerative agriculture can help to reduce the impact on forests. This can be done through training programs, providing financial incentives, or offering technical assistance.
- Engaging with Governments and Local Communities: Advocating for stricter forest protection laws and working with local communities to protect their forests can also be effective. Companies can also support initiatives aimed at providing alternative livelihoods to local communities to reduce their dependence on deforestation.
- Monitoring and Regular Auditing: Regular audits and field surveys should be performed to ensure compliance with deforestation policies. Companies should also make use of satellite imagery and other technology to detect signs of deforestation.
- Establishing Deforestation-Free Investment Policies: Traders can create and enforce strict investment policies that restrict financing for activities that contribute to deforestation.
The Meridia Team
Meridia is led by a seasoned and diverse team of experts in supply chain management, data analytics, and the regulated commodities industry. Their combined knowledge and experience are significant factors contributing to the company's innovative product development and strategic positioning in the market.
Thomas Vaassen, CEO of Meridia, founded Meridia seven years ago to use mobile and geospatial data to improve the lives and livelihoods of smallhold farmers. Today, the proprietary data and technology stack trained on years of field work is becoming a key tool in providing traceability and transparency, living income, and regenerative agriculture commitments in international smallholder supply chains.
In the decade prior to founding Meridian, Thomas was a leader in the entrepreneurial ecosystem globally. He was the founding Chairman of the global Impact Hub Association globally and served seven years as a managing director for Impact Hub Amsterdam. He holds an MSc in International Business from Maastricht University.
Beatrice Moulianitaki, CCO, was the Head of Sustainable SourcingHead of Sustainable Sourcing at The Hershey Company until late 2021 when she joined Meridia to lead sales into her network of CPG and agricultural commodity companies as Merida's chief commercial officer.
Olivier Vernin, Head of Product at Meridia, a broadly experienced software engineer for the past twenty years, Olivier was previously a lead software developer at France Telecom and at TCC - a mobile solutions company in Africa, including doing years of contract work for Orange.
Summary
Given the large market opportunity, the increasing need for compliance and transparency in commodity supply chains, and the strength of Meridia's team and product, we believe that investing in Meridia presents a significant opportunity. The company is positioned well for substantial growth in the coming years with a unique focus on smallholder farms and its ability to provide critical data to large commodities buyers.
Nothing contained herein constitutes investment, legal, tax or other advice nor is to be relied upon in making an investment or other decision. This article contains the opinions of the author, and such opinions are subject to change without notice. Furthermore, it may also include data and opinions derived from third party sources. Cerulean Ventures does not accept liability for the accuracy or completeness of any such information or opinions which can be subject to change without notice.