PMA Takes on Tech Podcast

Description:
Join a lively discussion with Paul Lightfoot, founder and president at Bright Farms. We talk about his journey with Bright Farms over the last 10 years and the strengths he sees with indoor growing around supply chain and water. Paul has also started a newsletter called Negative Foods and is on a mission to eat and promote foods based on regenerative farming practices that draw carbon from the atmosphere. Paul believes if we eat foods that draw down carbon on a net basis, our food system will be a lever to reverse climate change. We cover climate change, carbon negative foods, a challenge to organic crop systems and oysters and beer.
 
Speakers:

• Paul Lightfoot
  President & Founder
  BrightFarms

Vonnie Estes, PMA:
Welcome to PMA Takes On Tech. The podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of technology for the Produce Marketing Association and I've spent years in the Ag-tech sector. So I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes, PMA:
This week's podcast is being sponsored by Paine Schwartz Partners, a global leader in sustainable food chain investing. Paine Schwartz Partners is a private equity firm with a demonstrated 20-plus-year track record of investments across the food and agribusiness value chain. The firm leverages a thesis-driven approach and operational expertise to enhance value across its portfolio, please visit www.paineschwartz.com to find out more about the firm and its activities.

Vonnie Estes, PMA:
Today we talk with Paul Lightfoot. Paul is the founder and current president of BrightFarms, a hydroponic leafy greens producer in the US with five farms in 2,500 retail stores. I talk to Paul about his journey with BrightFarms over the last 10 years and the strengths he sees with indoor growing around supply chain and water. Paul has also started a newsletter called Negative Food and is on a mission to look at how we can grow food and create brands based on regenerative farming practices that draw carbon from the atmosphere.

Vonnie Estes, PMA:
Paul believes if we eat food that draws down carbon on a net basis, our food system will be a lever to reverse climate change. He believes consumers can make this happen by choosing foods with negative carbon footprints market forces will guide farmers and food companies toward regenerative practices. Paul is optimistic that the next five years will bring a wave of carbon-negative foods to the market. And by feeding ourselves with such foods will make the world a better place and save it for future generations. We cover climate change, carbon-negative foods, a challenge to organic crop systems and oysters.

Vonnie Estes, PMA:
Great to talk to you, Paul, there are a number of topics that I want to discuss with you today. Let's start with the great success of BrightFarms and then move into other topics you are speaking about frequently these days, like carbon. Most of our listeners know BrightFarms, It's a hydroponic leafy greens company in the US. You are in over 2,500 stores, which is pretty amazing. I just read that recently and maybe it's gone up, but that's a great number and you have four soon-to-be-five farms. So you were the founder of BrightFarms over 10 years ago. What was your vision when you started BrightFarms?

Paul Lightfoot:
Yeah. Well, I love the question because it's fun to think about that. The idea for BrightFarms was one that I effectively made up from scratch, but it was based on identifying a problem in the marketplace that I thought could be solved. And that's the answer to your question, right? The vision was to go after a supply chain and the incumbent salad supply chain, which is all based out on the West Coast, I thought was vulnerable to disruption. It was vulnerable largely in terms of having a product that was made worse by its supply chain. But I also thought that industry was going to face some headwinds with respect to water, food safety, vulnerability to weather as is the climate change.

Paul Lightfoot:
And so the vision was to really replace a long and complex supply chain that caused problems, sort of suboptimal outcomes for the product and replace that long and complex supply chain with one that was short and simple in a way that was better for the product and would be better for consumers and for customers. It was that simple and then that vision, I'd say it has largely been realized, as you probably know we're not the only player in the space anymore.

Vonnie Estes, PMA:
No.

Paul Lightfoot:
We do have more than 2,500 stores and we actually have five farms that are open. So we're even a little ahead of the data that you're looking at, but there's been billions that have flown into the space just over the last two or three years. And every major food retailer in the US has a local indoor program or is working feverously to get one. So then they're not behind anymore. And I would say that it's a really big category. I don't mean the indoor part, the whole thing, but the indoor, local slice of it is still very small.

Paul Lightfoot:
It's probably less than $150 million, but it's really where all the growth is and BrightFarms is the leader in this niche. So we feel like the thesis has been validated by the response in the marketplace. We feel like the growth is amazing right now, but we feel like there's just a ton of work to be done. So there's so much market share to be captured over the next several years that we've got our blinders on executing as fast as we can.

Vonnie Estes, PMA:
That's amazing. And people weren't talking about this 10 years ago, all this, all the disruption, and especially since we've seen, in the last year or so, people weren't thinking about, "Oh, we're not going to have enough water." or "Oh, what if there's a supply disruption?" So it's pretty amazing that, I mean, you were, obviously, but I don't think consumers were thinking that way.

Paul Lightfoot:
And, you know I didn't make this up on a whim. I did a lot of research, right. I sort of developed an analytical thesis. People were talking about the problems. I mean, you can go back 10 years ago in California had plenty of people talking about the water problems as an example. It wasn't being talked about in a system-wide way, in a way that it would impact the category. And of course, that's where the opportunity for a company like BrightFarms was born, right. Thinking about problems in an innovative way is often how you get innovation. But to agree with you strongly when I brought the idea home to my wife, who's still my wife. She said, "No, I don't approve that." Well, I mean, we overcame that, not without... I spent some political capital on it. There was a lot of people saying, "What the hell are you talking about?"

Vonnie Estes, PMA:
Yeah. No, it's really true. So how do you see the rise of indoor salads and how the indoor salad industry will win in the long run?

Paul Lightfoot:
Well, the rise is it's again because of the product, right and it generally is, right. You need to have several factors, but if you don't have a product, that's a better experience for the customers in this case, retailers or consumers, it's not going to work. So the easiest way to think about it is that the local indoor salads are five to seven days fresher than the long-distance field salads. And it's a two-week category. So a week fresher is just an enormous amount of difference. That's why there's this rise and the improvement of the product can be seen in certain metrics that are amazingly powerful in almost all retailers that we've gotten into their category sales have risen materially, right. So, same amount of shelf space, but the dollar sales of packaged salads goes up when we enter the category, right.

Paul Lightfoot:
And for a retailer, that's catnip, right. That's really where the action is because they want to increase their sales without increasing their costs or cutting out of the products. So I think that's going to continue in the long run and really over the long run it's the idea of sustainability that will be the reason that indoor salads eventually goes the same way that indoor tomatoes went, right. And if any of your listeners don't know if you go back 25 or 30 years ago, just about every fresh supermarket tomato was grown in the field somewhere, often in places like California and Florida. And today, the vast majority of supermarket fresh tomatoes are grown indoors, we have every reason to see the same thing is happening now with salads and a large part of that will be because of the product, of course, but it's also just to be sustainability in general.

Paul Lightfoot:
And I don't mean sustainability like big companies talk about their strategies. I literally mean the definition of sustainability is can something continue indefinitely. And if your business model is based on the aquifers beneath Salinas Valley, it's the definition of not sustainable, right. Every year, more water is taken out than is recharged through snow melt or rain, or any of the ways. And they're digging deeper wells, the ground is subsiding in some cases, the salt water is intruding into the aquifers. If our government doesn't regulate that, if our commercial markets don't regulate that mother nature surely will cause in the long run sustainability is not a choice. It's going to be imposed on us. And this is one of the first places on earth that we're seeing it imposed right now, we're watching.

Vonnie Estes, PMA:
So do you think then, right now it looks like to me is the category is getting bigger, but do you think as there's more indoor, that there's going to be less outdoor because of some of these limitations you're talking about?

Paul Lightfoot:
Well, it's above my pay grade, the answer to that question. I mean, I actually think that humans should eat a lot of salads. So I think the whole category should grow. I do think almost all the growth is coming from indoor to local right now, whether that means that the field-grown stuff will decline. It's actually a very complex question to answer. And I meant that literally it's not something that I'm smart enough or have enough information to answer because a lot of it is like labor base, right? Will people continue to grow in fields, things that require migrant labor in a period in history where you can't get that kind of labor, where other products could be grown in a way that's more mechanized, right. It's easier to automate. I don't know, I don't know how that's going to play out.

Vonnie Estes, PMA:
Yeah. And I think with water, I'm in California and the last couple of weeks, that's all anybody's talking about is we're just going into this huge drought and what is that going to do? Even this year for crops, there's going to be a lot of crops not planted because there's just not going to be water. And the change in our water, we're now going to start getting more of our water from rain and not from snow melt. And we're not really set up to handle that and so I think there's some infrastructure issues as well that's going to cause some of the shift. So what did we learn from COVID that supports the growth and continued success of CEA?

Paul Lightfoot:
Well, I think two main topics, the first is that people's health was a great predictor of whether or not they were vulnerable to severe illness, and by health, I mean in the sense that even before COVID, chronic diseases related to diet are the leading cause of death United States, right. And sadly, these are avoidable deaths, right. We don't need to have chronic diseases related to our diet. That's a relatively modern invention if I could use that word for something so tragic. And what we learned is that people that were subject to chronic diseases related to diet, like the diabetes and obesity, would dramatically more vulnerable to severe illness and fatalities of COVID. So that's the first thing we learned, right. People should replace the sugar-sweetened and ultra-processed foods that Americans eat with fresh fruits and vegetables.

Paul Lightfoot:
And there'll be less vulnerable to the next experience we have that's like COVID, if God forbid we have another one. And the second one, which I think is probably more what you meant when asked the question, is that we learned that having long and complex supply chains doesn't serve us well in times of volatility and disruption, right. And before I started BrightFarms, I ran a company that automated the distribution centers of retailers. And in many ways, the job was very efficiently getting goods made in the far east to consumers in America and by efficiently, I mean at low cost, right. And when I started, that has about 30 years old, I did it for almost 10 years. I felt great about efficiency. I like efficiency as a thing on its own, but over time I started feeling less excited about a global, hyper-efficient supply chain.

Paul Lightfoot:
And that's why you see me thinking about local supply chains. And then all those feelings became intensified during the pandemic, where you saw that a global problem like COVID prevented materials and people from moving around the earth efficiently. We're still, of course, suffering with chip manufacturing shortages, there's not enough cars because of chips and things like that. I do think that we're realizing as a society, that you want to have enough slack in your supply chains, that when there's disruptions, you won't have people go without things that they need, like chips, like food, not the chips that are food, but semi-conductors or whatever. In particular, having a decentralized system of intense food production facilities like what BrightFarms does, I do think is in the interest of society. And I feel proud to be working on that during this period.

Vonnie Estes, PMA:
Yeah. So lastly, since this is a tech podcast, what technology advancement has helped make BrightFarms successful, and what areas or new technology do you need more of?

Paul Lightfoot:
Well, I'll start from early, to now, to future in the answer. The first thing for us was controlling the climate, right. And I think people sort of gloss over that, but it's important and it's not that easy to do. So we have high-tech, computer-controlled greenhouse facilities that deliver the experience to the plants that they need to survive and to thrive. And that's where it starts and we can't ever lose sight of that, right. Especially as the climate changes, whereas we operate in more places with different climates, that continues to have to evolve. But the second is things like camera scanning and machine learning and artificial intelligence, we've got a proprietary platform that we call BrightOS that really pulls all the data from thousands of sensors in lots of different systems.

Paul Lightfoot:
And not just in the environment for growing plants, it's also the noise that comes from our supply chain that comes from the demand from our retailer partners. And it synthesizes it all together in a way where we can operate as resource-efficiently and as cost-efficiently as possible in a way to make us a more effective company. We're a company that has always made it clear to ourselves that we're not growing fancy food for fancy people on the coast. We want to grow mainstream premium salads that Americans can afford. We're selling at Walmart and Ahold Delhaize, not just at your neighborhood inner city, fancy specialty food retailer. And so we want to be able to operate as cost-effective, as soon as we can. And I do think by the way that the data shows we are the most cost-competitive of the indoor salad producers.

Vonnie Estes, PMA:
Yeah.

Paul Lightfoot:
So that's sort of now, by the way, but as I think about what's in the future, it's definitely automation. We find ourselves already highly automated and I should say at BrightFarms and we grow the way we do, which is horizontally, largely because it enables the high degree of automation without $100 million robots, right. Growing vertically hasn't really figured that out yet. They're either spending a lot on labor or they're doing insane amounts of almost primary science to automate something that's not easy to automate, but we find ourselves now, I founded BrightFarms in 2011, we find ourselves now in a much more challenging labor environment than I think I had ever imagined.

Paul Lightfoot:
And it didn't just start because Trump had bad immigration policies. It started well before that it was exacerbated in the Trump administration. And now it's gotten much worse because of COVID. It would be naive to think that it will revert next year to what it was seven years ago. So we're prepared for a really long haul where labor is difficult to come by and we're making massive investments in automation right now in areas that we didn't necessarily know we were going to try to automate so that we can overcome those challenges and continue to be showing up on shelves for our retailers and doing it with high quality and the surety of supply.

Vonnie Estes, PMA:
So let's shift gears a little bit here and talk about some of the things that you've been talking about and you've been making a lot of noise lately. I love it with some different thinking through your newsletter called Negative Foods and articles. I've read about you and speaking that you've done. And one of the things, that, a quote in your newsletter was, "I have a voice and a platform to encourage and support and shine a spotlight on startups bringing carbon-negative foods to market and so I'm exercising that voice and leveraging that platform." So how did you get here and why is this important to you and how is this an evolution of where you are in your career and your life and your beliefs?

Paul Lightfoot:
Yeah, it probably seems less abrupt to me than it does. And I say that because I didn't start BrightFarms just because I needed to find a new way to get paid, right. I had a pretty good career before this, but I wanted to be in the sustainable food industry and that was because my personal passion was there, right. I spent my 30s feeding myself and my family in a very progressive way and my career felt a little bit old school, right. And I started thinking to myself, I wish my career was in this area, that I had this personal passion. And so when I started BrightFarms, I think before I hired a single person, I knew what our mission was going to be, which was to improve the health of Americans and the health of the planet.

Paul Lightfoot:
And so I think BrightFarms has that baked into its DNA because that's what I had baked into my DNA. And I'm proud that BrightFarms still flies that flag without me holding the flag very often. And in many ways, that's what this next part is about as well, right. So it doesn't feel that abrupt to me because it's an evolution of the same sort of principles. And then as I thought about celebrating food brands that had supply chains that reversed climate change, I actually think about what I've done, right. BrightFarms at its heart is a company with an innovative sustainable supply chain that is a start-up branded food company, right. And that turns out to be a somewhat unique set of experiences, and I guess I should say skills as well of skills, is something that you've done and you can help other people with.

Paul Lightfoot:
And so when I started thinking about how will the food industry change? And this is something I thought about for several years before I started talking about it out loud, it was clear to me that foods with regenerative agricultural practices that are carbon negative or carbon neutral footprints were going to be a part of the solution for how society reverse climate change. And I just realized that my experiences would be more relevant to it than most because BrightFarms had a more sustainable, innovative supply chain change, BrightFarms was a branded food company that went to market through retail. And so I just decided I would shine a spotlight on people early in their careers, perhaps building startups that had supply chains that would help reverse climate change with regenerative practices. And it felt pretty natural to me to think about it like that.

Paul Lightfoot:
Now, of course, the other piece of this is that climate change went from being something that environmentalists talked about 10 years ago, but the President didn't, right. And world leaders around the world did not to the degree they do now. And more important than anything, there are no longer large, thoughtful companies that aren't talking about it and talking about it as being an important priority and not just operating companies, but the world's biggest investors, the endowments, sovereign wealth funds, family offices, and foundations. It's very hard to find any now that doesn't feel like these sort of ESG principles are at the heart of their success in the future and not just because of their values, but because they believed that not being long on reversing climate change is going to be a bad financial strategy. And so the rise of all of that sentiment in the world, particularly the commercial world, helped me recognize that this was the right time for something like this.

Paul Lightfoot:
Although I'll admit that it's the right time when I think about how the investors think about it and often, how the entrepreneurs think about it. It's very early for how consumers think about it. A lot of consumers still don't really understand what regenerative agriculture is, and they don't necessarily understand how their food choices are going to make climate change better or worse. Although I would argue that food choices are about the only set of choices individuals can make that make a difference right now because you're not easily changing the carbon footprint of steel, and glass, and concrete. You're easily changing the footprint of transportation and energy. That has to be done in a more systemic or government basis. But your food choices could make a difference and almost right away.

Paul Lightfoot:
And I should also say that food is unique in that it can be a lever to make the climate worse or better, but it's also unique in that we always make choices about it all the time. You can reduce your airplane travel. You can turn down the thermostat in your house in the winter in the Northeast, but you're probably still going to have to eat the same amount of meals next week as you did eight years.

Vonnie Estes, PMA:
Yeah. So talk a little bit about what it means for food brands to have a carbon-negative footprint, and maybe give us some examples of some that you've highlighted. What does that mean?

Paul Lightfoot:
Oh, sure. So this is a topic I think, you know I get excited about and it's inherently exciting. So carbon negative literally means you sequester more carbon than you admit, right. You draw down from the atmosphere more carbon or carbon equivalents than you released in the atmosphere. And so what that means is that if you find foods that have carbon-negative footprints when you eat those foods, the atmosphere has a little bit less carbon in it than when you started and there's some terrific examples that I'd love to give. Here's an example of a category that people maybe don't think about that often, but it seems as if oysters are a product that pull carbon from the atmosphere when they're growing and when you eat the meat of the oyster, the animal protein of the oyster, a lot of that carbon remains in the shell and it's essentially permanently sequestered.

Paul Lightfoot:
It can go into building materials, you can throw it back into the ocean essentially becomes a shell that'll a long time. And if we had as many oysters, New York Harbor, I think had half of the world's oysters, when Henry Hudson sailed up the Hudson in 1609, we've harvested a billion oysters around New York City since then. And now there's only a tiny slice of what was once there if we brought back the number of oysters, which, by the way, makes the water cleaner, provides jobs, there's almost nothing bad about that. It doesn't require feeding there's no feed that goes into it. There's no fresh water that's consumed. You're actually just going to end up with less carbon in the atmosphere than you had before. And if you think about what else could be like that, right?

Paul Lightfoot:
You know, you could grow wheat in a regenerative fashion. And I won't try to define what regenerative agriculture on this call is, but some of the practices include refraining from tilling the soil, using cover crops all year round. When possible, using fertilizer from animals instead of from chemical processes like the Haber-Bosch system. And there's a handful of those practices as well. But when it's done in a thoughtful way, and it's rotated in a thoughtful plan, it has been proven by lots of research and by practical applications that crops like corn, soy, and wheat can be grown in a way that sequesters more carbon soil than is released by the lifecycle of the product. And then you could find yourself choosing regenerative bread brands where you're eating bread that is regenerative. There is a Scotland based beer company called BrewDog that uses solar for a lot of its energy.

Paul Lightfoot:
It built a giant forest and its facility. And right now, because of that forest, it's drawing twice the carbon from the atmosphere, then it releases in its manufacturing process. So every beer that you drink, Vonnie, from BrewDog, is sequestering a little bit of carbon. So if you really care about climate change, they'll drink as many of those tonight as you can. And I've probably talked about belCampo meats on the West Coast. We're not far from you near Mount Shasta, they raised their cows in a way that it's pastured on land that's used in a way that it's also regenerative, right. So I'm going to probably feed my kids hamburgers tonight that's from that farm. And again, it's a little bit better for the carbon atmosphere than before it existed.

Paul Lightfoot:
I'm probably the only one in this newsletter that's making a list of these things for people and the newsletter is relatively new, but a couple of years into it maybe the newsletter will have an index of like here's products you should think about shopping if you want to be part of the lever to reverse climate change. And what I really hope is that consumers will start to recognize that they need to be choosing foods based on the carbon footprints and when that happens, I think you're going to see a virtuous cycle of more consumer demand that begets more and more products that have these footprints.

Vonnie Estes, PMA:
So this ties into two questions I had. One is around scalability, and a lot of these brands are great local businesses, and we love them. We love to have them. We love to support them. Can they scale to a level that is going to make a difference around carbon? And then secondly, where is the consumer and how do we bring the consumer into this conversation so that these brands and some of the bigger brands can actually do these practices and make a difference?

Paul Lightfoot:
Yeah. So and I do like to make a point that I'm a capitalist, right? I'm a staunch environmentalist, but I'm not a socialist and I'm not someone that thinks that we need to shut down the food economy to save ourselves. I actually, and I wrote a newsletter about big food that suggested that big food is a big part of the problem, but they might be part of the solution and that upset some people, right. That think that the small holder producers are the future and I don't have anything that's small to producers and I have lots of them in my pantry right now. But if we're going to, for example, replace all the trucks from food distributors, it's going to be easier to do it with the four giant food distributors.

Paul Lightfoot:
And it is going to be by starting a million regional food distributors that won't have the same access to capital, that may not have consistent sustainability initiatives. So I think that business models that scale, scale. Business smells that don't scale, don't scale. I'm going to be trying my best to identify the ones that do and to celebrate them. I'd actually give you that oyster example. I think that there's a massive market opportunity for oysters around the world. It doesn't take up land. It doesn't pollute anything. It makes the water cleaner, perhaps kelp it's similar. If we could replace some of the soy and processed foods with kelp-based nutrients that's similar to oysters and the way that it grows very little input, it's better for the environment, pretty cost-effective to produce and there's been an enormous amount of research.

Paul Lightfoot:
I would suggest looking at the Rodale Institute or the IPCC report that suggests that a lot of the row crops that are grown in a way that's bad for carbon can be grown in a way that's good for carbon at enormous scale, and the NRCS, the division of the USDA that teaches farmers how to operate well has been teaching this for a long time for decades. It's not some new concept for the NRCS or for the USDA. It's getting farms to adopt it's what's going to be important. Really importantly, we haven't talked about farmers in this conversation and my newsletter is not celebrating farmers. It's celebrating brands, but the brands aren't going to be worth much if they don't have good farmers that are able to succeed. There is a lot of data that suggests that yields would go down when they leave behind their current practices and move to regenerative practices, but that their costs will go down even more.

Paul Lightfoot:
So you'll see less yield, but you'll see higher farm income. And that will be welcomed by farmers, particularly younger farmers. And we need the younger farmers in this country, right? We're sort of aging out or farmers. A lot of today's farms feel like they're on a treadmill of higher yields and lower-income and that turns out not to be sustainable either. And again, I believe that sustainability has a way of imposing itself on systems. So I think that a lot of farms are getting it now that moving to regenerative practices for those sorts of crops is quite doable at scale and when they do it, the yields will go down and their incomes will improve.

Paul Lightfoot:
And I don't want to leave this concept out here that we're going to grow this food, and we're going to starve, right. I made the joke about my business model is based on feeding 10 million people. I also feel like when I hear people say, "We don't have enough food to feed the people." I think that's just so obviously not the case, right. You know, 40% of food is wasted right now.

Vonnie Estes, PMA:
I asked Paul to talk about his view on organic food and how organics connect and don't connect with regenerative Ag.

Paul Lightfoot:
I'll start by saying that the idea of organic is a great one, right.

Vonnie Estes, PMA:
Yeah.

Paul Lightfoot:
And my family eats a ton of organic food. So I'll start by saying, I don't want to be a hypocrite. I don't want my kids to hear this and comment online that I'm a liar since our pantry and our refrigerator is full of organic food. So my actions are clear that I do support organic. At the same time, and I'll say this directly, the organic movement has failed to achieve its goals, right. If I think back to what we were trying to get done when this country adopted the organic standard, it was to reduce the use of pesticides. It was to make food healthier. It was to make the environment better when it comes to the agriculture system and we just simply haven't done those things, right.

Paul Lightfoot:
First of all, look at the fact that only 1% of US farmland is organic, right. It's not even material, it's completely de minimis in terms of the impact it's having on US farmland. I think something like 6% of our food is organic, right. So we're importing all of that, maybe it's doing good for the places that we're importing it from, which would be fine. It's just not doing it on a material basis in a way that's changing the American farm system. So, but I would also argue that pesticide use has skyrocketed in the last 10 years, right. I thought we were supposed to get less pesticide use. And then finally, and I will say that I don't think this was well understood, when the USDA adopted the organic standard in 1990, I don't think it was well understood that being organic didn't mean being good for carbon emissions.

Paul Lightfoot:
And there's just lots of cases now with food being grown that meets the organic standards but isn't doing much for carbon emissions. And in fact, maybe it's a bad actor for carbon emissions. There are regenerative, organic standards out there. They're not adopted by anybody yet, they're not official, I don't think. That sounds like a great idea to me, right. Have both but for now, yeah, I think organic has proven to not meet its goals and it's a shame and if consumers think that, Hey, I'm doing everything I can, I'm eating organic. Like, I'm playing my part here. It's not my fault that we have climate change. They shouldn't feel that way, right. They're going to have to make more choices than just eating organic.

Vonnie Estes, PMA:
Yeah, I agree with you. I mean, the organic movement started in a really great place with great goals, but I think times have changed. It's like a lot of these rules that were put together decades ago. And I think really looking at incorporating different practices and having slightly different goals and measuring those goals makes a lot of sense. If what people think they're doing is buying more nutrient-dense food, that is better for the planet to grow. That is more sustainable. That's better for the soil that needs to be looked at and re-evaluated.

Paul Lightfoot:
Yeah, absolutely. And I don't think we're likely to see that just because it's organically grown, it's got better nutrient density than we used to have in this country. And this is maybe too much down the rabbit hole, but nutrient density of food is really highly correlated with the carbon footprint of food, right. Or I should say, the lack of carbon footprint of food, right. When you have the biodiversity in the soil, when you've got that microbiome of the soil, it's because there's biodiversity and carbon matter in the soil. That means it's got generally storing carbon. It's good for the carbon footprint of the food, but it also leads to a lot more nutrition in the soil, but it's early days for that. I barely understand that, maybe I don't even understand it that well. I don't think most consumers even would know what we're starting to talk about here.

Vonnie Estes, PMA:
So you-

Paul Lightfoot:
Wait, but I do think, actually, I'm not pessimistic about the role of consumers here, right. I want to talk about what I think is going to happen, right. I know that consumers care about climate change right now. That's not up for debate, there's been an endless amount of research that's made that clear recently, of both parties in this country and people all over the world. What people don't know is the carbon footprint of their food, but they're starting to ask it. And lots of food companies are starting talking about it, including big food companies, which again I think shows the positive role some big food companies could have in this and I think that consumers are going to pay more for and choose foods with carbon neutral and carbon-negative footprints.

Paul Lightfoot:
And I say that knowing that there's been a lot of market research that says that consumers won't pay more for food, that's better for the environment. So a lot of marketing experts say, "You're being naive, Paul, in thinking that people will pay more for green products because research has shown that they won't." But I disagree when I look at the organic movement, which, as I said, I don't think has made the planet that much better and I don't think it's proven to be healthier. People are buying more organic food, it captures more and more market share and they pay a huge price premium less than it used to be, but it's still huge. They're doing it because they perceive it to be, whether it is not, they perceive it to be better for the health and better for the environment.

Paul Lightfoot:
And that's more important to me than research data that's actual market data, right. So once we can show consumers that food with carbon-neutral and carbon-negative footprint is both better for the health, which it will be because there's more biodiversity in the soil and that it's better for the environment. And it's actually better in lots of ways. It's better for water, it's better for runoff, but particular, it's better for the climate, which is every young person's number one priority right now. People will choose it over foods that don't have carbon-negative or carbon-neutral footprint. And that's going to cause an enormous flight in consumer demand to foods with carbon-negative and carbon-neutral footprints. And that's going to create, I think, one of the greatest entrepreneurial opportunities of our lifetimes, you're going to see food startups that grow fast and achieve success in ways that we probably haven't seen, in my opinion, since the.com boom of the late 90s.

Paul Lightfoot:
And even though it corrected itself, the internet industry didn't go away, as we know, right. And it's going to cause an enormous amount of capital flow in from growth, private equity metric capital firms. And I think a lot of them are going to make a lot of money and good for them. I hope they do. It'll create a virtuous cycle where we see more and more businesses that do these things. And the big food companies will either see the writing on the wall and they'll create their own carbon-negative food brands and I hope they do. And if they don't, they'll acquire the startups and that's fine, too. They'll reward the entrepreneurs and the investors for taking the chances to compete with them.

Vonnie Estes, PMA:
That's it for this episode of PMA Takes On Tech, thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts, please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

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Description:
This episode focuses on the success story of fruit production in Chile. The public and private sectors have worked together to expand production of fruit using all types of technology and innovation. In 2019, the fruit-growing sector in Chile achieved record exports, of over $6.5 B US dollars with an increase of 3.6% compared to 2018. This is a reflection of Chile's strategy of expanding into new markets which has led to a significant increase in the number of export destinations, up from 78 markets in 2003 to 129 in 2019. Hear about the work being done in both sectors. And enjoy your winter blueberries.
 
Speakers:

• Andres Rodriguez, Agricultural Attaché to the United States & Canada, Embassy of Chile
• Stanley Best, Director Nacional de Agricultura de Precisión, INIA, CRI Quilamapu
• Alvaro (Al) Eyzaguirre, Director Ejecutivo Fundación para la Innovación Agraria (FIA), Ministerio de Agricultura - Chile
• Gaston Dussaillant Venezian, CMO & CFO, Capta Hydro

Vonnie Estes:

Welcome to PMA Takes on Tech. The podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, Vice President of Technology for the Produce Marketing Association, and I've spent years in the ag-tech sector. So I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry, and then discuss several possible solutions that can be deployed today.

Special New Fruit Licensing, SNFL, is a global leader in the research, development and licensing of premium grape varieties worldwide, servicing nearly 900 growers across 16 countries. Through 25+ years of experience, SNFL is committed to delivering tomorrow's varieties of table grapes today. Their proprietary in-house grape genesis program converges agronomy with flavor, creating value for growers, differentiations for retailers, and taste for consumers. Please visit www.snfl-group.eu for more information. SNFL, delivering science, technology and innovation in partnership with nature.

We are especially happy to have SNFL sponsor this episode, because of their strong presence and support in Chile in table grapes.

This episode is focused on Chile, the largest fruit exporter in South America, responsible for 60% of all fruit exports. Chile is the leading exporter of fresh blueberries, grapes, plums, dried apples and prunes. It is also the second largest exporter of avocados, cherries, walnuts and raspberries. Grape is the leading fruit, followed by apples and blueberries.

In 2019, the fruit growing sector in Chile achieved record exports or over $6.5 billion USD, with an increase of 3.6% compared to 2018. This is a reflection of Chile's strategy of expanding into new markets, which has led to a significant increase in the number of export destinations, up from 78 markets in 2003 to 129 in 2019.

In the last decade, the Chilean government started to seriously consider public and private investments in the development of agricultural innovation in the country. In collaboration with the World Bank, the government implemented a plan to fund technological agricultural innovations to project the sector into the future. By 2017, the government had begun to work with farmers, private investors, researchers and technology firms to develop functional ingredients and specialty additives of natural origin in Chile. This project had a public investment of $3.6 billion USD.

Technology has played a big role in this boom. Technological improvements enable new varieties, earlier crops and improved quality and improved shelf life for exports. In this episode, we will hear about the public-private relationships, and its value to the produce industry in Chile. First, we will hear from Andres Rodriguez, the agricultural attaché to the U.S. in the Embassy of Chile. He is also a friend and prior employee of PMA. Andres talks about how Chile got from Ag1.0 to now Ag5.0. He also introduces the importance of innovation to the Ministry of Ag in Chile. Innovation is a major pillar, as we will discuss later, with members from the INIA, which is the Ag Research Institute, and the Foundation of Agrarian Innovation, FIA. Let's drop in to the conversation with Andres.

Andres Rodriguez:
Today I'm currently the Agricultural Attaché of Chile to the United States and Canada. My background in Chile was mainly related to the trade associations in the agricultural sector, and my last position in Chile was representing PMA for the Chilean members.

Vonnie Estes:
Great. We love that. When was that, when were you working with PMA in Chile?

Andres Rodriguez:
I worked with PMA in Chile until May 2019. Yeah, so it was very exciting to work with PMA in increasing the memberships and trying to develop more interesting initiatives for the Chilean members. We created different task forces, and webinars, and seminars, and many different things that were very interesting to develop. It was a great challenge.

Vonnie Estes:
Some of the listeners to this podcast may not be aware of what food is grown in Chile. Can you tell us what's grown there, and how much is exported, or if it's just grown for the internal market?

Andres Rodriguez:
Well, Chile as you know is a small country. We have a population of about 19 million people. But it's got a great potential of agriculture. And we mainly focus on exports, so there is a great proportion of agriculture that it's for our exports. Today, if we consider all the food sector, Chile exports approximately $18 billion in food products, and actually it's the second largest industry after mining. And for far is the main non-mining in Chile. If we consider only the produce sector, today Chile is exporting about $6 billion in fresh fruit, mainly. Basically table grapes, cherries, blueberries, stone fruits, palm fruits, kiwi fruits and some others.

Vonnie Estes:
Great. So, this podcast focuses on technology primarily. Can you talk about what technology is being developed and used in Chile in the food supply chain?

Andres Rodriguez:
Yeah, well I would say that probably similar to what has happened in the rest of the world, we moved from agriculture 1.0 to agriculture 5.0 where we have that transit from the Asian times of the agriculture, like the basic agriculture, then moving to the use of materials in agriculture that was very important in Chile as well. You see a lot of the use of machinery in the agriculture. And afterward, moving to agriculture 3.0, with the use of high tech sensors of automatization, a lot of that today you see on the fields and also in the facilities that process fruit in Chile.

Then agriculture 4.0, with the use of data, a very data driven technologies, like big data, the use of, for example internet of things, and many other trends that we could see at that point. And today, even reaching the agriculture 5.0, it has more to do with the artificial intelligence, with robotics applied in agriculture as well. So we have seen probably all those trends. Chile has a very long agriculture tradition and history, so we have been developing our own technologies, but also importing many technologies from overseas. Chile is very well connected with the world in this regard, actually Chile is a very open economy, so we are always looking for new technologies, what can be imported, what can be improved, what can we export also to other markets, in many other fields but also in the agriculture.

And I would say that something that probably has been very important especially in the last years has been how to be more efficient in the use of water. So, that has been something crucial that probably, with the climate change and many other factors, the world is facing this huge challenge, and Chile of course is not an exception.

Vonnie Estes:
You mentioned that some of the technology is developed there in Chile, so what is the ecosystem for developing ag technology in Chile? What does that look like, and how could it be further developed so that you could have people in-country developing technology for you to use, that understand your market the best?

Andres Rodriguez:
Well, I think that today there is a good environment for innovation in general, I would say. Actually if you see the Chilean government, actually for example doing a Zoom in the Ministry of Agriculture, innovation is one of the main pillars of the Ministry of Agriculture. Actually under the Ministry of Agriculture, you have two main agencies that are INIA, that is the Research, Development and Innovation agency, and you have FIA, that is the Agriculture Innovation Foundation, which mainly promotes the innovation in the agriculture sector and the ag food chain.

And besides what the government could do in this regard, we see today that agriculture is much more trendy, I would say, than before. Because usually, years ago when you were thinking about innovation, probably you were not thinking necessarily about agriculture.

Today I would say that especially because Chile is important in agriculture production, all the innovation and the technology, it's also focused in this important field and important sector for Chile. So I would say that besides what the public sector could do in this regard with funding some projects of course, but also working together with the private sector in terms of a strategy nationwide, and how we can approach these common goals.

You see also that there is a different mood in general in the private sector as well. In the universities actually there are some incubators that are also including some agriculture projects within their portfolio, but also even seeing some incubators that are focusing on agricultures specifically. So yeah, so in general I would say that today there is an interesting environment to develop new technologies and innovations related to the agricultural sector.

Vonnie Estes:
And it sounds like, with these accelerators and these different companies, who's investing the money to get those going? Is that government, or NGOs, or external money from outside the country? Where's the funding coming from?

Andres Rodriguez:
Well, in some cases you see the government, that it's funding. Normally part of those projects, or depending, there are different models of course. But you see some other funds coming from the private sector as well, even from these accelerators or private investors that are interested in increasing the productivity, the yields, or being more efficient in terms of resources in their own companies, or in a certain cluster within the agriculture. So yeah, you see different models, but funds coming from the private and public sector for sure.

Vonnie Estes:
Okay. My last question is, you mentioned water and how important that is, and that's important everywhere. Some places it's important because there's too much of it or it falls at the wrong time, but with climate change that's changing, and people are trying to respond. Do you think that's the most important area for technology to be developed for in Chile right now, or what do you see really needs to be developed and moved along?

Andres Rodriguez:
Yeah. Well, I would say that for sure one of the main issues in Chile, it's water management. And as you say, probably worldwide. But yeah, beside the water management, that it's one of the main challenges, I would say that today, for example, producing with less pesticides, for example. Being more sustainable in general, not only with the use of water resources, but also the soil erosion, for example. Being more productive, lowering the costs and producing more. I think that the technologies can be very helpful in all those matters.

And also, for example, the traceability. That's something that's been a trend worldwide in agriculture. I think, for example, and especially in the companies that are currently exporting to the States, it is a great aspect to consider, for example with FSMA, this must to be able to have the traceability from the farms to the final customer here in the States. So I think that the technology, the innovation could be of great help to achieve those goals for sure.

Vonnie Estes:
We will now hear from Stanley Best, from the Ministry of Agriculture in Chile, INIA, which is the Agriculture Research Institute. Stanley talks about bringing technology to the farm, and how adoption occurs. He also talks about where innovation comes from.

After Stanley, we will hear from Al, who graciously said I could call him Al because no American can pronounce his name. Al is from the Foundation for Agrarian Innovation, or FIA. Al has had a long career in both the public and private sector, and has some great insights on the power of plant breeding, and Chile's adaptation to climate change. First, Stanley.

