SME F&B brands are in crisis: rising costs, shrinking margins, and a data gap they can’t afford
The UK is a global leader in food and beverage (F&B) innovation, with a £143B industry growing at around 15% annually. But the industry is in a state of crisis.
Over the past three years, manufacturers have seen their profit margins shrink by 27% year on year caused by the inability to pass on their rising costs. Meanwhile food inflation has surged 13x, driven primarily by supply chain disruption caused by climate change. Extreme weather events in Europe have increased by 48% in the past 2 years, with the frequency and severity of these disruptions expected to increase.
The problem is particularly acute for SME F&B brands, 77% of which say that their biggest challenge is increased production costs. Owners of these brands currently do not have a way to access the data and insights to understand the real-time unit economics of their products, and identify the actions they can take to improve their bottom line. While large FMCG companies deploy teams of analysts and integrated supply chains to mitigate risk, SMEs often have to dedicate the equivalent of one full-time employee to compiling spreadsheet data for risk and growth analysis. This labour-intensive process diverts valuable resources away from SMEs’ core activities, hindering their ability to scale and compete effectively.
Existing enterprise resource planning (ERP) systems are focused on digitalising the ordering, manufacturing, and sales processes that sit within the business. They are not industry-specific, expensive to customise, and take months to set up.
Pesto: AI-powered insights to drive profitable and sustainable growth for F&B SMEs
Pesto provides an AI-native platform powering SMEs in the global food and drink manufacturing industry to build resilient supply chains and drive sustainable, profitable growth. Their unified operating system centralises all the data manufacturers need to make informed commercial and operational decisions, automating key processes, and generating actionable insights for margin improvement and sustainability optimisation.
With Pesto, users can access real-time profitability data, deep dive into product recipes, and assess channel performance through a proprietary data ingestion engine. Pesto leverages AI-driven cost optimisation across ingredients, production, and overheads, along with supply chain management and performance analysis. This approach delivers targeted and contextualised recommendations that drive change and create a positive triple bottom line impact for their customers.
Led by industry experts driving innovation at the intersection of food and technology
Pesto is led by a team of accomplished industry leaders who bring deep expertise from both the F&B and technology sectors.
Kate Hofman(CEO) is a previous founder and former CEO of award-winning and pioneering vertical farming business GrowUp Farms. Kate has spent over 12 years creating systemic change for sustainable food systems. She launched the UK’s first vertically farmed salad brand, raising over £100 million to scale GrowUp to nearly 100 people, and represented the UK vertical farming industry at the 2023 and 2024 Farm to Fork Summits at 10 Downing Street. Kate was recognised as one of the Top 10 Women Shaping the Future of Grocery Technology in The Grocer Power List 2024.
Amish Ralhan (CTO) is a technology leader and full-stack engineer with 8 years of experience. Amish has a proven track record of delivering operational efficiency and modernising processes. At Citibank and Galaxy Digital, he developed scalable web applications that replaced Excel-based systems, significantly reducing costs and resource inefficiencies. His expertise in software development, combined with his technical leadership, makes him the perfect person for building cutting-edge solutions.
Sanjay Sood-Smith (COO) is co-founder of Indian ready-meal brand Tuk In (listed in major supermarkets including Sainsbury’s and Aldi). Having experienced the challenges firsthand, Sanjay has a deep understanding of Pesto’s customers' pain points and how to solve them. Sanjay’s 15+ year career brings deep expertise in financial management, supply chain management, procurement, optimisation, project management, and risk management honed at Bain & Company and Lloyds Banking Group.
Our investment thesis
If one were to imagine the perfect team to solve this problem, one would probably imagine Kate, Sanjay and Amish. Kate and Sanjay’s background in the industry gives them instant credibility with their target customers and a deep understanding of their day-to-day challenges. This was immediately clear as they racked up 100s of customer interviews and quickly signed pilot customers in just a few weeks in the residency. Amish’s prior experience replacing excel systems provides the team with the exact technical skill set they need to solve the challenges facing the F&B industry. Throughout the residency, the team executed at speed and even saved one client £15k within a few weeks by doing manual data analysis to prove their value.
While Pesto starts with profitability analysis as a wedge, we are truly excited about their long-term vision to become the default operating system for the food and beverage industry. Their roadmap begins with profitability and insights, with plans to expand into supplier ordering, payments, and operations, and ultimately into cashflow and financing solutions. Pesto will be the platform their customers run their entire businesses on every single day giving Pesto insights on everything related to their business and ultimately unlocking multiple revenue streams.
We are incredibly excited to be backing Kate, Sanjay and Amish as they revolutionise the food and beverage industry, making it more robust, sustainable and profitable for all involved. Since receiving our investment, the Pesto team has gone from strength-to-strength, signing up more pilot customers, building and launching their MVP, and securing early commitments from angels and VCs.
To find out more about Pesto, visit their website here.
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