2023: Measuring Backward
Prime Future 182: the newsletter for innovators in livestock, meat, and dairy
One of my favorite concepts is "Always Measure Backward" from the book The Gap and the Gain. The idea is that we build momentum for future learning & growth by realizing how much we’ve already learned, whether that’s in the last quarter, the last year, or the last decade.
So today I’m Measuring Backward by sharing my top learnings from 2023.
Learning 1: I'm increasingly convinced that the highest value future of the beef industry is in vertically aligned supply chains. If you weren't convinced after listening to this podcast by Lee Leachman, I'd love to know why.
Lee: "So the real question is do you want to work as an independent rancher raising what you think is right, hoping that the market pays you enough to be profitable, or do you want to work in a system that gives you really clear direction on how to build the best cow, the best feeder animal, the best carcass, and then brings the highest possible percentage of those dollars back to the farm?"
Learning 2: The climate bubble will pop. I'm increasingly convinced carbon markets will go away when the bubble pops, as will all products that have a climate-only value proposition.
Learning 3: Aligned incentives drive better outcomes; the success of CAB is a great example of that in beef and one the pork industry should heed.
1975 should call the pork people
Does the name H.A. Etling mean anything to you? Me neither, until recently. What about Certified Angus Beef, does that ring a bell? Of course. We’ve looked at the Eggland's Best model, an OG asset-light business model. But CAB is an even earlier asset-light business model; CAB is
Learning 4: Farm management software was an ok Agtech wave 1.0, but it has not created long-term sustainable value for customers or shareholders.
It's time to call it: farm mgmt software was a wash.
Riddle me this: What do you call a category of companies that raised a ton of venture capital and, a decade later, had not one sustainable business to show for it? There are a few categories that are in the process of playing out as we speak, including plant-based meat, cell-based meat, and indoor farming. But each of those is still too early to call for…
“In general, they are running on fumes, are afterthoughts within their organizations, or have been divested entirely. $400+ million in venture capital, ~$2 billion in acquisitions, and the row crop farm management category has not one sustainable business to show for it. While it’s time to call Agtech 1.0 a wash, I don’t think we can call it a bust.
It attracted capital and talent to a previously overlooked space. And even though you can't point to individual significant long-term successes in this category, we can safely assume the learnings that founders, investors, strategics, and farmers had through this process has informed how Agtech 2.0, 3.0, 4.0…25.0 will play out.”
Learning 5: I’m still looking for a luxury brand in animal protein.
Don't tell me Iberico pork or Rockfort cheese - those are products with great regional branding, not LVMH-style company brands.
What's the LVMH of meat & dairy?
LVMH is a French holding company with 75+ luxury goods brands like Louis Vuitton, Bulgari, Tiffany & Co, and Dom Perignon, across categories of wine & spirits, fashion & leather goods, watches & jewelry. LVMH has a market cap of ~$450 billion making its founder the (current) wealthiest person in the world.
“if luxury means the brand is positioned around a creative identity and a dream, not comparisons of quality or price, then there
really are no luxury brands in food retail given that regardless of the retailers pricing strategy, everywhere you look the signals and signage are about price and quality.Because that’s what matters to food shoppers.
Learning 6: While high-impact innovation does come in product form, equally true is that high-impact innovation comes in process form. (link)
“The aha for me is to keep perspective on how and where tech products fit into the bigger picture. It's a piece and an important piece at that. But it's not the puzzle.
The real magic is when product innovation partners with process innovation.
That magic is the history of progress in genetics, animal health, animal nutrition, and every other aspect of getting animal protein into the bellies of consumers.”
Learning 7: The pursuit of moats (sustainable competitive advantage) is where top 1% producers focus.
Unbreachable moat builders
“In order to be successful, a company must have a definite moat, a competitive advantage that allows it to maintain pricing power and better than average profit margins." "I look for economic castles protected by unbreachable moats." "What we're trying to do is to find a business with a wide and long-lasting moat around it, surrounded -- protecting a terrific economic castle with an honest lord in charge of the castle.
A few years ago I was convinced that animal agtech startups represented <20% of most agtech funds' investments because there was less venture capital available. Now I'm convinced there are fewer venture backed animal agtech companies, and less venture capital invested in the category, because there are fewer venture backable animal agtech startups.
Learning 9: Packers don't wanna be cowboys. Really. The worry about packers vertically integrating does not make economic sense. (link)
“My hypothesis is that it would be just as hard for a packer to move into commercial cow-calf production as it is for producers who move into meat processing. They are fundamentally different businesses with a limited overlap of operational skills.
Unless something fundamental & drastic changes, packers don't have any incentive to become cowboys. True in 1960, true in 2023. My hypothesis is that it will also be true in 2060 and 2123.”
Learning 10: “You do not rise to the level of your goals. You fall to the level of your systems. Your goal is your desired outcome. Your system is the collection of daily habits that will get you there." (link)
In Kindergarten, every day the teacher would hand out a piece of paper with a picture on it for us to color and every day I would instead turn the paper over and write a story on the back. I still stink at coloring inside the lines, and I still love writing, but I’ve realized that I especially love conversations with incredible thinkers & leaders & innovators. I am grateful to you for making it possible; thanks for being part of the journey.
And yeah, I'm still bullish on animal protein.
Happy holidays,
Janette