Stanley Best:
Okay, today Agriculture Research Institute of Chile, is the government institution that make, or is in charge of the research in agriculture and forestry in Chile. We have a part of our resources are coming from the government, and another part coming from the private sector. In Chile, we have a mix. It's not just the government that give the resources for the research.

Each money that the government puts, there must be some money from the private sector. With that you make the research more close to the necessities of the sector. And this is the way that we work in here. Our mission is related to the maintenance and sustainability of the agricultural sector, and improve the incomes of the people in the different relative states. The big farmers, medium farmers, and the small farmers, because sometimes they need more help. In the area of research, maybe it's in the healthy part, but in the area of technology and transparency, that maybe is in the lower part of the producers.

Related with myself, I study agronomies as a base, and after made my Master's in agriculture engineering and bio sources in agriculture engineering. It was in U.S., and after I came here and I started running all the research to make with the precision farming. That was the first wave of the technology that we have it around the world. And this opened all the different things related to the technologies, but it was a little lax in the connection with the real life in agriculture. And this, I think in the last five or maybe a little more years, everything changed into the agriculture 4.0 that is more related to the artificial intelligence, they put more knowledge and they analyze all this data that you get from the technologies, machinery, and all these things that they were coming from the precision farming. Pulling down into the connection to the user experience. The farmers and the companies, the lag or the distance between the actual knowledge and the farmers is huge. You need to see how you can pull down all this knowledge into the possibilities of the farmer to use.

This start to change, and with Corona Virus, related what we're doing here, the connection, the communication through the internet, or all the ICPs that they are evolved today with the necessities for the Corona Virus that you cannot go to the fields, or many things like that. Made inquiries in the advance in the technology to set it by the farmers and company, they start to change.

And this in fact will open other things like the possibilities, new regulation and new things that they start to coming from the different sector. In Chile, we are a country in which our agriculture is more supported by the fruit production and wine production, I'm sure you already drink Chilean wines. This is our big business as agriculture. Additional crops, or cattles, or these kind of thing, they are not big in Chile, it's just for something for us. And we have big, big, big countries like Argentina, Brazil, that they are next to us, we cannot compete. In wheat, or in corn, or cattles or other things.

This area is to maintain us in Chile, but our big business is related to fruit production and wineries. And in these areas, we need to improve the quality, the safety issues related to the production, maintain the environment, many things that the commercial area start to searching in this kind of product.

Vonnie Estes:
How do you work actually with the producers? Do you have seminars, or when it's not COVID do you go out and visit the farm, or do you have projects that you set up? What's the interaction?

Stanley Best:
The interaction between the companies is we're working, really close connection with the companies. Companies see the problem that they have, related with whatever issue, irrigate, infection, whatever. They come in to us, we start to talking, to see the possibilities of solution, and we apply for a grant. That is related with money from the government and money from the companies, and we work with them. And after getting the solution, we open through the seminars and technology transformation of fields, indoors, and we start to make a really connection with companies. Serious companies too, because finally the producers, or the company that produce something, they want a service. They want something that maintain the system by the time. That way we start to working as an institution with this company, not only to support and increase and develop a new area of business that is the technology business to support the company.

In my institution I am the National Director in the Digital and Agriculture. Everything that is related with electronic, informatics or whatever in Chile, I'm in charge of that. And we have 12 different centers around, you know Chile's pretty long.

We have from area with ice and in areas that is the biggest desert in the world. That is quite big differences in weather, in which each area create an environment of development of the producers that is different in the north than in the south. We have different station connection with these companies, and they start to develop new technology and make the knowledge a fit for them with the universities, with the service company, try to create a support, push out the startups and these kind of things.

Vonnie Estes:
Where does the technology come from? You mentioned universities, does some of it come out of universities, or are they companies that are being companies in Chile, or is it technology out of the country? Where does the technology come from?

Stanley Best:
What we start to see, and I think it's all around the world, private companies, service company, there are so many development of the capacities like tasting that they are in the market right now. Not like in the past, that they were just in the universities or these kind of centers. But today there are a lot of research that is making into the companies too. And in this area, that is more related with the technical things. Sometimes they know the electronic or informatics or these kind of thing, but it doesn't have the connection with the way they work in the field, the agronomy part.

And in this case, we started working with them too, to get advances in this area. This capital is coming from the Chilean companies that they start to create, as well as it's coming from outside from Chile, to Chile through some dealers. That they start to try to sell this kind of technology, but sometime it's difficult because one of the problem that we found with the digitalization of the agriculture is there are different companies. You have the companies of irrigation, you have the company of fertility, you have different company. Sometimes the inter-operation of those companies is not that good.

And a company, for example if I were a vineyard, I want to have just one thing which I can see everything.

And this simple operation, it starts to create, not just in Chile, I think in U.S. and Europe and different areas, that the development start to create a connection through the APIs to get this inter-operation through the different systems. And if you see a little bit high, you start to see big companies like Dole, with the global ending, you see IBM with their system. They start to create this inter-operated environment that they start to combine. And this is what we're talking around now, because with that amount of information you start to create artificial intelligence. You start to create intelligence for the data, to create it specifically. This is what we are in right now, I see it all around the world.

Vonnie Estes:
Yeah. What areas of research and solution development needs more work? Do you think it's around this area of artificial intelligence and data analysis, is that the most important thing?

Stanley Best:
I think the most important things, it's not in the area of technology development, it's in the refrain. We are a lack of people that understood, as a user. Sometimes you have technology, but their final users doesn't know nothing about this. It's like Chinese, Mandarin.

And it is, in this area I think the technology transfer or the structure of the careers that we have, have not made the evolution that they should have. Because they are not a market, the market is in there but it's growing, it's not big enough to make the change into the universities or the institutions, to create a new issue.

Vonnie Estes:
You have a very interesting career. I want to hear about your current role at FIA, and I also want to talk a little bit about your years with DuPont and all the technology you have seen over the years in the country. First, please tell us a little bit about yourself and your career, including your work at FIA.

Alvaro (Al) Eyzaguirre:
Okay Vonnie, thank you very much. My name is Alvaro Eyzaguirre. I'm working, actually the Director at the Foundation of Agrarian Innovation at the Ministry of Agriculture of Chile. I have been here since March 2018, and prior to that I spent many years, I did most of my career was at Pioneer DuPont, I was there for 29 years.

Vonnie Estes:
How has technology changed agriculture over the decades that you have been involved, in Chile?

Alvaro (Al) Eyzaguirre:
Well, it has been great to see all the change. It has been really a huge change when it comes to technologies and agriculture. I had the luck of being working for Dupont Pioneer for those 29 years. I started on research, so it was basically planned reading, and later on the bio technologies I was working on that. It was quite, quite exciting. Later on I moved into the supply management area, which was also a very interesting area on the seed production. And later on I ended working on the business, responsible for the business in Chile, Peru and Bolivia.

The technologies I saw over my career with Pioneer was amazing. Not only as part of Pioneer, which is of course a leading company, today is called Corteva, Pioneer at Dupont. And this company really gave Chile and other countries of the world top breeding materials which really impact the world, the food security when it comes to high yield, resistant to disease or something. But when you think about overall, biotech was really, really important. Planned genetics, very important.

And when it comes today, when we talk about Ag4.0 is today a reality today here in Chile as it does in other countries, it's probably one of the most challenging things on agriculture today in which some countries can go faster than others. However, no matter where you are located in the agriculture chain, you can be a small farmer and you have a lot of big range of opportunities to use this Ag4.0. Or if you are really a top notch farmer, you can also have... There's always a gap. There's always a technology gap which makes this very exciting. The integration of technologies that today we can see, after as I mentioned in all my years I have seen a lot of very, very interesting developments when it comes to mechanics, automation, later on the precision farming and all those things really added value to the process, to the proactivity of this activity.

And today, I would say that it's really, really amazing what artificial intelligence brings, how you can integrate the information. We are operating today with big data. Big data is a tremendous source of quality information that allows, through artificial intelligence, to come out with precise and accurate information for decision making. And that's something that we think that agriculture is working with living plants and animals. All the growth of an animal or a plant is related to many, many factors. You have temperature, you have the nutrition, you have a lot of things which, if you integrate all this you get the perfect formula on what is needed to really achieve the expectation, and on the other hand use the right resources.

Now, today we know climate change is putting tremendous challenges on people. We need to use the resources in the best way. We cannot go and utilize things like the word abundant. Today we think about water, climate change is really, really affecting. And we think about our case in particular in Chile, Chile is one of the countries worldwide that is suffering the most, or is the most affected by this challenge. Chile has seven out of the nine elements that the United Nations has defined as elements that make a country vulnerable. So we are vulnerable among the climate change, and we're seeing. We have faced a bad, bad drought. A long drought, more than 15 years in which we have not seen the rains that we were used to.

That's impacting agriculture, it's impacting the farmers on their decisions. Some farmers are not able to keep doing what they have done over years. Other farmers, with the glass half full, we have tremendous opportunity. We, at our foundation, in which we are devoted to promote and work on innovation, well we take climate change as a big and exciting challenge. We foresee opportunities to do agriculture or plant crops, for example, on areas that never, ever before you would have thought about it. We are producing almonds, in very southern Chile we are producing wine in Patagonia, we're doing a lot of very exciting things, taking advantage of this challenge that can be terrible for many farmers. But on the other hand it offers opportunities.

Vonnie Estes:
Yeah, and growing those crops in different places is really important then to have the technology that you were talking about in ag4.0, where you are gathering the data and you're understanding what is happening with the temperature, and the water and all of the at information. So I hadn't thought of that, but that's very smart that you're now saying okay, climate change is happening, it's happening to us, and we have this information and this data that we can use to help us determine where we can grow different crops and move with climate change, because you can't completely stop it. So that's very interesting. My next question is, what has been the most surprising to you? That's what surprising to me, but what has been something that you didn't expect would happen, or you couldn't have predicted early on in your career that's happening now?

Alvaro (Al) Eyzaguirre:
All my life I have enjoyed and I have been quite impressed about many, many changes. From very basic farm activities up to high technology things. We think about what communication means, what it means to carry an intelligent mobile on your pocket, and you have access to all the information while you are working your corn out in the field. And that was quite exciting when I was working with Pioneer and doing all the planned reading, I was taking notes out in the field with my laptop, and I was able in the shade of a tree to send all this data to the U.S. and I'm talking about quite a time ago.

So, all these changes have been quite exciting. To me, I would say today, and probably because I'm thinking on the future but enjoying the present, to me agri 4.0 has been the most surprising thing. When we consider this integration of data coming from these sensors, recording the temperature, the air, the soil, and then putting together that with satellite and drone images. And on top of that you get other elements and you do know from signs what a plant or an animal requires to grow in the most efficient and effective way, that's really exciting. And we see today a lot of things that are going on, and at the same time the future, it's amazing.

Something that is very, very important, part of this integration that also excites me a lot. Chile produces a lot of fruits, a lot of food. We are helping feed the world, from being a very small country. However, when it comes to food production, we feel very proud about it. And one of the things that also, besides the nice weather and the soil. Our territory is so broad. We are a very skinny, slim country, however that allow us also to be in a very broad range, a big distance.

Now, something that is also a particular condition from Chile is our light. The sunlight we get here compared to other countries, we do not get any rain at all during the spring and summer time, for example. So most days are clear skies, and compared to other countries in the world it's really a benefit. That allows Chile not only to produce good and healthy food and fruits, et cetera, but also to take advantage or the sun energy. Solar panels are the future in Chile. Chile has the driest and one of the largest desert in the world. That land is not good for farming today, there are opportunities, however it's a tremendous opportunity to generate this energy from sunlight. When we integrate this energy, so low cost energy, together with such a long coast, Chile has 5,000 kilometers of coast, and we have all that ocean, we have all that water there.

So we are suffering from this drought, and we have the ocean there. So there is water. Not the quality water we need for irrigating, however today you can work on that water and have reasonable water for farming, or good quality water for people. And what's the limit there? The limitation on that water direction, coming from the ocean, is energy. But that energy, on the other hand, is becoming cheaper and cheaper. Today solar panels allow you to be very competitive. So, that opens a tremendous, tremendous opportunity for a country like Chile.

Vonnie Estes:
My last question is around public and private sector. So you've worked both in the public and the private sector. What role does and should government play in technology development and adoption in ag, and then what role should the private sector play, and how does that work in Chile today?

Alvaro (Al) Eyzaguirre:
I feel very lucky, very, very blessed to have had the chance to work in the private industry first, and in the public sector later. I was able to learn, and I have been able to learn, and today I enjoy every day what I am doing, and to learn from the differences and the things that we do have in common. And I would say that overall the big challenge that is required here is to work together. The public sector has a lot to offer. Has great people, has resources, has experience, has a lot of things. And on the other hand, private sector can contribute with other elements. You put both together and you get a tremendous synergy. All the big challenges that we have when it comes to water management, when it comes to food security, we cannot do it alone. No matter how big your company, your private industry, you're not able to accomplish and fight these challenges. And on the other hand, the governments along cannot do it. So there is tremendous opportunity. That's a very optimistic and positive message. Together we can absolutely produce much more.

Vonnie Estes:
After hearing from the private sector, we will now hear from Gaston Dussaillant Venezian, from Capta Hydro, a company that designs, develops and markets innovative technologies to improve water distribute in irrigation canal networks. Gaston is a classic serial entrepreneur, and it's fascinating to hear his journey in Chile to tackle two of the biggest issues, water and labor.

Gaston Dussaillant Venezian:
My name is Gaston Dussaillant, I'm one of the co-founders of Capta Hydro. Capta Hydro is a water technology startup, we're dedicated to the development of internet of things solutions for surface water management. Basically what we're trying to do is to have a much more adaptable, more persisting hardware devices that allow our customers to think in hundreds and thousands of devices installed in their infrastructure. And also software that really helps them solve their water challenges.

Vonnie Estes:
What are the problems that you're trying to solve for your customers with the technology you've developed?

Gaston Dussaillant Venezian:
Thanks. First, it's helpful to think, we have two main customer segments. One is the surface water distribution organizations, that in California you know them as the River Districts, or Irrigation districts. On the other hand, we have any organization that uses surface water. That can be farms, agri-business, hydro power companies, utilities and distributors.

The problem that we're trying to solve for them is basically the low efficiency, precision and really low flexibility of the current surface water distribution infrastructure. Which can account for thousands of lost acre-foot per year, and nobody really knows where those losses are, and how much they are, and how to solve them.

The thing is that lots of these losses come from major problems. It's not only seepage in operation, but really that they quickly solved with IAT solutions that allow you to monitor in real time the water flows and also to control them in real time. This problem, for many years it wasn't really a problem, where we had more water and less water demand. But as you know, here in Chile, in California, because of climate change, you have increasing drought, you have much higher water demands, particularly from more permanent crops that have a better water security. There's also environmental relations that are okay because we need the rivers to have water, but all this has resulted in much higher prices for water as we have seen in California this year, and those are prices that we jeopardize the future of some of activities, especially for agriculture. So it's an important problem to solve, to try to recover these lost volumes, and I think that this is one of the most efficient ways to do it.

Vonnie Estes:
And what countries are you working in? You're in Chile, are you in other countries as well?

Gaston Dussaillant Venezian:
Yeah, so we are mainly in Chile. We are also working in Mexico, we have a pilot project in Baja-California, in Mexicali. Also we have plans to do really a roll out for pilots in many different places in Mexico. And also we're trying to do our first pilots in California in this irrigation system. We're supported by the Value Ventures Accelerator in Fresno State University, so through them we also have spoken with irrigation districts. I'm trying really to understand what are the specific problems in California and to adapt our solutions to offer them this year and next year, target.

Vonnie Estes:
So, when you say pilot projects, are those projects that you support and fund, or what makes a pilot project, as opposed to a paid project?

Gaston Dussaillant Venezian:
We understand that most of our customers know other solutions, so they will be a bit skeptic and want to know okay, what's different? Our telemetry device for surface water has a lot of differences, and one of them is that it's really easy to install, and to transport, and it's very modular. So we can send it through flight shipping, and the customer can install it basically by consulting a couple operators. So that flexibility allows us to offer these pilots in a very practical and for almost no cost for the customer. And we're willing for the first ones to do them without cost for the device, they have only to pay for the shipping. It's part of our entry to the market.

Vonnie Estes:
Yeah. So, how many projects total do you have going on in these different areas?

Gaston Dussaillant Venezian:
Mainly in Chile we have around 120 devices installed. They vary from the flood gate and canal gate automation, and also to telemetry devices. They have different models, some measure water height, others measure water flow directly. We also have some ground water telemetry that's more like a complementary business. But we are expecting high growth this year or next probably to reach 1,000 devices in the next couple years.

Vonnie Estes:
Turning a little bit to your background, I was reading up on you and I read that you founded a number of other companies that have been in software and mining and different industries. What got you interested in irrigation, and looking at solving problems in agriculture and water?

Gaston Dussaillant Venezian:
Yeah, thanks for the question, Vonnie. Really I'm 32, I've been an entrepreneur basically the last 10 years. And honestly, it was more luck that I got into water. I'm happy it was that way. I started with the software for retail, didn't really like it. It was just to make retailers richer. And then the mining was kind of like a year, but I also didn't really like the industry. I got into water really by... It was pure luck, because we started the company as a energy technology company for micro hydro power, and the idea was to do hydrokinetic turbines for artificial canals. We were two years into the business, we had some pilots, but we were talking constantly to irrigation districts, river districts, and we realized that energy generation was not their main priority. Number one, two and three was water distribution.

We started to get in to understand the problems, and we realized that one of the important solutions that could be this IOT monitoring and control devices. There were so much need, and there was this big gap between the amount of devices that were needed and the ones that were installed. Because of cost, vandalism, adaptability, a series of issues. And that's where we decided to basically pivot the company 100%, it was three years ago, into irrigation management and water management solutions.

Vonnie Estes:
One of the things I'm trying to do with these podcasts, and looking at different countries, is looking at what's the ecosystem like there and what it's like to actually start companies there. So you may not have a comparison, but was it difficult to start your company in Chile? And how did you get funding, and how did you get started?

Gaston Dussaillant Venezian:
I think to start wasn't that difficult, because in Chile we have lots of pre-seed subsidies, especially for innovative and technology-based companies. But what was really a challenge is once you already spend those subsidies, was to get the further funding for that initial growth, before our break even we're reaching this year. So that was a big challenge. We were lucky to have some angel investors, friends and family mainly, and also we had some debt between the partners that we were able to get. But we realized that that's not necessarily the situation of most Chilean entrepreneurs. Many get into this funding gap, they don't know angel investors, angel investing is not really such a common activity here between wealthy people. They prefer many times to invest in their own companies more than in someone else's so that's a challenge.

And also, the next stage for us now is to raise our serious hay. And really, even though we'll talk obviously with Chilean investors, we're also looking outside Chile. We'll talk with Mexican, also North American investors to see. Because what we're trying to solve is really a global problem, and obviously not limited to Chile.

Vonnie Estes:
Yeah. Are there a lot of startup companies in Chile that are focused on agriculture, or is that not a growing segment as much?

Gaston Dussaillant Venezian:
Yeah, it is a growing segment. In fact, there are a couple that come to mind right now, a couple that are doing quite well in California right now. One with water filtration, it's Biofitlro. Another with precision agriculture is WiseConn. Those already have done some good inroads for us that we're following behind. And also the agricultural sector in Chile has grown so much in, I would say the last 20 years. Fruit exporting is now one of the main businesses, main exporting industries in Chile. Particularly cherries, I think they're growing like 30% a year every year and sending them to China.

Vonnie Estes:
Wow, I didn't know that. Yeah.

Gaston Dussaillant Venezian:
It's almost a $2 billion a year business now. But all this growth has its challenges, right? One of the main challenges is probably water management, that's the big limitation to keep on growing the production. And lots of startups have tried to develop solutions at different stages of the water needs of agricultural businesses.

Vonnie Estes:
Yeah, somebody interviewed me yesterday for a podcast I was on and he asked me what I thought the two biggest challenges were. I said labor and water. And those are two things-

Gaston Dussaillant Venezian:
Yeah-

Vonnie Estes:
... I don't work on as much, but I think those are the two big challenges, yeah.

Gaston Dussaillant Venezian:
I was going to say labor as a second big challenge. It was really exacerbated this year by COVID and obviously immigration restrictions. So yeah, that's another big opportunity I think, lots of startups are focused on trying to solve and automate some jobs. And in fact it's kind of what we're doing. When we install a telemetry device, or when we install a gate automation device, really what we're doing is automating a really mundane task that a person had to go and visually look, once a day, how much water there was, and operate the gate. So everything is trending to that.

Vonnie Estes:
Yeah. Yeah, that makes sense. We've seen a lot of change in COVID where people didn't want to rely on technology. Even if they had technology, there were like, "Oh, I'm just going to go look." And now, since we can't move around so much, I've seen better adoption where people are actually willing to look at the data. And the data is often better, or the task is actually done better by sensors and by information. Yeah, yeah, than actually doing it yourself. So that may, of all the horrible things around COVID, that might be a good thing that comes out of it.

Gaston Dussaillant Venezian:
Yeah.

Vonnie Estes:
It was great to learn about the produce industry in Chile in this episode. Chile's public and private investment in fruit production is why we here in the U.S. are able to eat many fruits year-round. Partnerships between innovation companies, the state and venture capitalists have provided great technical advances in the country, and result in me getting to eat blueberries all year.

That's it for this episode of PMA Take on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com, and wherever you get your podcasts. Please subscribe, and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables and we will see you next time.

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Description:
I had so much interest in being on the podcast in Israel that we are doing Part 2! As a global innovation hub, Israel uses novel technologies to lead the AgTech and FoodTech industry towards a more efficient and sustainable future; it serves as a global laboratory for producing more food using fewer resources. Israeli start-ups are improving traditional agriculture by introducing new, groundbreaking technologies in the field. The country has a strong ecosystem with universities, a long history in food production with multinational VC’s and Corporates involved in financing and strong government support. In Part 2 of our episodes on Israel, we hear from experts and industry veterans on what is happening in Israel and why it is a good place to start a company. The conversation ranges from plant genetics to high-tech sensors gathering data to be analyzed by AWS. Across the entire supply chain from seed to fork, the country of nine million people is full of companies working on cutting-edge innovation.
 
Speakers:

• Vonnie Estes, Vice President, Technology, PMA
• Gil Ronen Founder & CEO at NRGENE Ltd.
• Matan Rahav Director Of Business Development at CropX Technologies
• Doron Meller Vice President at Israel Innovation Institute 

Vonnie Estes, PMA:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, Vice-President of Technology for the Produce Marketing Association, and I've spent years in the ag tech sector, so I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems.

Vonnie Estes, PMA:
Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes, PMA:
Stout Industrial Technology collaborates with customers to build and launch industrial technology solutions that are designed to last. The Smart Cultivator combines a proprietary, agriculturally-proven mechanical platform with Stout True Vision technology to eliminate weeds and cultivate ground in a single pass. Visit stoutagtech.com, that's S-T-O-U-T-A-G-T-E-C-H.com, to learn more.

Vonnie Estes, PMA:
Welcome to Part Two of the Focus on Israel. If you missed Episode 22, I recommend you listen to it as well, where we featured FruitSpec, Clarifruit, Copia Agro and Food Technologies Fund and Tal-Ya Agriculture Solutions. It was a very full and long episode.

Vonnie Estes, PMA:
This week, we return to Israel, as I really couldn't pack any more into Episode 22. In today's episode, we continue to look at innovation coming out of Israel, and why. We talk to two companies, NRGene and CropX, and then finish up with hearing about the Israel Innovation Institute.

Vonnie Estes, PMA:
These three speakers, along with the four from the previous episode, demonstrate the entrepreneurship and innovation coming out of Israel to help feed the world. Let's start with NRGene. We speak to Gil Ronen, founder and CEO of NRGene. Gil has been working with plant genetics for over 25 years. I've been aware of his work in this company and his previous company.

Vonnie Estes, PMA:
What I find amazing is how his company was very cutting-edge 11 years ago when they started, and with all the big technical advances, they still are. Let's drop in to the conversation.

Gil Ronen, NRGENE Ltd.:
I'm Gil. I did a PhD in Plant Genomics. Everything, all my professional career, I was in the genomic companies developing high-end AI tool and make them available to make better seed, better animal breed, et cetera. This is for myself. If we count the PhD as well, it's now 25 years.

Gil Ronen, NRGENE Ltd.:
With NRGene, we started NRGene 11 years ago with the very simple, but straightforward idea to say that there's so much data that we can help in choosing the best seed for every farmer, so while develop the tool that can analyze this data and enable on the computer to find the best genetic combination for every crop, for every geography. This is exactly what we do from the day we started until today.

Vonnie Estes, PMA:
There's a number of people thinking like that now, but 11 years ago, breeders weren't thinking like that. That was pretty revolutionary thinking.

Gil Ronen, NRGENE Ltd.:
Yeah. There were few things that were very different 11 years ago. First, in every significant breeding entity, there is the actual breeding, the classical, the natural breeding, which is done routinely every year, every season, and there was the biotech part.

Gil Ronen, NRGENE Ltd.:
The biotech part was where all the new innovation tools that are non-natural like GMO and gene editing, et cetera, this is where those part were tested the different technologies, and very rarely they were merged into a product. In most cases, even today, most crops and animal are all naturally bred.

Gil Ronen, NRGENE Ltd.:
The technology, the high tech was not involved to that level in the natural breeding, which again, in our understanding, this is a waste of a resource, and this is why we try to change. This was one thing that it was really thinking differently, but then, when we try to realize how much data we need to analyze and what are the tools that are necessary, if you do breeding of tomatoes, for example, so you have thousands of different plant, each of them with different genetic combination, and each of them have about one billion letters in the DNA.

Gil Ronen, NRGENE Ltd.:
You have really a huge amount of information you need to accumulate. You need to store it and you need to analyze in order to find the very basic differences in the DNA that make one tomato taste better than other. This was something that people didn't believe any computer can handle, and even the cloud where they do at the very beginning, they didn't believe it's possible.

Gil Ronen, NRGENE Ltd.:
They say Amazon doesn't have enough cloud power to do this level of analysis. What we did, we try to shrink the data, to condense it to a way that a machine, a computer can handle, and then we can analyze all the data and find those genes, the beneficial genes.

Gil Ronen, NRGENE Ltd.:
This is something even a very, very sophisticated cloud computing company didn't believe this is possible to do, and this is what our challenge, and I'm very happy to say that now we are successful and now many others do similar things.

Vonnie Estes, PMA:
Who are your customers now? What types of companies do you work with and what's an end product for them that you develop?

Gil Ronen, NRGENE Ltd.:
Within the value chain, there are companies that develop new seeds or new animal breeds for farmers and sell them to farmers. Farmer that grow wheat, for example, every year they buy new band of seed of wheat and they sold them and they grow them and they put fertilizing and wait for the rain, et cetera, or irrigate them, and eventually get the yield.

Gil Ronen, NRGENE Ltd.:
Every year, they could get different varieties of seed, and these new varieties is supposed to be more productive, more efficient, resilient, better drought or other stresses or different pathogen. We work with the companies that constantly developing new seed for the farmer and new animal breed for the farmer to make the farming more productive.

Gil Ronen, NRGENE Ltd.:
Those are the companies. There are two types of companies. The company that this is actually their business, they are called seed companies or breeding companies. They are your giant companies in this space like Bayer, Syngenta and Corteva and BASF and Limagrain and KWS. They're all working with NRGene today. This is one type.

Gil Ronen, NRGENE Ltd.:
Another type is companies that say I produce food or I produce a beverage or I produce rubber or I produce alpo paper, and I need to make sure that farmers grow the best raw material for me. If I'm a chocolate company, I need to make sure that farmers grow the highest-quality cocoa. If I'm not able to do that, then I'm losing my business.

Gil Ronen, NRGENE Ltd.:
Some of those companies now more and more take the responsibility on developing new varieties of coffee or cocoa or rubber trees or eucalyptus for paper, and this way they make sure the raw material they made will be produced to the highest quality. This is the other type. This is the industrial companies like food and beverage companies, et cetera, that are involved in breeding because they cannot afford having not the highest quality of the raw material for their end product.

Vonnie Estes, PMA:
Companies like that, do they have the germ plasm or do you work in public germ plasm? Where does the germ plasm come from?

Gil Ronen, NRGENE Ltd.:
This is very good question. Seed companies that sells into pharma, usually they own their own germ plasm. It's very broad, it's very diverse. We have the whole plain ground to sexually-cross between different varieties and choose the best progenies, the best seeds for the next generation.

Gil Ronen, NRGENE Ltd.:
In the food and beverage and other industrial companies, sometimes they have their own genetic material, and sometimes they rely on other resources. It could be public resources, it could be some academia that work, for example, do breeding of cocoa in Africa or something like that.

Gil Ronen, NRGENE Ltd.:
This way, now we need a three-way collaboration between the end producer like the chocolate maker, the breeder which is academia that do, maybe it's breeding of cocoa, and ourselves. In many cases, this is the current situation. We can handle with that. We know how to work with all breeders of all crops and bring the value.

Vonnie Estes, PMA:
If you were working with, say, a chocolate company or a food company like that, if they came to you and they said, "We want a certain trait," how long would it normally take before they'd actually have that trait? I know it depends, of course, but is it 10 years? Is it five years? What's the range?

Gil Ronen, NRGENE Ltd.:
It depends on the lifecycle of the organism, the crop you work with, because we are advanced from one generation to another generation. If we work in cannabis, that you have a single generation in 10 weeks, so it's move very fast. If we work with cocoa, that a single generation could be six or seven years, it moves pretty slow.

Gil Ronen, NRGENE Ltd.:
In those cases, the companies actually need our technology more because what we do, we predict, for a given genetic combination, how the plant will perform in the field. If our predictions are accurate, they can select the best individual before they can realize the full potential of the specific plant that can take five or six years. The longer the lifecycle, the more they need us.

Gil Ronen, NRGENE Ltd.:
If we take a chocolate company, of course they want the highest-quality cocoa, but they need a farmer to grow the plant, and in some regions, because of climate change, there are more seasons of drought or heat or there is a new fungal disease that spread and they need to be able to cope with it, et cetera.

Gil Ronen, NRGENE Ltd.:
They don't want to spray chemicals because they don't want the chocolate to have a ... chocolate with chemicals, no one wants that. We want it to be as clean, as natural as possible. They are coming to us. We are talking to the breeders and they say, "We have very good cocoa trees that resist drought and very good cocoa trees that resist this fungi. We have very good-quality cocoa trees, but this is different tree. It's not everything in one."

Gil Ronen, NRGENE Ltd.:
They ask us to make everything in a single tree. What we do, we do two things. First, we do sexual crosses between those trees that contribute different genes or different traits of interest, and we analyze the full genomic makeup and we actually identify on the computer what are the genes that increase the quality, what are the genes that give the resistance to the fungal disease and what are the genes that help the plant tolerate drought.

Gil Ronen, NRGENE Ltd.:
Now, we can do on the computer and we can predict which of the next progeny will have the genetic combination that will bring all the traits together. Then, they can take them after the crosses, a few, two months after the crosses, they can select the most successful plants according to our prediction.

Gil Ronen, NRGENE Ltd.:
Now they can grow and focus only on them. It will probably take years before they realize that all our predictions are true, but at least they don't need to grow hundreds of thousands of trees and wait for so long. They can focus on those.

Gil Ronen, NRGENE Ltd.:
Because we completed close to 300 projects and our prediction rates are so high, relying on our technology is the best bet they had. This way, instead of getting the same trees in 20 years from now because they need three full generation, they can get it in a single lifecycle or two. We cut significantly the time from the moment they realize this is what the new variety they need until it's ready to use.

Vonnie Estes, PMA:
You recently went public and hired some new senior staff. Congratulations on that. Where do you see NRGene going? What are you planning on going forward with the money you've raised and the staff? Are you going in different directions?

Gil Ronen, NRGENE Ltd.:
In the first years, we build the best technical staff. We are located in Israel. We have 40 technical staff, many data scientists, and they work with software engineers and mathematicians and others, and geneticists of course. They are all working together. This is the brain. This is the brain of the company, and this is the people that make those tools that can resolve very, very tough genetic challenges.

Gil Ronen, NRGENE Ltd.:
Now, of course we are in Israel and we are very good in ag tech, but Israel is very, very small in ag. We have very little land. We have very expensive water. We are not that big in ag. Actually, our technology is required in the US, in Canada, in Brazil, in China, in India, et cetera. This is the place where the technology is required.

Gil Ronen, NRGENE Ltd.:
In order to work closely with the companies that produce the seed for farmers, we need to be also close with the farmers and the grain producers on the value chain. The way we expect to grow is to put a local entity that do the actual project hand in hand with the customers, or that now become more collaborators than customers.

Gil Ronen, NRGENE Ltd.:
This way, we better realize the need, we have immediate use of the technology, et cetera. However, the same brain, the same AI software and the people will run it, we can have one in Israel. We can have 10 different location when we work closely with our customers or collaborators and do the all analysis on the cloud with a single tech team that is very special. They've very unique globally, with very unique capabilities, but they can serve all those project.

Gil Ronen, NRGENE Ltd.:
This is the idea. By doing that, not only we come closer to the customers and we work more efficiently, we are also entitled to co-own the new IP, the new seeds that we produce together, and get royalties from the sale of the seeds for the farmer.

Gil Ronen, NRGENE Ltd.:
We are commercial company, so revenue is also important. We try to feed the world and we hope we do something to improve food availability, but still, we try also to generate more revenue, but by the way of getting the revenue model of royalty or revenue share. Over there, of course the market is way bigger and the opportunity for the company is greater. This is on one end.

Gil Ronen, NRGENE Ltd.:
On the other end, our customers, we work together with them, so if there's no product in the end, we don't get any revenue. We take a risk on the short term with the big opportunity on the long term, because if you develop a new tomato seed variety or a cannabis strain or banana, usually it's the same variety have a significant market share for years. It's not a single year. It could be anywhere from three, four years to 20 years.

Gil Ronen, NRGENE Ltd.:
The fact that we do one effort and then get annual revenues for many years, of course, increase the potential of this project in terms of a revenue for the company. This is the way we believe we need to move forward. Actually, it was announced, but it was in Hebrew, so maybe some of the audience missed that, that we opened a lab in Saskatchewan in Canada-

Vonnie Estes, PMA:
Oh!

Gil Ronen, NRGENE Ltd.:
... to serve the collaborators we work with, yes, in many, many of the key Canadian crops like wheat, canola of course, some of the legume. We have some projects for alternative protein from legume, cannabis and hemp, and other stuff that is very commonly produced in Canada. It makes a lot of sense to be there.

Gil Ronen, NRGENE Ltd.:
We actually now have five people on the ground in Saskatchewan, and this is growing and probably will be doubled by the end of the year. We hope this lab will start to operate and do R&D projects very soon.

Vonnie Estes, PMA:
Great. I have one last question for you. This episode is focused on Israel, and I've talked to a bunch of amazing companies. What has been the advantage of starting your company there, besides the fact you live there?

Gil Ronen, NRGENE Ltd.:
This is a big advantage, yeah. I think Israel is one of the best place for innovation, for several reasons. First, and the most important, you have a lot of relevant, excellent people. If you think of it, if you are a software engineer, I'm not sure working in a startup, working in ag tech is something that is on your radar, but in Israel, it is.

Gil Ronen, NRGENE Ltd.:
In Israel, because there are many architect and biotech companies and because some of this software engineer is used to work three years here, three years there, and sometimes it's in a very, very company, and because we have the high tech hub, we have a lot of real excellent people.

Gil Ronen, NRGENE Ltd.:
Actually, if I think what is the one thing that makes us special is the people. Actually, because they are moving from different companies and different industries, they are very open-minded. It's not like one software engineer work in some kind of a single company for 20 years. They are very open-minded. They are trained and they are practiced to solve challenges that they didn't even think of before, et cetera.

Gil Ronen, NRGENE Ltd.:
This is the treasure. This is the treasure, and I think to find ... now we have 40 people that come from so different backgrounds that can work together, speak together and be able to develop a product together, this is something that is very unique. Again, I was fortunate to hire the right people. This is the key to NRGene's success, no question about. This is one thing.

Gil Ronen, NRGENE Ltd.:
The other thing is, again, although we are Israelis, the global companies tend to work with Israeli companies because they have a good experience. They know we are not working by the book and it's not the most organized organization; however, we are very innovative and we are very flexible.

Gil Ronen, NRGENE Ltd.:
They are not surprised if a new innovation is coming from Israeli tech company, and this is actually open door for us. If you say you are from Israel and you approach a company like there, Syngenta, they say, "Oh, this is so and so. Let's see what their new ideas are now."

Gil Ronen, NRGENE Ltd.:
I was part of the fact that we build this brand of Israeli ag tech, but it started way before I was there. This many, four, five decades of this level of experience, et cetera, it pays itself. This is I believe the second thing.

Gil Ronen, NRGENE Ltd.:
The third is that it's relatively easy in Israel to get what we call seed money. Seed money, the money to start a company, not the seed business with the seed money. It's relatively easy because there are many early-stage investor. Some of them are private investors, what we call angels, some of them are venture capital entities, and there is matchup fund from the government usually.

Gil Ronen, NRGENE Ltd.:
If you are young company and doing pure R&D, you get some matchup fund from the Israeli Innovation Authority. This of course helps you move very faster. I think this is the three main elements that makes Israel the best place to start an ag tech company.

