How could pastured poultry scale?
Prime Future 89: the newsletter for innovators in livestock, meat, and dairy
The US chicken industry processes ~9 billion birds each year.
I can't find good data on what percentage of that is pasture raised, but my guess is <.001%. Why is pasture raised poultry a negligible piece of the industry?
Because mainstream chicken is raised in amazingly efficient systems, where costs are managed to the fraction of a cent and live performance metrics like feed conversion are managed to the hundredth of a pound. Amazingly efficient systems = amazingly affordable protein.
Meanwhile pasture raised poultry is land intensive, labor intensive, and therefore cost outlandish for most people. It's the very definition of a niche category.
So, why waste time talking about a tiny sliver of the industry when the day in day out poultry is produced by large scale vertically integrated companies?
Because we are here 👏🏼for 👏🏼the 👏🏼 script 👏🏼flips.
Pasturebird is working to break down the barriers that make pasture raised poultry impractical at scale; they're using technology to flip the script.
Paul Greive, founder of Pasturebird, joined the Future of Ag podcast for an interview about the dynamics that led to the creation, early growth, and acquisition of the company.
Pasturebird has two elements that make their business interesting:
Proprietary technology to decrease production costs.
Consumer facing chicken brand.
Paul describes their proprietary technology as an "automated range coop, a solar powered 6000 bird structure that's 150 feet by 50 feet with independent drive motors that actually drives the system to fresh pasture each day." The technology was designed to reduce the extremely high labor costs associated with pasture raised poultry.
Pasturebird was acquired by Perdue Farms, a company that bets on brand and markets on production attributes.
Paul covered a ton of interesting ground in the interview, but here are 5 takeaways from Paul’s insights:
(1) Impact demands scale. "We wanted to take the best from conventional ag and the best from small scale pastured poultry. Our whole mission as a company is to make nutrient dense pasture poultry more accessible and affordable. In order to scale pasture poultry, we need to take the labor out and start to get some of the efficiencies as conventional production." Do you hear the AND at the center of their thesis? Thats a pragmatism that’s often missing from folks on the niche end of the industry.
(2) Low cost, and… "For 30-40 years people asked the big companies for cheap chicken, and they’ve delivered. People are now starting to ask for something different and companies are trying to figure out how to do that. Now people are saying it’s not just about a good price, it’s also nutrients, etc."
(3) Nutrient based pricing? "We've relied on attribute based marketing in meat for 30 years. Now there's an opportunity to shift to outcome based marketing. There's a big opening in the market to go deeper with data and analytics and lab results than ever before." Imagine a world where instead of looking at a price per pound of chicken sticker, you were looking at a price per unit of protein, omega 3's, Vitamin E, etc. Crazy, right? 🤯 Maybe not.
(4) Omnichannel expectations. Pasturebird customers can purchase chicken direct from Pasturebird, via CrowdCow, or via Perdue Farms’ ecommerce site. Paul points out in the episode that it’s not about exclusivity to any single D2C channel, customers rightly expect to be able to purchase their brands anywhere shoppers in that target market might be. Omnichannel = convenience.
(5) Most importantly, make the niche less of a niche. "Electric vehicles will become cheaper when they reach scale. I don’t know if that will be our story but I think we can get competitive. If we can get within 10-20% of the ‘Walmart baseline’ then we can be competitive. We have to get away from the current 3x price to have impact though."
It's easy to write pasture raised poultry off as a hyper-niche segment but remember the central idea of the Innovator's Dilemma is that incumbents run the risk of missing emerging trends because emerging trends begin on a minuscule scale - by definition.
Emerging trends grow gradually then suddenly.
My favorite business strategy podcast is Acquired. In each episode they deep dive into a different company's strategy, particularly acquisitions (obvs), followed by an analysis based on Hamilton Helmer's 7 powers. The 7 powers are:
Scale economies
Network economies
Counter positioning
Switching costs
Branding
Cornered resource
Process power
From that framework, Pasturebird seems to leverage the following powers:
Counter positioning. The ~899,999,990,000 chicken processed in the US each year are raised in wildly efficient systems of stationary indoor housing and every few flocks, chicken litter is moved from inside the house to on the field. Pasturebird said hey what if we can do the opposite.
Scale. In a niche where small is the default, Pasturebird built the business around the assumption that scale is necessary.
Cornered resource. Pasturebird does not currently sell their proprietary technology, they use it for their own poultry production. Given what a critical role the technology plays in the business model, this gives Pasturebird a competitive advantage in its category by having this cornered technology resource.
Many thanks to Tim Hammerich for sharing the Future of Agriculture podcast mic for this episode, and to Paul for his insights.
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I’m interested in all things technology, innovation, and value creation for every link in the animal protein value chain. I’m on the Merck Animal Health Ventures team where we invest in early stage technology companies who are creating value for livestock producers.
Prime Future is where I learn out loud. It represents my personal views only, which are subject to change…’strong convictions, loosely held’.
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