From WIA Summit 2020: Projecting the ‘New Normal’ for Agribusiness

By Michelle Pelletier Marshall, Women in Agribusiness (September 22, 2020)

We hope you joined us last week for our 9th annual Women in Agribusiness Summit, where we welcomed nearly 700 attendees, but in case you missed it, here’s a peak into one of the session discussions – Projecting the ‘New Normal’ for Agribusiness. To note, since the Summit was completely virtual, the opportunity is still available to register to listen to all of the recorded sessions, get access to the attendee list, and partake in online messaging, which is live through next week.

The first presentation was from a long-time supporter and attendee of Women in Agribusiness (WIA) – Mary Shelman, now of the Shelman Group. Shelman, who was the first presenter at the first WIA Summit in 2012 and the first speaker at this, our first virtual summit, has spent six decades in the agrifood industry – living it as the daughter of a farm equipment dealer and a farmer in Kentucky, studying it as director of the agribusiness program at the Harvard Business School, and working in it, from genetics to agtech to consulting.

In her presentation, Shelman highlighted four megatrends that were shaping the future of food & ag and driving change and creating opportunities pre-COVID, and how COVID has impacted these trends:

1). Engaged and empowered consumers

Consumers are increasingly impacting the way acres are farmed and animals are produced as they ask more questions and place higher requirements on the food they buy and eat. “Millennials are a dominant force behind this and are changing what, where, and how they buy,” said Shelman. “They are leading the way on values-based decision-making, thinking about things like climate change, the environment, and animal welfare, and they also hold a stronger link between food and health, which has grown even stronger with COVID.”

Before COVID, this focus on transparency in the supply chain and healthier eating was driving buyers to shop at farmers’ markets and focus on the perimeters of grocery stores where produce, dairy, and other fresh, healthier “clean” products are featured. There also was a growing willingness in consumers to pay more for products that meet these needs and values. “Industries responded with an exploding number of higher priced specialty products with increasing levels of differentiation, many based on production practices,” noted Shelman.

2). Sustainability – From Fad to Fundamental

“Related to this new food consumer is the fact that over the last 10 years, sustainability has grown from a marketing tool to become a fundamental requirement of business,” said Shelman. “In the agrifood industry, sustainability has evolved from protecting a company’s reputation to securing supply, to winning customers and consumers, and basically ensuring the industry license to operate over the long-term.”

Shelman explained that the definition of sustainability is a moving target, as are its boundaries and objectives. Initially sustainability had an internal focus on operations, but it has grown to encompass so much more: animal welfare, labor practices, packaging, and food waste.

“Sustainability of an agricultural product cannot be improved once it passes the farm gate, which is supporting great linkages across the supply chain in order to drive change at the farm level,” Shelman said, noting that 60 percent of the impact is inside that farm gate. Because of this, she explained, creative programs are now underway to increase the adoption of regenerative agriculture, biodiversity initiatives, and carbon sequestration, adding that more data is key to bringing all this to fruition.

“Industry is only as good as its weakest player,” said Shelman, noting that this focus on sustainability initiatives has encouraged competition and improved operations. “Collaboration amplifies impact so we see a lot of it going on.”

3). Transformational Technologies

“There is a lot of potential and excitement around digitizing agriculture at the farm, with the idea that we will transform farming from an art to a science,” said Shelman.

Gene editing, drones, data analytics and machine learning, AI, automation, and more – these new technologies are affecting every level of the agriculture supply chain. We have seen this in deals such as Benson Hill’s acquisition of Schillinger Genetics to improve nutrition, sustainability with predictive breeding and gene editing; or last week’s announcement of St. Louis-based Lewis & Clark AgriFood Growth Fund leading a $7.7 million Series A for BinSentry, a Canadian sensor tech company.

Shelman noted she felt the most promising applications are the ones that connect the fork to the field, two-way systems, such as with Driscoll’s berries, where they have included a unique barcode on each package of berries. Consumers are invited to take a survey about their purchase – were they too soft, not ripe, too sweet, where were they bought, etc. – which gathers real time information on a specific field as well as ascertains specifics on the berry type, taste, and size, which producers can access to update operations accordingly.

4). Increased Capital from Diverse Investors

If COVID did one thing, it was to put a spotlight on the ag supply chain. This further awakened an educated, diligent consumer who was already keeping watch on the system, and amplified the call for innovations and solutions to streamline processes in order to satiate the strong projected grow in food demand over the next 30 years. But all of this takes capital – capital, Shelman stated, that has substantially increased both in level and type, where new investors are examining the significant opportunities for disruption and above market returns in agriculture.

