Where's the Honeycrisp of the meat case?
Prime Future 52: the newsletter highlighting trends in livestock & meat
I love wandering the aisles of a boujee grocery store. HEB, Whole Foods, Wegman's…here for them all. Naturally a highlight is walking the produce aisle, letting your eyes take in the color explosion and the magic of plant genetic creativity brought to life: fizzy grapes, plucots, strawberries with more shelf life, sweet peppers with more flavor. Or, the crown jewel of the entire produce aisle: the Honeycrisp apple….pure magic. (I'm honestly not convinced they aren't laced with something highly addictive.)
The produce industry has produced countless examples of product development / innovations that are
visible to us as consumers, that we can see & taste & feel. Yes, genetic progress has been made on traits that improve the crop for the farmer like higher yielding, hardier, etc. But seed companies have been laser focused on outcomes consumers care about: flavor, shelf life, color, etc.
Another case study is the plant based meat category. While the explosive growth is new, let's not act like the category is. It's the veggie burger product line that's been updated, expanded and reinvented to be a trendy growth category. Veggie burgers weren't a threat. The packaging was sad and tired, and one can only assume they tasted as disgusting as they looked & sounded. But rethink veggie burger to plant based meat, throw in ~$750M per quarter in venture capital for marketing and product development, create compelling brands tied to a bigger story and ...voila!
While plant based burgers aren't my thing, objectively the product itself has completely transformed - and continues improving - as a result of innovation and R&D investment. Pat Brown, CEO of Impossible Foods, has been vocal about his strategy: bring about a world without livestock for meat by offering a plant based meat product to the world that meets consumer’s objectives on taste, cost, and nutrition so they do not have to make a values based tradeoff.
Which is a smart strategy! It’s the Tesla strategy. It’s ‘product first’ which inherently means high investment in product development. Here is that same mentality applied to other examples:
Now let's go to the retail fresh meat case where things have remained unchanged for, um, a while. That steak or pork chop or chicken breast is basically the same as it has been for the last 30 years. Why is that?
Most genetic progress in livestock centers around live performance, not end product outcomes.
We talk about genetics in terms of live performance metrics: Feed conversion. Growth rates. Calving ease. Hatchability.
None of these are attributes you can see at the meat case.
Improved live performance is producer language, not meat case language.
We all know the amazing genetic progress over the last 50 years across livestock. Drastically improved feed conversions and growth rates have led to much lower production costs per pound of meat/poultry/milk. Great for producer, beneficial for consumer. I'm not taking anything away from the economic or environmental impact of that live progress….but I am saying, maybe it’s not enough?
Like it or not, we live in a what-have-you-done-for-me-lately world….so where are the product development innovations in meat that are noticeable to the consumer?
Where’s the meat case equivalent of the Honeycrisp apple?
To dig into this question, I talked with Kerryann Kocher, CEO of Vytelle. Here’s how she framed the dynamic in beef:
"There are 30 Million mating selection and reproduction method decisions made each year in the US by over 800K cattle producers. These decisions are influenced by not only what is important for that individual producer but also how that producer gets paid. For a large % of the US herd, the producers making breeding decisions cannot hear the market signals from downstream. Producers select for calving ease or maternal traits - he doesn't get paid if those calves grade or not. He'll never know if those animals grade or not! However there are an increasing number of pockets where coordinated supply chains are connecting end product outcomes with breeding decisions and what traits get selected for. They will sell bulls to "contract growers" and buy all the calves back and feed them out. These are examples in beef of pockets of genetic control to drive outcomes that are aligned with a customer profile."
Is the lack of focus on end product outcomes just a beef industry thing that’s more structural than anything else? Set aside the highly fragmented nature of beef, and look at highly integrated pork and poultry. Although some advancements have been made in pork tenderness, even pork and poultry producers are generally not selecting genetics primarily based on outcomes like tenderness or flavor because those outcomes are not what producers are incentivized to select for.
Why do we not see livestock genetics decisions prioritize more traits that the end meat eater will see, taste, or feel as is the case in fruits & vegetables or plant based meat?
It always comes back to incentives.
Although there are increasingly pockets of laser like targeting to improve end product outcomes, a lot (most?) of meat and poultry is largely still a commodity. Which means the primary driver is reducing cost of production, so that is where innovation focuses.
Producers will produce what processors will buy…processors will buy what their customers demand which is what they expect consumers to pay for. So, somehow the market signals from downstream to drive upstream genetic decisions that prioritize end product quality improvements are either non-existent (unlikely) or not breaking through the value chain. But innovation and the creation of a competitive advantage doesn’t happen at a value chain level, it happens at a supply chain level.
I recently heard a seasoned elder of the swine business say “the concept of vertical integration is a bit of a myth - you generally just have separate live production and processing capabilities that happen to be owned by the same company, but they aren’t integrated in a way that drives value”. That rings true with what I’ve seen in poultry as well. It also sounds like a compelling opportunity for those integrators doing things differently, doesn’t it?
My hypothesis is that a growing mega trend will be around the opportunity for increased alignment or coordination of beef, pork, and poultry supply chains to leverage the market gap around end product innovation.
Here’s to some Honeycrisp-esque innovation if the meat case.
I'd love to hear counterpoints to this analysis.
What do you think?
What pockets of genetic improvement that are impacting product outcomes do you see?
What are the barriers here? opportunities?
I'm on the Merck Animal Health Ventures team. This newsletter is not representative of anyone's views but my own. Sometimes it doesn’t even represent my views :)
Prime Future Summary
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Food Supply Chain Tech Adoption Curve (link)
If you don’t already follow them, Culterra Capital publishes a lot of great stuff. They recently published a piece looking at tech adoption through the value chain.
Related Prime Future content, ICYMI
Meat eaters don't care about livestock genetics, could they? (link)
Chances are that when you think of green chilis you think of Hatch, New Mexico. Hatch and green chilis have become synonymous. Yet Hatch green chilis are grown from Arizona seed. But no one knows Curry Farms, the source of 90% of green chili pepper genetics in North America. They know Hatch as the source of all good and perfect pepper flavor.
That’s because chili growers in New Mexico decided about 30 years ago to begin branding peppers, to highlight the region. It worked. This is the power of a marketing strategy to build a brand & differentiate even in a market where differentiation is challenging.
And this “no one downstream from the farmer cares about the genetics source” is s a story that plays out similarly across all segments of ag. Could that be changing?
Turn up the volume on livestock market signals (link)
Since each poultry complex has its own business model, whether a big bird complex producing commodity meat for further processing where efficiency is the name of the game, or a small bird complex producing very tight specs for KFC where consistency & low variability are the name of the game, in theory, each business type should have aligned incentives back to contract growers around the specific metrics that drive profitability for the plant based on their sales channel & customer base.
And yet, curiously, contract growers tend to be paid on the same live performance metrics regardless of the plant’s business model. Why do market signals not break through?