Vonnie Estes, PMA:
The next conversation is with Matan Rahav of CropX. CropX is as high-tech to sensors as NRGene is to genetics. This is a fascinating conversation about sensors, water savings, the cloud, and AWS.

Matan Rahav, CropX Technologies:
My name is Matan. I handle business development at CropX. I joined about two and a half years ago. My background is actually soil and water sciences. During my master's degree, I've conducted a research at a commercial citrus orchard, and that was when I played around with just about any type of soil-sensing technology that was available at that time.

Matan Rahav, CropX Technologies:
When I saw what CropX was doing, I immediately fell in love with the solution and I basically came here knocking on the door, asking for a job. I haven't looked back since. CropX is an agricultural analytics company that revolutionized and automated the farm decision-making process, mostly around irrigation and nutrition management, by developing the world's first, and only, I think, farm management platform that based on real-time soil data, measured by proprietary, self-installed sensors that we developed in-house.

Matan Rahav, CropX Technologies:
We started selling our product in 2018 and we were able to scale quite rapidly. Last year, we became the leading company in the world in terms of real-time installing data points, with almost 9,000 installations worldwide.

Vonnie Estes, PMA:
Wow. What's different about your soil sensors? There's other soil sensors out there. What's different about yours and what kind of information does it give that's different than the other ones?

Matan Rahav, CropX Technologies:
I would say that it revolves around four main points. The first is the scalability. The fact that our hardware is self-installed based on do-it-yourself approach means that we don't have to physically travel for new projects. It doesn't require our boots on the ground.

Matan Rahav, CropX Technologies:
Our sensor takes just one minute to install. Anyone can do it. It doesn't require any calibration or maintenance at all, so it's plug-and-play. This allows us to be the most scalable solution in the market.

Matan Rahav, CropX Technologies:
The second point is the fact that we close the loop. We don't only focus on above-ground data or below-ground data, but we represent the entire soil-plant-atmosphere continuum. With our proprietary hardware, the satellite imagery that we integrate into the platform, and we integrate many additional data layers like topography, crop models, hydraulic models, soil maps and more.

Matan Rahav, CropX Technologies:
Everything gets crunched in the cloud so that we can provide actionable insights, not just raw data, but bottom line, how we can help farmers make better decisions. Everything is done in-house. We have a very large team of engineers, software engineers, hardware engineers, data scientists, agronomists. We have all the expertise in-house to be able to make an impact.

Matan Rahav, CropX Technologies:
The third very significant advantage is that we're backed by a world-class syndicate of strategic investors, like Google's Eric Schmidt's private fund, Innovation Endeavors. He fell in love with CropX because of our vision to become the Google on soil.

Matan Rahav, CropX Technologies:
We have Flex and Bosch and Sumitomo Corporation, a giant Japanese trading company, and Reinke, one of the world's largest irrigation system manufacturer, Finistere, that's one of the world's largest ag food VCs. We have a great syndicate of investors that helped us scale rapidly.

Matan Rahav, CropX Technologies:
The fourth and last point is that I think we're the only ag tech startup that is already starting to position itself as the market consolidator. I know that you wanted to ask me about that later, but we've already made two acquisitions and we're currently involved in another acquisition that hopefully I'll be able to announce publicly soon.

Matan Rahav, CropX Technologies:
I think this already proves that we're not a very young startup. We're already mature. The market syndicate technology risks, these are all behind us. Now really our key focus is our continuing growth via strategic partnerships and acquisitions.

Vonnie Estes, PMA:
Let's touch on that now. I thought that was really interesting when I was reading about the company is that most companies at your stage aren't making acquisitions. Talk a little bit about why you decided to make acquisitions and what that brought to you as a company.

Matan Rahav, CropX Technologies:
Sure. First of all, I would say that you can divide acquisitions into two main objectives. One would be the technology behind it, and the other would be the channel.

Matan Rahav, CropX Technologies:For us, we examine both opportunities as they present themselves. The COVID pandemic created a lot of interesting opportunities that were brought to our doorstep even without us actively looking for opportunities, which is interesting.

Matan Rahav, CropX Technologies:
With the first acquisition, CropMetrics, it was mostly around the channels. CropMetrics started bottom-up. They're not a VC-backed company that started top to bottom. Really it started by farmers to farmers, very local, US-based, irrigation management platform that integrated a third-party soil sensor.

Matan Rahav, CropX Technologies:
They, too, realized that they had to close the loop and get below and above-ground data to be able to provide interesting insights and actionable insights, but they didn't develop their own hardware. They used a third-party soil sensor, which prevented them from being able to scale the way we did.

Matan Rahav, CropX Technologies:
When we acquired them, they already developed a well-oiled solution channel of 150 dealers serving 1,000 clients with a very high retention rate and 500,000 acres under management and over 10 years of agricultural data collected in their platform. With that acquisition, we managed to get an amazing channel into the US farmers segment and to add a lot of agricultural data into our platform.

Matan Rahav, CropX Technologies:
Going back to the second acquisition, it was a little bit different. Regen is the company that we've acquired in New Zealand. They were founded also in 2010, also a well-established brand that have become a local leader in effluent irrigation management. That acquisition allowed CropX first to get a foothold into a new market, New Zealand, and a new product in a new high-value use case, interesting effluent irrigation and the entire dairy industry.

Matan Rahav, CropX Technologies:
Before that acquisition, when we started, we were focused on irrigation management. Then slowly we've developed into nutrient management, but for crops, and that really unveiled a completely new market for us, which is the dairy industry. That was thanks to this acquisition.

Matan Rahav, CropX Technologies:
Also, that has increased our sustainability offering, helping farmers prevent runoff and leeching of cow manure, basically. Also, we've added I think over 100,000 acres under management in New Zealand, including some very important strategic corporate customers that Regen were serving.

Matan Rahav, CropX Technologies:
This also strengthened our sales network. With ag tech, it's very important to flatten out your seasonality curve, because what if you only operate in the US? Then your season is around three months, and then in the remaining year, you basically have to sit down and wait and prepare for the next season.

Matan Rahav, CropX Technologies:
By opening the New Zealand market, we were basically able to have business all long year long, and obviously, recurring revenues from hundreds of active farm clients with a very high retention rate. All of these things were made possible thanks to this acquisition.

Vonnie Estes, PMA:
What geographies are you in, then? You're in New Zealand, you're in the US, you're in Israel. Where else are you?

Matan Rahav, CropX Technologies:
Almost everywhere, apart for Antarctica these days.

Vonnie Estes, PMA:
This must be partly because it's not a complicated installation process, so you don't have to have people everywhere, so you're really able to scale in a way that other companies probably can't if they have to have people on the ground everywhere, right?

Matan Rahav, CropX Technologies:
Exactly. Usually, when you have a product that is not do-it-yourself like ours, it's usually by first opening a local presence that allows other companies to provide the installation support services, but we don't have to do that.

Matan Rahav, CropX Technologies:
We can reach anywhere with our Zoom meetings and shipping the sensors to be installed by the user. Yes, that allowed us to scale very rapidly and to be able to get to many new places. We have deployments in countries that I never even traveled to in my life. Sometimes I envy my sensors.

Vonnie Estes, PMA:
You wish you could go along with them. You had mentioned COVID earlier, that it had brought some opportunities. How else has COVID affected the company and your deployment?

Matan Rahav, CropX Technologies:
The global pandemic actually served as a great opportunity for CropX. We were very lucky in this regard. Yes, we had sufficient funding and inventory, but more than all, it is our do-it-yourself approach that allowed us to scale very rapidly even during the pandemic.

Matan Rahav, CropX Technologies:
We continued shipping thousands of systems. We actually broke our sales record in that year, and that was thanks to our do-it-yourself approach. That is when all other companies had to stop all new projects because it requires their physical presence or their boots on the ground, but we managed business as usual. We were very lucky in this regard.

Matan Rahav, CropX Technologies:
Also, I would say that during that time, farmers even realized more than ever the importance of being able to remotely monitor their fields. Ag tech got a huge boost during this time.

Vonnie Estes, PMA:
I think we've seen that throughout the whole supply chain, all the way from on the farm through harvesting through shipping product, that people that were used to seeing everything with their eyes had to finally rely on the technology in all those different points.

Vonnie Estes, PMA:
We've seen an uptick of lots of different technologies from shipping and storage and through the supply chain as well. It'll be interesting, as we look back, what a big impact of leap forward technology took during COVID because people couldn't look with their eyes. They had to depend on it.

Matan Rahav, CropX Technologies:
Exactly. It's almost forced adoption and accelerated adoption. Yeah, definitely.

Vonnie Estes, PMA:
Exactly. I have a geeky question for you. I read that you are using AWS. One of the challenges in the industry right now is the need to build and use analytic tools, which, not everyone has that ability. The question is often, do we build or do we buy or do we use a service? How did you decide, and how did you think about that? Maybe that happened before you joined the company, but how do people talk about it?

Matan Rahav, CropX Technologies:
First of all, I think there is no right answer or a formula to this question. It really depends on what the organization is trying to do. We as an Israeli startup, we knew that we could very easily recruit a powerful team that could do that maybe better than anyone else.

Matan Rahav, CropX Technologies:
We knew that there are many things that we are going to build ourselves, and obviously when you develop it yourselves, you have more control of the entire supply chain, including, by the way, hardware manufacturing. We assemble the sensors in Israel. We do everything here.

Vonnie Estes, PMA:
Oh, wow.

Matan Rahav, CropX Technologies:
There's a lot going on. It's very interesting. There are some things that we're considering to acquire because it will be faster than it would be than to develop it ourselves.

Matan Rahav, CropX Technologies:
We spent several years in perfecting our hardware and our current platform, and we understand the time and effort it takes to get there. We understand that to develop products that are very different than what we are doing right now, if it's completely unrelated, it will take maybe the same time that it did to get where we are right now.

Matan Rahav, CropX Technologies:
It might be interesting for other technologies that we're considering integrating into our platform to buy instead of building, and this is also something that we're actually doing at the moment. I've mentioned the potential acquisition earlier that you will hopefully hear about-

Vonnie Estes, PMA:
Great.

Matan Rahav, CropX Technologies:
... hopefully soon.

Vonnie Estes, PMA:
I have one more question for you. These two episodes that I'm doing on Israel, as I mentioned, is featuring Israeli companies. What do you see are the advantages of starting a company in Israel, and are there ways that the ecosystem could be better?

Matan Rahav, CropX Technologies:
I think we are very lucky to have been established in Israel. I think Israel has one of the most successful, vibrant innovation ecosystem.

Matan Rahav, CropX Technologies:
First of all, Israel is a small place. It's very easy to get connected to all different industries and verticals. Just walking around the block, you can see people that have served in technological units in the Army, or you have farmers that are right next to your doorstep, and the kibbutz movement that I told you about before we had this call.

Matan Rahav, CropX Technologies:
Israel is the perfect ... with different technological backgrounds, different experience in a small place. Israel is one of the first country that have invested in what the public sector had invested in private sectors' and academic sectors' R&D. That really created a very interesting type of relationship between the academic sector, the private sector and the public sector in Israel.

Matan Rahav, CropX Technologies:
There's so many communities for every different industry. There's a planet tech, there's desert tech, there's water tech, there's everything tech. Everything has a very vibrant community, such that the different people from the different parts of the industry could engage and brainstorm.

Vonnie Estes, PMA:
I want to hear more about the ag tech ecosystem in Israel, and it certainly seems you are the person to talk to. Please tell me about yourself and the Israel Innovation Institute.

Doron Meller, Israel Innovation Institute:
Nice to meet. My name is Doron Meller. I'm the VP of the Israel Innovation Institute. It's a small NGO, nonprofit, non-revenue, managed around six innovation communities. Growing IL, the active community, is among them.

Doron Meller, Israel Innovation Institute:
What we're trying to do is we're trying to do two major thing. First of all, we're trying to do an ecosystem development. This mean that we want to create and connect all the relevant players in the ecosystem in one sector, let's say the agritech, this is one time, and help the companies, the entrepreneurs and the connection between all of them, et cetera.

Doron Meller, Israel Innovation Institute:
The second thing, we want to create better connection between what we call the demand and the supply. The demand is the market itself, its innovation challenges. It could be a agribusiness company or a farmer region, et cetera. We have the other and we have the supply innovative solution, which means that startup companies and so on, and what we are doing is open innovation processes who can better connecting both side over to get to a pilot better site implementation and so on.

Doron Meller, Israel Innovation Institute:
We do it and what we consider the impact sector like digital, health, smart implementation, agrifood tech, desert tech, climate change and so on. This is more or less the Innovation Institute. I manage also Growing IL as one of the communities.

Doron Meller, Israel Innovation Institute:
What we're working together with the government, in this case the Ministry of Economy, Ministry of Agriculture and Innovation, Israel Innovation Authority, what we're trying to do is create better and bigger ag tech ecosystem in terms of more companies, more investments in growth stage, more employees, more solution towards the globe, and also to help the local industry. This is more or less Growing IL and the Innovation Institute.

Doron Meller, Israel Innovation Institute:
About the Israeli ag tech ecosystem, I think it's one of the maybe top dynamic ecosystem in the sector of ag tech in the world. It's at around 500 company techs, among them 300 startup. Let's say that relatively to the US, it's small numbers, but per capita, it's maybe number one in the world.

Doron Meller, Israel Innovation Institute:
Just mention AgFunder report in 2020 that currently, the Israeli agri food ecosystem raised around $480 million, which is not ... again, relative to the US, it's very small, but per capita, it's first in the world. Beside the companies, we have I would say living research institutes such as the Volcani Institute, the Hebrew University and Weizmann Institute.

Doron Meller, Israel Innovation Institute:
You can connect this the general, I would say, high-tech atmosphere because we see a lot of people coming from that general high tech, from other sector in the high tech that contribute their abilities to create solution who can make better agriculture and better solution for in this term. You can put people from robotic or from AI or from machine learning, and they're getting their abilities and translate it into a better and impact agriculture.

Doron Meller, Israel Innovation Institute:
Another thing just to name that we have in Israel, you can say, traditional farmers, but since Israel establish 70 years ago, we managed to do more with less. I think this is one of the abilities that build the knowledge of precision agriculture, how you can do more accurate water management, fertilizer, et cetera, and I think the Israeli farmer is more open to innovation relative to other farmer on the world, from the world.

Vonnie Estes, PMA:
I have a couple questions off of that. You were talking about linking demand and supply. When you look at demand for solutions, you must be always looking globally as well, because Israel's a smaller company, so when you're working, you're looking at, how can we deploy technology globally. Is that right?

Doron Meller, Israel Innovation Institute:
Yeah, exactly. As we're talking about Growing IL, we consider just the globe. A little bit of the local, but the ag tech market is globally know that we're working also with big companies. Just for example, we did a process of open innovation with Bayer Crop Science, the biggest agrochemistry company of the world.

Doron Meller, Israel Innovation Institute:
They are trying to look around the Israeli ag tech different and new ideation for automation in phenotype on vegetables, for example. This is what we're trying to do. No doubt that we're trying to tackle the global challenges, yeah, the food crisis, climate change crisis, et cetera.

Vonnie Estes, PMA:
When you talk about the amount of money that's been invested, is that also from VCs and firms inside Israel and outside? Where do the investment dollars come from?

Doron Meller, Israel Innovation Institute:
I would say in general that we see a development in creating more VCs with focus in agri food on the world and in Israel as well, but money is invested also from a lot of foreign VCs and also from Israeli funds. Both.

Vonnie Estes, PMA:
The other thing you mentioned that caught my interest was just talking about talent of being able to bring ... that you have a lot of people that are educated and schooled in high-tech disciplines and being able to recruit them into the ag tech field.

Vonnie Estes, PMA:
That's certainly one of the things I think we struggle with more in the US is that a lot of people in those fields can make more money and it sounds more interesting to them to go into other high-tech areas, and they've never heard of agriculture. Why do you think in Israel that you're able to get that cross-fertilization of bringing tech people into ag?

Doron Meller, Israel Innovation Institute:
First of all, I have to say honestly that in Israel, it's also a challenge. It's not that clear that everyone is coming to agritech. In the end of the day, agritech is, like you said, a little bit more risky and could be, will be less invested from some reason.

Doron Meller, Israel Innovation Institute:
It's not that simple, but I think in general, I don't know if Israel is unique in that case that people from some time to time [inaudible 00:48:13] to just develop the next application, the internet side, whatsoever, and they want to do good. They want to do an influence on impactful way on the world.

Doron Meller, Israel Innovation Institute:
They are looking for sectors like agri and food and maybe health, and maybe climate change, to do better, because after you make money and after you did the high-tech scene for one or two or three or five or 10 years, you are looking to make your influence better on the world. I think this is the most present reason.

Vonnie Estes, PMA:
You hear different people say that here in the US, it's like, "I don't need to design another shopping cart for another app." How many times do you need to do that?

Doron Meller, Israel Innovation Institute:
Exactly.

Vonnie Estes, PMA:
That's great. How did the Institute come together?

Doron Meller, Israel Innovation Institute:
I think 10 years ago, exactly 10 years ago, was one entrepreneur, his name, Leonid Bachman, he's still entrepreneur, but now he's the president of the Institute. He said, we have pretty developed high-tech scene, but in the end, the self-entrepreneur is working in his garage all alone, working all alone, and we need to see how we can make a better system to help one sector such as agritech or mobility or something to develop, and then how we can find the market failure and how we can support the one person to be more effective and create more opportunities, more companies, et cetera. This is one thing that we call ecosystem development.

Doron Meller, Israel Innovation Institute:
The other thing that I think that the Institute did in the last 10 years, that working with the government on a area of impact. Let's work with the government of agriculture, let's work with the government on mobility or climate change, and let's not work with the government on internet side or another just application. Let's direct the government to bring their sources, and together, we can do impact from Israel to the world in impact sectors.

Doron Meller, Israel Innovation Institute:
I think this is the most two meaningful reasons why the Institute was raised. Another thing I can say, we talk about the demand side, so in terms of Israel, one of the goals of the Institute is to make a better service pattern and to work within hospital, with public service, and we can create and help to create more innovative service or solution to the citizens, so Israel is enjoyed from innovate solution as well. This is maybe can be the third reason.

Vonnie Estes, PMA:
How would you describe the ag tech ecosystem in Israel and how has it changed over the last five years? How do you see it will change over the next five years?

Doron Meller, Israel Innovation Institute:
I would say that Israel is traditionally, I would say, innovative. You take companies such as Netafim bring innovative solutions, water management since the 1970s, et cetera, but they think after few decades, you can see in the last decade, maybe the last 15 years, a lot of the rise of new companies.

Doron Meller, Israel Innovation Institute:
You can see a layer of 200 new startup who combine with the Israeli scene, and then you see a lot of innovative solution and new solution combined from the tech sectors to the agriculture sector and combined together to a new solution. This is one thing.

Doron Meller, Israel Innovation Institute:
Another thing is you see, even though ag tech is a bit in risk comparing to other sector in high tech, you can see more and more investing in the sector. If you take the 2014 since you see around $50-million investment in the Israeli scene, and now in 2021, you can see around 480. This is another thing.

Doron Meller, Israel Innovation Institute:
I think Israel in the last decade developed a lot of smart farming, precision agriculture solutions, but now, I hope to see, if you talk about the last five years, so we see a lot of dominate in the area of smart farming, a little bit of biotechnology and a little bit of supply chain, and what I really hope to see in the next five years is, first of all, in general I want to see more growth company, maybe even to dream about unicorn something like that, but to see more growth stage, more money, more people work in the ag tech general.

Doron Meller, Israel Innovation Institute:
I think I want to see more solution in the, like we talk earlier about the global link, so more gene editing and resistance on probes and more solution of robotics in terms of the labor issue, which is a very big issue in agriculture, and I would say to see more sustainable agriculture.

Doron Meller, Israel Innovation Institute:
It can come from alternative protein solution, plant-based, et cetera, but also from a regenerative ag and more urban agriculture, indoor agriculture, which I said relatively in this area, Israel is a little bit behind the world. I really want to see more variety in the solutions, more growth companies, and more people in the industry.

Vonnie Estes, PMA:
Great. One thing that's interesting that I'm starting to see is in areas like indoor ag is that as that matures, we're starting to see more and more companies that are developing technologies to support that industry. I can imagine seeing better AI companies or better lighting companies or those water use companies, those types of things being built. It's not just people building the farms, but it's the technology that the farms will need, and that would make sense to get people working on that, too.

Doron Meller, Israel Innovation Institute:
Yeah. Exactly.

Vonnie Estes, PMA:
That's a wrap on my focus on Israel. Working in ag tech for so many years, I was very aware of innovative companies coming out of Israel. What I didn't realize is how many there were, and what a great ecosystem for innovation it is based on generations of doing more with less and developing close-knit communities that work with each other over lifetimes.

Vonnie Estes, PMA:
This is the end of this season, and we're talking a couple weeks off. I'm taking my first flight in over a year to see my mother, then I'll be back taking on Chile, Mexico, microbial solutions, carbon and more. See you soon.

Vonnie Estes, PMA:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at PMA.com and wherever you get your podcasts. Please subscribe, and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we'll see you next time.

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Description:
I turn the microphone around with Tim and Tyler Nuss from The Modern Acre. We hit updates and insights in some hot topics in agriculture. We talk through the recent coming together of PMA and United Fresh, the latest in carbon markets, agtech exits including SPAC’s, indoor farming, and seeing a Rivian in the wild! This episode has it all.

Speakers:

• Vonnie Estes, Vice President, Technology, PMA
• Tim Nuss, Senior Manager, Customer Success at Apeel Sciences, Co-Founder at The Modern Acre, Partner of Nuss Farms
• Tyler Nuss, Group Manager, Commercial Purchasing at Rivian, Co-Founder of The Modern Acre, Strategy & Marketing for Nuss Farms

Vonnie Estes, PMA:
Welcome to PMA takes on tech. The podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host Vonnie Estes. vice president of technology for the produce marketing association. And I've spent years in the ag tech sector. So, I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes, PMA:
Stout industrial Technology collaborates with customers to build and launch industrial technology solutions that are designed to last. The smart cultivator combines a proprietary agriculturally proven mechanical platform with Stout true vision technology to eliminate weeds and cultivate ground in a single pass visit stoutagtech.com that's, S-T-O-U-T-A-G-T-E-C-H.com to learn more. Hello today, we are changing things up and I'm the one on the other side of the microphone. This episode is a conversation I had with the modern acre recently. Listeners of this podcast will remember my interview with Tyler and Tim Nuss on regenerative ag episode 10 on December 8th.

Vonnie Estes, PMA:
I was also a guest on one of their early podcasts. I love talking to Tim and Tyler about their podcast, their family farm, and growing up in the produce industry. Besides being involved with their family farm Tim works for Apeel, a PMA member focused on reducing food waste and featured in episode six. And Tyler works for Rivian an electric truck and SUV company in Southern California. You will hear some reference to me seeing an electric SUV in the wild at the end of the show. Make sure you check out the modern acre. They have nearly 170 episodes and cover a lot of topics around ag tech and they were an inspiration for me to start PMA takes on tech. Let's jump into the conversation with Tim and Tyler.

Tyler Nuss:
Vonnie is a great friend of the show and it was great to have her back on. We talk a ton of different areas that we wanted to just dive in and get her perspective on. She's really an expert in the space. And so, we talked about her starting her podcast. We talk about the million- or billion-dollar question that is ag tech exits. And so she really gives an overview of what specs and why they're getting so popular. And they're so hot right now in the space and the companies that are choosing to exit and IPO via SPAC.

Tyler Nuss:
We also get into carbon markets and just the emphasis on carbon with the regenerative agriculture movement. So, we hit on all the fun stuff today guys. And Vonnie, I think, brings a ton of great insights into it. And we finished this show, talking a little bit about her seeing a Rivian in the wild. So, it's pretty fun as well, but without further ado, let's jump in. Bonnie. It's great to have you back on the podcast. We've built a relationship over the years we've been on your podcast. Want to start there, since we talked to you last on our podcasts, you've started your own. So, want to just talk about how that's been for you, what it was like starting, starting a podcast for you and what you've learned so far.

Vonnie Estes, PMA:
Thanks so much for having me on. You guys were an inspiration to me. And I think we started the podcast last June and it's called PMA takes on tech. And my idea was, especially during COVID, since I couldn't go out and talk to members or travel that I would start, this was a way to continue conversations that I wanted to keep having during COVID. And so we started last June and it was... I was a consumer of podcasts. Your podcast was the first one I listened to in the ag space. And I thought, well, I'll just give this a shot. And we had no idea if it was going to work or not like who is going to listen to this and all the learnings of buying the right microphone and all the things that come with it. But we just dropped today our 20th episode.

Vonnie Estes, PMA:
So we've done 20 and we are in spitting distance of a hundred thousand listeners, which is really exciting. It's quite amazing that we've gotten that many people to listen to it. And the format that I use is usually bring in someone to talk about a problem or a region overall. And then I bring in two or three companies to talk about solutions. And I've recently been doing a lot of work in other regions outside of North America, which has been fun for me since I can't travel, but it's really, I've learned things I hadn't expected and, and looking at these different regions. But yeah, it's really been a great thing to work on and I've really enjoyed it. And just love that I have a following and thanks you guys for being my inspiration.

Tim Nuss:
That's been really fun watching you kick that off and listening. It's a big milestone to hit 20 episodes. It's a lot of work as I'm sure you're realizing, but it's cool to see you going down that path. And I think a really opportune time to get into this space with COVID and the lack of travel in a way to educate yourself, which is something that Tyler and I find super rewarding with the podcast is just talking to really smart people and learning about what's going on in the space.

Vonnie Estes, PMA:
Yeah, definitely. And I think working, I'm right now working on a Singapore episode and Israel episode and a Chile episode. And at this point really talking about how these ecosystems are developing and these other areas. And I wouldn't have asked the question that way. I've done also one in Brazil and Australia, but it's just how I'm thinking about during COVID and doing the podcasts of framing the question of like, what are the ecosystems in these different regions? How are these companies formed? How do they think about going global? In Singapore, if you develop a company and you get investment, you better have your eye globally because it's a pretty small country. So it's been really interesting just to hear about new technologies and how they're being started in other places.

Tim Nuss:
Yeah. I think that's super important. To keep the global lens not just focus solely on us companies. I think there's a lot of innovation like you're saying, out of Singapore where it's really centralized a lot of ag tech popping up there in the middle east and getting the holistic lens on what's happening. Well, Vonnie, we'd like to talk about something that's top of mind for us. We saw in the news recently that PMA and the United Fresh announced a merger. Can you give us any insights into the merger?

Vonnie Estes, PMA:
Yeah, sure. So I'm sure most of your produce industry listeners are aware of the PMA and United Fresh coming together to form one company. And that will start next year, January 1st, next year. And so both organizations will continue to run as they've been running this year. But we're really excited about the groups coming together. And many people have watched this over the years and thought this would be a good idea. I'm forming this new global trade association to serve the industry with the strengths of both organizations. So there's a transition team in place to make it all happen. So stay tuned and see how this all unfolds. And both organizations will continue to have their events that they planned for this year. And the new organization will form at the beginning of next year.

Tyler Nuss:
Awesome. No, really appreciate that update and definitely really exciting, I think, for the industry. And it'll be awesome to follow just that transition. It's definitely a big undertaking, but I'm sure it will be a lot of exciting stuff in the future. So we'll stay tuned for that. Vonnie want to dive into a few different topics that we've chatted about on the podcast. Want to get your take, obviously being in the produce industry and focusing on ag tech. One thing that obviously we talked a lot about in the podcast is regenerative agriculture and the focus on soil health and how that relates to sequestering carbon. So I know there's been just a ton of discussion on podcasts on big news publications. There's a lot of headlines surrounding carbon markets and especially with the new administration, there's been a lot of talks on about that. So we're just left to park here for a few minutes and talk about your thoughts about carbon markets and the emphasis and focus on regenerative ag.

Vonnie Estes, PMA:
Yeah, it's been really amazing. I mean, throughout my career, there's been a couple of big ideas or big things that have happened that have turned everybody and focus everybody's attention. And one of those early on in my career was genetic modification. And I got very involved in that at an early stage. Another one was biofuels and the biofuels industry, and there's a lot of learnings from that in this case, I think. And then I've worked more recently on gene editing and some of those technologies. And so this is another one where suddenly everybody's talking about it. And I think part of it is because of the change in administration and suddenly we're paying a lot more attention to climate and climate change. And then that's brought into looking at how do we sequester more carbon. So I think from an overview, there's just a lot of different forces.

Vonnie Estes, PMA:
We've got companies, we've got the government paying attention to it and starting to put money into it. We've got companies the major food and ag companies like Cargill and General Mills and some of the other big companies. They're saying we really want to talk about carbon friendly practices and regenerative ag. And then we've got consumers now saying, "We're really interested in you showing us that the way that you're growing and that this is good for the environment and that's the kind of food I want to eat." So I think what makes this moment different is that we've got all of those different interests of people saying, "Yes, we want this and we want it now." And then the rest of the market and this whole system is floundering saying, "Well, how do we deliver this? This is really complicated. And we're not even sure how to measure carbon in the soil. And over what period of time?"

Vonnie Estes, PMA:
And so I think it's really fascinating to look at how do we build the system and not. How do we just get a bunch of tools and stack the tools together, but how do we develop the system where producers don't take all the risks producers actually get paid and get rewarded and get supported for sequestering carbon. And that there are tools that are easy to use and that are verifiable. And that there's a system to sell the carbon credits and that's set up and there's a system to buy the carbon credits in that set up. And so that whole system needs to be put into place. And right now it's just a bunch of moving pieces that I think is confusing a lot of people.

Tim Nuss:
Yeah. It's a super interesting space. It still feels very early. Almost like the wild west where you read about these deals. Where it's hundreds of thousands of dollars for carbon credits. And I think the industry is going to mature here quite a bit. Tyler and I get asked about it quite a bit on the farm. Are we into carbon markets? And we've poked around a little bit, but we still haven't found anything for our particular size and scope of our operation that makes sense. We've talked to a few and in a lot of cases, just the cost to process the transaction is more than the value of the credit itself. So for us personally, I think we're viewing it as a nice to have. We're not building into our 2021 budget or next year's budget. But I think we're hoping that in the future that becomes a part and a potential revenue stream to supplement what we're doing with our actual crop revenue.

Vonnie Estes, PMA:
Are you having people approach you saying that they want to buy credits for you or they want to help you set up a way to measure? Are they coming to you and starting to offering you different systems?

Tim Nuss:
Not yet. We've reached out to a couple companies that you see that are popping up in this space us reaching out to them. We haven't really put ourselves out there as far as opening ourselves up to it. I'm not sure if there's a marketplace that exists like that. But I think that could be interesting where farmers that are interested and you can almost start collecting a database of who's interested, who's doing what to understand the addressable market.

Vonnie Estes, PMA:
Oh, that's a great idea. It's a good business motto.

Tyler Nuss:
Hey, it's for sale guys. Anyone listening, hey, if you want to, if you want to approach us we'll figure out a deal. Don't worry.

Vonnie Estes, PMA:
Yeah. I think especially in the produce industry is, like you all are, people aren't really approaching us as much yet as they are corn and soy and then the more broad acre crops. But when you look at it, the crops that you guys grow, there's a lot of carbon in those roots. And so I think really thinking about the produce industry and how we can make this be a positive for people doing what they're already doing or making minor changes. And so I think it'll be really interesting to see how it plays out.

Vonnie Estes, PMA:
But I really see it as, they'll start being some really good pilot programs. And I think putting some government money into is good and some incentives is good and the government has to be involved to get this nascent industry off the ground a little bit but not set it up with a bunch of subsidies and not set it up with a bunch of unrealistic expectations and not have the government pick winners and losers, but just enable the market. But I think it's going to be at least five years before we really have something that that's working throughout the whole system.

Tyler Nuss:
Yeah. I think that's a really good point. One thing I think is important is just the technology. Right? I mean, I think most of these programs or companies are using the comment system, which has a lot of flaws. It's really clunky and it's based on a lot of assumptions. Right? So there's got to be a balance. And I think it's going to happen over the next few years, like you said, of the technology to actually measure this stuff, because I think that'll be a really critical piece of it.

Vonnie Estes, PMA:
Yeah. How do you measure it? How do you verify it? How long? How permanent does it need to be? I think there's a lot of questions there that we just... And then making sure that we're measuring the right thing and what we're doing is really good for the soil and good for the environment. I think you started off this piece, talking about regenerative ag and I think that's such an important part of it is... Yeah. Let's not all focus so much on carbon in the soil, but let's make sure that we're doing practices that actually are better for the soil better for the land and better for the food that we're producing.

Tyler Nuss:
Absolutely. Yeah, definitely really interesting space. We'll be obviously following very closely with what happens in carbon markets and regenerative. But Vonnie want to want to switch gears here and talk about ag tech exits and introductions to the market. So I think this has been a really common theme or question within the ag tech industry over the past five, 10 plus years of, what our exits going to look like? And we've seen a few recent companies going public via specs, as well as a few other exits in the space. So just want to get your perspective on what you're seeing the industry is trending towards right now.

Vonnie Estes, PMA:
Yeah. This is so exciting. I'm so excited about this. It's like exits, we're really having exits. And I remember when I first started working and what we started calling ag tech six, eight years ago. And I got asked to speak on a number of panels where people were saying, "Okay, is ag tech, the new clean tech, and is it going to completely fail?" And money was really nervous about, do we really want to invest in this and is this real? And then in 2017 we had blue river and granular we're two pretty good exits. Pretty positive for the companies. That's 2017. And I don't know if that there's been anything big since then. We still hold on whenever anyone says, "Well, what are the... Oh, there's granular and blue river." But that was 2017.

Vonnie Estes, PMA:
So I'm so excited this year that there's so much going on and SPACs has been, they've been amazing. And I'll just briefly, I'm sure most people know what they are, but there's special purpose acquisition companies. And they're created to raise money that will be used to take a private company public through a merger at a future date. So it's a new way of raising money and it's a little less risky for the company. And I know a number of companies have gone through this. They say, "Okay, if I do another raise, if I do my series D and I raise $400 million, what's my valuation going to be? Or do I do a SPAC and go public and get a much better valuation.

Vonnie Estes, PMA:
And so I think that's why a number of companies, both in our sector and other sectors are saying, "This is amazing. Let's go to market this way because it makes more sense. In my house my husband works for 23andMe and they just announced that they're doing a SPAC. So we're pretty excited about that as well. So it's happening. And it really brings in a number of different people that invest and a different way to go to market than has happened in the past. So there's been 306 SPACs that have gone public in all sectors this calendar year. And sometimes this is a better way of going, an ag may be part of this because the investors in SPACs are looking for more high growth and significant more long-term potential. And so that's pretty exciting. So it's a little background on SPACs.

Vonnie Estes, PMA:
And so app harvest was the first one in our sector that did a SPAC and they got $435 million in unrestricted cash from that. And so what they're going to do with that, they say, is just build more farms and it's a great infusion of cash for them to really be able to expand. And then the second one that we've seen is AeroFarms and their public offering, they're going to be valued at $1.2 billion and their IPO will close it the quarter two of this year. And that will leave the merged entity with over $300 million of unrestricted cash at close. And so AeroFarms again, will have this cash that they can use to expand, which is super cool. So those are the two SPACs that have happened. And then UpHarvest turned around and bought a Root AI. And so that's a great exit for the investors that people in Root AI. So that's another example of what's happening with the maturation of the market.

Vonnie Estes, PMA:
Farmer's Edge went public on the Canadian stock exchange. And so that's another great IPO of a company going forward. There's been some smaller companies that have come together, mergers like Flora Stat, and there's been some other exits of those types. So it really is this interesting maturation of the market. That's so exciting to watch, and it will bring more money to the market as investors see that, yes, we can invest in this space and we can get out and we can make money. I think we'll see more companies going public. This isn't based on inside information at all, but I wouldn't be surprised to see Plenty go public and Impossible foods has already said that they're looking at going public. So I think it's a great time for the industry. I'm super excited about it.

Tim Nuss:
Yeah. It's a super fun time in this space. It's like the saying, "Everything happens slowly then all at once." And it seems like everything's happening all at once in Q1 of 2021.

Vonnie Estes, PMA:
Yeah. While we're all sitting around staring at our computer screens. It's pretty amazing.

Tim Nuss:
It's been pretty cool. Well, the companies that you mentioned, Vonnie, UpHarvest, AeroFarms, Plenty, that you mentioned, all the common theme is that they're indoor farming companies. Anything that you think is unique about indoor farming and why now that all this money is being raised?

Vonnie Estes, PMA:
Yeah. I think it is pretty exciting that this has really caught hold. Especially at a time when it's still hard to show, given some of the high energy costs that we're going to make a lot of money in the U S with these types of farms. But I think they're driving costs down. A lot of the costs are going down with the inputs for indoor. And I think there's a number of things. I think the whole sustainability story around indoor that you're using less, you have to use a lot less crop protection products. They're using a lot less water. The footprint is a lot smaller. So I think that whole story of around sustainability for that sector, and also not having to transport product as far, because you can locate closer to markets. So I think that story is playing really well of investors and has really grabbed people's attention.

Vonnie Estes, PMA:
I think for the PMA members that are in Salinas and then other areas where we're growing a lot of leafy greens outside, I think that's still is a really important part of the market. And I think what the indoor ag growers are doing or are growing the market. They're making the pie bigger. So it's not taking anything away from those that are growing outside. And I also think a lot of the technology that's being developed indoor because the cycle times are fast. And because we're putting these really brilliant computer scientists in there to study how plants grow. I think there's going to be a lot of learnings that we're going to get. And a lot of breeding we're going to be able to do, that we're going to be able to apply to outside as well.