“It’s not only the level of investment that has changed -- it has grown 10 times over the last 10 years -- it’s also the type of investors that have changed. It used to be these very specialized groups that understood ag and were willing to take the risk because ag was slow to change,” said Shelman. “Today we have family offices, generalist venture capitalist firms, governments, sovereign wealth funds, impact investors, including several wealthy individuals like Bill Gates and Jeff Bezos and others around the world – who see the returns there but they also think the food system is broken and it’s up to them to fix it.”

Shelman highlighted two areas that have received a lot of attention: controlled environmental ag (CEA), or indoor farming, and alternative proteins. She highlighted the $82 million investment by Equilibrium Capital in AppHarvest in May 2019 to construct what is reported to be the world’s largest greenhouse in Morehead, Kentucky, with 60 acres under glass and another 60 planned. There are also the recent efforts of Iron Ox, which just closed on a $20 million Series B to fund its robotic and AI-driven farming startup on the West Coast.

“The capital costs of these projects are very high, the production costs are very high, and they apply to a limited number of crops. But a lot of people are very excited about indoor farming because you eliminate the weather risk, you can move production to new areas, you can lower inputs, reduce labor through automation, and potentially replace foods coming in from Mexico,” said Shelman.

As far as alternative proteins, a sector that is expected to grow at a CAGR of 9.5 percent from 2019 to reach $17.9 billion by 2025, the new developments are endless. This includes funding for Impossible Foods, which at this time totals more than $1.5 billion since its launch in 2011, and Beyond’s Meat’s IPO in 2019 that quickly saw it valued at $9 billion. Shelman cautioned however that the supposition in alternative proteins is that animal production has a very large environmental impact on the land, water, greenhouse gas production, and more, and the solutions are different depending on which side of the fence you sit on. Are we going to breed better cows? Are we going to replace animal protein with a plant-based protein? Or lab-grown meat? Suffice it to say that even Tyson, one of the largest protein companies in the world, introduced its own line of alternative proteins – Raised & Rooted – in June 2019.

And What About the “New Normal”?

“COVID has accelerated all of these megatrends,” said Shelman, who explained that consumers were shocked by empty store shelves, which put a greater emphasis on food safety, healthy diets, and buying direct from local farms or growing food themselves, in addition to rapidly adopting online shopping.

COVID also shined a light on the need for sustainability as people realized the strained relationship between humans and nature. In response, automation was kicked up a notch due to working availability and health concerns; and finally, investors started to view investment in alternative proteins and security/supply chain solutions more favorably.

Shelman suggested what ‘new normal’ might look like:

- Online Shopping is Here to Stay. There will be more “home eating” but not necessarily more home cooking. The sector has seen huge consolidation among retailers, and the demise of many independent restaurants, as well as a real reduction in SKUs based on the huge shift in demand. And meal kits are back as well.

- Fractured Demand: There has been much growth on the premium side, but a lot more consumers on the value side, causing a wide gap and a polarization of demand. The growth has been on premium, but how will we respond on the other side?

- Rise of Local/Regional Food Systems: There is an increased discussion about the need for greater resilience in the global and U.S. food systems. Will we have local food systems that can respond to the need? Can we build in diversity of production, extra capacity, redundancies, duplicate systems, and more without putting the burden for that on farmers?

- Competing Supply: This can help create pathways to a sustainable food system: defend, develop, defy, and disrupt.

About Mary Shelman

Mary Shelman, founder of Shelman Group, is an internationally recognized thought leader, author, and speaker on global agribusiness, agtech, and food system trends. The former director of Harvard Business School’s Agribusiness Program, she now works with companies, governments, and investors around the world through her consulting and advisory firm, Shelman Group, based in Boston. Through Shelman Group, Shelman provides unique insights into technology and consumer trends and champions collaboration, industry alignment, and strategic planning to achieve system-wide improvements and create pathways for sustainable growth. Shelman currently serves on the strategic advisory boards of Crop Enhancement and Women in Agribusiness, and is a venture partner at Radicle Growth. A native of Kentucky where she still owns a farm, Shelman holds a BS in Chemical Engineering from the University of Kentucky and an MBA from Harvard Business School.