There's a meat vacuum in AgTech
Prime Future 006: the weekly newsletter highlighting trends in animal protein
$16.9B in venture funding went to agtech companies in 2019. Sensors, robotics, machine learning, CRISPR, plant based proteins, wearable tech for livestock, and so on. A ton of activity in row crops, a lot of activity in dairy, some interesting plays in livestock…but what about the meat sector?
What about that massively critical phase from the time an animal leaves the farm or feedyard until it shows up on the front step of a retailer, foodservice, or consumer. Where’s the venture backed innovation in that space?
Think of all that happens in that black hole from plant gate to table:
Harvest
Carcass disassembly – there’s still many manual processes, complex decisions about how to disassemble the carcass most profitably
Selling meat – let’s not kid ourselves, price discovery could use a little upgrading as well as the processes around transactions of all sizes
Shipping a perishable product to customers likely to unpack, further process, repack, and ship again
All of this complexity while operating in a world where consumers increasingly expect transparency and sustainability.
The meat value chain is complex, it’s capital intensive, and it’s a bit of an innovation black hole with very few venture backed businesses working within the sector.
So disruptors are coming from outside. And from the outside, it appears the best way to disrupt the meat business is to replace the most complicating factor about it: the animal. More than $2B dollars have been invested into plant based meats alone!
But why isn’t more venture capital being deployed to tackle the problems *within* the meat industry? To radical innovation that allows consumers to feel great about eating meat? To allow producers to feel good about their relationship with the rest of the value chain? To drive cost out of the system (something this industry knows how to do!) and expand industry relevance and revenue (something slices of the industry know how to do).
Is it because the market isn’t big enough? Negative.
Is it because the industry isn’t interested in innovation? If you can show ROI, companies will follow the money.
So what gives?
Here’s my hypothesis: the lack of venture backed startups solving problems in the meat industry is because the meat value chain is essentially a black box to those outside the industry. Within the industry, game-aware leaders know where the industry needs help. They know the big problems that need solving. And they need outside innovation but often don’t know where to go to get it, for a few reasons:
Meat is a nuanced space. These aren’t widget factories. Even with improved genetics and refined feed rations, there’s variability in nature that must be reconciled in the processing plant.
The industry has exploded based on scale & cost efficiencies. Now the pendulum is swinging to other growth drivers: distribution, packaging, product, sustainability.
Limited incentive to disrupt from within as scale has been the path to market share and profitability, when commodity cycles cooperate.
The upside of the venture capital subsidized plant meat venture backed ad frenzy is that meat is a relevant topic right now. More and more people – and entrepreneurs – are interested in the meat industry….but they don’t have first hand, up close experience with the problems that – if solved – could elevate the industry.
So what if….
What if there was a way to get the big players to bring identified unsolved problems to the table, and entrepreneurs to bring startup scrappiness and fresh views, and bridge the gap that’s prevented the meat industry from benefiting from the Agtech boom?
This article isn’t a thought exercise, I’m looking for discussion 🙂 What do you think would drive more innovation around the meat industry?
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PRODUCTION
Here’s a podcast episode from Future of Agriculture, “FinTech meets AgTech in Farmland”. This model of creating a syndicated investment vehicle to invest in farmland on a small scale raises the question of how this model could be applied in animal agriculture to securitize assets in new ways. Is it in poultry or swine housing? A flow of pigs through a hog barn? Lots of cattle in a feedyard? Or at a micro level with head of cattle? I’m hoping for some “fintech meets animaltech” headlines soon.
I recently spoke with a veteran swine veterinarian who hosts “Pig School” for teams and companies looking to enter the swine market needing to understand production. This is an awesome example of opening up the industry black box for outside innovators.
PROCESSING
Thankfully processors are largely back online with beef and pork <15% down from the same time a year ago and poultry quite close to the same. At its worst beef and pork were closely to 40% less production than a year ago. This is great news for producers, now the challenge will be working through the backlog of animals. This overview by Jayson Lusk lays out the data nicely but most interesting are his charts showing the “marketing margins, the difference between wholesale meat price and the farm-level livestock price”. I wrote about the markets recently and the difference in basic economics and opportunities for innovation in today’s markets in “Livestock market transparency is possible; here’s how.”
END CUSTOMERS (Foodservice/Retail)
Investment banker turned ag & food venture investor Seana Day recently wrote:
This is not a moment for platitudes and future-casting; we need to think about what is failing NOW and how to realign the systems around agility, value creation, risk/reward sharing, and incentive structures to meet customer and market demand.
System-level change is difficult and messy. It requires bold investment, leadership, collaboration and, in some cases, creative destruction. We, of course, will need to develop the methods and means to finance the transformation of the food system…
I believe this systemic shock has created an opportune moment that will allow us to leapfrog the evolutionary path from incremental, component-level change to disruptive, system-level innovation which will strengthen and secure our future.
FOUNDERS
Sales is hard. Startup sales is harder. Here are some rules of thumb for founders, or anyone selling anything (ahem, all of us):
The problem is that many founders have a hard time tempering their obsession in order to have a conversation that engages a prospective customer, investor, or partner in a journey...instead of a monologue.
Sales is about process and principles. And when it comes to enterprise sales, having good process and the right principles is critical.
Here are some rules of thumb that Consultative Selling Skills taught me that work for almost every type of conversation.
Crossing The Chasm is one of my favorite business books, partially because it rightfully elevates the role of strategic marketing but mainly because it is such a helpful model for startups or established companies launching new products into new markets. This counter-consideration from a16z caught my eye:
For tech founders, this model affects how to think about everything but especially how to think about sales. As the model goes, until the chasm is crossed, sales must be evangelical, sale cycles are long, and startups struggle with anemic productivity. But once the chasm is crossed, hallelujah! — those product-market fit issues are solved and the challenge now is to just keep up with demand. Because once you cross the chasm, your company goes from a difficult “push-based market” to one that is “pull-based”, where customers are naturally drawn in.
It’s a useful theory — I used it to think through my own company as well as lessons learned and shared — but in widespread practice, crossing-the-chasm almost never plays out. Worse, it gives countless startup founders the sense that it is merely a matter of time and waiting (“we’re just crossing the chasm now”) while in reality struggling to go to market for years. Moreover, given how fast technology is changing, more startups are spending more time in the chasm… and they may never exit. And guess what? That’s ok.
About Janette
Janette Barnard works to enable technologies throughout the animal protein value chain. She leveraged her commercial experience with Elanco Animal Health, Cargill, and McDonald’s Global Supply Chain team to launch and grow two animal protein focused startups. Janette is now a principle in Rock Road Consulting, helping companies to launch, source, and fund innovation.