Tyler Nuss:
Yeah. That's really interesting. Taking those learnings where the money's invested there and bringing it outside, I think is really interesting prospects. Yeah. And I think in general, I'm super curious to see how the indoor farming, vertical farming movement compares to the regenerative ag movement and focusing on the soil. Right? And so I think it's going to be to two parallel movements to keep an eye on, for sure.

Vonnie Estes, PMA:
Yeah. I think they can certainly co-exist and people can love them both.

Tyler Nuss:
Yeah. And I think that's what Tim and I have long discussed. I think there's different use cases and I think there's not necessarily a right answer. I think there's there's room for innovation and different techniques and approaches within the space. And it's going to take a lot of work across the industry to push each other. Right? And where maybe indoor falls in some areas maybe regenerative falls short in other areas. Right? So I think it's going to be important to have that competition and innovation in these different approaches.

Vonnie Estes, PMA:
Yeah. And it'll be interesting to see what happens with Indoor beyond leafy greens. I know Plenty has been talking about their work they're doing with Driscolls and developing strawberries and other UpHarvest is greenhouse not vertical but they're doing mostly tomatoes and other crops. And so it'll be interesting to see how that grows and what other crops we can get into. And I think also overseas in areas that it may be harder to grow outside. How is that going to take off? As I mentioned, I've been talking to people in Singapore this week and it's a real push in Singapore. They import 90% of their food. And with the supply chains disruptions this year, they started thinking how do we really push forward and getting more food produced in Singapore if there's a larger supply chain disruption. And so they have a plan 30 by 30, which has produced 30% of the food that they eat by 2030. And so I think looking at other areas where vertical farms may be a better solution for lots of different reasons. Totally

Tim Nuss:
Well, Vonnie, as we start to wrap up here, what companies or trends are you following right now that you're most excited about?

Vonnie Estes, PMA:
So I think this goes with my trend when I was talking about exits and maturation of the industry. And what I like seeing is a lot of the companies that are starting to support these bigger trends. And I sit on this board of a group it's called IN2 and it's, NREL the national renewable energy lab in Colorado and the Danforth center in St. Louis and Wells Fargo came together and work with really early stage companies to just help support them. Both do the science, either at NREL or at the Danforth center and also with some funding to help them get going. And so we just finished up a program with them where it was all about indoor ag technology. So I think they started, I don't know how many applications they got, but they narrowed it down to 33.

Vonnie Estes, PMA:
And then we had to narrow, we the people on the board had to narrow it down to five. And it's typical pitch day where you sit there and listen to 10 pitches. But it was really fascinating to see all these different companies that are looking at different kinds of lighting and different kinds of water and systems and different kinds of breeding. And so I'm really seeing this maturation that we're starting to have companies develop and come up that are supporting the big trends like indoor ag. I think the, I'm always going to talk about genetics. But I think what's happening in breeding is really exciting when you've got a lot of companies like Pairwise and Vincent Hill and companies like this that are looking at using new breeding techniques and supporting the industry with new germplasm and new types of traits.

Vonnie Estes, PMA:
And I talked a startup company yesterday, which is coming out of the indie bio accelerator, and they've got a really interesting technology that's on the very front end of that to help people figure out genotype to phenotype. So do that very first step faster. And so two young guys that are looking at that differently. And so I love that we're starting to see just these supporting types of industries. One other one is around, I know you guys have talked a lot about around robotics and augmentation. And I think a number of the half step solutions, like burrow and some of those which are, get these little robots out in the field now. Get them working now. And then we'll get into the big, gigantic ones that are a little harder. But I love seeing that we're really getting things out that are being used.

Tyler Nuss:
That overview. And I think you're spot on. It's a lot of the infrastructure, the supporting spaces that I think is going to be where a lot of value is created. And hopefully a much of that value is going to the farmer. But I love that overview. Vonnie, this has been a ton of fun. We really appreciate your insight. You're always a wealth of knowledge. As we finish up I just want to ask, what was it like to see a Rivian in the wild? It sounds like you saw Rivian doing some on-street tests.

Vonnie Estes, PMA:
This was so cool. So I was walking down the dog park with my two dogs and I saw it and I was like, "Oh my gosh that's so cool. What is that?" And then I went up and I saw what it was, and it was the paint job was amazing. The whole... It was just amazing. But there was no one around. Yeah. And so I was just standing around and then I was walking back from the dog park and there was a guy and his dog and there's four people standing around. And so I let my dogs drift over so I could start the conversation.

Tyler Nuss:
Yeah. Very casual.

Vonnie Estes, PMA:
Very casual. And then like, "Those aren't even out yet. How do you even have this vehicle?" And so he was opening the door and show me the inside of it. And it was just-

Tyler Nuss:
Oh, that's awesome.

Vonnie Estes, PMA:
Yeah. It was so cool. And he didn't tell me the name of the company, I'm sure you know. But they said they designed the software and you're in Palo Alto. And so it was just this really amazing Menlo park moment where like the dogs were talking to each other and I'm looking at this car that isn't even really out on the street in many places yet. So I was psyched.

Tyler Nuss:
That's pretty awesome. I have not seen one in the wild yet. One of the test vehicles. So yeah, we're getting super close to launch them to the public. Definitely really exciting time for, for us as a company this year is going to be quite the adventure.

Vonnie Estes, PMA:
Yeah. Good luck with that. It was... I felt privileged. It's only because, well, they were asking me like how I knew about it. They're like, "How do you know so much? Because I was asking them about the customer service were you were saying that every vehicle goes out is going to have their own customer service person. And so I just knew way too much. How do you know so much? And so I mentioned you and it was just a very exciting moment. So yeah.

Tyler Nuss:
That's awesome. Well, Vonnie, thank you so much for the time. We really appreciate it. Thanks for being on.

Vonnie Estes, PMA:
Yeah. Great to be here.

Tim Nuss:
So Tye, what do you think?

Tyler Nuss:
We got to talk about all the fun stuff today. So that was really fun. I loved Vonnie's take. One thing I learned was, I've had a negative connotation towards SPAC stem. The connotation I have is, it's for companies that maybe aren't prepared to go the traditional IPO route. And so to get her perspective on actually a lot of the advantages of it, even from the company's perspective and the employee's perspective I think was, was really important. And I think they could fill a huge need within the industry. Especially in ag tech where historically it has been hard to go the path of IPO. So I think there's probably a lot of really strong companies that SPACs may be a fit for. But time will tell about if this whole spec model is really here to stay or if we're going to see a bubble.

Tim Nuss:
Yeah. I had a pretty similar takeaway. I thought that was an interesting perspective looking at it from, from both sides. And I think with the Coinbase IPO, that was a direct listing. I think there's a lot of nuance in how companies go public. And a lot of implications for existing shareholders, stockholders investors on what that means in the route they use to go public. So I think we'll probably see more of these creative ways to go public in the future.

Tyler Nuss:
We'll hope you guys enjoyed that. That was a lot of fun to just hit on some of our favorite hot button issues right now, carbon markets, regenerative ag, indoor ag. And so that was a lot of fun with Vonnie.

Vonnie Estes, PMA:
What a fun conversation. I hope that was interesting for my listeners to hear some of my background and thoughts on current hot topics. Please let me know if there are other topics you would like me to touch on in future episodes. I'm going to continue doing regional episodes. I have part two ready on Israel and I'm setting up focus episodes on Chile and Mexico. I'm also planning an episode on Floral and then of course taking my turn, talking about carbon. You can reach me at vestesatpma.com with any additional ideas. That's it for this episode of PMA takes on tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe. And I would love to get any comments or suggestions of what you might want me to take on for now. Stay safe. Eat your fruits and vegetables, and we will see you next time.

Hide transcript

 

Description:
As a global innovation hub, Israel uses novel technologies to lead the AgTech and FoodTech industry towards a more efficient and sustainable future; it serves as a global laboratory for producing more food using fewer resources. Israeli start-ups are improving traditional agriculture by introducing new, groundbreaking technologies in the field. The country has a strong ecosystem with universities, a long history in food production with multinational VC’s and Corporates involved in financing and strong government support. In Part 1 of the a 2 part series on Israel, we hear from experts and industry veterans on what is happening in Israel and why it is a good place to start a company. The conversation ranges from plant genetics to hyperspectral machine vision technology to supply chain disruption and innovation. Across the entire supply chain from seed to fork, the country of nine million people is full of companies working on cutting-edge innovation.
 
Speakers:

• Oded Distel CEO Tal-ya Agriculture solutions
• Ohad Zuckerman Managing Partner at COPIA Agro& Food Technologies Fund
• Raviv Kula CEO of Fruit Spec
• Elad Mardix President Clarifruit

Vonnie Estes, PMA:
Welcome to PMA takes on technology. The podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of technology for the Produce Marketing Association. And I've spent years in the agtech sector. So I can attest, it's hard to navigate this ever changing world and developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today. Stout Industrial Technology collaborates with customers to build and launch industrial technology solutions that are designed to last. The smart cultivator combines a proprietary agriculturally proven mechanical platform with Stout True Vision technology to eliminate weeds and cultivate ground in a single pass. Visit stoutagtech.com. That's S-T-O-U-T-A-G-T-E-C-H.com to learn more.

Vonnie Estes, PMA:
Welcome to this episode on agtech in Israel. I've been doing these episodes based in different regions. I've done them for Brazil, South Africa, Australia and last week, Singapore. It varies how difficult it is to get the right people on Zoom and produce an episode. It mostly depends on my relationship with people. If I don't know people very well or at all, it can take up to three months to get three to four speakers. Well, Israel broke the mold on that. I know a few of the speakers from prior work and they got back to me right away and everyone had a suggestion of other people who should be on the podcast. So suddenly I had eight people. Unless you are Tim Ferriss, no one is going to sit through a two hour podcast. So I decided to do two episodes on Israel.

Vonnie Estes, PMA:
I think this can be attributed to both the amount of agtech coming out of Israel, that everyone knows everyone else due to the size of the country and just how outgoing and willing to talk people are in Israeli agtech. So get ready for an exciting episode about an exciting region. Israel has long been famous for growing food in the desert and inventing cherry tomatoes. Its current agricultural achievements are no less than precedent. And dozens of innovative agtech and now food tech startups are developing innovative solutions for the world. Precisely because Israel is a small country with relatively few natural resources of its own it has stressed the development of forward thinking highly advanced agricultural solutions. In this episode, we will hear from a great variety of experience and technologies.

Vonnie Estes, PMA:
First, Oded Distel will talk about his time at the Ministry of the Economy and Industry and also his new startup with a solution for water shortages. Oded gives a great overview of how government helps the growth and success of the agtech sector in Israel. We will also hear from Ohad Zuckerman, managing director at COPIA Agro and Food Technologies Fund. After Ohad, we will hear from two companies with great solutions for the produce industry. So let's get started with the conversations. We have with us Oded, and I want to talk to you about your company. But also I want to talk to you about your time with the Ministry of Economy and Industry. So you got a very long career both on the commercial side and also on the government side so you're uniquely positioned to talk about what's happened in Israel in technology and in agriculture. So why don't you start just telling us a little bit about yourself and your background?

Oded Distel, Tal-Ya Agriculture Solutions:
Sure. So first, pleasure being here with you here today. I'm a follower of the podcast and a great pleasure to be talking to you today. So as you said, I had a long career in the Israeli government, seeing things from a macro point of view, looking at the industries, water industry, the agro industry from that perspective. And recently about a year and a half ago I left the government after 23 years there, moved to the private sector and I'm the CEO now of a Tal-Ya, small agro company. The transition is fascinating, looking at things from a totally different point of view now. And I like it, makes my life interesting.

Vonnie Estes, PMA:
Great. Yeah, that is different. The different types of things that are necessary to run a commercial company. So in this episode I'm focusing on agro technology development in Israel and how the ecosystem has evolved. From your background it looks like you've had a big hand in developing ecosystem through bringing foreign investors and support from the multinationals. So please talk to us about your work at the Ministry and how that's helped agtech.

Oded Distel, Tal-Ya Agriculture Solutions:
Yeah, so when you talk about the technology, so what you really think about the tech side. You serve good stuff, algorithms, automation, and on and on and on. And usually people ignore the fact that in order to bring a technology to full implementation to the market, it takes a huge effort from the entire ecosystem to work together and to want to make it happen. And the ecosystem concept means that we work together with all the different players, the government, the regulators, the investors, the academia, startups, NGOs, obviously farmers, water, utilities and on and on, and try to bridge the gaps between all those different players, which is a relatively a very tough challenge. In Israel we have a lot of things that play in our favor. One obviously, the place is small.

Vonnie Estes, PMA:
Yeah.

Oded Distel, Tal-Ya Agriculture Solutions:
So it's really easy to get around and to interact and to meet the people almost on a daily basis. If my office was in Jerusalem, at the ministry, but I could be there in the morning and then go to Tel Aviv for a meeting and end up in Jerusalem back in the evening for a meet up. And same goes with Beersheba and Haifa, and the entire country is in a distance of a few hours of driving. Which means that you are able at the end of the day to say, okay, I know the ecosystem, meaning I know the people, not something theoretically.

Vonnie Estes, PMA:
Yeah.

Oded Distel, Tal-Ya Agriculture Solutions:
I have everybody on my iPhone. It's figured out to almost all the CEOs of the companies and the main researchers in the academia, and I can ask questions and get answers immediately and connect the dots in no time. Which I think is pretty different to a large country like the US or even a medium sized country or relatively big compared to Israel like Italy or France or whatever. Second is the local culture in Israel, which a people tend to interact a lot. Relatively warm open culture and we have a lot of opportunities to interact as well. So there is the army service that everybody mingles together, university. So the ability to bridge those gaps between the groups is much easier in Israel compared to other places.

Oded Distel, Tal-Ya Agriculture Solutions:
And eventually the fact that we didn't have any other choice. We had to come up with solutions to those challenges because we simply could not do otherwise. So we had to come up to solutions to water challenges, we had to grow food in the desert, we had to come up with processes that would allow us to do much more with less resources. So all those combinations together created a very dynamic society and culture that pushes forward on those concepts of fair innovation, of fair thinking out of the box, of trying to do something fail and try again until you make it. So I would say the combination of all those elements together created this interesting place that brings a lot of innovation in agriculture, in water, in medical, in cyber, in whatever.

Vonnie Estes, PMA:
So a lot of the things that are developed in Israel, like you said, it is a small country and you do have a lot of agriculture there but it's not a big country. So when companies are formed, do they form with the idea that they're going to need to go global, that they'll need to be global companies? Is that in the thinking of the formation?

Oded Distel, Tal-Ya Agriculture Solutions:
Sure, from day one. And sometimes people exaggerate because they start a company and the two founders would argue if they want to go IPO in Chile and in London. They didn't do anything yet, but they find something to argue about. So the answer to that is definitely yes. Everybody looks at the local market as a testbed, as a final place, play around in the sandbox and at a very relatively very early stage, move globally. Obviously, the fact that the world is so close now, even the time of corona, you could be in a conference in the morning in India and then end up in somewhere in Chile afterwards with Zoom call. And it's quite a common in Israeli culture for some time now to be very globally, to interact with the different cultures, languages, people from all over the world. So the long answer to say, big yes.

Vonnie Estes, PMA:
And with the financing, I mean, I know a number of the agtech VC companies that are here in the States have made investments in Israeli companies even very early stage. And is that normal? Does the financing often come from outside the country or do you have a lot of venture capitalists and private money that goes into companies in Israel or both?

Oded Distel, Tal-Ya Agriculture Solutions:
So the VC industry in Israel started somewhere in the '90s. It's a very interesting story because it's one of those cases where the government did something positive.

Vonnie Estes, PMA:
Yay.

Oded Distel, Tal-Ya Agriculture Solutions:
Yeah. And we keep coming back to this story, is very happy with it. So somewhere in the early '90s the government identified that there're a lot of startups and entrepreneurs. And that the lack of financial resources is the main obstacle that prevent them from growing. And the government initiated a program where it said, that the private sector we'll put a bucket of money, you put a bucket of money, you manage the investment and in some time we the government will give you the private sector the option to buy us out, buy them out. And then the startup. So in the beginning, five small VCs that were a partially owned by the government but the private sector was the one to manage it. To make the long story short, it was a huge success. At a certain point the private sector bought out the government and the VC industry went on from that point, going very fast forward.

Oded Distel, Tal-Ya Agriculture Solutions:
So at the presence the VC industry in Israel is local VCs, foreign VC is represented in Israel, Israeli VCs that raise money from abroad, mostly US, Canada but recently also a lot of money is coming from Asia, China, India, Japan, et cetera. And obviously the recent trend is a lot of interest from the Gulf, from the United Arab Emirates that we see and also Europe, not to forget Europe. So it's a very competitive, interesting market. And you'll hear different things. From the point of view of the startups, you'll hear that the VCs are very conservative and they don't take risk and they don't invest enough and they just look for the easy investments and they don't go to very early stage, et cetera. From the VC side you'll hear, not enough options, not enough companies and on and on. But I assume it's the same discussion you hear in the Silicon Valley and you hear in London and in all those centers of innovation. And usually it's a game. Sometimes you have a lot of a competition over the money and sometimes the money is competing over full startups.

Vonnie Estes, PMA:
Interesting. So what do you think that the ecosystem needs to continue and grow and prosper in Israel? Is there anything, it sounds like you got money coming in from a lot of different places, you've got government support, is there anything missing or anything you'd like to see different to keep things growing as fast as it has been?

Oded Distel, Tal-Ya Agriculture Solutions:
So, the government also has an important role. And the government has to interfere, not interfere, but to be a partner where I would say the other different players would see a more narrow point of view, more narrow angle. And the government has to have a broader perspective of things. And in a way this is what I did when I was in the ministry, we have created or we have fostered this ecosystem around the water technologies. And the same concept was then implemented in other sectors including agriculture. So I'm a very strong advocate for this concept of working in ecosystem and providing the opportunities for the entrepreneurs to interact with regulators. And it is fascinating because you realize that they speak different languages.

Vonnie Estes, PMA:
Mm-hmm (affirmative). They can end up talking past each other, right?

Oded Distel, Tal-Ya Agriculture Solutions:
Amazing, amazing. We have a meter and we called it regulator on the bar. We brought the important regulators from the water authority, from the Ministry of Health, Minister of Environment, to meet Israeli water startups. And at a certain point I realized that I need to interfere and translate the language to the regulator and the language of the entrepreneurs because they did not speak the same language. Obviously they speak Hebrew, but it was not the same language.

Vonnie Estes, PMA:
Yeah.

Oded Distel, Tal-Ya Agriculture Solutions:
So if you give the regulator the only opportunity to meet a startup when they have to take a very bold decision to allow a new cool technology to enter the market, and they have tons of responsibility on their shoulders and they have to take it upon themselves, the chances that they're going to be strong enough to take a courageous decision is not big. But if they have met the entrepreneur a year before and they have interacted with him, and maybe they went to see a small pilot that the guy had in the university and they've built confidence and they've built a trust relation, the chances that at a certain point this guy might say, okay, I feel that I'm on the safe ground. I can take a little bit more risks with this technology, is much greater. And in a way this is the idea.

Oded Distel, Tal-Ya Agriculture Solutions:
Same goes with investors and with NGOs, to be able to connect all those players. And going back to your question, what is in a way missing now? So the fact that so many sectors are now competing over specific capabilities or specific talents, it has to do a lot with data and data scientific enom, makes those people being torn in different sectors. The financial sector wants them at the health sector, agriculture, transportation, energy and on and on. So the idea is how do we open the door and let a lot of new talent and people from other sectors that were not yet in the game until recently. In the Israeli case it would be the Arab community in the ultra orthodox, and let those guys come in and play in this wonderful field that we all like so much.

Vonnie Estes, PMA:
Yeah, I think that's true for the United States as well. Is that sometimes agriculture isn't the most exciting in people's minds if they didn't grow up around it. And so, how do you get talent both people who live in the US and how do we bring people from other places? Because we have a shortage of that talent as well because there's so much need in the area. So let's switch a little bit to your company. And as you've mentioned several times, water scarcity is a very big issue in Israel and becoming more so worldwide. And so what attracted you to go into the private sector and tell us about the company and your product?

Oded Distel, Tal-Ya Agriculture Solutions:
So after 23 years in the government, which was fascinating, right. As I told you, I did something that I felt like I had a startup inside the government, which is totally a crazy thing. But it was really inspiring and challenging and very interesting. True. And then at a certain point I said, okay, enough, I want to do something different, I want to do something totally different. And then from my position I knew almost everybody in the water, in agriculture, in energy. And there was this small company that I knew for some years that I was totally in love with the technology. And it was still at the stage where it was a big promise, but did not yet deliver. And then I said, okay, this is the mission. This is something I want to take forward, to take a very small company with a very simple technology. I mean, Tal-Ya, what we do, we create ideal microclimate to the root zone of young trees. And by the way, the product we call it Mitra, which is wound in Greek.

Vonnie Estes, PMA:
Wow.

Oded Distel, Tal-Ya Agriculture Solutions:
Yeah. And this is the way and this is exactly the way we look at what we do to those a very young trees. We are like a mother taking care of very young babies. So the challenge here is, the technology works. Agronomically we know it works, we tested it. And the beauty of it is that it works in a holistic way. It saves water, it prevent weeds, it mitigates extreme weather conditions, it protects the soil, it takes care of soil health, soil erosion, and on and on. So we're doing all this beautiful staff in an extreme extremely simple way because we work with nature or nature works with us, it's a partnership. So this is the journey that I choose to take after leaving the government. So from this huge big very bureaucratic monstrous organization, all the way to something extremely small. Yeah, and this is a challenge and I love it.

Vonnie Estes, PMA:
It's fascinating. I looked on your website and there's a video that shows. And it's very infrequent that you see a video that really without words it completely explains the product and how it works. And so that's really well done and really shows what the product can do. What geographies are you in right now and kind of what's the state of rolling this product out?

Oded Distel, Tal-Ya Agriculture Solutions:
Great. So in agriculture as you know made better than myself, things takes time. So it is a slow process to introduce a new product to the market. So we are working in India, and in India we have collaboration and partnership with their very strong local players. So it is a Tata Trust and Tata Coffee and Syngenta Foundation. And those organizations are aiming at improving dramatically the smallholders segment and increase their income. And because Tal-Ya and the Mitras are a very modern, meaning we can be implemented in an extremely large orchard in California or Australia. And we are totally relevant for a small holder with maybe one acre behind his house. So, we work in India and we had some extremely nice pilots there drawing tomatoes and some kind of Hanuka zucchini, Indian zucchini, with wonderful results and we're now moving to the next stage. We have a very nice pilot in New Mexico with the New Mexico State University with-

Vonnie Estes, PMA:
That's where I went to school.

Oded Distel, Tal-Ya Agriculture Solutions:
Nice. Wonderful people and such a joy working with them. Professor Manoj Shukla is running the spiral. So it is with the countries and we learned that the pecans are a great place in the local economy in New Mexico and at the same time they have a very serious issue with water shortage.

Vonnie Estes, PMA:
Mm-hmm (affirmative).

Oded Distel, Tal-Ya Agriculture Solutions:
Take a lot of water. So the promise that we make is very attractive. The only problem again, it's going to take time to get results. So there's New Mexico, we are working in Mexico and in Australia with wine yards. So yeah, different geographics. We are looking for the situations stuff. Where things are tough, then our contribution is significant.

Vonnie Estes, PMA:
Great to hear that broad perspective of what is happening in Israel. Now we will move to hear how investing is working in Israel at COPIA Agro and Food Technologies Fund with Ohad Zuckerman. COPIA invests in agricultural and food technology projects in Israeli R&D institutes and by hands on management and in cooperation with strategic partners that bring them to maturity. COPIA has several interesting business models on getting technology to market quickly and less costly. Ohad has a great background in management and international business with a long career in ag and food which gives him a great eye as to what they should invest in and develop. Please tell us about yourself, your background and COPIA Agro and Food Technologies Fund.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Sure. So I'm 57 soon in July. And COPIA is my third career. I started working in a family company, seed family company that my father founded back in the '50s. It's called the Zeraim Gedera. It was actually purchased, acquired first by a fund, a private equity fund in Israel and then by Syngenta. It's now part of Syngenta. Then I moved to aquaculture. And I initiated a company that deals with micro algae. Today the company has a face mask for micro algae and it's starting to do all the commercialization. And COPIA is my third and hopefully last career. This is really an amazing fund. We have a great achievement so far. I meet amazing people every day. I'm an agronomist by profession and I have a business degree, a joint degree from Tel Aviv University and the Kellogg School of Business from Northwestern. And actually these two things of agriculture and food and business come together in COPIA. And the good thing about COPIA is that it's not just making money, it's really an impact funded to also try to do something good with the money.

Vonnie Estes, PMA:
So what is being an impact fund mean to you? How do you act differently than if you weren't an impact fund and how does that color your investments and how you look at different businesses?

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Okay. So first of all, COPIA invest in agriculture and food technologies that do something good to the food supply chain, from the genetics to the plate. We're trying to improve the sustainability by mitigation of climate change and food safety and food security. And so all our technologies are doing something that either changes from chemicals to biologicals or improving the processes of the food production or improving the shelf life and the quality of food and things like that. And we talk not about the fruits and vegetables, but also livestock welfare for example and about fish production. So we are really involved in all aspects of food. And the impact is really to increase sustainability by replacing a product or enhancing processes and enhancing of course yields and productivity. Another thing as an impact fund, at least I think it's very interesting, doesn't need to do anything with technologies. We invest in two main avenues.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
The main avenue that we invest in is in technologies originating from Israeli research organizations and universities. We find technologies that have passed the proof of concept stage, we teamed up with companies from the relevant verticals and we transform these technologies into products that could be sold or process that could implement and improve sustainability. And of course, this is done in a very serious way. We create a team between us, the research team and the research organization or university and the company that is doing the development and commercialization later on. So we finance the research part, the companies do the income investment by funding all the development of commercialization. In addition to that we also invest in startups. And the startups are all more into development than research, but they complete our portfolio. So that's one thing that we do from the impact point of view.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Another thing which is very interesting, if you look at the technologies in which we invest in research institutions, about 60, 65% of the technologies are led by women researchers. However when you go to the startup world is completely ruled by men, 99%. So people talk about gender equality, and this is something that I personally believe that gender equality in life will come from gender equality in business. So this is already now the second year that COPIA initiate and manages a competition for women entrepreneurs in agriculture and food. And the second competition is going to take place on June 6th, it's going to be live in the internet as well. And I think this is another aspect of the impact that we're trying to do as a fund not only by the technologies in which we invest but also the way that we do business and the way that we promote the industry.

Vonnie Estes, PMA:
I really love hearing that. I'm speaking on a panel in a couple of hours about women in agriculture. So I've been doing some research and just looking at what it looks like in the startup world, this is in the US and it's across all startups, but we're going backwards. 2020 has been a bad year for women in business period. But this year, in 2020 2.3% of the startups funded were women founded down from 2.8%. So we're a little better than 99% men, but not far. And you have to do it on purpose. So I love that you're really paying attention to that. And that's really exciting, that's great. The other thing that struck me in what you said is, the part of pulling technologies out of universities. I think that's really interesting. It's kind of like the flagship model here in the US, flagship pioneering where they look for technologies and they build a team around it. And it's a very different model. Have you found that to be equally successful to the startup entrepreneur model or it's just a whole different model?

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
I think it's much more efficient because if you're a startup and you want to establish a company, you invest huge amounts of money, millions of dollars including the team, getting laboratories, making trials, doing formulations, go to registration, all these things they cost a huge amount of money. If you go to our model, the research is done by the institutions that are very well equipped and they have amazing teams there. The development and commercialization is done by companies. That they've all the facilities, all the know how, all the market knowledge and they do the other part of the equation. So if you're able to connect these two and to create the fluent process, then you save huge amounts of money and you're much more efficient. Because the best people in every domain do what they have to know. The researchers do the research, the companies do the development and commercialization and we are doing the connection. Usually these two entities, business and academia do not speak the same language.

Vonnie Estes, PMA:
Yeah.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Just to give a simple example, take the issue of IT. Researchers usually are promoted because they publish articles. When they publish, you cannot write a patent. So there is always an issue when to publish, should we publish, what we will republish. And so this is something that always creates tension. If you know how to handle it and you create a win-win business. So we speak both languages, we know how to speak with researchers, we know how to speak with the industry. And we created a smooth process. And we know exactly how to differentiate between R&D to create a very, very coherent process. So basically, it's more efficient both financially and also from the operational point of view. So far we have 26 investments, eight different organizations here in Israel. And in addition to that, we also have two startups. So altogether 28 investments in the fund. So we have six project leaders, people that are industry professional freelancers that work on an hourly basis plus success fee, and they manage clusters of technologies like crop protection, food quality, aquaculture, genetics, et cetera. And they report to us and this way staff control is very well kept and managed. So that's a unique model. We don't really build startups around technologies, but we create cooperation with industry. And we act as a bridge between academia and industry and it works fantastically.

Vonnie Estes, PMA:
Oh, I see. So you're not forming a company necessarily around the technology, but you're bringing the technology to companies that already are involved in that space.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Yes and no. We do establish a special purpose company for every technology, which is the vehicle through which we make the investment in the research institution. Or we do the business development with the industrial partners. So there is a special purpose company for every technology and this is the way we manage it.

Vonnie Estes, PMA:
I see, I see. So how do you see, you've been really involved in the agtech ecosystem and just in the time that I've known you, that it certainly has changed and grown. So how do you see the agtech ecosystem has grown in Israel in the last five years?

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Okay, so first of all we have a lot of startups, much more startups than we had in the last like five years ago. More food technology than agtech. Yes.

Vonnie Estes, PMA:
Yeah, I always end up doing agtech ones, I guess. So I've seen so-

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Even though we do have enough agtech, there is a lot of food tech and the growth is mainly food tech. And I think that the majority, if not all of them, address the happy and not so hungry world. While the agtech companies do also address both the hungry world and the not hungry world. So from my point of view, first of all, there are many more companies. Second, more funds. And in Israel specifically there is a new vehicle for investment which is called R&D partnerships, which enables institutional investors to invest in public entities that invest in startups. So they do not invest directly in the startups, they invest in the R&D partnership and through this they get involved in the small companies. Because they will not move for 10, $20 million, they will move on for much more than that.

Vonnie Estes, PMA:
Oh.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
So in addition... Yeah. And in addition to that the last thing is that you see more MNCs, more multinational companies coming to Israel directly. They've representations here, they do scouting here, they invest here and they are doing a lot of good work by helping the startups to focus more on what the industry really needs. So these are the main four things that I can tell you that happen. More companies, more investment vehicles and more MNCs and of course, the partnerships which is the new thing.

Vonnie Estes, PMA:
So what technologies in the agtech side do you see that are the most interesting and promising right now?

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Well, I think that there are a lot of things that are going on. I cannot tell you on one thing which is specific because usually these are trends.

Vonnie Estes, PMA:
Yeah.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
And it's difficult to talk about trends. Because you listen to the same interview two, three, four years down the road, maybe what you hear is old fashioned already. So I think that I would like to address something which is from our point of view with the fund that deals with a lot of projects and technologies is important. When we go to change from chemical to biologicals products. Okay, let's talk about for example, crop protection or enhancement of quality of fruits and vegetables, things like that. Then we come into the issue of formulations. And the formulations are something that the big companies usually used to do. And slowly, slowly, when the startup started to go into the business, then they found they need to do it. And today you have companies that specialize in formulations. This is something that is really missing in the industry. The expertise of creating new formulations for bio materials, I think this is very important. So that's one thing that I would like to point out. However if you talk about trends, I would say that in food it's all the protein substitutes, both plant based or the cultured meat.

Vonnie Estes, PMA:
Mm-hmm (affirmative).

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
And when you speak about agriculture is precision agriculture. So we talk about the protein substitute, I think that the plant based easier. Okay. And it's a matter of taste and honesty whether you think it's the same or not. That's one thing. The second thing is the cultured meat, it will take time. However, I think it's important. Nevertheless, until it's there and commercially available and affordable, people still need to look at the real meat producers and not neglect them. I think it is important. Even though we're impact funded, we look in the environment. Still, there is a world that we need to feed and it will take time until the real meat substitutes like cultured meat will be affordable and commercially available for everybody. So regarding agriculture, I think that precision agriculture is a buzzword. And here, again, I've got some things to say. I think that it's really nice to see the way that high tech comes into agtech.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
However, I met many, many companies and each one tells me that they will increase the yield by 15 to 20%. So let's take two or three like that or let's even take five, so the two plants will have to bear more and more and more fruits because if each one is right then it's going to multiply the fruit. So it's ridiculous, it's impossible that everyone will do that same, the same time. So first of all, it's very difficult to measure the incremental real contribution of every technology. That's one. Second, due to that it's very difficult to create a business model that is real and affordable to the grower and also good enough for the company. And the third thing is, think about the food grower that gets 20 notices to his cell phone from wanting irrigation, wanting fertilization, wanting crop protection, wanting like this and wanting like that, and he doesn't know what to do.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
So eventually I think that all three, maximum four players will be the ones that will purchase the best of breed from each one and unite them into one solution. And they integrate the knowledge and understanding and will come with a daily recommendation or a periodical recommendation to the grower. And this will take time. But I think this is where the industry will go. So as investors, we're very careful and we're looking at this. And we still didn't find the one that really can unite all the inputs from all their small startups that everyone has a wonderful solution. And we cannot still know how to measure precisely and to write business model for them. So I say, I think that people are rushing into it without giving enough thought to it. But certainly, it will happen, it's there. And I believe that eventually there will be three to four major supplier of these technologies altogether to the farm.

Vonnie Estes, PMA:
Yeah, of course we're seeing the same thing in the US too. It's just you can see a grower with 15 different dashboards and none of them speak to each other. And it's really difficult to really act on those decisions when everything's coming in separately like that. So I think it's really important that we find some platforms that support all these different tools.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Just to tell you one thing, I think that if you look at our portfolio there are a few things that I think may be interesting to tell you about. First of all, one of our companies is called ToBe, deals with the bees industry. As the bees are disappearing.

Vonnie Estes, PMA:
Mm-hmm (affirmative).

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
And there is a huge issue with the bees because they're the major pollinator of food crops. The main cause for the disappearance are viruses and certain mites that causes direct damage and also transmits the effect of the viruses into the hives. It's called the varroa mites. And this is the number one problem of the bees industries, the bee industry. And one of our company, ToBe, has a solution to that. And we see this as one of our major contribution in the future to the industry as a whole. That's one. The second one is post boost, which it's a material that enables to enhance the color, the taste and the shelf life of fresh fruits and vegetables. It's sprayed before harvest. It's an amazing material. And the last one which I think is important is grading specialty items. Personal melons, muskmelons, that are going to be a personal size and with edible rinds and with soft seeds so you can eat it as an apple.

Vonnie Estes, PMA:
Oh, I love that.

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
These are things, it's very interesting things for the PMA members. And there are two more technologies more on the production side which I think are interesting. What is called soil fire. It's a replacement of all the chemicals and not so environmental friendly crop protection materials that are used for soil disinfection before sowing and planting. This is an amazing material that doesn't harm the microbiome in the soil but it does kill weeds, noxious weeds, nematodes and fungus. For example, also the Panama disease found in live Fusarium. So this is an amazing a product. Another one is called bird up, it said to break the dormancy of birds of fruit trees. It's an amazing product, less toxic than Dormex, dramatically, not toxic actually. And safer and also does a better job. We have very good trials in the States and in Mexico and we believe this could be a very good product for American, South American growers. So this is just some examples of the things that we have in the fund that are very relevant to the agri food industry.

Vonnie Estes, PMA:
Thank you for that. If people wanted to find out more about the companies, are those listed on your portfolio page on your website?

Ohad Zuckerman, COPIA Agro& Food Technologies Fund:
Yes. I think that super fruiter, the one with the melons is not yet there. But the all the others are there. And one more thing, as investors now but in the past I managed companies and I was working with investors and working in agriculture. I think that it's very important that when people go to raise money, they will have the right team in place. Because investors invest in people, they do not invest in a technology or in a market because technologies can change and markets can change and trends are trends. And it's very important to have a team. So the entrepreneurs usually come on by themselves and we tell them listen, you need to come with a complete team that eventually or at least partial that will show us that you understand what is needed and that you have the right team next to you. Because we do invest in people. Always a good idea with an excellent team will do much better than an excellent idea with a poor team. So as an investor I can tell you that we do invest in people and I hope that there will be more women in the people we invest in.

Vonnie Estes, PMA:
Next, you will hear from two companies in Israel that are using groundbreaking technologies to solve problems in the produce industry. Raviv Kula founder of FruitSpec provides yield estimates as a service based on hyperspectral machine vision technology. And then I will talk to a Elad Mardix, president of Clarifruit, a company addressing food shrink with an automated QC platform. So tell me about yourself in your company, please.

Raviv Kula, Fruit Spec:
So my name is Raviv. I'm a veteran in the high tech industry for the last 22 years, mainly coming from communication, managerial role of product management, product marketing, marketing, sales, business development in the industry. About four and a half years ago, I sat down with a friend of mine for the last 25 years and we talked about hyperspectral technology that we believe that the potential is only scratching the surface of being used. And with this we debated among ourselves what we can do with this technology. And the Neil, my friend and now my co-founder, he's a citrus grower. And he said, look, in the place that we live there are many citrus growers but Shahar, which is the third co-founder and I are keep asking ourselves, how do we know how many foods we will have this year? And we thought of testing the hyperspectral technology to solve this question. And we tried two different technology and failed. But then the third one was weaker. We found the technology, we know how to see green foods at the early stage of the season.

