Three structural changes + three big plays in animal protein
Prime Future 013: the weekly newsletter highlighting trends in animal protein
Three big ideas have been on my mind lately:
Play long term games with long term people.
Be actively patient. This Ryan Holiday piece sums this idea up.
Be ready to make big plays.
Speaking of big plays, here are some interesting ones in animal ag recently:
The merger of Vytelle & GrowSafe into a single precision livestock company. "With the combined capabilities of the new Vytelle, cattle producers will be able to convert individual animal performance data into genetic progress faster than ever before. Linking genetic insights available only through GrowSafe’s proprietary efficiency database with breakthrough IVF technology, Vytelle’s customers will be able to shorten the interval between elite animal identification and optimal marketing of those genetics within the beef and dairy value streams.” I expect to see more of these types of plays completely built around the idea of shortening the feedback loop. And in beef genetics, that’s currently a looong feedback loop.
Tenacious Ventures investment into food waste startup GoTerra. Basically GoTerra provides modular, automated larvae “farms” to decompose food waste (like at the back of a McDonald’s store) and then those insects can be used for animal feed. Here’s a summary by AgThentic, "40% of food is wasted in the US, and globally food waste is a huge issue that’s increasingly attracting cross-sector attention, yet few economically viable solutions have emerged. Flies thrive on food waste, meaning the waste stream can become a low cost or even revenue-generating input to the feed industry.” Here’s a Future of Ag podcast episode interviewing the founder.
Land O Lakes partnership with Microsoft. The press release is pretty vague and uses a lot of buzzwords but I’m giving this the benefit of the doubt because these are big co names and their scale has the *potentional* to be an asset in their objectives of "to pioneer new innovations in agriculture and enhance the supply chain, expand sustainability practices for farmers and the food system, and close the rural broadband gap.” But, show me the first use case & the primary value proposition. Don’t tell me data, or analytics, or feed the world. Tell me who you are going to make money for and how.
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Three trends in food that are being defined as they emerge, and as they evolve will certainly have implications for upstream value chain players:
1)Foodservice structure & the rise of ghost kitchens. Euromonitor reported that ghost kitchens will be a $1 TRILLION market by 2030. To put the context around that, check out this New Yorker article about the dynamics surrounding just one of the companies trying to win that market.
2)Supply chain claims about environmental impact. Claims on antibiotic usage or animal welfare in the supply chain are not new at all, but Burger King’s announcement that its burgers will be from animals fed a "low emission diet” made a splash this week. The interesting thing is that this is 1) an opportunity for producers to tap into a higher value supply chain and differentiate, 2) likely signals where consumers (or at least food co’s) are going, at least in terms of some sort of environmental impact claim. (Side note: NCBA lashed out at Burger King over this move while many producers continue blaming packers for their pricing woes. The irony abounds at the resistance of the majority to break out of the commodity cycle - increasing the opportunity for those willing to do so.) Notably this week Blackrock also started laying out expectations for environmental claims from its food and ag investments. These things don’t go away and once there’s momentum building from both shareholders and consumers, the snowball builds. More on this soon.
3)Be all things to all customers. This article sums up some key data points around this trend, "Chipotle is adding drive through lanes. Starbucks Corp. said last month it would open 40 to 50 pickup-only stores over an 18-month stretch even as it closed down some traditional cafes in the U.S. and Canada. Darden Restaurants Inc., the operator of Olive Garden, LongHorn Steakhouse and other brands, has said it is enhancing carryout. Many restaurant companies have sought to bolster delivery options.” This matters to the industry because this expectation for “everything’ness” will roll uphill to suppliers - what that will look like remains to be seen.
And finally, here are some excerpts from a recent WSJ article on the rise of meat automation in a post-COVID world. I found a lot of their perspective to be highly relevant to our recent discussion on this topic. Don’t pay attention to what companies say, watch their decisions, e.g. where are they investing, who are they hiring. Some key quotes:
In April and May, more than 17,300 meat and poultry processing workers in 29 states were infected and 91 died, according to the U.S. Centers for Disease Control and Prevention. Plant shutdowns reduced U.S. beef and pork production by more than one-third in late April.
Tyson, the biggest U.S. meat company by sales, currently relies on about 122,000 employees to churn out about one in every 5 pounds of chicken, beef and pork produced in the country. The work at Tyson’s Manufacturing Automation Center, which opened last August, is speeding the shift from human meat cutters to robotic butchers.
The Covid-19 pandemic has been a debacle for the $213 billion U.S. meat industry.
Because robots can’t yet match humans’ ability to disassemble animal carcasses that subtly differ in size and shape. While some robots, such as automated “back saw” cutters that split hog carcasses along the spinal column, labor alongside humans in plants, the finer cutting, such as trimming fat, for now largely remains in the hands of human workers, many of them immigrants.
Roughly 585,000 people work in U.S. meatpacking plants. Plant workers cycle in and out of jobs rapidly, with annual turnover in meat plants ranging from 40% to 70%, according to Boston Consulting Group, versus an overall 31% average for manufacturers.
JBS, the world’s biggest meat company by sales, has been working for years to automate portions of its poultry and livestock operations around the world, said Mr. Nogueira. JBS in 2015 paid $42 million for a controlling stake in Scott Technology Ltd., a New Zealand-based robotics company that has automated lamb processing.
Teaching robots to cut and sort meat, which involves soft material and variability, he said, “it’s the most challenging operational environment you can find.” The low temperatures at meat plants, kept cool for food-safety reasons, pose more hurdles for robotics, as does blood splatter, industry officials said.
European meat plants have incorporated more automation than their U.S. counterparts, using lasers and optical eyes to read cuts of meat on a conveyor belt and send them to different departments to be packed, weighed and shipped. The technology means a single worker in plants in Sweden, Denmark and France does the work of eight or nine workers in U.S. plants, though the operations run at a slower pace, said Mr. Lauritsen, the union official.
Also of note are Tyson’s recent hires from Google (new president, who previously oversaw automation projects) and General Motors (another executive working on automation). Hmm…
Below is one final image from my 4,000 mile roadtrip across the west. There’s nothing like a mountain lake or a roaring waterfall to inspire reflection! This photo was taken at Shoshone Falls in Idaho.