Vonnie Estes, PMA:
How long did that take, those trying the two things and then finding the one that worked. how long did that take?

Raviv Kula, Fruit Spec:
Since we're dealing with fruits you have a season and you have to squeeze everything.

Vonnie Estes, PMA:
That's agriculture.

Raviv Kula, Fruit Spec:
If you want to capture everything you have two months, you don't have much more than that.

Vonnie Estes, PMA:
Yeah.

Raviv Kula, Fruit Spec:
It was about three months, four months. It was very difficult to get the equipment. But then once the third one was successful, I called my wife on my way back and I said, look, we have everything that we need, we're going to win the market. The technology was so profound that we can use it. And this is how we started FruitSpec.

Vonnie Estes, PMA:
That's a great story. So what kind of insights do you give your clients? And you're solving the problem of yield, right? That's what the information that you're getting. And how do you work with clients and how do they get that information?

Raviv Kula, Fruit Spec:
So we started with counting the number of fruits, but then we found out that nobody cares how many fruits they have. They speak about carton, they speak about weight, and not the number of fruits. Of course, the number of fruits is a fundamental component in this equation, but you need to know what the customer needs. And we found out first that the segment that we should target is the packing houses and not the grower because the value that we can bring them is much higher. And then after solving the issue of how many fruits, we found out that this problem of not knowing how many fruits it's actually lead to a much bigger problem of yield management. How do you manage the inventory of the fruits that you have in your orchard? What are the tools that you need in order to do that? And we found out that nobody is doing that.

Raviv Kula, Fruit Spec:
I mean, there are some ERPs in the packing house, but they are doing some invoicing, transportation, shipments and so on. There are some farm management on the other side, they're doing the agronomy side of the business. But nobody is linking the orchard to the marketing. And we form, the marketing name is the food intelligence platform, that we provide yield management to our customers. Meaning, accurate data on how many fruits they have, what is the weight of the fruits, what is the weight going to be by the end of the season. So how many carton per size they will be able to pack from each orchard. And on the aggregated level what they will be able to sell. And we can provide this information in citrus, six to seven months before picking. In apple, stone fruits, three to four months before picking. And this is crucial for the profit and top line for the packing house.

Vonnie Estes, PMA:
And it's a service, right? You don't have to sell anyone equipment, you go into the fields with your own equipment. That's how it works, right?

Raviv Kula, Fruit Spec:
Yes, exactly. In any territory that we're serving, we have a local team that have our systems, have our vehicle and it's a service. So that the customer does not have to bother with buying the system, learning how to operate it and handling everything. We have coming, we scan, we go, the customers see the results through the web portal. It's very transparent, this operation to the customer.

Vonnie Estes, PMA:
And what other crops do you work in addition to citrus?

Raviv Kula, Fruit Spec:
So we're working on citrus, apples, stone fruits, grapes, we have plans to expand this year into, continue with the packing housing to berries and some other food types, but also for tropical fruits. So we have a very innovative solution for bananas yield management, pineapple, papayas. So we are expanding. The technology roughly is the same. I mean, as the same as the pattern that we got. But it is agnostic to any type of fruit. But the implication of how to do that and how to plan forward is something that we have for any fruit type separately. And as I said, we currently targeting for this year to go for bananas and pineapple, tropical fruits, but also expanding what we are doing to polygons, berries and so on.

Vonnie Estes, PMA:
So it sounds like you're working outside of Israel then if you're going into tropical fruits. So what geographies are you in?

Raviv Kula, Fruit Spec:
In Israel at the ethos of Israel is being agriculture, but the country is small and there are not a lot of export coming out of Israel for our fruits So we look at it as a kind of a lab that we can test a lot of things that we are doing. This week we done some cherries and berries over here in Israel. So we can test our equipment, our artificial intelligence models over here. And we have offices in the US, in California, the Central Valley, Chile, two offices in South Africa, one office in Spain, we have a minor operation in China. But this year we are going to expand and open at least two other offices during this year.

Vonnie Estes, PMA:
Wow, that's a very wide spectrum. So this particular episode that I'm talking to people on is to kind of focus on Israel and that the ecosystem is like there and what it's like to do a startup there and the benefits. And so, you live there, that's where you're from. So it makes sense that you would start a company there. But what's the ag ecosystem, the agtech ecosystem like there? And has there been good access to funding? And has it been a good place to start a company?

Raviv Kula, Fruit Spec:
It's an ecosystem, it's not just the system. There are some communities that assist, forming a company knowledge, connection. In Israel it's very wide and people do not hesitate to introduce you to either customer or to high level connections. So it's really, I can call everyday two, three, four, five CEOs for other startups and tell them look, I have a problem over here, how do you solve it? Okay. Either financial or something that is specific to the domain that we are doing, it's very common to do that. So the ecosystem is very open and helpful. The access to funding, it's changing. I mean, from the day that we started the backlog in the end of 2016, which was very difficult and only a few funds or investor were available to invest really in ag space, now it's a much more wider community, investors. And you can see, you can see the forming of big companies. Companies are going into the C and D rounds with 200 people, 500 people in a company. So the industry is maturing step by step.

Vonnie Estes, PMA:
So the most companies that start in Israel, most companies must start with the idea of this is a good place to start but we have to be global for this company to make it. Is that kind of the thinking? Does anyone start and say, I'm an Israeli company and I'm going to serve the Israeli market. Or are most people thinking, I'm going to be broader and be a global company.

Raviv Kula, Fruit Spec:
I think that 100% are looking to be global. I've got customers in the US that have around 10,000 hectares. I mean, in acres it's different. But-

Vonnie Estes, PMA:
Yeah.

Raviv Kula, Fruit Spec:
The overall citrus bearing land in Israel is about 15,000 hectares. So in comparison, you need the customers and you need to prove your technology is working outside of Israel. Investors are looking for the international reference and not just it's working over here in Israel.

Vonnie Estes, PMA:
Mm-hmm (affirmative).

Raviv Kula, Fruit Spec:
I must say that the acceptance from the customer, from the client point of view is quite the same. It's whether that you are a very small packing house or you are a huge packing house, they're always willing to hear what you're saying, understand and test it for sure. Israel is not different from the rest of the world in terms of attitudes towards agtech. The scale is much lower.

Vonnie Estes, PMA:
Yeah, that makes sense. Well, there's such a great education system there and amount of talent. I've worked with a number of companies over the year more on the biology side and agriculture and it's just, the universities are fabulous. And so it's a wonderful breeding ground for sure for these types of companies to then go global.

Elad Mardix:
I'm Elad Mardix. I'm the president of Clarifruit. And together with my two partners, Avi and Ruby, we actually established Clarifruit about three and a half years ago. And just maybe a word about how the idea came up. Clarifruit was born actually primarily through my partner, Avi, was really the product visionary of the company. And he used to work for HP for about 10 years before establishing Clarifruit. And at HP he actually ran on the R&D side, the world's largest automatic testing product for the software world. He's also coming from a farming family background. And in about 2017 he had a very interesting observation. And the observation he had was that software and fresh produce are actually very similar.

Vonnie Estes, PMA:
Oh can't wait to hear how that is.

Elad Mardix:
There you go. If you think about it, both software and fresh produce are merchandise whose quality is changing on a daily basis. It's very unique, as opposed to an iPhone or a chip that's coming out from a foundry and the minute it's being produced the quality is fixed. It's very different for both software as well as fresh produce. Now, 20 years ago HP has invented automatic testing for the software world because they recognize that the supply chain of software distribution was very inefficient and they needed to apply an automatic testing concept to this industry. Avi recognized that actually the fresh produce industry, which as we all know is a very long, complex and inefficient supply chain, will benefit enormously if there was an automatic testing concept applied to that supply chain. And that's really how the idea was born.

Elad Mardix:
Clarifruit had essentially developed an automatic quality control platform for the fresh produce industry. Essentially what it means is, we developed software that has two components. Component number one is a mobile application that you can use on any smartphone that exists today in the market and actually allows you to perform a quality control inspection of your fresh produce in an automatic way through computer vision technology that we have developed and have patents on and some other integration that we have. And even more importantly, we have a web app, a management and analytic dashboard that generates in real time data and insights that really are not available today in any other parts.

Vonnie Estes, PMA:
So you have customers all along the supply chain, can you tell us about your different customers and what problems you're solving for them?

Elad Mardix:
Sure. So first let's start actually, who is our target customer? So if you think about it across the supply chain, from literally the grower down to the front store of the retailer, there are about 10 to 12 points today that people already perform a quality control inspection on a sample basis. Right between whatever, 0.5 to 2% of the supply that's coming in. It's already being tested today, just in a very manual way with very limited data. What we're doing is automating this inspection process, and effectively the entire supply chain who's performing those tests are going to be our customers. We started about two years ago going to the market and we focused on the marketing companies, the guys in the middle, the packer, shipper, that works with all of the growers on the upstream and sell to the retailers and wholesalers downstream. And we have expanded in the last actually six months downstream to the wholesaler and the retailer segments. So today we effectively work with the marketing companies downstream to the retailer. The pain point that we are addressing is multiple and it also depends on the segment that we are interacting. But if you think about it on a high level, the biggest pain point, and I'm talking dollars wise, right. The biggest pain point is the rejections that are taking place in the supply chain.

Vonnie Estes, PMA:
Mm-hmm (affirmative).

Elad Mardix:
Based on information that we've seen, the average supplier in the market is suffering from about 7% financial loss as a result of rejections. And at the end of the day, the automation that we have with the AI and computer vision technology and the digitization that we're allowing, there are all tools. They are tools in order to do two things. Number one, help the supply chain to reduce the rejections that they are experiencing today. And number two, give them real time data so they can make better decisions. Like who is the right guy to sell to? Where should they ship it based on shelf life prediction. And effectively help them maximize, I call it the wallet opportunity with the customers that they are interacting with.

Vonnie Estes, PMA:
That's a great amount of information that can really help things move through the supply chain much better. So which crops are you working on and focusing on? Just anything that moves through the supply chain or are there particular crops that you focused on?

Elad Mardix:
Okay. So maybe I explain just before I go there, explain for a minute the solution that we offer. Our platform essentially can digitize any fresh produce category that exists in the market today. Digitize means that, let's say you are a retailer who has 275 fresh produce categories, we can essentially upload all of those categories on our platform so you can digitize the entire quality control process and the quality standards that you're using., right. So your inspectors, wherever they are don't need to actually use pen and paper, Excel or an electronic form anymore, everything is going to be performed through the mobile app. Now, we have developed our own computer vision technology to be able to analyze external attributes like size and color and stem color automatically. Through algorithm we're just taking a picture from the smartphone and this solution today is already commercially available for 10 produce categories. Started with table grapes, then we went with tomatoes, stone fruit, cherries, bananas and pineapples, as well as the citrus family and apple. So altogether we have about 10 products category that are already automated, we're going to have 10 more added to that automation capabilities within 2021. And I expect that within the next two to three years, we'll get to the vast majority of the volume, which is about 45 products categories.

Vonnie Estes, PMA:
Wow. So you truly are a global company working across the supply chain of wherever the food's going. Where in the world are your customers? What different regions are you working in?

Elad Mardix:
So about two years ago when we really started to go global, our first international customers who was in Spanish, which is in Chile and Israeli, is the world's largest exporter of stone foods, one of the top five in grapes. So we started really in Latin America and we have a very strong presence there today across Chile, Peru and Mexico. We then expanded to North America, both in Canada as well as in US. But I would say that probably the strongest market for us has been Europe, where we work with multiple very big marketing companies as well as the retailer.

Vonnie Estes, PMA:
And do you have offices there, people on the ground in these different areas? Or are you able to do it all from Israel?

Elad Mardix:
So good question because the answer would have been very different in March, last year before the COVID. So today we actually have offices both in the Americas, North America and in Latin America as well as in Europe. They usually, those offices include sales team as well as operation team that essentially helps with the initial implementation. But what's interesting is that in the last year, especially between March to December in 2020 because of COVID, we worked with customers globally. And I'll mention just one of them for example, we just started to work with Doyle International. We're all of the QC for Doyle's pineapples, bananas and we'll do the other categories as well. And the entire implementation process for Doyle, which took about four months, has been performed totally remotely. So we do have the local operations to honestly help close the loop, quicken. But we have demonstrated the ability to actually implement very complex project with very large customers in a total remotely way.

Vonnie Estes, PMA:
So this episode of the podcast is focusing on Israel. And there are an amazing number of agtech and food tech companies that have started in Israel and most of them are global. Why do you think that is? Why do you think it's such a good place to start companies and why are there so many good companies that have launched there?

Elad Mardix:
So I think the answer here is twofold. From a technology perspective, Israel is probably in the top two ecosystems in terms of technology entrepreneurial. Number one is probably the Silicon Valley and Israel is right behind it. So Israel is a leader within technology, entrepreneurship and development in any technology sector, right, not necessarily agri tech. This is a result of the nature of the people and I think a lot of the cultural related attributes that people are growing into. Specifically for the agtech and fresh produce in our case, to be honest, the local supply chain here, let's say within fresh produce, has a much higher or stronger propensity for technology adoption than you would usually find for other fresh produce players in the supply chain. So I just think it's easier to get your first couple of customers here like the beta product and check it with them. And we find the product initially before you go out to the world. And people here also on the supply chain side would be receptive for errors and mistake and they understand how it works. And that's I think the important underlying mechanism that enable new technologies to flourish out of Israel.

Vonnie Estes, PMA:
Oh, that's really interesting. I haven't heard that point of view before. But that makes a lot of sense. So what new technologies do you think are still needed in the produce industry at this point? And do you see those being developed?

Elad Mardix:
Yeah, so there's a lot of new technology that I can think of for the entire supply chain, obviously. But I'm going to focus on technologies which are related to the quality, which I think again, quality is important in any business, right. But as I mentioned before, in the fresh produce supply chain, it's more important than anywhere else because the quality actually changes on a daily basis. So it's really tricky to be able to measure it. I think two things are very important that should happen over the next three to four years. Number one, I would like to see the digitization trend really taking off across the entire supply chain, not just in specific silos and the retailer. For example, it really needs to go across the entire supply chain. And we have seen by the way a huge acceleration of that since June last year.

Elad Mardix:
And the reason I think it's important to happen is because if we really want to be able to figure out the shelf life prediction accurately in order to help in reducing the waste in this industry, the only way to figure out shelf life is by having digitization and collaboration of data across the entire supply chain. One silo having the information is not going to do the work. So that's one thing that is really important. And I do see a bunch of other startups and companies attacking this digitization trend from different places. And I'm really hopeful that we're all going to be successful in convincing the suppliers and the retailers that this is going to create a lot of value for these guys. The second new technology that I'm hopeful will be relevant to the supply chain is hyperspectral technology. Okay, so if you remember I mentioned that we developed our own computer vision technology to take pictures and analyze automatically external attributes.

Elad Mardix:
The technology that it's being performed on is the camera that we all have in our iPhone and Android devices. And it can only measure external attributes today, including defects. But only external. The holy grail would be that you Vonnie will take a picture and it will be able to analyze not just the external attributes but also the bricks or firmness, acidity, pH because then you're actually going to be able to analyze the quality of the fruit or vegetables and get a grade instantly. And when that happens, our technology is going to be applicable not just to the professional supply chain from the farmer to the retailer, but also to the consumer. And I think when we get this hyperspectral technology, which by the way, already exists. It just cost between 15 to $20,000 per camera in the sorting machines.

Vonnie Estes, PMA:
Might need to get that cost down a little.

Elad Mardix:
Well, yeah. And people are working on that. But I think it's probably going to be in the next five years when we start getting this technology into the camera of our smartphones. And at that point of time, the way it's going to play out is you're going to be able to pull up the Clarifruit app from your phone, go to the supermarket and before you buy these blueberry or watermelon, you just take a picture and you'll get instantly the quality grade and the shelf life prediction. And that's going to be a whole game changer for the industry in terms of waste reduction. But again, we're going to need hyperspectral technology to get to the smartphones, and that's probably four, five years away from us. So today, we're focusing on the professional supply chain, automating, decreasing process with the combination of their industry devices like the factor meter and dura meter. But really the vision is to be able to do it for everyone down to the consumer as soon as we can get this technology to the smartphone.

Vonnie Estes, PMA:
Wow, such wonderful conversations. As I mentioned at the start, I had so many exciting companies to talk to in Israel, I'm doing another episode. Look for the next episode to drop in a couple of weeks. That's it for this episode of PMA takes on tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables and we will see you next time.

Hide transcript

Description:With little farming land, Singapore imports 90% of the food it consumes. Coupled with the recent supply chain shocks, the government has set up a number of programs and incentives for local food production and innovation. In this episode, we hear from there different companies in the well-functioning AgTech ecosystem in Singapore. Benny Chng from SGInnovate discusses the companies they are investing in at this time and why food and ag are important. We also hear from Foong Yoke Oon who with her husband is building Ubertas Agritech, a vertical farm to serve Singapore. And Adrian Teo from DiMuto a global commerce solution company for the produce market. These three conversations illustrate what a good ecosystem can bring to a sector with government support, private sector financing and smart entrepreneurs.

Moderator: Vonnie Estes, Vice President of Technology, Produce Marketing Association
Panelists:

• Foong Yoke Oon, Director - Ubertas AgriTech Pte Ltd
• Adrian Teo, Chief Operating Officer - DiMuto
• Benny Chng, Assistant Director - SGInnovate
  
   

Vonnie Estes, PMA:
Welcome to PMA Takes on Tech. The podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, Vice President of Technology, for the Produce Marketing Association. And I've spent years in the agtech sector, so I can attest, it's hard to navigate this ever-changing world, in developing, and adopting new solutions to industry problems. Thanks for joining us, and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry, and then discuss several possible solutions that can be deployed today.

Vonnie Estes, PMA:
Stout Industrial Technology collaborates with customers to build and launch industrial technology solutions that are designed to last. The smart cultivator combines a proprietary, agriculturally proven, mechanical platform, with Stout True Vision technology to eliminate weeds, and cultivate ground in a single pass. Visit stoutagtech.com, that's S-T-O-U-T-A-G-T-E-C-H.com to learn more.

Vonnie Estes, PMA:
With little farming land, Singapore imports over 90% of the food consumed in the country. The food at local markets mainly comes from overseas. In 2019, the government announced its 30 by 30 policy agenda, aiming to produce at least 30% of its nutritional needs domestically by 2030, while also strengthening and securing its external food sources. In April 2020, the Singapore Food Agency established the 22.6 million dollar, 30 by 30 express grant scheme, to help local agrifood producers rapidly increase production in three key categories: eggs, fish, and leafy vegetables. In September 2020, nine urban farms were offered 29 million dollar grants, by the Singapore Food Agency, as part of efforts to support the growth of local agrifood enterprises and ramp up local food production over the next 24 months. And then, in February 2021, the Singapore government announced that it will dedicate 45.2 million dollars for a new agritech fund, that will focus on supporting farmers through the use of technology, that ultimately boosts domestic food production. The purpose of the Agri-food Cluster Transformation Fund is to help farmers through the use of technology in local food production.

Vonnie Estes, PMA:
So there's much focus by the government to develop technology and produce food, in and for Singapore. Singapore is also a financial hub, with a number of investors willing to put money into early stage technologies, along with a talented and trained work force. Today we will hear from three very different voices on what is happening in Singapore, in agtech. First, Benny Chng from SGInnovate, will talk about the companies they are investing in at this time, and why food in Ag are important. Next, we will hear from Foong Yoke Oon, who with her husband is building a vertical farm. And finally, from Adrian Teo, from DiMuto, a global commerce solution company for the produce market. Let's drop into the conversation with Benny.

Vonnie Estes, PMA:
We have with us, Benny Chng, from SG Innovate in Singapore. Welcome to the show, Benny.

Benny Chng, SGInnovate:
Hi, thank you for having me. Hi Vonnie.

Vonnie Estes, PMA:
Hi. So tell us a little about yourself and also your role at SGInnovate.

Benny Chng, SGInnovate:
Okay. You've got my name already, I'm Benny Chung, an assistant director here at SGInnovate. And I focus on the agrifood investments that we do as a company. So SGInnovate is a Singapore government-backed, early stage, Deep Tech venture capital firm. We focus on a number of areas of interest, and these include agrifood, smart manufacturing, healthcare and biomedical sciences, and sustainability. So in a nut shell, that's what we do, but we also focus on investments from the deep stage all the way up to Series B, for a first investment. And we also have a global investment mandate, so we're not just limited to investments in Singapore itself. We've done investments, for example, in United States, in Israel, and interestingly, all the way in Estonia. So there's a good mix right there.

Vonnie Estes, PMA:
Yeah. Great. So what do you personally focus on? Do you focus on all those areas? Or do you focus more on the food side, or what's your specialty?

Benny Chng, SGInnovate:
Yeah, so I focus very much on agrifood in the way that we approach agrifood investment. We are a bit of an early stage, seeker fund of sorts. So I'm sure our listeners here today would be very familiar with the likes of Temasek or GIC, or at least heard of these companies.

Vonnie Estes, PMA:
Uh huh.

Benny Chng, SGInnovate:
So they are our primary investors in a number of different areas. So we try and identify the up and coming investment trends, in the areas that we invest in. So in agrifood, we look at things that we have not invested just yet. But could be interesting for them, in the next two to five years. And we focus on investments where there is a technology defensibility. So for us, that's where we would try and catch an early wave and take the early risk, and identify possible winners in the next couple of years.

Vonnie Estes, PMA:
That's fascinating. That kind of brings me to my next question of just talking about the ecosystem. So you kind of serve a little bit as a feeder of identifying those trends earlier than some of maybe the larger investment companies would.

Benny Chng, SGInnovate:
Yup.

Vonnie Estes, PMA:
So tell us about the agtech ecosystem, and it really seems to be growing and thriving in Singapore. So what does it look like and what sorts of companies are involved?

Benny Chng, SGInnovate:
Okay. Well that's a question with probably a very, very long answer, so hang in there. So as a country, we're not a very big country, as our listeners I think would know. Singapore is a tiny place, it doesn't even compare to some of the cities in the United States, in terms of geographic size. But interestingly, although we only have say about 1-2% of our land used for agriculture, we produce 10% of our food just from that.

Vonnie Estes, PMA:
Oh.

Benny Chng, SGInnovate:
Which isn't too bad, but it's just 10%. So the Singapore government, we have seen all of the disruptions caused by COVID-19, with the issues around the Suez Canal. And food security, food resilience, is a big topic for us. So the Singapore government, through the Singapore Food Agency, which is the regulator here in Singapore, very similar to the FDA, or somewhat similar to the FDA in the States, set a target of producing 30% of our nutritional needs by 2030. So very catchy, 30 by 30, we are doing this in a number of different ways. On the agricultural side, there is a push towards automation, towards providing more land for our agricultural needs. So we're developing, for example, a agricultural pop. Very similar in many ways, to a business pop, 18 hectares, which isn't big by United States standards, but in Singapore it's a big deal. In the northern part of the country, where we will be setting aside land for farms, and for poultry, for livestock, for the growth of different crops. So we're looking into that space. We're encouraging the people also, to look into having their own family plots if you will.

Benny Chng, SGInnovate:
A lot of the people here in Singapore, live in high-rise flats and condominiums and so forth. But we're using some of the spaces available, even in these flats, to have little plots of homemade gardens, if you will. So we're encouraging that in small ways, so that people have a feel for that. So that's at that level. At the corporate side, there are a number of different companies involved in agriculture in Singapore. It starts all the way from the producer side. So I've briefly mentioned about the farms that produce our agricultural crops and work with livestock, so we've got a number of these sorts of companies. A number of them are modernizing. So just the other day in the news, there was this sheep farm that is moving into a six story facility, I think in the next year or the year after.

Vonnie Estes, PMA:
Wow.

Benny Chng, SGInnovate:
We will be able to take care of all of the sheep in a clean way, keep them comfortable, make sure that the temperature is all right for them, no stress. So there are things that we are doing around these areas, together the corporates here in Singapore. So you've got the producers, along further down the line, you've got folks that help the food processing, you've got folks that help the supply chains. And this is a company they've already heard of. It's a popular company of ours, DiMuto, that does the supply chain and logistics for fruits, as a start. They're looking at other products as well, but fruits is a first start. And they have signed a number of different deals, with different companies all around the world, but it's all built from Singapore.

Benny Chng, SGInnovate:
So we've got producers, we've got the people down in the middle in food processing and supply chain logistics. We've also got a big emphasis on food and food tech. So we've got lots of ground based here in Singapore, for delivery. You've got so many different restaurants from so many different places. And you've got, of course, all of the new up and coming food tech companies developing new ingredients, new foods. So it's a really growing and vibrant ecosystem of food and agri players that we have in the country, but we are looking of course to grow it out. One thing I forgot to mention is Bühler and Givaudan, it's the large food processing companies. They have a joint lab that they're setting up, opening end of this month actually, looking at plant base food processing. So exciting things are happening in Singapore, happy to dive more into each of these, if there's time for that.

Vonnie Estes, PMA:
Okay.

Benny Chng, SGInnovate:
But again, sorry, long answer to what should have been a... It's a short version of long answer.

Vonnie Estes, PMA:
Yeah, well there's a lot going on, so you have to answer it long. So you mentioned the 30 by 30 from the government, so is the government actually putting money in? Is the government one of the investors in trying to build the ecosystem?

Benny Chng, SGInnovate:
Yup. So the Singapore government does provide a fair amount of support, some of it's financial, some of it is too, different initiatives and schemes and programs. Schemes tends to have a bit of a negative connotation overseas. But here in Singapore, scheme is a fairly neutral word, it's just a program. But we do have a number of these initiatives that government has put forward. Singapore government acts as a capitalist in a number of different ways. We don't intend to crowd out private sector investment, it's just to kick start what was already happening. So there has been a lot of interest from agrifood players that come into Singapore, to do something here in Singapore, but we just want to kick start it and move it a lot faster. And then let private sector take over.

Benny Chng, SGInnovate:
But directly to your question and to your point, we for example, have 144 million dollars set aside in the next couple of years to find a number of these initiatives. And hopefully, when more and more private sector players are coming in, setting up facilities, putting in their resources, and government can then taper back some of these initiatives, some of this funding. And let private sector run with that. So yeah, again in a nutshell, Singapore government is going to help, but not to crowd out the private sector and take over the private sector's good work.

Vonnie Estes, PMA:
So in funding new technologies and new companies, where does the money come from them... And there is companies like you, but are there other investors that are involved? Do corporates help fund technology? And are there other investors outside of Singapore that invest in technology in Singapore?

Benny Chng, SGInnovate:
Oh yeah, for sure. So regionally, Singapore is a financial hub in Asia, so that extends also to venture capital and private equity investment. So I've very briefly covered some of the public sector investment entities here in Singapore, so that's SG Innovate, Temasek, GIC. There's also EDBI, which represents the Economic Development Board. Also there are a number of these players, but there's also very large private sector interest that we have as well.

Benny Chng, SGInnovate:
A number of these firms are based here in Singapore, and they are starting to invest more heavily in agfood. So we've got a full gamete here of accelerators, incubators, going up to your VCs, your private equity firms. A number of the corporates also have invested alongside some of these financial investors. So corporate VCs, or the corporate arms themselves come in and invest directly off the ballot sheet, so we've got that. And because of our status as a financial hub, a number of foreign entities have also decided that this is a good place to invest. And setting aside the fact that we are a financial hub, we also have science and technology in the region.

Benny Chng, SGInnovate:
So we've got a number of great facilities here, state-of-the-art facilities, people who have been well trained, who speak a number of different languages. I speak two, one not very well, but I speak... So a number of Singaporeans are able to do at least two. So this is a center of commerce, of science and technology, so it does bring together a number of different anchors who are interested to invest, to support companies growing out of Singapore.

Vonnie Estes, PMA:
This may be hard to answer, because I'm sure it's different for every single person. But a lot of the people in the U.S., that go into agtech and really are trying to develop technology for food, grew up on a farm and that's their background and that's what they know. We also have a number of people who are people who grew up here where I live, in Silicon Valley, and they're the tech side and they try to take that to agriculture. Since there are not that many people in Singapore that grew up on a farm, how do people get interested in agriculture and food? Where does that interest come from?

Benny Chng, SGInnovate:
Okay. Number of ways to answer this question. First of all, Singapore is a food nation. We come from many different lands, our folks, our ancestors, they came from places like China, India, the Malay Archipelago around us. So the one way that has helped connect all of the people, here in Singapore, is through food.

Vonnie Estes, PMA:
How interesting.

Benny Chng, SGInnovate:
So it has always been an area of interest. And there are some unique Singaporean dishes that you wouldn't find anywhere else, thanks to the mix that we have. So in the first place, the nation, as a whole, the people here are naturally inclined and predisposed to be interested in food. That's the first thing. The second thing is, in spite of our small land size, actually historically, a number of people grew up on small family plots. Tiny, really tiny by global standards, but we lived in... At least my parent's generation or my grandparents and the ones before them, they lived in tiny family plots, where they could grow their own fruit and all of that. So my mom has a lot of stories about growing all sorts of different fruits, Durian, which is not very popular. But there's Durian, there's papayas, and all of that.

Benny Chng, SGInnovate:
So all the generation, they still have memories of their own family plots, of growing all of these things, of being self-reliant, of putting food on the table through their own hard work, doing it and growing it by themselves. And fishing, and all of that. So we've had that historically, it's just as the country has modernized in the last 50 years, some of that has gone away. But our natural interest towards food, all the generations interest in growing their own food hasn't quite gone away just yet. So there are people who are still interested to for one, get into food because they're interested in it. Two, to rediscover their roots and to find out what exactly it was that their parents, or their grandparents found interesting. I can't say that everybody would naturally be interested in food, just because of these two factors. But naturally interested in going to food as a career or agriculture as a career because of these two factors, these two factors I think have helped a number of people rediscover agriculture in Singapore and want to take part in growing the space. So again, a long answer to a short question.

Vonnie Estes, PMA:
No that's fascinating. It's really interesting. You just wonder how people end up getting excited by food, and those are great reasons. So are there any technologies that you see are needed, or any solutions that technologies could solve, that you see are needed that aren't being developed? Or that you're hoping new technologies will start being developed? Does that make sense?

Benny Chng, SGInnovate:
Yeah. It does. We are excited about a number of different things. On the agricultural side, I think we are excited to find ways to reduce the incidents and prevalence of disease in crops, in livestock and in fishstock. So that's one of the directions in which we are exploring. It's possible to develop better vaccines, or probiotics, or products of that nature, in which we can help increase these yields and reduce disease. That's one aspect that we are exploring.

Benny Chng, SGInnovate:
The other, I think in agriculture is to maximize, or to increase yield. I think the Green Revolution in the 60s did already show that, but a lot of it is geared towards countries where, by in large, there is plenty of space. And a country like Singapore, where there's not a lot of space, we're still trying to see how we can bring up the yield. And that's something else that we're considering as well, so that we can surpass our 30 by 30 goal.

Benny Chng, SGInnovate:
On the food side, we are looking at different things that we could potentially do. We've gotten to a point here in Singapore, where we've modernized, we've become a first world country of sorts. We've gotten all the developed world issues, if you will, around obesity and diabetes and all of these chronic conditions. So we are looking at what we could do to replace, for example, or reduce fat and sugar and salt. And yet, not compromise our taste. One thing that consumers can't quite get around, even they do want healthier food. As we know, eating less tasty food, they can't deal with that.

Vonnie Estes, PMA:
Mm-hmm (affirmative).

Benny Chng, SGInnovate:
So if you want healthier food, you will still need to at least maintain the taste, if not make it tastier. So we are looking at new ingredients that could potentially play that role, on the food side. So broadly speaking, in terms of things that interest us very much, we're looking for new technologies in these areas.

Vonnie Estes, PMA:
So a lot of the companies in Singapore, when they develop products, or they look at building a company, are they looking at mostly the Singapore market? Or are they mostly looking at, "We're going to make a product here and then sell it to the global market?" Or some mix of both?

Benny Chng, SGInnovate:
Well it's probably more of the ladder. The market here in Singapore is tiny. We've got just over 5 million, close to 6 million people in Singapore. If we want to compete on a global stage, be conscious of this market... So all of the startups that we invest in, we need them to have a global mindset. We would love for their businesses to be anchored here in Singapore, so they can do all of the RMD here, product development here, but if the target market sales is only Singapore, that's not interesting. It's not going to be a global winner. And for us, we need to be clear about our way. Because otherwise we would be, to be very frank, an insignificant speck on a global map. So I appreciate your words. And having all of our companies here in Singapore adopt that global mindset, where it's great to be anchored here in Singapore, but you also need to think about how you can reach the global market, how you can sell to different people overseas. And that's really the goal for companies here in Singapore.

Vonnie Estes, PMA:
I used to work in industrial biotech for some period of time, and worked for a company that we had a lab in Singapore. We worked through the economic development group and just the incentives to have a lab in Singapore were really good, the financial incentives, and then the talent was amazing. The people that we could get to work for us, that were really good biologists, were surpassed to many different places. So you've got a lot of advantages there, of having some support, and then having really great talent. So that's a great place to build companies, for sure.

Benny Chng, SGInnovate:
Oh, thank you for your kind words. We can't rest on our laurels, so it's a lot of pushing up and then above and beyond where we can.

Vonnie Estes, PMA:
Yeah. So can you talk a little bit about the companies that you're currently either just invested in, or you probably can't talk about the ones you haven't invested in, but just kind of what are some of the investments that you've done recently, is my last question.

Benny Chng, SGInnovate:
Okay. So here in Singapore, the investor in DiMuto, like I mentioned earlier, there are a couple of other companies that we invested in. I think for us, as a company, we're focused slightly more on the food side. So we for example, invested in a company called Ai Palette, that does a bit of social media listening and identifies food trends that are coming. So to just give an example, there was a little bit of food trend a couple of years ago, where there was this salted egg yolk mix. It may sound a bit weird to foreign listeners, but salted egg yolk mix, which has this very nice savory feel to it. And people started adding it to all sorts of food products, so you have salty egg yolk burger, and all of that. So the problem for FMCGs, is identifying when such trends occur. And the Ai Palette is able to do that through social listening.

Benny Chng, SGInnovate:
And this trend, if I may take a step back, it came up because a café started serving certain products that included this product, this salted egg yolk mix. And people started sharing on social media, "This is great, this is wonderful, it tastes fantastic, smells great." You know, all of that. And people started picking it up and it had been café to café to café over there, their side copying that. But FMCG was slow on the uptick for the product. So I think about a year and a half after people got excited about it in the cafe, we only start seeing it appearing on shelves, FMCG said, "Okay, this is interesting, let's try something." McDonald's came onto the bandwagon. So Ai Palette then serves as a way for FMCGs for big brands to try short circuited process. They discover that people are interested in a particular food trend, and they start working on products that potentially can be served, to ride that wave. So that's a company that focuses on that.

Benny Chng, SGInnovate:
As an investor, we've been around for 25 years now. So we have invested in a couple of companies in agfood. Even before this term wasn't as big here in Singapore, is overdone, for example restaurant AI, ordering, even before it was a thing. So we've done a number of these things in the past, but we're trying to ramp up. And like I said, we don't just invest in Singapore, so a number of our investments are overseas as well. We invested in an Israeli company, for example, that does sugar replacement. It uses a sweet protein to replace sugar. Tastes exactly like it, I tried it, wonderful. And it doesn't have any insulin response, so it's potentially going to be a life changer for diabetics, where the taste of your drinks, your food, doesn't change. But you don't have any issues, in relation to diabetes. So we're, fingers crossed, very excited about that product.

Vonnie Estes, PMA:
What's it made from? Is it a plant? Or is it through fermentation, what's it made from?

Benny Chng, SGInnovate:
Yeah. So it's fermentation. But it's based off a sweet protein that's only found in Africa. It's a fruit that's quite rare. Very easily bruised, can't be easily transported overseas. They looked at the characteristics of their protein that's produced from this fruit. Reject a bit of the protein, but interestingly, it's a NON GMO. And they ferment it then, and that protein is added then to your drinks and to your food products. You just need a minute amount of it because it's super sweet. It's 3,000 times sweeter than sugar.

Vonnie Estes, PMA:
Wow. Fascinating.

Benny Chng, SGInnovate:
Yeah, it's a product we're excited about.

Vonnie Estes, PMA:
I'll have to look that up. Because yeah, people have been trying to solve that one for a long time, so that's really exciting.

Benny Chng, SGInnovate:
Oh yeah, yeah, for sure. So we're looking now, other than alternative sugar, we're trying to look at alternative fat, alternative salt, alternative anything that can help us be healthier, have the food taste the same, and is cheap. So we're looking at things like that.

Vonnie Estes, PMA:
Great insights from Benny. We will now hear from Foong Yoke Oon, talk about building her vertical farm business, followed by DiMuto's global commerce company.

Vonnie Estes, PMA:
So please tell me a little about yourself and your business.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
Okay, well actually the chief driver of my farm is actually my husband, who I call the chief farmer. He comes from an IT technology telcore background. He's been doing that for 30 years and he took an early retirement, and he suddenly sort of doing farming. So he did prototyping for a couple of years in a small greenhouse space, up in the north of Singapore. I think without a clear background in farming, you need to do a lot of trial and error, a lot of research. And that's what he started doing. I've come from a marketing business development background. I was raised as part of another company in Singapore, part of Economic Development Board.

Vonnie Estes, PMA:
Oh.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
They promote a lot of investments in Singapore. I was there initially for a couple of years and then I did hunting for a couple of years.

Vonnie Estes, PMA:
Oh.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
And I've actually been a stay-at-home mom for the last maybe 20 years now. And getting back to work right now.

Vonnie Estes, PMA:
So when did the business start? When did you first start it?

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
We actually started doing a bit of market research about 2019, we started to speak to some restaurants and people who were maybe interested to be our customers. And it was a real chicken and egg situation, we approach restaurant and they tell us, "Oh, okay that's good. Do you have any samples? Can we come and see?" And we say, "Oh, we haven't started yet." But it was also very difficult for us to say, "Look, let's clunk in a couple hundred thousand to do this." Without actually knowing that the business is out there. We went through this situation where we couldn't move on. And we said, "Okay. We'll do this."

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
And my brother, who owns actually his own law firm, started to put in some money, as well. So we decided to just start up, and this is in late 2019. And we were in the midst of fitting out, when 2020 came and all, in March and April. And we were in complete lockdown. So everything had to stop, our contractors were stuck in Malaysia, they couldn't come out to Singapore. Equipment couldn't come in. So basically, for the whole of 2020, our premises was just left empty. We couldn't get me started into late 2020. So we basically really started planting late 2020, early 2021. So it really effectively, only January this year.

Vonnie Estes, PMA:
So are you supplying customers now? Or are you still in the testing phases?

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
We've gone through I think two, three cycles now. And we've started initially with planting our kale and that's done quite well. We are still talking to restaurants, but I think in the time that my husband started prototyping five, six years ago till now, a lot of vertical open farms have started in Singapore. One or two have gotten very big, but there are also quite a number of small companies, like us, to startup in a small premises. Ours is about 3,000 square feet. So there is a lot of players out there and it's getting very competitive. And as we approach restaurants, they come and tell us that we've got a lot of suppliers. Pricing is a big issue for them, so it's been a bit difficult to bring into the restaurant market. So in the meantime, we've decided to do more of an online business.

Vonnie Estes, PMA:
Oh.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
We're building a website right now, and I think what we would like to do, is to do subscription boxes. So there will be a weekly box of five, six farmer's picks of varieties. We hope to get you on board, if we do numerous orders, we do free delivery, there will be free pick up. And I think eventually, we might also like to do a membership scheme, where if you pay a certain monthly or yearly fee, the price of the box will go down, different sort of concessions to it. So I think for a start, we'll do that because I think it will be easier to get those numbers in, for the beginning stages, while we work on our selected restaurants to market to.

Vonnie Estes, PMA:
How will you do the delivery? Will you do it yourselves? Or is there a service that will do the delivery for you-

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
Yeah, we've got a vendor, will come in and do delivery. Because we don't expect to be doing a daily delivery, if you order the vegetables by Friday, Saturday, we'll deliver by Monday. And maybe another one for midweek, we'll also offer a pickup service. Singapore is very small, so it's not difficult to do deliveries, you can drive more than half an hour from one end to the other.

Vonnie Estes, PMA:
Are you mostly doing leafy greens? Or what all are you growing?

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
At the moment we are doing, we've got a lot of kale, we've got about three varieties of kale, we're doing curly kale, kale toscano, we also have a lot of basil, mizuna, summer rocket, we've done some kalian, and we've also done strawberries.

Vonnie Estes, PMA:
Strawberries, wow.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
Yes, very difficult because they need lots of TLC. We germinated in December and I think we saw the first fruit in March. It's not very consistent. And actually, one of the restaurants we provided samples to, they really liked our strawberries, because they look like wild strawberries. They're not very even and the texture's a little bit unique. And she wanted 100 pieces a week and we said we can deliver. I think it's a showcase for a lot of farmers, that they can grow strawberries in Singapore, indoor. But I think to do a consistent delivery and volume and of quality as well, will be very difficult.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
So I think most greens, we can do herbs, we're doing also radishes. About several varieties of lettuces. We're growing back Chye and Ice Plant. So I think most leafy greens are growing quite well. We just need to get the consistency of the cycles, to make sure that every week we have five, six varieties growing and maybe to actually change varieties on a weekly basis. So that if you order a box from us, the next box will have two, three things that are different.

Vonnie Estes, PMA:
Mm-hmm (affirmative). That sounds great. So do you plan to expand? Do you think you'll build another facility? Or is just doing this one going to be plenty?

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
I guess we are kind of really at the first stage right now, because ours is a vertical racking system. So right now we are only doing two levels. Not even fully two levels yet, maybe half of two levels. We can go up to four levels, but it would require lots of equipment, in terms of actually going up particularly quite high. So I think we would like to see how the subscription boxes go. I've started some initial marketing on Facebook and on IG as well. So I'm trying to develop a sort of interest with that. So I mean, for a start, we've gotten quite a good following right now. We want to launch the website actually sometime this week, so that you can order for next week. We plan to harvest in a week or two, so let's see how the numbers grow. I don't think we can even do 50, 60 boxes for a start because we haven't built up the volume. And it would be sort of a step-by-step approach.

Vonnie Estes, PMA:
Did you get any funding from the government? Does the government support businesses like yours? Or is it mostly friends and family that invested?

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
Well, the Singapore government is actually on the real campaign and mission now. And they have a 30 by 30 target, to grow 30% of what we consume. I think COVID highlighted the problem that we are very reliant on food exports. And if there were to be another complete shutdown, I think it would be very difficult. We can't stockpile a lot of food, especially perishables, we can't do that. We truck in a lot of vegetables from Malaysia, we are very reliant on that. So when COVID happened, it was difficult. They had to find sources from elsewhere. So the government, in the past two years, has launched a 30 million dollar grant to help farmers build up the projection in Singapore. As you know, we are very late start.

Vonnie Estes, PMA:
Yeah.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
So what they're trying to do is just get the traditional farms to actually re-engineer themselves to do a lot of high technology farming. So it means compact spaces, by building up, by using a lot more technology, so we don't use the label, which is expensive in Singapore. So there's a very, very big drive. We've approached Singapore Food Agency, with a lead agency in Singapore, to promote, in terms of getting grants. We are still in discussion with them, but they would like us to also prove that we are very technologically advanced. So you need to be able to put in parameters where your use of lighting, or use of water has improved in terms of using technology, so productivity improvements have to be there.

Foong Yoke Oon, Ubertas AgriTech Pte Lt:
So we are talking to them, so the government is very supportive. But I think small businesses, it's also difficult because we are starting up more, we have to think about the business and yet we have to put up this huge proposal to prove to the government that we are very productive, we've applied a lot of technology to actually get the grants. But in the last budget... In fact, the 30 million has already been used up because there are a lot of small open farms now. I would suspect about 10, 15 now. So it's a new trench of about 30, 40 million that they've put in the budget for this sector. And it's not just for vegetable farming, but for fish farming and prawn farming as well. So there's a lot of agriculture, I think the fish farming is also advanced a lot in Singapore, in terms of doing it in indoor spaces.

Vonnie Estes, PMA:
Please tell me about yourself and your company.

Adrian Teo, DiMuto:
So my name is Adrian and I work for DiMuto, I'm the Chief Operating Officer for DiMuto. DiMuto is a Singapore based blockchain traceability company. We started in March 2019, so we are a little over two years old. And we have developed a solution that allows us to use blockchain, to track and trace produce from farm to table. And primarily, trying to solve issues like trade disputes, arising from the lack of data visibility in our suppliers traits. But also on the retail side, helping retailers understand where their produce comes from. And then also allowing them and empowering them with the tools to then be able to engage with their end consumers. Yeah.

Vonnie Estes, PMA:
Great. So there's so many services packed into that answer. So who are your main paying customers? What part of the chain do people actually pay you and extract the value? And then can you tell us about some of the customers and then what are some of the services that people use the most.

Adrian Teo, DiMuto:
Yeah, great question Vonnie. So actually that short introduction I had, wasn't all the services we provide actually. But the main key customers that we target are the ones who are actually supplying it. So the farm producers, or even a packing house, exporters even. Because they are the ones that in the first place, would get the most pinpoints. So I'll give you an example all right, so we have several customers out of Europe, Southeast Asia. But they do trades with China. So a lot of times what they face, is buyers from China would tell them that, "Hey, as a result of a quality issue, when we receive your goods, we're just going to write off 20% or 10% of credit just as claims."

Vonnie Estes, PMA:
Oh.

Adrian Teo, DiMuto:
But yeah exactly, and the suppliers would then be puzzled, right. Because they are thinking, "Wait a second, I sent this in great conditions. It's been a painstaking harvest season for us. We've put so much tender loving care into ensuring that our products are great. Sent that over and now you're telling me there are issues." And many times, how do they tell you that there're issues, to just send a couple of WhatsApp pictures or some random images. It can be a bit dubious in that sense because you don't really know exactly where those images come from, or which box they're talking about, et cetera, etcetera. So that just creates a lot more confusion for the suppliers and at the end of the day, just to save the relationship with the buyer, and to ensure that their networks into those markets are stable, they will absorb those costs. But as you know, once you keep on absorbing those costs, it adds up to your bottom line.

Vonnie Estes, PMA:
Yeah, and especially now with COVID, it's not like you could go visit and say, "Show me what happened." So that's really interesting. So when you go to make a sale, like you go to a supplier and is that kind of what you lead with? You say, "This will help you handle those disputes." Is that the main selling point?

Adrian Teo, DiMuto:
Well it really depends on what our suppliers, or rather our customers, are looking for. So many times they might explain to us that, "Hey, they don't have a traceability system." So then we come in and say, "Hey, here's a food package traceability system that's on a blockchain and we connect to the others on networks as well." But then there are customers who come here and say, "Hey, you know what, I've got issues with trade disputes, can you help us solve that?" Now there's another service that we do provide, which is really a value added service, as a result of being able to see very clearly the data points within your trade. And that's actually the financial services aspect.

Vonnie Estes, PMA:
Oh.

Adrian Teo, DiMuto:
So for example, I just got off a call yesterday with a new sort of company that sells blueberries and strawberries out of South Africa. Really awesome branding, really awesome marketing strategies that they have employed. But really new company, although they have 20, 30 years of experience in that industry, collectively. But they are at the stage where they really want to breakout of just the South African market into the global markets. Either, is it in China or Southeast Asia. But they don't have the working capital to do that. Right. And as well all know, we're all tied down to your end customers payment terms. Which can be prohibitive sometimes, actually all the time, in doing more business. Right?

Adrian Teo, DiMuto:
So I can speak just for Singapore and Southeast Asia, typically we get in excess of 30 or 45 days upon arrival, in terms of payment terms. And that's something that many of the suppliers worldwide in Europe, in Americas, aren't too happy about, unless you have an ongoing and longstanding sort of relationship. And because of those long payment cycles, your working capital is locked up. And when it's locked up, you face a lot of issues trying to grow and breakout and compete with your other competitors in that market as well. Now then layer on issues like trade disputes and claim issues, on top of that, and you can imagine your payment cycles are just going to get extended way beyond the 30 or 45 days.

Adrian Teo, DiMuto:
So where DiMuto comes in, is that we're able to help you digitalize your trade from farm to the table. The entire documentation level, product level, have that all visible on the platform. Some of this information are part of the blockchain, so that we can ensure transparency and trust. But the beautiful thing about having your information digitalized on the platform now, is that we invite financing companies, supply chain factory companies, credit insurance companies, to come in to reduce the risk involved from a payment default, for example. And then we finance, either the supplier or the buyer. Right. So something like, if we finance the supplier, what we will do is we would ensure that your products are tracked, we send those information to the financing company. The moment your goods arrive in good condition at the buyer's location, up to 70-80% of the entire trade value will be paid to you upfront. Right. So Vonnie, can you imagine what that would do for your business, if you're able to now unlock up to 80% of that trade value within the next day and then roll that over for more trades.

Vonnie Estes, PMA:
It's a great service. You mentioned a number of different regions and countries. What is your global footprint? How many different countries are you working in?

Adrian Teo, DiMuto:
I think we are close to at least ten countries. I can roll it off like a rap if you want me to.

Vonnie Estes, PMA:
Sure, go ahead. I'm sure they're at the top of your head.

Adrian Teo, DiMuto:
Southeast Asia of course. Singapore, Indonesia, Malaysia, Thailand. We're trying to make en routes into Vietnam right now, and the Philippines, we have a footprint there. And then East Asia, so in China, Taiwan, South Korea and Japan. So we are really strong in that East/Southeast Asia aspects.

Vonnie Estes, PMA:
Mm-hmm (affirmative).

Adrian Teo, DiMuto:
But we're also, from a supplier standpoint, we have suppliers from Latin America, so we have Mexico, Columbia, Peru, Chile. Now we're trying to tap into Brazil as well, huge market there.

Vonnie Estes, PMA:
Yes.

Adrian Teo, DiMuto:
And then talking about the Pacific region, we've got Australia. Then moving West, we've got Africa, so South Africa. We're now doing a pilot of soybeans in Ghana, so that's exciting. And then interestingly, we are also now doing flowers out of Holland. So we are shipping flowers from Kenya to Holland and then onwards to the rest of Western or Eastern European countries. And then yeah, UK for sure.

Vonnie Estes, PMA:
Mm-hmm (affirmative). So this episode that I'm doing right now is on Singapore and looking at Singapore companies and trying to help the rest of the world understand what it's like to be a business in Singapore. So why did you start your company there in Singapore? What was the reason to start there? Because you were all there? Or were there other reasons?

Adrian Teo, DiMuto:
Yeah Vonnie, I think that is the first and foremost reason perhaps. That we're all Singaporeans, Gary the founder, runs and is still part of the board of a fruits trading company based in Singapore as well, and that's sort of the natural progression for us to continue being in Singapore. But I think beyond this obvious reason as well, I think Singapore is a great place to start, especially an agtech company. Anything related to technology, and that's really because of the sort of ecosystem that the Singapore government has really built over the past few decades, to support such innovations to happen around here. So it's not just from a financial standpoint, where they give those supports in the form of grants, or funds that we can tap into. But even the professional support, the intellectual support that happens around here, especially in Singapore, is something that is very attractive for us to remain in.

Vonnie Estes, PMA:
These three conversations are like dropping into what a good ecosystem can bring to a sector. Government support, private sector financing, smart entrepreneurs, with all areas willing to take risks to support growth. I love that Singapore is both working at developing food for itself and also as Benny says, developing technology for the rest of the world as well.

Vonnie Estes, PMA:
That's it for this episode for PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at PMA.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

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Description: Be ready to take notes! This episode covers the needs of the food supply chain which was pushed into the spotlight by COVID-19. As we saw shortages on the shelf, and supply disruption and dislocations in production and distribution, this complicated question arose: What does it take to get data flowing from farm to plate to resiliently manage the supply chain? Brita and Seana have previously covered the well-funded ends of the supply chain. Seana in AgTech and Brita in Foodtech. They believe there is tremendous, untapped opportunity for vertical-specific technology companies which are focused on serving the unique needs of the food supply chain. After listening to this episode, you will to!

Moderator: Vonnie Estes, Vice President of Technology, Produce Marketing Association
Panelists:

•  Seana Day, Partner at Culterra Capital
• Brita Rosenheim, Partner at Culterra Capital

Vonnie Estes, PMA:
Welcome to PMA Takes on Tech. The podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So I can attest, it's hard to navigate this ever-changing world and developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes, PMA:
Stout Industrial Technology collaborates with customers to build and launch industrial technology solutions that are designed to last. The Smart Cultivator combines a proprietary agriculturally proven mechanical platform with Stout true vision technology to eliminate weeds and cultivate ground in a single pass. Visit Stoutagtech.com that's S-T-O-U-T-A-G-T-E-C-H.com to learn more.

Vonnie Estes, PMA:
If you were anywhere in the food supply chain from producer to retailer food service, you're going to love this episode. Also, if you are a tech provider or investor in the food supply chain, you should listen up. I talk with Seana Day and Brita Rosenheim of Culterra Capital about their landscape of the supply chain and the trends that they're seeing. Most of the investments to date, have been focused at either end of the supply chain, either in ag tech or food tech. This landscape focuses on everything it takes to get food from post-harvest to retail, get ready to take notes. They talk about the four pillars of the supply chain and the seven innovation drivers. We also discuss why this is the time for investment in the supply chain and the difference technology can make. Let's jump into the conversation.

Vonnie Estes, PMA:
Brita and Shauna, it's so great to have you on the podcast. As you know, I'm such a big fan of your work. You recently published your supply chain tech landscape 2021, which is a masterpiece view of the industry. You've also laid out trends and the importance of investing in the supply chain now. For those of you listening, who are near a computer or your phone, you can Google Culterra Capital and open up the landscape. We'll talk about it later, but before we get to that, let's get to some background. So tell me about who you are and a little bit about how you got there and you're focus on the supply chain.

Seana Day, Culterra Capital:
Thanks very much, Vonnie. It's great to be with you. I'm Seana Day and I'll give Brita Rosenheim a chance to introduce herself in just a second, but I'll jump in first. And just give you a little bit of background about the journey and how we kind of got here. So I've historically covered ag tech and some of your audience members might've seen the farm tech and ag tech landscapes we've published for the last five or six years. And we really look at that through the lens of IT for food and ag. So we're looking at software, hardware applications, and I think I cover at this stage about 1,600 companies, that's probably growing on a global basis. And so this was really a fun opportunity for Brita and I to do some collaboration as we look into the messy middle of food and ag, but just kind of by way of background.

Seana Day, Culterra Capital:
I sit in the Central Valley in California. So I'm based in Turlock. And this was kind of a natural extension for me to look into the supply chain, given that kind of ag background and the ag roots. And not only that, in California, it's a $200 billion food processing industry, and a lot of that takes place in the Central Valley as well. So this has kind of been a passion of mine, since I moved back to my hometown about seven years ago, and really spent more and more time thinking about not only what's happening in the farm, in the field, but also the value add. The food processing, manufacturing and a lot of the logistics. So I'll kick it over to Brita, to give a little bit of her background.

Brita Rosenheim:
Thanks, Seana. Yep, this is Brita Rosenheim. So for me, it was also a natural extension going upwards. Historically, over the last decade, I've focused on technologies that are supporting the retail, CPG and restaurant sectors. So obviously they're very tied to the supply chain and over the many years, I've spent time looking at pockets of supply chain, but I think COVID really an earth and opportunity for us to roll up our sleeves, connect our worlds, and really understand the different technologies associated with the different value chains across the food supply chain. So really great timing.

Vonnie Estes, PMA:
Great. Thanks. So please define for us what supply chain means to you and remember that many of my listeners are in the produce industry. So how do you define supply chain?

Seana Day, Culterra Capital:
Yeah, I mean, I think we spent a lot of time actually thinking about how we position it, how we define it as we were creating the landscape itself. So we'll unpack a little bit of that later on in the conversation, but kind of fundamentally, we see the supply chain in four kind of pillars, if you will. First mile, so that's basically what's happening from the farm gate to the first packer, shipper processor or primary processor, the first kind of handoff. The second pillar is really around production and food manufacturing value add. The third in our view would be around distribution logistics, and then the fourth would be kind of demand, so really what's happening closest to the retailer or the food service provider. Really, that kind of loading dock.

Seana Day, Culterra Capital:
And then, Brita's kind of world picks up within the walls of the retailer food service and looking at food tech, but that's really how we've kind of approached the supply chain as it were. And then as we thought about, what are some of the innovation drivers within that supply chain? We really got pretty deep over the course of 2020. Looking at seven different distinct innovation value drivers. Strategy and analytics, so really thinking about how to improve responses to changing the dynamics and kind of internal shocks as we saw in 2020, but just internal considerations. Whether it's weather, trade, labor disputes, what's happening on the ground. We looked at planning and execution.

Seana Day, Culterra Capital:
So how do we create an environment of more responsive operations, better forecasting, better planning. We looked at asset utilization. I think this is a particularly interesting one as we start to think about load planning and transportation and logistics, and co-packers. How do people use their assets and how can technology improve the use of those assets in a more productive and profitable way? Of course, labor is something that's near and dear to I'm sure most of your audience's ears and hearts in this topic. As an innovation driver, we really believe that labor is going to be a key influencer in terms of adoption of automation and technology, but not only that, just worker safety as well. So what kinds of tools and technologies can be applied to improving worker safety.

Seana Day, Culterra Capital:
Of course, quality and food safety is another key innovation driver that we looked at in the supply chain. And that's really thinking about how you decrease FSQ, food safety and quality costs. Costs to comply and report to monitor. How do you mitigate those risks, food, safety, risks in particular? And our produce listeners would probably really identify with kind of more real-time technologies and more real-time tools to help mitigate food safety risks. And then of course, extending shelf life. And we've seen some really interesting innovative technologies there.

Seana Day, Culterra Capital:
The sixth pillar, is really thinking about vendor and order management and in our case, grower management. So how do you kind of digitize some of those back-office processes and improve ability to collaborate among supply chain partners? And then finally, as a key innovation driver, the physical flow of goods. How do you increase visibility into the cold chain? How do you reduce transportation costs? How do you reduce penalties and rejections from the retailers with sort of track and trace technology and reporting technologies? So that's a long-winded way of saying how we think about the supply chain, but that's how we've defined it in the landscape and then thought about investment opportunities and innovation opportunities across the supply chain.

Vonnie Estes, PMA:
Wow, there's a lot in that. That could be a whole another fruitful conversation.

Seana Day, Culterra Capital:
We'll come back some day and talk about that.

Vonnie Estes, PMA:
Yeah. That can only be spoken by someone who has really dissected this and looked at it very closely. So we'll dig deeper into some of that. So value creation to date has been consolidated at the end points of food and ag, as you were talking about. So growing and harvesting at one end, where there's been a lot of technologies developed and a lot of money invested in ag tech on that side, which is Seana, what you've worked on a lot and then retail and food service, kind of at the other side. There's been a lot of investment and technology development, which Brita you've worked on a lot. So why do you think this is the time for investment in the supply chain and how has COVID accelerated this need?

Brita Rosenheim:
Sure. I'll take that one. In doing this work, even ahead of COVID, we are reaching a unique inflection point in the evolution of the food supply chain. We do think that there's growing agreement and understanding by food supply chain stakeholders, that they can no longer put off investment into technology. So we're seeing increasing digital readiness, obviously spurred by COVID, supply chain dislocations, but we're also seeing new innovation from the tech companies, themselves, new tech breakthroughs that are focused on the new ... Excuse me, focused on the unique nuances of today's food industry. Some of that again, pre COVID existed, post COVID exacerbated. These shifting consumer preferences, the tremendous increase in omni-channel, that's putting greater pressure on suppliers to adopt to the dynamic demands of the buyers.

Brita Rosenheim:
Of course, we're seeing, as Seana referenced, acute labor shortages, that's driving the need for automation. And taking a step back, we're looking at market and investor demands for increased traceability and sustainability. So those are some of the key drivers that were percolating ahead of COVID, but I think we've really sharpened the focus of the different participants across the supply chain and recognized that there is urgency that that technology can address.

Vonnie Estes, PMA:
Yeah. And I think with COVID ... Before, COVID most Americans didn't even consider the food supply chain, they had never even thought of it, because food always showed up. And so I think it certainly has put some consumer focus on it as well.

Brita Rosenheim:
Yep, yep.

Vonnie Estes, PMA:
So what part does digitalization play? And can you give some examples of that?

Brita Rosenheim:
Certainly. Yeah. So just building that, we're seeing this increased recognition that accumulated technical debt is unsustainable in the supply chain. Right now, the supply chain tech category is highly fragmented. We're seeing a lot of legacy or very specialized or highly customized and of horizontal edge enterprise tech solutions. And so that's what we're dealing with. Digitalization exists, but we're looking, how do we take it to the next level and create interoperability across those solutions? So we're seeing kind of clear venture opportunities to develop. We think vertical plays and strategy and analytics, robotics, automation, specialized distribution and logistics players. All of those rely on unsiloed data, you're connecting systems across the supply chain, but we're also seeing artificial intelligence, machine learning, IOT and other advancements that are driving tech into more complex physical spaces. And so that's, factories, roads, warehouses, farms, where historically we didn't have a lot of technology.

Brita Rosenheim:
And so, that's paving the way for a broader digitalized platform foundation. For example, the function of vendor and order management. We know Excel and email, they're the king of supply chain applications still to date, but there's increasing adoption for business automation, process automation software, it helps operators in the first mile and in retail, digitize those back office functions like document processing, payments. RPA, robotic process automation. There are a number of different technologies that are helping to create an underlying digital foundation to the supply chain.

Brita Rosenheim:
Ultimately, that supports increased collaboration, internal and external, better data quality, better insights. Ultimately, optimize procurement processes for the retailers because they have better insights, better predictive processes. And we think that it has a potential to reduce overall time to market and that's particularly important, obviously in the fresh and perishable space.

Vonnie Estes, PMA:
You mentioned interoperability, which is an issue across the whole supply chain on farm, all the way through to retailer. And so how do you think about that and how do you think that's going to play out, because right now it seems like there's so many different systems and they don't speak to each other.

Seana Day, Culterra Capital:
When we started this project, this Odyssey last year. I really started to fixate on this idea of, so what? So if, you have more data, how would that have changed some of the massive dislocations that we saw in the food supply chain? And a few that come to my mind, just based on where I sit. We saw dairy processors kind of shut down overnight because they may have been servicing the food service industry. And all of a sudden, they didn't need 20 pound totes of mozzarella anymore. And then you'd see milk, dairy producers then having to dump milk in their fields. And that kind of dislocation, I think really hit people hard. But getting back to that question, I ask myself, "So what, if we would have had more data, how would that have changed that outcome?"

Seana Day, Culterra Capital:
And that's kind of got us to sort of pull on this sweater, thread of data interoperability and how data flows through the supply chain to kind of start. The more we pulled on it, the more things kind of unraveled as we were trying to get to some of these answers. You kind of have to unpack what the data is. Is it specs, is it traceability data? Is that food safety data? What is the data that needs to get passed from one hand to the next. We kind of think about it in two ways. You've got what exists within the four walls. And a lot of that's going to be your production data, your manufacturing execution systems, things that you need to operate the business within the four walls. But then you've got to share some of that selected data with your supply chain partners as well.

Seana Day, Culterra Capital:
And as we started to map out those data flows, which we did sort of an agonizing level of detail to get to some of those so what answers, then we kind of sort of backed ourselves out of it and said, "Okay, so what are some of those adoption headwinds?" In terms of getting people to share data or adopt digital technologies to kind of aid in the sharing of data And Brita, mentioned one, which I think is a real sort of struggle and pain point, and that's that Excel and email sort of remain the defacto technology standards in many industries. It's not unique to food and ag, but we certainly see that in food and ag.

Seana Day, Culterra Capital:
We struggle with data quality. There's a lot of sort of manual entry. You write something down in the field or out on the loading dock. And you've got to give a piece of paper to somebody in the office who transcribes it. Functional silos, that's another. We understand the pain of functional silos and decision-making well now. I think if you're talking to an FSQ manager, procurement manager, a transportation manager, they might have different pain points and the same solution is not going to necessarily solve their individual pain points. I think probably one of the biggest that either you and your audience may identify with, is really change management or sort of incremental improvement or process improvement. However, you want to call it, getting people to change the way that they've always done things is really, really difficult, and it takes leadership and capacity building. And the technology has to be easy to use. And there has to be a short learning curve.

Seana Day, Culterra Capital:
These are all, I think, learnings that the technology companies and the business leaders are probably struggling with, but hopefully we sort of get over that inflection point and we start to see more of that commitment to digitalizing businesses and not sort of trying to do everything all at once, but really having a sort of long-term strategy for implementing technologies. And also, recognizing that the ROI of tech starts to come when you can combine some of these systems and data sets. So having kind of reasonable expectations for ROI in one system versus a kind of systems, of systems, where you really start to hum in terms of the decision support, but it doesn't happen overnight.

Vonnie Estes, PMA:
Yeah. I was listening to this South by Southwest virtual conference presentation a couple of weeks ago, and it was a guy talking about how now every company is a software company and it was very compelling. And them talking about, all the tools that you need to be using just to do business right now, you better have people oriented around how things connect. How does data gets get passed through? So I think that's going to be a big change in our industry, along with every industry. So let's-

Brita Rosenheim:
Just building on that one particular point is, I think that's where we're seeing the opportunity, especially at the venture side. As I mentioned, you have a lot of legacy systems, but we're seeing an increase of software SaaS, in early stage companies that are using AI and machine learning to better harmonize data from legacy systems. So they're straddling the existing systems. You don't have to rip and replace, but they're integrating them to better optimize for real-time planning, visibility by pulling from multiple systems. So you're going to be a modern lens. And this is also another driver, one other driver I'd say is, consumerization of enterprise tech. You're getting those kind of modern user experiences and pulling this data from lots of legacy systems in order to make better decisions. And so in the strategy analysis piece, that's where we think there's a lot of opportunity for earlier stage teams to help move the needle there.

Vonnie Estes, PMA:
Yeah. They were also talking about, just making the decision of, do you build or buy? What systems are out there like, AWS, that you don't have to build everything yourself, but what can you kind of plug everything into? For a company that doesn't normally use those systems, just integration of everything is going to be a challenge as well.

Brita Rosenheim:
Certainly. Yep.

Vonnie Estes, PMA:
Yep. Seana, you and I've had this conversation a little bit before about the first mile, but let's kind of open it up again to talk about, what happens at first mile and what happens there right after harvesting has one of the biggest effects on produce quality and shelf life. So what do you see as the important technologies and innovations that are coming there and are needed there in the first mile?

Seana Day, Culterra Capital:
Yeah. I mean, Brita's sitting in New York right now and I'm in California and I can probably hear her eyes rolling back in her head because I talk about first mile so much, I'm obsessed with it. Every time I get on the phone with somebody and I have a chance to talk about first mile or ask questions. I do. So I'd love to answer this question. Again, when we started unpacking this, I did a lot of work just to kind of understand what actually happens in the first mile, what data is collected? From harvest and sort of labor planning, harvest planning, harvest equipment planning, actually harvesting, the harvest activities themselves. To then kind of load scheduling, load logistics. Once it sort of leaves the field, then looking at receiving, grading, QA, QC, how are the commodities stored? And then how are they marketed and how are they sold? And the shipping logistics from that point.

Seana Day, Culterra Capital:
And then also within that first mile umbrella, and you'll see this on the landscape, is really that grower contract management, grower management. So that's where the payments, the certifications are really, the sort of tools and technologies to keep records there. So that's a lot, those are a lot of kind of discreet moving pieces that obviously have a lot of dependencies on one another as well. There's a whole bunch of different data sets that go along with those different activities. And by data sets, they don't necessarily go into a computer. They are on a notebook somewhere, or they sit in a dispatcher's head, who's worked on sort of load planning and transportation logistics for 20 years. That's the area of the first mile that I'm really excited about, but really, I think we have a long way to go in terms of digitalization.

Seana Day, Culterra Capital:
This is probably the least digitized part of our sort of supply chain as we've defined it. I think a lot of the activity that at least I've seen as we've done a lot of the company research is really in that producer management, grower contracts. There are sort of workflows and task management activities there that plug into food safety and quality, and they plug into some of the other traceability applications that we're increasingly seeing more and more demand for. And then of course, you have monitoring also, as you mentioned. And we've talked about, what happens in that first mile is so important from a quality and shelf life standpoint. You might think that the cut to cool time is three hours or five hours, and it might be taking nine hours. Once, you kind of look at the monitoring technologies. Those are just some of the areas that there appears to be a lot of opportunity for technology intervention and better monitoring, reporting, and management of relationships and contracts.

Vonnie Estes, PMA:
So let's switch to the landscape that you've done. And so this is such an amazing piece of work. And so those of you that can open this, it's Culterra Capital, and you can open and look in the landscape. I realize that probably some people listening to this are either driving or folding laundry. So you might want to open it up later and look at it. But can you at a high level then walk us through kind of the backbone of the landscape. One of the things I found the most interesting about it, was just how you even segmented everything. It was like looking into both of your brains to see how you think. The way that you even segmented it because that in itself was an amazing piece of work. So how did you break up the different sections and then how did you find the companies and kind of populate it?

Seana Day, Culterra Capital:
Brita and I spent most ... As many people in the world know, we didn't travel very much in 2020. So we had a chance to really go deep and in an undistracted sort of very focused way. And we realized probably about midway through that we had bit off a lot more than we could chew, but that was a challenge for us that we happily embraced. This took us a long time to kind of figure out how to organize and not only organize the pillars, the supply side production and manufacturing, distribution, logistics, and demand. But also really thinking about, "Okay, who's doing more strategy work, who's doing more just the blocking and tackling execution and then who are those kind of more value chain players that really crossover?" And the first kind of, I guess, qualifications I'd say. We fully recognize that there are many companies on this landscape that could fit into multiple categories.

Seana Day, Culterra Capital:
So we had conversations with them to try to figure out what the predominant business model was. We had to make some judgment calls there. And then the other thing that I would say is, I want ... Brita, wouldn't know exactly the number I'm sure, but I think we've got about 3 or 400 logos. We came up with about 650 companies in the database, and we really approached this in the same way that we approach our respective landscapes, mine on the ag tech side, Brita on the food tech. We do just a lot of research. We have our own proprietary databases. We talked to a large number of companies, which is great, about these maps. It gives us a chance to get to know, where the really exciting innovators are. And we love that part of our work.

Seana Day, Culterra Capital:
It was new to us and a lot of these companies are also more horizontal, especially if we look at the production and logistics and distribution. Food and ag might be a vertical that they have a footprint in, that was kind of a criteria for us. Every company on this landscape has a footprint in food and ag, although many are horizontal. And that was really how we started to kind of come up with this thesis of, "Okay, now is the time. It feels like we are in that moment where verticalized food and ag specific, food and bev specific technologies are really going to advance the modernization of the food supply chain." And again, we look back at the massive dislocations that we saw in the supply chain in 2020. And that sense of urgency I think, is really sort of creating an interesting moment for us.

Seana Day, Culterra Capital:
And we're excited to get to know, and we'll shortly make our announcement in a first mile investment that we've made in the last couple of weeks. So we're really excited to support the companies that are looking at building these food and ag specific data sets to address some of these supply chain challenges.

Vonnie Estes, PMA:
When I look at that landscape and that's so many really smart people and a bunch of money that's gone into it and great technology that's being directed to the supply chain. I think people wouldn't realize that, that's happening without you really shining a light on it.

Seana Day, Culterra Capital:
Yeah. I mean, the other thing that we did, and you touched on this earlier. The investment has really sort of gathered around the end points, Food tech and ag tech, and here we see a lot of internal R&D. You've got mature companies here that sort of obviously reinvest. So we're not talking about outside investment. I fully understand that there's great R&D that's done, but if you actually look at the venture and private equity investment in the kind of messy middle here, it is sort of surprisingly low given the size of the prize. We kind of call this $150 billion opportunity and the proportion of outside risk capital and outside investment that's flowed into the spaces, is surprisingly low given the size of that prize.

Vonnie Estes, PMA:
Do you think that's because people don't see it as an opportunity or don't know how to attack it? Or now that you've kind of broke it open, you think people are going to rush in. Why isn't there more money flowing into there?

Seana Day, Culterra Capital:
Look, food processing isn't very sexy. We hope that, that changes. We hope that as people start to understand the really interesting work that's being done around food safety detection. Freshness control application, there are some really interesting opportunities to move the needle significantly. Particularly, when we talk about these big picture challenges, like food waste. Everybody talks about food waste. Well, here's a place where we can deploy capital to really move the needle and kind of improve the metrics around food waste, for example.

Vonnie Estes, PMA:
You all have identified five trends that will accelerate tech adoption. Can you kind of go through some of those and highlight what you see are the important trends?

Seana Day, Culterra Capital:
Yeah. So I'll start and Brita and I can both speak to this. On the supply side and this applies across the board, but really operational visibility. As I mentioned before, the first mile is kind of the least digitized part of the food supply chain. So increasing that level of the digitalization. Tech enabled resource and asset planning, I think that's really going to be an important trend to watch as we look at ... Just anecdotally, I drive around in my part of the valley and I'll drive by a field every couple of miles where you see 20 empty trailers or 30 empty trailers, and you kind of scratch your head and think, "Wow, I wonder if there's a way to better utilize or optimize the CapEx that's gone into those 20 or 30 empty trailers." So really using technology to improve resource planning and allocation.

Seana Day, Culterra Capital:
And then the other area that we kind of looked at, and you'll see this on the map is, sort of data-driven market insights. What kind of data and information can marketers, can traders use to reduce volatility, to reduce risk, to reduce loss across the supply chain? I think there's a lot of neat work that should be done and will continue to appear on the horizon around just those market insights. And then I'll also speak to the production piece, the food manufacturing piece. I think really thinking about industry 4.0 readiness and Brita, touched on it earlier. How do a lot of these food manufacturing plants or value add plants really react to those industry 4.0 innovations that are coming down the pipeline to improve automation, to improve worker safety, to reduce dependency on workers in some lines? And then also to be able to provide ...

Seana Day, Culterra Capital:
We haven't talked very much about it, I don't know what number to use, you can use anywhere between 30 and 60,000 food processors in the US alone. And there are obviously the very large ones that we've seen and heard a lot about, but the S&Bs, the small to midsize food processing, food, manufacturing facilities, and plants really don't have the same sort of end-to-end operational platforms that some of the big guys have. It's going to be exciting, I think, to see more of those types of kind of end to end technology solutions that can help those S&Bs focus on productivity and profitability in their businesses. So I'll kick it over to Brita, to talk about a couple of the others.

Brita Rosenheim:
Yeah. And building on that, looking at the logistics and distribution piece, which straddles the entire supply chain. One trend in particular that we're seeing in food and ag, but broadly, is supply chain as a service. So layering in better intelligent logistics and distribution options and not necessarily managing it all within house. So just in the same way that cloud computing has allowed companies to reduce their upfront CapEx, supply chain as a service is helping companies across the supply chain augment their procurement, their production control, their manufacturing, quality, warehousing, logistics. Outsourcing that, where it makes more sense to leverage companies that are specializing in those functions. That obviously helps, especially on the earlier stage side. It helps S&Bs get up to scale quickly, leveraging these other technologies.

Brita Rosenheim:
Another piece of that, in terms of intelligent logistics and distribution is layering robotics, so human robot collaboration. So where in DCs and fulfillment centers, we're seeing increased robotics. Some are autonomous, but increasingly we're seeing that relationship between humans and robotic solutions or AR, VR in terms of training. We're seeing that middleware, the software systems that are supporting the operations and the workers within the warehouses. I think that's generally a category that's been horizontal. And as we're seeing this increase in horizontal software, so looking at multiple industries, and as we're seeing the shift towards increased eCommerce, digital grocery ordering. We're going to see increase solutions that are focused on the fresh and perishable category in terms of robotics and automation at the warehouse and DC center. Obviously, they're focused on how do you fulfill at the quantity and speed that you need in order to make eCommerce profitable?

Brita Rosenheim:
Going a little further down the supply chain to demand, looking at these actual retail and restaurant businesses themselves. We're seeing a huge urgency for last mile economies of scale. How do you actually get it to the consumer? And increased focus on inventory management, demand planning, distribution. How do you upgrade your processes there to better react to the consumer demands and these new business and revenue models? Whether it's direct to consumer, omni-channel or the cook and collect options. Obviously, on the restaurant side, which we haven't talked about more, you're not in business, if you didn't adopt a digital interface and online ordering and curbside pickup at a minimum during this past year.

Brita Rosenheim:
We've seen a huge jump in terms of, kind of technical adoption through Instacart, whether it's the large third-party marketplaces, not all of it's done in house, but helping these restaurants and retailers adopt to these new purchasing behaviors. So I think that's changing kind of business model approach on the demand side. And then, just broadly we're looking at ... If you're looking at taking a step back at the entire value chain, all of these lead to hopefully a tighter and better connection between supply and demand. Now that's the Holy Grail. And Vonnie, you had mentioned ahead of this, when were preparing for it. There's little visibility between the warehouse and the point of sale. Where's my stuff? Where's my stuff going to? We still have very siloed data and a number of technical gaps to fill there. So ultimately, all of these technologies should be supporting a better connection between supply and demand in terms of visibility.

Vonnie Estes, PMA:
Yeah. I think that's definitely what the industry needs. You look at that landscape and you think, "Okay, that's what it's going to take." All right. Well, Brita and Seana, this has been an incredible conversation and I always learn so much from both of you. And I think you have one of the best views of what's happening in this whole middle piece. And I hope that, that drives your investment and also other people's investment into this sector, because it really supports the whole food industry. So thank you very much for the work that you do and for spending this time with us today.

Seana Day, Culterra Capital:
Thanks for having us, Vonnie.

Brita Rosenheim:
Absolutely, our pleasure. Thank you.

Vonnie Estes, PMA:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at Pma.com and wherever you get your podcasts. Please subscribe, and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

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Description: Chief Economist Wandile Sihlobo talks about what technology is important in boosting productivity in Africa along with how growing more produce can help address unemployment on the Continent. We also hear from two entrepreneurial companies from South Africa who have developed solutions to problems Wandile discusses and have gone global. Greg Whitaker from AgrigateOne discusses how their produce supply chain data systems supply insights to growers and buyers.  Vic van den Berg from Aerobotics talks about their intelligent tools for orchards. 

Moderator: Vonnie Estes, Vice President of Technology, Produce Marketing Association
Panelists:

• Vic van den Berg – VP of Grower Relations, Aerobotics
• Wandile Sihlobo Chief Economist, Agricultural Business Chamber of South Africa - Author “Finding Common Ground”
• Greg Whitaker Founder at AgrigateOne

Vonnie Estes, PMA:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host Vonnie Estes, Vice President of Technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So, I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes, PMA:
Stout industrial technology collaborates with customers to build and launch industrial technology solutions that are designed to last. The smart cultivator combines a proprietary agriculturally proven mechanical platform with Stout true vision technology to eliminate weeds and cultivate ground in a single pass. Visit stoutagtech.com, that's S-T-O-U-T-A-G-T-E-C-H.com to learn more.

Vonnie Estes, PMA:
In today's episode, we traveled to South Africa to find out what is happening in ag and ag tech in this important region. We will first hear from Wandile Sihlobo, who studied agriculture economics at university, and has worked in private sector agriculture consulting with farmers across the country. He is now the chief economist at the Agricultural Business Chamber of South Africa. His recent book called Finding Common ground is a selection of key articles from his regular business day column along with insightful commentary. The book outlines, the challenges and opportunities faced by South Africa's agricultural sector. Of the many important themes in this book and there are many, I recommend everyone take a look at it, we will focus on my three favorite themes, technological developments, agricultural driving development, and job creation, and the urgent need for agricultural policy to address gender equity.

Vonnie Estes, PMA:
After Wandile, we will hear from two innovative ag tech startups in South Africa, Aerobotics and AgrigateOne. Let's jump into the conversation with Wandile. Welcome, Wandile, it's very nice to have you on the podcast. Please start by introducing yourself a little bit about your background and your current role.

Wandile Sihlobo:
Yeah, thanks for having me on my name is Wandile Sihlobo. I am a South African agricultural economist. In my current role, I work for the Agriculture Business Chamber of South Africa. So, the Agriculture Business Chamber is basically an association of agribusinesses. Almost everyone that operates in South Africa's agriculture and food value chain with the exception of the farmers. We have the input suppliers, financing institutions, we also have then the food processing companies and their grain handlers and everyone. That's what Agriculture Business Chamber or in short Agbiz is. We also then do operate across the South Africa base, even though we are pretty much stationed in South Africa. And my role there is chief economist of the organization.

Vonnie Estes, PMA:
Wow. And you have time to write a daily column while you're doing that role as well. And I've been reading your book called Finding Common Ground. And the book is a selection of key articles from that business day column framed with insightful commentary and context. And the book covers important broad themes and outlines the challenges and opportunities faced by Africa's agriculture sector. And there's so many different themes in it. And many of the themes are land reform, leadership, cannabis, and trade. And I encourage everyone listening to this to read the book.

Vonnie Estes, PMA:
I got mine, the electronic version for My Kindle. So, it's very easy to get. And each one of those topics could be a full podcast in itself. But we're going to focus on a few of these broad topics that I think our listeners will be interested in. And those three that we're going to look at are technological developments on the continent, agriculture driving development and job creation, and the urgent need for agricultural policy to address gender equity and youth involvement. So, let's start with my favorite topic, the technological developments and megatrends underpinning agricultural development.

Wandile Sihlobo:
Yeah, on that one, I mean, I think we will have, Vonnie, to take the view from a continental perspective because Africa's agriculture is pretty much diverse. If you look at some of the countries like South Africa and maybe a few in Southern Africa like Zambia, that's where you will see that technology has pretty much contributed immensely in boosting productivity over the past couple of years, particularly in the case of South Africa and technology in two ways. Firstly, on a biotechnological side and also on a biological side and also on the mechanical side. I mean, on a biotech you think about South Africa, we probably now the only African country that from the early 2000 to adopted the use of genetically modified seeds, also a heavy use of some of the chemicals that yes, environmentally friendly to a certain extent, but also useful in productivity in agriculture.

Wandile Sihlobo:
Zambia is one of those countries that is also starting to adopt more of the biotechnological aspects that are helping and boosting productivity. And on the mechanical side, that's where the uptake is also following up. I would say South Africa is on the lead again. At least in the Sub-Saharan Africa, because as far as you look up North, Egypt, Morocco, and all of those other countries are also advancing to a certain extent in them. But I think at the core of everything, technology has been key in boosting productivity yields per hectare. That's what we've seen it's role playing on.

Wandile Sihlobo:
But I think off late some of the technologies that we do see playing an important role especially if you look at the East Africa as well as amongst the small holder farmers, it's either technology is for ensuring that market information reaches people, use of drones and all other aspects that too is beginning to take shape or be adopted to a certain extent. And this, Vonnie, is across all sub-sectors of agriculture, either it's horticulture, field crops, livestock and poultry. That's where we do see this uptake and tech being very important on boosting productivity.

Vonnie Estes, PMA:
On the genetically modified seeds, do you see other countries will start accepting it? And what do you think the barriers are and that people don't want to use GM seeds?

Wandile Sihlobo:
I think the barriers are in two ways, largely more on a political side, I would say that's everyone rather than on the scientific side. There is beginning to be some bit of openings. And I say this because if you look at countries like Kenya and you look across the East Africa region, they're beginning to be a lot of tests that are being done on cotton, to a small extent on corn. So, I'm thinking that in the next couple of years, we could see policy changing. Even in countries like Zimbabwe the importation of GMCs has been allowed, permitted.

Wandile Sihlobo:
The next step now is looking at say, can it be adopted for planting and not only just staple grains but across a number of crops. So, that's something we're watching and I think the next five years or so could be revolution around that end.

Vonnie Estes, PMA:
On the mechanical side, like you mentioned some of the adoption, what types of technologies are you seeing in the mechanical use of mechanization and different types, is it harvesting or planting or what are you seeing?

Wandile Sihlobo:
I think, I mean, it differs on a country by country basis. If you look at South Africa, when you look at central South African farms for example, across our agriculture belt, what you see here is not very different, what you will see in America or somewhere in the US or Australia, which means that pose on the tractors much more, latest tractors that people use and also combined harvesters. But in the African continent, that's where then that tends to be some bit of changes in a sense that the farms in a number of African countries are still small holder farming.

Wandile Sihlobo:
So, you see the major combined harvesters that you see in countries that have an industrial agriculture. And I think that's where there still role for a number of players, technology providers, John Deere, and all of those guys to study those countries and see what sort of mechanical technologies they could bring in some of these countries, but certainly harvesters and tractors, but different games depending when a country's agriculture.

Vonnie Estes, PMA:
Yeah. And I think a lot, certainly in the US as well for the horticulture crops, things need to be smaller, more compact than some of the bigger row crops. And so, we're seeing that starting to be developed as well. So, what do you think is needed? You mentioned having bringing different tractors and that sort of thing, but what other technology do you think is needed for the continent and where else will that technology come from? Or are you developing it in Africa or is it coming from other places?

Wandile Sihlobo:
I think the one thing that we need to think about is the question of saying, "How do you improve productivity in Africa's agriculture?" And the first step there starts with saying, how do we get investments coming in, either on the private sector or public investments coming into the sector? And that goes back to broader policies across the African continent of saying people are not investing a lot in agriculture because they are property rights issues. People are not investing a lot in agriculture because of the infrastructure constraints, public sector infrastructure that could be put in place. But I think as soon as we move through that hurdle, which is where policy makers need to play a role in, then we'll begin to see the investments in technology.

Wandile Sihlobo:
And I think the first start on the technological side, it needs to really to say, what better seeds can we get in, across the horticulture across the cereals? And I think institutions that supply the best seeds should be allowed to get in that country, because in the end, you will compete in the global market and with everyone that is using the better seeds. So, I think farmers should be more open to be allowed and be more open to buy wherever they can procure. And I think we do see that to a large extent in South Africa, more opening up where farmers can procure seeds wherever they want.

Wandile Sihlobo:
Obviously, the roles of the regulators will still be there before the seeds could be adopted in the country but I think there needs to be more openness. And I think next to that state, the next one is really on the mechanical side. And I think when the mechanical side there to be some movement, if you talk to people in Ethiopia, for example, now, Vonnie, there's already some opening up of importing some of the machinery that is needed in agriculture. The Ethiopain government has less tariffs that were there for many years for some of the machinery that farmers needed. There were tariffs that were just increasing the input costs, but the country was protecting nothing because it wasn't really producing some of these machines.

Wandile Sihlobo:
So, I think that's sort of openness is the first step. And obviously over time as industrial policy across countries starts to become more vibrant and they are thinking about producing their own seeds and their own machinery. That's the next step that could happen. But at the start is really openness so that everyone can use the resources that farmers across the world are utilizing.

Vonnie Estes, PMA:
And how much focus is there on environmental sustainability initiatives, both on the policy side and on the actual production side?

Wandile Sihlobo:
I think environmental sustainability and the whole discussion around climate change is increasingly gaining momentum. And I think we are forced by the circumstances. We live in take, for example, the Southern Africa parts of the continent. Typically, say before 2010, we used to have droughts after every four year, five year cycles. But right now we are being hit by droughts after every two years. And that discussion has made people to think more thoroughly to say, "Okay, we need to take the climate change situation very seriously and see what are the better farming methods. What ways can we use whatever techniques we're using in farming, but in a more sustainable way?"

Wandile Sihlobo:
So I would say the negative effects of climate change are forcing people to actually be producing better. And that urgency is both coming from the industry perspective, but also the policy makers, because you will remember that most African countries still have agriculture taking up 25%, 20% of GDP, employment nearly toward two thirds of that. So, when that sock of the drought caused by climate change is there, it really has major consequences. So, urgency is coming from both ends.

Vonnie Estes, PMA:
So, let's move to the next topic. And this is ag driving development and job creation. So, looking at harnessing agriculture to address poor economic activity and higher unemployment in rural areas, please tell us your thoughts about this. And how is this especially relevant in horticulture crops?

Wandile Sihlobo:
I think horticulture. I mean, if you talk to any South African policymaker and you say, "Oh, in agriculture, you see it as a way to lift economic activity and job creation in rural areas." The one thing they will tell you, one that is a focus is horticulture, fruits and vegetables, because that for us is labor intensive, but also high value, but also healthy, which is what we promote in that many people need to be consuming healthy so that they could live longer and live happy lives. So, that is one of the key focus.

Wandile Sihlobo:
And obviously, even if you look at the exports of South Africa's agriculture sector. I mean, right the top 10 is all horticulture with the exception of corn and beef. So, horticulture is the main focus. And for areas of expansion in South Africa, what would you have seen? All of the major expunction that is happening across the country is on horticultural production. Either it's avocados, it's citrus, it's deciduous fruits. It's on across the range of vegetables. And this message that is happening in South Africa is also happening across the African continent, where exponentially in agriculture, people are saying it needs to be on horticulture.

Wandile Sihlobo:
Global demand is solid, but also high value and labor intensive for addressing the issue of employment. But most importantly, perhaps an issue I should have mentioned earlier, in green housing and everything else, horticulture takes less space, but also you can do a lot under the greenhouse and facilities, which is what we are seeing happening across in some African countries. And I think over time that will begin to take shape because that's technological capabilities, people being able to control their production, climate and be able to get better yields.

Wandile Sihlobo:
And that's something that we think it will continue to take shape, but at the core, addressing unemployment, addressing the issue of economic activity in the rural areas of Africa.

Vonnie Estes, PMA:
I didn't know that about greenhouses, which crops are you growing under greenhouse?

Wandile Sihlobo:
It's largely a range of vegetables that you do see in South Africa. If, for example, one day when you visit South Africa, you're driving out of Johannesburg at the major city, just outside of it you will see a couple of greenhouses that people put up put across, and they are doing some really nice vegetables, which then they also closer to market in the cities. So, that also reduces their transaction costs in one way or another.

Vonnie Estes, PMA:
And reduces waste, right, because you don't have to travel as far.

Wandile Sihlobo:
100%.

Vonnie Estes, PMA:
Yeah, that's great. So, my last area is, in your book you cover the need for agricultural policy to address gender equity and youth involvement. And I've also watched a couple of YouTube videos of panel discussions recently that you've done on this topic, which is an important topic globally. So, how have you seen this issue evolve over the last two years?

Wandile Sihlobo:
Yeah, I think over the last two years or so, we've started to see conditions becoming better. I mean, you look back 10 years, not only in the case of South Africa where I'm having a conversation virtually with you from, but across the African continent. In a leadership position of agricultural companies, but also agricultural associations, it was largely men. You walk in a room, you will find that it is a meeting of men, but right now we're beginning to see more women also represented in them.

Wandile Sihlobo:
And I think that in that topic, we need really to get up over the fact that you're not doing women any favors on that, but it actually benefits the organization to have that diversity of thought either on policy or on a leadership position side. And I think it's an appropriate discussion that we keep emphasizing and we'll keep raising. But not only ending there, I think that across all ranks, even on labor markets, if you look at South Africa as an agricultural labor market, we have roughly 810,000 people working in primary agriculture.

Wandile Sihlobo:
And they're roughly a third is women and the other majority is still men. We do think that there could be flexibility, particularly with the horticulture that we are boosting as a country. As an area of focus, women need to participate more into that. But also across the research and services the scholarships offered a lot to women. That's something that the universities in South Africa starting to prioritize. And we do think that we need more women scientists, more women agricultural economists and stuff. So, that's something that I think there is at least a major focus in South Africa, both from the industries and also the lawmakers they are putting a bit of an emphasis on that.

Wandile Sihlobo:
My hope is that now this message could go broader in the continent. We all know from statistics that majority of small holder farmers in the African continent are women, but we need to see now are women playing a much more important role in the value chains and in the leadership positions of agriculture across the African continent.

Vonnie Estes, PMA:
Yeah, I completely agree. And I think that's true everywhere. And women have so much to offer just in understanding what's going on on the farm and really be aiming to relate and bring a diversity of thought as you mentioned. And so, I'm glad that that's been looked at as it is everywhere and hope to continue to see improvement because we've got a long way to go. Well, thank you so much. It's been great talking to you and I look forward to the time when I can come visit you and see some of these things in person. Thank you very much.

Wandile Sihlobo:
Thank you.

Vonnie Estes, PMA:
Will move into our conversation with two startups who are working on products to solve some of the challenges just outlined, Aerobotics and AgrigateOne. We're now speaking with Vic van den Berg, the VP of Grower Relations at Aerobotics. Thank you so much for joining us.

Vic van den Berg:
Thank you for having me. It's a pleasure to be here.

Vonnie Estes, PMA:
Great. So, please tell me about your company Aerobotics.

Vic van den Berg:
Well, Vonnie in a nutshell, we're an agritech company that works in the aerial imagery space and artificial intelligence. And our mission is essentially to build intelligent tools for agriculture. Aerobotics has a vested interest in ensuring global food supply as many other businesses do. And we're hoping that with the tools that we are able to develop and offer to growers and producers and industry stakeholders around the world, we can essentially allow them to optimize their yields and essentially ensure productivity and enough food for them to remain in business and to supply the growing global demand.

Vonnie Estes, PMA:
So, what crops do you work on? What range of crops?

Vic van den Berg:
So, our focus is perennial tree crops. So, that's essentially all fruit and tree nuts that you could imagine around the world. We also do vines and grapes, but we're particularly powerful when it comes to two trees that are grown commercially and that's why some of the main areas that we focusing and developing and investing in are those places that are growing tree crops for food production around the world.

Vonnie Estes, PMA:
And so, in supplying the information and the work that you do, do you supply the customers with drones or are you giving them data? What information are you getting them? And how's that working?

Vic van den Berg:
All right, well. That's a common question. So, we do not supply the drones. I mean, we use the drones essentially to collect the information, but to the actual collection of that information and imagery we do so with the network of the third party accredited pilots or businesses that essentially on the business of flying drones all around the world. So, when a particular customer requests a drone flight for our services, we have an operations team that essentially will source a pilot, and that pilot will then go and collect that data and send it to us.

Vic van den Berg:
Our proprietary algorithms and machine learning models will then analyze and process that data. And then we deliver that in our platform to the grower. So, the pilot network that we have stretches all around the world, and that's what's given us the opportunity to scale our business because at the drop of a hat, we can have a pilot on your ranch collecting and flying information. So, we've got very quick turnaround times and multiple pilots around the world. So, irrespective of the size of the job, we can get it done.

Vonnie Estes, PMA:
That's a great model. Then you don't have to own the drones either. And the growers don't have to figure out how do I fly this drone? So, that seems like a great model having everybody do the piece that they do the best.

Vic van den Berg:
Yes. Look, we do have options for certain growers or customers that own their own drones, many do, and they are more than welcome to fly and collect the data and send it to us. And that's those all options we have, but we find that in general, because it's quite time consuming. And for large operations, it can be quite an investment in terms of the hardware. Growers generally find it far easier for us to do the collection piece and then they get the information.

Vonnie Estes, PMA:
So, how do they get the information at the analysis, is it an app on their phones, or how is that delivered?

Vic van den Berg:
Yeah, so we've got a desktop or a web based app, which you essentially gain access to once you become one of our customers. And there's also a free demo account that anyone can create. If they've visited our website to see or have an idea of what it is we offer. And then we also have a mobile app, which you can download on your smart device. And the two are actually very important because they work hand in hand. The desktop app is essentially the opportunity to view the imagery and the analytics that we provide through the processing of the data that we collected. And the mobile app is essentially the tool that the grower would use to go and investigate inside his orchards and collect information on a personal level.

Vic van den Berg:
So, the desktop app is essentially where we deliver the analysis, and this is in a form of multi-layered geo-reference multi-spectral imagery. So, depending on what you'd like to look at, whether it may be the health of your crop or the size of your trees, or even the number of trees, those are essentially all tools that we've built for the grower to work with to try and understand what some of the very variables may be in his orchard. And then the mobile app is essentially the tool for him to go and find or get to those places in the orchard where he would like to go and intervene or stage an inspection.

Vonnie Estes, PMA:
So, what's the biggest value that you bringing to the customers? What kind of insights are they getting and what decisions are they able to make with your analysis?

Vic van den Berg:
So, that's a very good question. And that's one that we asked ourselves every day when we were in the early days of the development, because we didn't want to just be a service that takes pictures and drop them off. We wanted to be a service that takes pictures, provides accurate and relevant data-driven information to the grower with internal ag experience, which we have, and then to create tools and services to allow growers to take action, to eventually mitigate possible risks, intervene, and then be able to track those changes over time by using our service over and over and over again.

Vic van den Berg:
So, ultimately what our imagery does is allowing growers to quantify and identify under-performance in their orchards. So, growers are faced with tough challenges all around the world, irrigation, water stress, pests and disease, soil quality, vectors, all these things are essentially challenges that growers are faced with every single day and especially very large corporations. It's extremely difficult to keep a finger over it all because no business can have thousands of team members running around on the farm keeping a track on this.

Vic van den Berg:
So, what we essentially do is we are able to take very large operations and map them and allow them through a series of user flows and user interface and tools to be able to go and identify orchards that may be underperforming. And then go take a deep dive into those orchards to identify inside that particular block where are these areas of underperformance? What may it be? Is it the slope? Is it the health of the trees? Is it the canopy sizes? Could it be soil? Could it be nutrition? Could it be irrigation?

Vic van den Berg:
And then we've created a tool to allow the farmer to essentially get into the orchard, to those places and collect information and come back and sit down with his crop advisors or his nutritional consultant or his irrigation specialist and take those corrective measures. So, we see this as a full circle end to end solution rather than like a halfway stop. That answers your question.

Vonnie Estes, PMA:
So, you started in South Africa, but you've now become a multinational company. So, where do you have offices and where are you operating globally?

Vic van den Berg:
So, yes, we started in South Africa and our operations department still very much sits here, but on a commercial level and on a development level, we are now active all around the world. We have our headquarters or commercial headquarters in Los Angeles and a team of both customer, customer team members and other stakeholders that operate in the United States between Florida and California. And then we also have teams in other parts of the world. Some of our big focus areas this year is in Portugal and Australia, but we also have a footprint in several other countries where certain large grower groups may use our services.

Vonnie Estes, PMA:
So, what do you see are the differences between operating in the US and South Africa? Have you seen those differences and how have you responded to those differences?

Vic van den Berg:
I think on an operational level, we're fortunate that we are a cloud-based software, so it doesn't really matter where in the world we are, we can essentially operate and process information. On the collection of the data, we're fortunate enough to have been able to just as easily as we did in South Africa, build and create a network of drone pilots in the United States. And so, that for us was very fortunate. And so that hasn't been a hiccup. I think one of the big things we see as a differentiator between the United States and South Africa is the scale.

Vic van den Berg:
Yes, South Africa is a leader in agriculture around the world. Many continents or countries look at South African agriculture as the pinnacle and forefront of technology because growers have historically had to work extremely hard to grow high quality crops for the export market. With certain large areas, had a massive domestic market and that high quality wasn't always something that they're too freaked about too much, but the United States in terms of scale and in let's call it acres and crop density is massive compared to South Africa.

Vic van den Berg:
So, as a young business with massive ambitions, we would like to scale. And so the obvious choice for us would be to go there with the highest density of anchorages of our primary tree crop. And that's why we're operating there. And so far, it's been fantastic and we've been well received by large grow operations there and including the insurance sector. And that's why a big focus for us this year is going to be investing and building in the United States.

Vonnie Estes, PMA:
Yeah, I've been to several of your events in the US and familiar with how you guys have been expanding in the last couple of years. And I've really been impressed at how organized the events were and how you were able to come into a new geography and bring the right people together. I was in an event up in Napa and it was just very impressive because as a person who does events, I know how hard it is to get the right people in the room to have a discussion. So, how do you do that? And how has your organization built that, that you can go into geography and get going so quickly?

Vic van den Berg:
I think it's twofold, to be honest. And I agree with you it is tough to get growers, stakeholders to attend these events. Everyone's very busy. As you know, and especially farmers considering the fact that he's not only the farmer on site, he's also the electrician and the plumber. So, whatever time he thought he had available, usually gets consumed by something else. I think the reason why we've had success and great traction is one where we have an incredible internal marketing team that are essentially experts in efficiencies and value proposition positioning.

Vic van den Berg:
And doing that, we're able to really learn what it is we do and why it's worthwhile attending in as few words as possible through the content creation that they do. So, that's one component, and then we're very fortunate to have them. The second component is relationships and our customer team on the ground. The number one priority is growing long-term trust with our customers and strong relationships in the sector with all stakeholders. And because of those two components, we're able to get customers to attend because of that relationship piece, but also the broader audience we're speaking to them in a language that they want to hear and creating interest for them to attend.

Vic van den Berg:
And when they do so we obviously shoot the lifestyle in terms of presentation. And then that essentially then fuels the demand for the next event. So, I don't know if that answers your question, but that's my personal outlook on why we've been so successful.

Vonnie Estes, PMA:
Yeah, I agreed. Those are all the things that happen in the back office and then in the event itself. And it really shows. Well, thank you so much for your time, and I really appreciate you being willing to take time out and talk to me about what you guys are doing, and I wish you the best of luck. Next, we'll be talking to Greg Whitaker. He's the founder and CEO of AgrigateOne. So, tell me about yourself and your company, and thanks for being here.

Greg Whitaker:
Thanks very much, Vonnie and thanks for having me and thanks for the PMA. Yeah, so where did it start? I grew up on a citrus farm on the Limpopo River and in Limpopo in South Africa and started this company in 2018. The main reason for starting it was to actually get my dad to stop complaining.

Vonnie Estes, PMA:
Did that work?

Greg Whitaker:
It hasn't worked yet. He is a farmer, maybe you know how it goes. But yeah, started it in 2018 and started it with myself and a few co-founders. And it's grown to, I think with 16 people at the moment in the business, largely on the computer science and data science side of things. Yeah, and we focused on a thing called a market network. We create a software service or service as a software and create workflow in the business on the farming side, as well as the buying side and into the kind of logistics components too. And we overlay disparate tech systems and create a single view for our users.

Greg Whitaker:
So, can have a whole bunch of different kind of service providers linked to one part of the supply chain or one order from the farm. Yeah, and then we create a kind of unique identity and unique communications between the parties that flow throughout the system and create kind of efficiency in it. So, we try to take out a bit of the administrative tasks of WhatsApps and emails and Excel sheets through doing that. And then what that creates is a kind of market reporting and price comparison and working largely towards decreasing waste and sustainability in the industry.

Vonnie Estes, PMA:
Wow, fabulous. So, is the grower your primary customer, or do you have different customers throughout the chain?

Greg Whitaker:
No. So, we have grows as customers. We have exporters as customers. We have importers as customers. We have cold store facilities as customers, we have shipping lines as customers. We have logistics companies as customers. I think, a lot of what we trying to do is kind of just strengthen the relationships between the parties and take out any administrative or burdens or kind of manual work and see how much we can automate of that current manual process.

Vonnie Estes, PMA:
So, it's anyone who needs that information and wants to see that flow?

Greg Whitaker:
Correct. So, we've got data as a service. So, what we try do is offer our data sets for decision-making to our clients.

Vonnie Estes, PMA:
So, the global produce supply chain has been so impacted by COVID worldwide. How has your company responded to the changing needs for trade?

Greg Whitaker:
Well, I think it's positively affected kind of technology and a need for online. For example, in the past, a lot of our clients, our export or import clients would need to get out to the growers and kind of go and do fond visits and have a look at the produce and the estimation for the season. And by taking a lot of that online, it's kind of helped that the guys don't have to kind of be there all the time and kind of follow up on what the produce is looking like or the kind of the estimation or forecast for the next season. So, I think it's definitely affected us positively in terms of the global supply chain. I think it's definitely moved things more online and the need for less kind of it's in, for lack of a better word in terms of like physically intense kind of labor practices.

Greg Whitaker:
So, working on Excel sheets, joint Excel sheets, or kind of WhatsApps or heavy emails or things like that. And I think it's been a positive impact on agriculture as a whole especially in South Africa.

Vonnie Estes, PMA:
Yeah. I think that's been really interesting to watch. I've seen that in other parts where people are starting to rely more on technology and not having to see everything with their eyes. And so I think that's been an interesting change that's happened during COVID. Do you think it'll go back the other way? Or do you think people will start from here and move forward and relying on technology more?

Greg Whitaker:
Look, I think you'll never ever get away from human interaction. I think you'll also never get away from relationships. And I think that's a key focal point of what we kind of trying to keep cool and center is that there is a need for all the players in the industry. And how do we strengthen that relationship through technology? So, how do you make the data more accurate? How do you make sure that what both parties are looking at are very similar? I think my original background is from the logistics kind of universe.

Greg Whitaker:
And when I worked there, I always would hear how bad logistics was, but coming from the growth side, but now with understanding the whole supply chain everyone is trying to do a job at the end of the day. And everyone's trying to fulfill a common goal in terms of taking their produce and getting it to the end consumer. And I think, that's been super important in terms of the co-creation of the whole industry. And what I think will stay in place is the relationships between the players but where I think it will change quite drastically is how the information is shared and used.

Vonnie Estes, PMA:
Did you start as a global company? And what have the challenges been to go global?

Greg Whitaker:
So, I don't think anyone ever starts as a global company. I think the nature of the industry is that there's obviously, there's local market challenges which are quite unique to local markets. And then there's global market challenges that are very unique to global challenges. And I think coming from a freight forwarding background and a shipping background is naturally the way I would progress would be more on the export, import global market side, because it's what I knew. And it's how we focused our business. We are completely packers to end consumer and that's where we play. That's kind of, it puts directly in what we're trying to solve. Whereas I think, to do it locally comes with a completely different skill set too.

Greg Whitaker:
Companies that do it really well, and they can be that I'd way rather work with and partner with in South Africa who are doing amazing things in the local market. In terms of inclusiveness in farming in terms of the whole kind of agricultural industry as a whole in South Africa. So, we started on the export, import side and it started letting us get clients in Asia, in Germany and in kind of places outside of South Africa too. And then it's kind of just grown from there and the need for kind of closing the gaps in terms of where that data is. And throughout the supply chain just kind of gets bigger and bigger and it grows from your origin ports to your destination ports, to your handling, to your receivers at actual destination port. So, to kind of naturally progress that way.

Vonnie Estes, PMA:
So, what do you see is the challenges and opportunities in ag and in ag tech in South Africa, kind of stepping back a little bit?

Greg Whitaker:
I think challenges are probably market entry is pretty tough. So, your barriers to entry into the industry are quite high. I do see infrastructure as a bit of a kind of stumbling block in some of the kind of effectiveness of agriculture too. I think exports are critical in South Africa just because of the return in GDP in the country and the marks of employment in this country. And I think by enabling infrastructure to create more sustainable and then commercial farming, it has a very positive impact on the GDP. And it will have a very positive impact on our GDP.

Greg Whitaker:
Another challenge I guess, is political and land risk and something that I think South Africa does need to solve. And they are some really good kind of books to read about it. Like one in particular comes to mind is one written by Wandile Sihlobo. And I think that is something that I think is a challenge that can be turned into an opportunity. I think it's important to drive inclusiveness in agriculture in South Africa, and there's a way to do it within creating equilibrium in the industry itself.

Greg Whitaker:
From an opportunity point of view in ag tech, I think the big thing is you've got to sell a problem before a solution. I think often people try sell solutions and then attach a problem to it. I believe there's a massive thing in first sell the problem and then the solution. So, they are problems to be solved and if you solve those problems, then you've solved the solution too. And then I think there's massive opportunities for agriculture in South Africa, I think. And in Southern Africa, I think as I mentioned earlier, more inclusive agriculture projects, uplifting small holder farmers a bit more.

Greg Whitaker:
And then tech as a whole, there definitely is improvement for technology across various areas and focal points. There's on-farm technologies, they have back house technologies, there's logistics technology. So, there are opportunities for it. I do think that in the long run, it's going to be critical in sticking to what you're good at too. And making sure you stay ahead of market in that.

Vonnie Estes, PMA:
This was such an interesting episode to do. Nothing like talking to a good ag-economist to get the lay of the land. I love have Wandile ties together, regulation, policy, social open-mindedness, and reaction to real examples of climate change in his solution sets for further increase in productivity. And also that he recommends increasing the growing of produce across the continent as a way to address unemployment and rural development. I look forward to seeing great innovations like these two companies from Africa.

Vonnie Estes, PMA:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

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Description: You have a great innovative idea that will have revolutionary impact on the produce industry. You have tapped out friends and family but you aren’t ready to go to a VC and give up equity in your business yet. What can you do? Government funding is a great way to help advance your small business's technology. One of the most popular government funding avenues is the Small Business Innovative Research (SBIR) program. SBIR is a United States government program, coordinated by the Small Business Administration, intended to help small businesses conduct R&D. The funding is a grant that requires no equity. In this episode, hear from experts about how the program works and examples grants and their benefits.

Moderator: Vonnie Estes, Vice President of Technology, Produce Marketing Association
Panelists:

•  Dr. Timothy Conner, Division Director, Division of Bioenergy, USDA National Institute of Food and Agriculture
• Martha Schlicher, Executive in Residence at BioGenerator, CEO at Plastomics
• Diana Endicott, Co-Owner and Marketing Manager, Rainbow Organic Farm & Good Natured Family Farm

Vonnie Estes:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, Vice President of Technology for the Produce Marketing Association. And I've spent years in the ag-tech sector, so I can attest, it's hard to navigate this ever changing world and developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsor Sensitech. Sensitech's innovative Supply Chain Solutions help customers retain quality, manage supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need, when you need it, to increase efficiencies. Learn more about Sensitech's suite of real time visibility solutions at Sensitech.info/PMA.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries and blackberries. With more than 100 years of farming heritage, Driscoll's is a pioneer of berry flavor, innovation, and the trusted consumer brand of only the finest berries.

Vonnie Estes:
There are so many things to consider when starting a company or funding a new idea. Besides the brilliant idea one might have that is going to feed the world, companies need funding. Lack of capital is the biggest reason companies fail. The most common path is to start with personal money, then go to friends and family. At that point, many companies go to venture capital where they provide equity in their company in exchange for investment. There's another option that can help innovators and businesses that are creating novel, potentially disruptive products. Startup grants are available to help finance R&D efforts of a company.

Vonnie Estes:
As we will hear from Diana Endicott many of these business ideas can come from small family farms. Small family farms are using and developing technology every day. Grants can also aid them develop their ideas and businesses. A startup or small business grant is monetary funding from the government or an organization to help companies succeed in building and growing their businesses. Unlike loans, you don't have to pay the money back. There's no collateral that you're required to put up, and you won't need to pay fees or interest. The best part about grants is that the money is yours to keep and you'll never have to pay it back after using it for your startup.

Vonnie Estes:
Today we're going to talk about one such US government program called the Small Business Innovation Research Program, or SBIR. Annually nearly 5,000 small businesses receive over $2.5 billion in federal government grants and contracts to help them carry out the R&D necessary to develop and bring products to market through SBIR. SBIR is the largest source of non-dilutive early stage seed capital in the world.

Vonnie Estes:
We're going to hear, first, from Timothy Conner, Acting Deputy Director who works with the SBIR at the National Institute of Food and Agriculture. Tim tells us in very helpful detail about the nuts and bolts of the program. After Tim we will hear from two business entrepreneurs who have benefited from SBIR and hear about the great advantage of the program, both for ag-tech companies and for small family farms. Let's drop into our conversation with Tim. So can you describe the SBIR program for us?

Timothy Conner:
Sure, but there are 11 agencies that have the Small Business Innovation Research programs of which USDA is one. In a nutshell, it's a competitive peer reviewed grants program for small businesses. I would describe it as an incubator program, where you throw in business ideas that may be a little short on validation along with small business ability. And you put in a pot and you see if the recipe is good enough to eat. So in other words it's opportunity to move ideas and innovations from small companies to products and commercialization.

Vonnie Estes:
Very cool. So what does USDA hope to achieve with this program?

Timothy Conner:
Yeah, so their goals for the SBIR program overall that are really consistent with USDA's goals, but it really is a way to stimulate innovation by facilitating research and translating the market, for end user's and consumer's benefit. But really, it's about providing new opportunities for solutions for agricultural issues. And in rural communities, those communities that really sort of are embedded in agriculture. And it's just a way to maybe identify disruptive technologies, ideas and things that may not come from big companies or big organizations, but small grass roots sometimes. And sometimes the smaller companies have different brainstorming, thinking out of the box ideas. And that's really sort of the value of the SBIR program and how USDA hopes to leverage it to solve some of those key problems in agriculture.

Vonnie Estes:
So can you give us the big picture? How many companies are enabled by the program each year kind of on average? What areas do you support? That type of thing.

Timothy Conner:
Yeah, so first of all, I should say it's a two phase program. Phase one is primarily, once you're awarded phase one, your primary objective there is to prove the concept that you have provoked. Phase two is about really sort of developing the concept and something that's a lot more commercialization, and sometimes it is commercializable after phase two. Oftentimes, it's just moving it further down the pipeline. But for Phase One, we may typically get 550 applications, and we will find roughly 75 or 80 companies per year. For phase two, you can only get a phase two award if you've already been in previous phase one winner. And so that one, we tend to fund about 25 to 30 Awards. So total, it's a little bit over 100 per year.

Vonnie Estes:
Okay. So let's talk about the process. Say I'm a small company or a person with an idea. How do I go about applying for the SBIR grant both phase one and phase two? How far along is my idea need to be before I submit an application? And what do I need to reveal? Like some people are worried about if this isn't a patentable idea, am I telling you too much? How does the process work?

Timothy Conner:
Well, yeah, let's start off first, it is sort of, it requires a certain amount of activation energy to really sort of get moving. And a lot of our small business concerns start getting a little bit nervous about it, they don't really know what to expect. So it's a very good question about how do you really get started in it? And where's the best place to start? And I would say that, you first need to start by really sort of deciding where you fit in the program. So USDA has 10 topic areas, and they range everywhere from the basics, maybe research and ag production and protections, maybe it's crops, or maybe it's a livestock or aquaculture type.

Timothy Conner:
And it ranges all the way through to engineering answers to some of those questions around irrigation or using drones or developing sensors. But there are also some that are more around how do you take something that's already on the shelf, and you innovate it and apply it to ag, to something. Maybe it's coming from something that's more hardcore computer science or algorithms for human health, that you can now use an agriculture. Or, maybe it's developing algorithms that help you educate the rural communities better, or help them sort of get access to broadband. So we have all those examples. So the first step is figuring out do you fit in the USDA, SBIR? And if you do, which of those topic areas you belong in?

Vonnie Estes:
Is it a series of questions? Like how do you figure out whether you fit or not?

Timothy Conner:
Yeah, no, I think the first thing is reading that requests for applications. The RFA will have a solicitation, we call it a call, and that is called a request for applications. If you read that you begin to get a sense for "Oh, I see how my idea can actually fit into one of these things or topic areas." And you sort of get confidence in that. Once you do that. I think then the next question really is okay, contacting someone in USDA, SBIR program. And that's typically done by just Looking at the RFA, and just finding out who in those topic areas you want to talk to, and just picking up the phone and calling them and just sort of just briefly sort of telling them what you're thinking and finding out if that fits into their topic area for that particular category.

Vonnie Estes:
And is that pretty easy to do? If you call someone in the USDA, they're going to answer or are you going to get voicemail? Or how does that work? People are pretty busy.

Timothy Conner:
Yes, well, it depends. But no, we will always somehow get back to you. It's probably best to send an email with a general brief introduction to yourself and the general area you're interested in. And then that allows that topic area leader, we typically would call them a national program leader, to be able to address some of your concerns by email, but it primarily gives him a chance to say, "Sure, let's set up a meeting to talk." Or "I think you should call another person, because your area of interest may fit better with that topic area."

Vonnie Estes:
I was looking on the website trying to figure out, it looks like there's a little bit of pause in phase one right now. They didn't give dates on the website of when the next phase one happens. Has that been announced, or because of the change in administration does that kind of you're waiting for some time for the next phase one program?

Timothy Conner:
Yeah, so there's usually a gap between when we finish the awards from what and when we publish a new request for applications.

Vonnie Estes:
Okay.

Timothy Conner:
We've been doing a two year cycle lately. So I think it's really great for the small business to go and look, and then see the dates. Because it's right, it's very important to help you plan, maybe when you make your phone call, or when you need to start thinking about when to submit and things like that. But typically, the fall application cycle began for the phase one applications throughout October of the year. We have one solicitation per year, but it's pretty regular. And so it is on schedule. And we don't anticipate any changes going through the next year.

Vonnie Estes:
Okay, that's impressive. With all the other upheaval, I'm sure. What's the success rate for grant applications at each phase of the two phase program?

Timothy Conner:
Yeah, so Phase One is the highest hurdle. Phase One, as I said before, we get somewhere around 75, 80 applications out of over 500. So it's about a 15% success rate. But I like to look at it as when you're applying for an SBIR grant, you're probably applying for not just phase one, which is $100,000 award, but you're probably looking for getting a phase one and phase two. Phase Two is about a $600,000 word. So you're looking at a probably a little bit over $700,000. I call it the three quarters of a million dollar question.

Timothy Conner:
So yeah, so I think 15% for phase one. But once you get to phase one, you're eligible for phase two. For phase two, we tend to fund about 50% of those awards. So I think getting in the door, with that phase one is really important. [crosstalk 00:13:06] important to know, and maybe only 15% success rate, but for Phase One you can apply as many times as you want. So oftentimes, it may take two or three cycles for a small business to actually be awarded.

Vonnie Estes:
Okay. What others support do companies receive between phase one and two?

Timothy Conner:
That's a really good question, Vonnie. There is a technical and business assistance program, which is associated with SBIR as were like. And typically in phase one your $100,000 award it is primarily for research. But in addition to that, you can also budget $6,500, up to $6,500, for help with either helping you sort of get a better foundation for, maybe the business opportunity that you may sort of not have your hands around yet. You can do that by contacting your own vendor by agreement, or you can use the USDA's vendor choice, we do have contract out with a vendor that will provide certain services to you around technical and business assistance.

Timothy Conner:
And that is very useful, because they will help you sort of get grounded, and it really is there to help design your program. So you'll be more successful for phase two. Because phase two, unlike phase one, you have to have more of a commercialization plan that goes along with your proof of concept from your research. And so it can be a very instrumental way to sort of help solidify that into a plan that makes you more competitive for phase two.

Timothy Conner:
But specifically, the TABA, what we call Technical and Business Assistance Program helps with everything from intellectual property support and helps you sort of maybe think about how to and maybe get an initial market assessment data. It may help you refine your business strategy. Or if you have a product that requires manufacturing and help you think about how to design that plan. Now, $6,500 doesn't go a long way. But it does allow you do a lot of strategy and planning. And it will, again, allow you to have a better phase when you do the phase two application. But I should add one other thing, the TABA for phase two also exists. But for phase two, the TABA's $50,000. And you can imagine using that to go further in terms of developing the necessary things to be successful, once you've demonstrated some product concept to develop.

Vonnie Estes:
It's a great template. I know that I've worked with a lot of small companies and startups or people with ideas, and this is just a great template of just the way that you have it set up. It allows people to know what they need to be thinking about and not everybody knows okay, now I need to be thinking about commercialization. And how do I think about that. So the just the way the program is set up, seems really helpful to people. So what can you use the funds for? Can you use it for anything? Or are there rules on what you can use the funds for?

Timothy Conner:
Yeah, I mean, that's a very important question. When you get the award, you typically will get what we call a terms and conditions, which give you a little bit more guidance on it. But for starting, you sort of need to know, so you'll know how to write your research grant proposal. It really is, the phase one research is focused primarily on supplies, salaries to get the work done. It is focused on again, proving the concept. And it gets a little tricky when you get to equipment, that purchase versus leasing. But all those things are part of the research process, and therefore, the funding can be used to support those activities around the actual equipment purchase or leasing, salaries and supplies. Legal services for things like patents are not included,

Vonnie Estes:
They're not, okay.

Timothy Conner:
That would be part of the TABA of funds. And that's an important thing to sort of distinguish between where you can use the research funds and where you use those TABA funds.

Vonnie Estes:
Yeah, no, that's helpful. So if companies are in a situation where they're also trying to raise money, either from VCs or from other non-diluted sources, are they allowed to be pulling other money in at the same time that they're working with an SBIR grant?

Timothy Conner:
Absolutely. The objective is not to limit their ability to grow their business. And so, one possible use of TABA actually is using them as sort of a think tank or consultants that help you think about how do I go out the next stage and start really sort of attracting capitalists or investors or finding new sources of money. That can actually be part of what that TABA's used for as well. So I think it's wise actually, for them to sort of keep their eyes open and sort of leverage the SBIR research sort of award to try to attract other funds. As a matter of fact, I know that several SBIR companies have sort of said, what's more important to them than phase two is actually using that idea that they got an SBIR award to actually get investors to be interested in their company and also provide funds for support as well.

Vonnie Estes:
Yeah, I know that it is some level of validation. I've talked to companies that have gotten the awards, and VCs would know, "Okay, this has been kind of vetted, other people have looked at it, this is kind of solid enough for one of these awards." And so it actually does give them some support. That somebody's looked at this and thinks it's a good idea. So that's helpful. So what happens after phase two is completed? Is there a continued relationship with the USDA? Or do you just say, "Go forth and prosper," or what happens then?

Timothy Conner:
Well go forth and prosper tends to be the most common answer. But we like to think that there's always the possibility of another option, which is entering into phase three. You probably don't hear a lot about phase three.

Vonnie Estes:
I haven't.

Timothy Conner:
Applicants don't. Phase Three it's sort of... It's a stage to where we don't fund phase three. But there are advantages to sort of completing a phase two project because it leaves open the possibility of maybe getting a sole source contract with another USDA agency. So if it's something that a departmental agency needs, or feels like it can be useful to further collaborate on, then as long as it's not SBIR funds, and it's possible they will use a fund network or contract, get into a contract for that service.

Timothy Conner:
One example that's most obvious for USDA is probably more in our topic area 8.1, which we call forest and forest products. We have a lot of firefighting innovation that comes out of there. And you can imagine that the Forest Service and maybe the Department of the Interior might be two obvious candidates that might want to utilize some of those innovations needed to protect their firefighters. Or develop sensors, which help them maybe detect fires earlier.

Timothy Conner:
And it can be everything from garment that's used for firefighters to wear all the way through to again, drones and sensors, which are monitoring smoke and fire and air particulate matter and things like that. So that's one example. But for the most part, most of them sort of go their own way. And our relationship going forth is we like to send out surveys every now and then, we like to make phone calls just to find out how they're doing, how we should be maybe looking at tweaking the program and things like that. So we like to keep a relationship, but it's not a formal relationship after that point.

Vonnie Estes:
Great. Well, I have one last question. But this is so interesting, because I've known of companies, that these grants just give people a little bit of breathing room. They give them a little money to operate and think and then be ready to go to the next phase. So they've really been of great help to get innovation out into the ag industry. So I appreciate the program very much. So where can people find out more information about SBIR and the application process?

Timothy Conner:
Yeah, I would just encourage them to just type in their web browser, USDA SBIR. And then come straight to the NIFA website, which talks about the SBIR program. I think in there, the important things to look for, to get more information specifically on, is eligibility, what is a small business, are you eligible, you'll get some information on, if not, when the next RFA solicitation is, you certainly can get information on basically what needs to be included in the application.

Timothy Conner:
And then you'll get the program contact so that's where you'll really be able to contact those people to ask them more about topic areas, and things like that. And you can really read a lot more about the topic areas and the types of projects that are funded, because there's also a section in there, which talks about abstracts from previously funded projects. So I think that sometimes is very useful for people who sort of get their juices up, so they have that activation energy to move on. One other source that I would encourage people to look at would be that SBIR.gov website, to give you a better foundation for what the program is. That may help them so really sort of gel their thoughts together. And really think more about how to put together more successful applications.

Vonnie Estes:
Next, we will talk to two highly qualified business entrepreneurs that have benefited from the SBIR program. We have with us Diana Endicott. Diana has had extensive experience with applying for receiving and benefiting from SBIR grants around small family farms and market access. Welcome Diana, what we were just talking about before I turned the record button on I can't believe all the things that you've done and everything you're involved in and really the message towards smaller farms and getting access to these kind of grants. So I'm going to let you introduce yourself and tell us what you're working on and what you're passionate about and kind of your experience around all this.

Diana Endicott:
Well, thank you so much for giving me the opportunity. I want to thank PMA and for really reaching out to the small farms and giving them this information so that they too can participate in some of the grant programs that the USDA has available. My name is Diana Endicott, I actually farm in southeast Kansas, we have a cow calf operation. And early on, we raised greenhouse tomatoes. So we have experience both on the produce end and then also in the agriculture meat production.

Diana Endicott:
I was asked to give a little bit of our history about how we became involved with SBIR. And we returned back to the home to farm in early 2000. So it's been a while. And we started raising greenhouse tomatoes. And we're in a very rural area. So it's an hour and a half to any major supermarket. And the farmers markets that we have in our area were very small unless you go to the urban core. So it was how do you find a market for your product?

Diana Endicott:
And I just, happenstance one snowy day. And this is the truth. I was just looking through grants, I'd never really written a grant. And I just came up on SBIR. And I was intrigued. And this was before they actually had a small farms division. And I just wrote the application myself. And really, it was about market access, because it was so difficult for me to understand, coming from a farming background and not a marketing background, why was it so difficult for us to be able to sell our product into the conventional markets.

Diana Endicott:
And so with that I submitted for an application and phase one. And then if you get a phase one, you can apply for a phase two. And the phase two portion of it was really actually developing a guide, it became a video called Farm to Supermarket Shelf. So how do you take your product from the farm, like for examples, tomatoes. And how do you get that to the supermarket shelf, and it included everything of all the lessons learned from slotting fees to lead off shelf space, to UPCs, PLUs, product liability insurance, and all the things that you have to do to packaging and promotion.

Diana Endicott:
So all of the different steps that you really needed to know to be able to participate. And we were very, very fortunate, and to work with a small chain of grocery stores called Ball's Food Stores which owned in Kansas City, which was basically Hen House Markets, and the Price Chopper stores. And so it was very rewarding. And so, yes, it helped our farm greatly because we were able to access the market. But the result of that was other farmers calling us and saying "We have eggs, we have honey." And so the result over the last decade or so has really been the organizing of local foods in and around the Kansas City metro area and accessing the supermarket. So now today, we have not only the supermarket chain that we worked with, but other supermarket chains participating in local food.

Diana Endicott:
And so, the supermarkets there have a very vibrant local food. And this is all started by an SBIR grant. Sometimes I think that we look at the SBIR, the Small Business Innovating Research because it says innovating research, and it's the technology base. But we need to remember that technology is the application of scientific knowledge for practical purposes. And so small farmers use this scientific knowledge every day. So I think that in looking at SBIR programs, what are you doing on your farm, that could make a difference to your business and that also could help other businesses.

Diana Endicott:
And over the years, that's really what we have looked at as we've tried to grow and diversify in our farming operation, because we are small. So for example, after we had success with this, and we started bringing the other farmers on into an alliance, which increased to over 100 family farms, selling to supermarkets. Then from there, we have a cow-calf operation. And we put together, I believe the first all natural beef Co-Op in the state of Kansas. And then we had Mad Cow came out. And it was okay, identification and traceability was the big thing.

Diana Endicott:
So my question was always well, how do we take what the large scale ag operations, what direction they're going, what are what needs are they servicing. And then how can we take that and apply it to small farm scale? So it's rather kind of working backwards. But being able to take identification and traceability systems, and how can we actually implement them on a small scale, on the small farm, so that we too can continue to have market access? So as you go for pro-

Vonnie Estes:
Is that what you wrote a grant on for that one?

Diana Endicott:
Yes, identification, traceability, I can't remember what number it was. But it was one of the applications that we submitted and were awarded. And, again, it was just all of these grants are different ways of looking at market access. Because without having market access, small family farms cannot survive. And I believe that the pie is big enough for everyone to have a place at the table. And one thing about produce that we really need to look at is that produce for small farms has a low cost of entry. So it's a lot lower cost than animals. And so I think that when you look at small farms, you are looking at a lot of produce.

Diana Endicott:
And so I think there's a huge opportunity with SDR to really be the forefront leaders in how are we going to maintain our landscape to be inclusive of these small fruit and vegetable farms. But then another one that we did was on small scale poultry processing. So we have consolidation of the poultry industry. There was a lot of our new HASF regulations and food safety regulations really came across for on farm poultry processing. So how do you take a small poultry processing and how do you actually be able to participate in the marketplace.

Diana Endicott:
And from that, now, we have several small poultry processing plants in the state of Kansas and Missouri. So I think it's maybe not just for your farm, but making sure that you share the information with other people, so that they might not use it this year, but they might use it three years from now. And that's what we found.

Diana Endicott:
Probably the latest or the last... One of the more recent, I guess, I should say, SBIR grants that we participated in, was actually looking at St. Louis and replicating the concept in Kansas City into another metropolitan area like St. Louis. And so we spent a phase one and a phase two, actually looking at how do we build a food hub, around in the St. Louis area. And a great research project and was really excited about doing that. But toward the end, sometimes some the people higher up have a plan for you, God may have a different plan. So what we ended up doing was actually building, actually a supermarket with a convenience store, in what they call in the north side of St. Louis, which is one of the largest food desert areas. And I think we're going on our second year of operation.

Diana Endicott:
It was a huge project because it was built from the ground up, and it was actually done as a for profit business. And it was done in partnership with the North side regeneration project that is currently going on there with the geospatial center, down the road. So it's been a journey. I mean, it really has. And I have to take my hat off to the SBIR team, don't be intimidated. They're very, very helpful.

Diana Endicott:
Dr. Charles Cleland, who's now retired, became a dear friend. I mean, they come and they actually visit your farm. When you get to a point that you have a question, they're there to help. They have some very, very bright minds. So I just really want to take my hats off because we would not be where we're at today without them. And I just hope that more people will at least take the time to look at it. If you've not written grants before reach out to your economic development, reach out to your rural development. These people are very, very familiar with SBIR. And they will definitely... Anyone that has an idea or a concept that takes and applies...

Diana Endicott:
For example, right now the leading thing is regenerative agriculture. That is the key. And every single day, many produce farms, fruit and vegetable small farms are implementing some of the leading ideas in regenerative agriculture, biocides. So these are the people that are actually putting it to use in a very applied manner. And I think that you can reach out to rural development, economic development, some of your leaders and extension at the university. And they can help you package that in a way that can help benefit your farm to maybe have the resources, it's all about having the resources, to expand your ideas and your concepts.

Diana Endicott:
And I think then you're able to take that information and share it with others. So I'm just here to greatly encourage everyone that's listening to, they actually have a small farms division now in the application. They didn't have that when I started. So I was just applying with everyone else. But I think that maybe some of that early work really made Dr. Cleland who was the project director for many years, maybe early on it made them look that yes, maybe small family farms are needed. And so you're giving SBIR credit for really bringing small family farms and the technology and what they have to offer to the forefront.

Vonnie Estes:
That's great, really wonderful advice. And I really love that you speak to helping people that are looking at things in a different way that may not have thought, "Oh, I can get a government grant on innovation for this." So I think that's going to be a huge help to our PMA members. So I really thank you for your time and keep up the good work. And you're really helping a lot of people, not just yourself, but the government and other small farmers. And thank you very much for that. So, thanks.

Diana Endicott:
You're welcome. And if anyone wants to reach out to me, they're more than welcome to just go to goodnaturedfamilyfarms.com. And you're welcome to email me and reach out to me. And I'll be glad to share any information that we have with you.

Vonnie Estes:
Now we're talking to Martha Schlicher. Martha is executive in residence at BioGenerator , which is an investment group in St. Louis, and the CEO of two small companies. So, obviously very busy. It's great to have you on Martha. It's been a few years since we were traveling around in Nebraska, looking at building ethanol plants. Welcome.

Martha Schlicher:
Good to see you again, Vonnie. Nice not being in six feet of snow, agreed.

Vonnie Estes:
Yeah. Please tell us about yourself and what you're currently working on. I'd love to hear about the BioGenerator, the work that you do, and then the companies that you're working with?

Martha Schlicher:
Yeah, sure. Thanks for having me. So BioGenerator is part of a larger organization called BioSTL, here in the St. Louis region. And its role is really to help ensure the success of the region building on its life sciences capabilities. So BioGenerator is a small venture arm within BioSTL that invests directly in startups in the life sciences space, but also on its nonprofit side, really just tries to help those startups be successful.

Martha Schlicher:
And one of the most impactful ways they've done that is something called GTB or grants to business. And that's to really work with startups to make them aware of the grant possibilities that are out there, to then help coach them with whether they would be eligible or not for those grants. And then to put them through a pretty rigorous process to ensure the quality of those submissions. So that's a really great way for a company to start out, especially something coming right out of a university, that may have a founder with a phenomenal technical idea, but probably hasn't put itself through the paces of whether it's commercially viable.

Vonnie Estes:
And what have you seen with some of the companies you've worked with? Do a lot of them end up getting the grants? Or did they find out it wasn't the right thing? Or how hard is it with the companies you've worked with?

Martha Schlicher:
Yeah, it's all over the board, I would say. For some of them as they go through the process of really trying to think through, "Gee, do I have anything proprietary or exclusive," it falls apart pretty quickly. Or they haven't maybe thought through the commercial model, or the competition. And that might just require them to say, "I'm not ready right now. But boy, I might be ready by the next cycle." Then there's some who probably have had previous experience or some people that may have come out of industry and been working with an early stage startup, they're usually much savvier in how they've thought about it, and usually can have some pretty good success on their first try with a grant. If they really put together a serious and good application. I would also say, whether you get the grant or not, certainly it's a time investment. But it usually ends up really helping you have thought through your business model and your kind of premise to begin with.

Vonnie Estes:
So you've worked a number of companies, and why don't you tell us a little bit about the two companies you're working with? And then have you worked with other companies that have actually gotten the grants and how that's helped you?

Martha Schlicher:
Yeah I'll actually maybe answer it in reverse. So, no, I worked for Monsanto for a long time. And then I left and worked with a startup called Divergence that was here in the St. Louis area. And Divergence was founded by Dr. Jim McCarter, who had come out of academia who's very familiar with grants. And so he was very instrumental in having Divergence go after SBIR grants. That became a significant amount of the actual dollars, R&D, dollars that Divergence had to work with and really became a roadmap in my mind of what startups in many cases, didn't know how to do and didn't take advantage of.

Martha Schlicher:
Divergence, successful exit, ultimately bought by Monsanto, but that stuck with me. And so knowing what BioGenerator was doing with the two companies that I'm leading, Impetus Ag and Plastomics, that approach to looking to see what grants we might be eligible for and going after them, is clearly instrumental. Now I always say you don't want to be tail wagging the dog, you want it to be aligned with something that's critical to your business model. And so in the case of Plastomics actually started before my time but going on right now, have an NSF, SBIR grant, that's absolutely a critical part of our R&D development platform, because it's a pretty high risk technology, that's hard to get significant venture funds for at this point in time.

Martha Schlicher:
Alternatively, in the case of Impetus, that company, while it's still very early stage with only a couple million invested, over 50% of its investments come from corporate or venture. And by the rules, they vary a little bit by organization. But generally speaking, if you've got more than 50% corporate or venture, you're no longer eligible for those grants. So that's tough, because you can be at a very early stage, you could have only raised $200,000 but if it came from a corporate or venture, you wouldn't be eligible.

Vonnie Estes:
So when is the best time you think for a company to apply for like the phase one? There's three different phases, I understand. I guess, and part of that question, as well is, is it like a different kind of technology? Like if you're a company and you say, "We want to innovate and try this new thing that's not part of our core business?" Is that something you'd go after grant with? Or is that the whole company itself? Or both?

Martha Schlicher:
Yeah, I think I'd say, for an early stage company, you got to be so focused. That if you're going to go after a grant, it's got to be directly related to the core of what you're doing, or just something that could add incremental value to that core. But by definition, to be eligible for one of these grants, especially an NSF grant, you've got to be doing something pretty transformative.

Martha Schlicher:
So getting that funding, because of the potential of course, for a phase two, is really a big deal. The other thing is it gives you credibility with investors. That "Wow, the NSF has said this is transformative technology." That's a pretty big deal. I would say the other thing is they require you to actually do customer interviews. And I think, again, especially if you're somebody coming out of academia, or a different kind of industry, those insights from those customer interviews can really help you refine what you're thinking about.

Vonnie Estes:
For phase one? They require that, or is that...

Martha Schlicher:
Yeah.

Vonnie Estes:
Wow. I bet that's really eye opening for some people.

Martha Schlicher:
Oh, my goodness, yeah, really eye opening. And also that can help and open the doors to other possibilities with those companies to be on an advisory board or to guide further thinking, bring in new ideas, I think if you're going to try to go after it to do something that might be a different approach, a different platform from your primary work, venture probably isn't going to get real excited about that. Your investors probably aren't going to get real excited about that. It's like, focus on your primary objective first.

Martha Schlicher:
But I think all of the... So right stage, I would say it's best if you've had some seed, you've had some early stage investment. So what you're doing isn't just a paper exercise, you have some proof of concept of what you're doing in the laboratory that's foundational for putting together a really good research plan for the grant. Because it's rigorous. You got to put together milestones, a budget, what your resourcing requirements are going to be. And so you really want to have thought it through in terms of how you'd actually implement it. Versus "Oh, shoot, I got this now what in the heck am I going to do." Now the project managers are really great about working with you and coaching you and guiding you throughout the process, so you can certainly make refinements and adjustments, but it couldn't be I was going to Mars and now I'm going to Neptune.

Vonnie Estes:
And how much oversight... Once you get the grant, how much are you involved with the project managers and are they watching how are you spending the funding or is there reporting? How does that work?

Martha Schlicher:
Yeah, certainly there's, there's kind of rigorous time tracking and record keeping. So if I've said, it's going to be one FT of molecular biologist and one FTE of an organic chemist, if that changes, I have to talk to the PM and explain why. I mean, they want to be looking for early signs that something's amiss. But generally speaking, if you put your operational systems in place, you provide good tracking, then the PM will generally leave it up to you for how frequently you want to engage and talk to them. And if everything's on track that's maybe every few months, every quarter. Probably, if you're having greater challenges, or run into something else. In the world of COVID, maybe your laboratory was shut down or something. They'll work with you to try to figure something out. They spent a lot of time to review all these applications and to pick the winners, they want to try to do their best to help ensure you can be successful.

Vonnie Estes:
Are there reasons to not apply for a grant? I mean, have you ever told someone, "This isn't the right situation for you." Or "This won't work for you?" Are there situations where it’s not the right thing.

Martha Schlicher:
I think certainly, early-stage companies are so desperate for money, that sometimes they try to make a solicitation fit their work, when it just really doesn't fit the work. And you can't afford that time. You can afford that time. Or sometimes if it's... Let's say it's a company that maybe has raised a million to a couple million dollars. If you're going to go after grants of $100,000 or something, you really got to start thinking about the investment of your time, the investment in the oversight to know if that's really going to be worth your while. Then you kind of have to start thinking, maybe I got to go back to my overall business model and business concept if I can't get outside funding here.

Vonnie Estes:
Grants for small businesses can be hot commodities, you have to do your research to find available grants and fill out the application. If you're feeling intimidated by the application, consider bringing in another party to help you fill it out as Diana suggested. Grant writing classes, conferences and workshops may also be able to help too. No matter how you approach the process the rewards are there for small business owners who put in the time and energy to submit a complete and compelling grant proposal. The process itself will help you think about your business differently and more professionally.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts, please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now stay safe, eat your fruits and vegetables and we will see you next time.

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Description: Understanding where investors put their money in 2020 will help guide predictions for 2021. In this session Ingrid Fung, an Investment Director with Finistere Ventures, will discuss what areas of agricultural technology venture capitalists invested in in 2020. We will also hear from AgTech companies about what it took to weather COVID-19 and fundraise during such a difficult year.

Panelists:

• Ingrid Fung, Investment Director, Finistere Ventures
• Jacqueline Heard, Founder & CEO, Enko Chem, Inc.
• Han Chen, Co-founder and CEO, ZeaKal, Inc.

Vonnie Estes:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of technology for the Produce Marketing Association, and I've spent years in the AgTech sector. I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us, and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry, and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsor, Sensitech. Sensitech's innovative supply chain solutions help customers retain quality, managed supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need, when you need it, to increase efficiencies. Learn more about Sensitech's suite of real-time visibility solutions at Sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than 100 years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries. Today's episode is a rebroadcast of my conversation for PMA's Virtual Town Hall on AgTech Investing, where's the smart money going?

Vonnie Estes:
My guests are Ingrid Fung, an Investment Director with Finistere Ventures, personally located in Toronto. Jacqueline Heard, founder and CEO of Enko Chem, a crop protection company with a revolutionary approach in the Boston area. And Han Chen, the co-founder and CEO of ZeaKal, a plant traits company in San Diego. This is a very unplugged conversation about AgTech and what it was like for an investor, and two startups in 2020. These three are very optimistic people, and it's great to hear their vision for AgTech around better business models, better science, and better communication. Let's jump in.

Vonnie Estes:
I can't tell you how excited I am about this panel today. I've had the opportunity to work with this group before, and I can assure you that you're in for an entertaining, exciting, and a different type of conversation. I'm really looking forward, and appreciate the panelists being with us. Ingrid is going to start us out with an overview of AgTech investing, and then she'll introduce Han and Jacqueline, and we'll take it from there. So I will now turn it over to Ingrid.

Ingrid Fung:
My name is Ingrid Fung, I'm an Investment Director with Finistere ventures, and we are an early stage AgTech investment fund. That means, we invest into startups that have technologies that apply in agriculture. We've been around in the space, investing into early stage AgTech companies at Series A and beyond since 2006. As technology investors, we're really data and information focused.

Ingrid Fung:
As part of the work that we do in order to benchmark the investments we make, if they're good decisions or not, we've partnered with PitchBook to really build a database of companies and investments that have happened within the AgTech startup scene over the last 10 years. We've partnered with them to put out reports annually as well, to allow the industry to benchmark trends as well as investment flows within the sub sectors of our industry.

Ingrid Fung:
Really, what this information has allowed us to do is to look at how AgTech investment has grown over the last 10 years. Suffice it to say, over the last decade, AgTech investment has shown incredible growth, going from less than 100 million invested annually to about 3.2 billion invested over the first three quarters of 2020. A lot of this growth had to do with generalist investors moving into the space, and an increased interest from private equity groups and pension funds to invest in ag with a sustainability lens.

Ingrid Fung:
Going into 2020 from 2019, we expected to have another banner year, after all, there was about 2.7 billion invested into the sector in 2019. But when COVID hit, we weren't really sure what to expect. To our surprise, COVID had the effect of accelerating investment into AgTech as investors sought to bridge their companies beyond the impact of the pandemic, and consumers became increasingly aware of food, supply chain challenges, and risks.

Ingrid Fung:
What are investors investing in within our sector, and what are we interested in? Well, investors are attracted to technology companies with great positioning for product market fit. When we take a look at where capital has flowed with AgTech in 2020, we saw that indoor ag captured about 28% of capital deployed within the sector. We believe this was actually due to benefit from supply chain risk tailwinds as investors sought to mitigate risks from supply chain disruptions, from growers like yourselves that produce produce, to bringing production closer to cities.

Ingrid Fung:
Now, indoor ag companies are still a long way away from becoming the dominant produce producers, but there has been significant capital that's flowed into the sector over the last years. We also saw about 28% of investment into the sector flow into crop protection, companies like Enko Chem, as investors became a lot more interested in investing in technologies that would allow climate proofing, food production, and provide producers with tools to secure food production in a profitable way.

Ingrid Fung:
Then lastly, we saw a rise in investments into animal technologies with the sector capturing about 16% of investment into AgTech. This was because COVID brought an increased awareness of the intertwined nature between animal health and human health, in terms of both active molecule management as well as issues of disease spread, and so forth. Now, while overall capital flows into each of these subsegments within AgTech, can shift depending on trends and interests. We can all speak to the interest in digital ag earlier on in the decade as well as the rise in interest and investing in carbon credits, and financial tools.

Ingrid Fung:
Investors are really at the core looking for several key components that we believe make good investments into startups. That's, startups with unique technologies that are defensible allowing them to build a moat around their business, startups that create value, and startups that have great product and technology market fit. Now, the first three of these components have always been table stakes. But over the last year or so, it's becoming increasingly important for startups within our sector to have clear communication and positioning around how their technology add its value within farms.

Ingrid Fung:
We believe that, as we move into an increasingly digitized world in the coming decade, clear communication and brand positioning for even the most serious of science and technology startups within AgTech will be key to succeeding. So, today, I brought along two of my portfolio companies, Enko Chem, and ZeaKal, who I really believe exemplify these components of being solid science companies that create value on the farm. But have also been incredibly thoughtful and strategic about the way they've positioned their technologies, and how they're going to be communicating their technology value, not only to producers, but to consumers alike. With that, I'm going to hand it off to Jacqueline Heard, CEO of Enko Chem, to introduce herself and tell you a little bit about her company.

Jacqueline Heard:
Thanks, Ingrid. Great introduction. I'm Jacquelyn Heard, and as Scot had mentioned, I guess if you used one word to describe me, it would be entrepreneur. I started my career as an entrepreneur, and now I'm ending it as a CEO of a startup company called Enko Chem. In between the two startups, I actually had a 12 year career in Big Ag. I worked at Monsanto Company, from leading R&D programs, to doing venture capital investing.

Jacqueline Heard:
I'm, again, always finding a niche to get to that innovative, entrepreneurial spot within the organizations that I've worked. It's about three and a half years ago, I founded Enko Chem, when I was a venture partner with Anterra Capital. The company really was focused on addressing some of the biggest needs in agriculture today, which is, having safe and sustainable solutions for growers around the world to protect their crops and their yield from pests and disease.

Jacqueline Heard:
We're taking a slightly different approach that hopefully we'll get a chance to talk about more, which is, we're using a human health paradigm and bringing that to crop health. We can talk about what that means, but we're using a target-based approach and a novel set of tools to get to differentiated products for the global market.

Han Chen:
Thank you everyone for having us on board today. My name is Han Chen, I'm the CEO and co-founder of ZeaKal. My story is one of serendipity. I never thought I would be in agriculture, and even our entire technology journey is one of, I'll say, very fortunate accidents that ultimately led us to discover a new trait technology called PhotoSeed which changes the photosynthetic capacity of plants.

Han Chen:
If we all rewind a little bit to our high school biology, what that means is, we're letting some of the key crops in the world, we're improving their ability to capture sunlight and CO2 to make better yields, more nutrition, and obviously improve their sustainability index. We started with our roots in New Zealand and California thus the name, ZeaKal, and our original focus was in perennial ryegrass, a crop that many of us here in North America hadn't heard of.

Han Chen:
But over time, as we saw this great platform technology evolve and its applications across so many different crops, we ultimately migrated the technology here to the U.S., and we're focused on soybeans. That's our flagship products. In soybeans, we're trying to use that enhanced photosynthetic capacity to improve the nutritional density. With our last round of investments, we're now also broadening out into other crops including rice, hemp, and obviously with our continued efforts in forages in New Zealand.

Vonnie Estes:
Great. Thank you guys for those introductions. Like I mentioned, I've had the opportunity to work with Han and Jacqueline quite a bit specifically, and watched their companies grow and have watched their careers, so it's really fun to have them on the virtual town hall and talk to them about their journeys. Looking at COVID, it's been hard for a lot of startups that I've talked to, during this last year, not being able to go out and talk to people.

Vonnie Estes:
I mean, most investors say, "We want to spend this amount of time with a management team before we would ever invest in them in person." So it's been a struggle for some companies that weren't out there to raise money and keep going. It's amazing to see that Jacqueline closed a $45 million round of funding during COVID. If you could tell us a little bit about that, Jacqueline, and what that magic was, I'd appreciate that.

Jacqueline Heard:
Yeah, we can chalk that one up to an experience. But actually, we started raising our funds... Well, first, let me just tell you that the number one role of a startup CEO is to raise operating capital. You're constantly trying to look for ways to raise funds so that you can support the operations of your company so that you can continue to drive value for investors. You raise funds, and then you manage your stakeholders and your investors, but it's very much a relationship process, right? It's all about your network and the relationships that you build.

Jacqueline Heard:
As Ingrid said, at the beginning of 2020, it was a challenging environment. I think a lot of investors were hunkering down and saying, "Well, we've got to really focus on providing those support that our current portfolio might need in case there's liquidity, or cash availability issues that arise as a result of the pandemic." We started raising in the fall, or before that period of time.

Jacqueline Heard:
I would say, if there's any learning that I had from actually getting to our close in the summertime was that, it started off tough. But then, things started opening up where Zoom was actually a huge benefit to actually getting meetings on the calendar to tell your story, to give your pitch. That was fantastic. But the one issue that I did notice was that, you need time to do due diligence and to really build a relationship with your potential investor.

Jacqueline Heard:
When you think about it, any investor is going to be a part of your company, and have a close relationship with you for years and years. It's really so essential to make sure you have that rapport, you have that relationship, and that you have the time to build it. That's where I felt like COVID was a little bit... It was challenging to meet in person and to build some of those relationships.

Jacqueline Heard:
But like with Ingrid, it was wonderful because we had a chance to do a lot of due diligence before the shutdown happened. I would say that, it ended up being fine for Enko Chem. We feel very fortunate to have raised the 45 million, and just in terms of agriculture, it was a great year. It was a great year for generalist investors to come into the space. So I feel very encouraged by the future for AgTech.

Vonnie Estes:
Great, thanks. Han, you had closed a round in 2019, so the rush wasn't as much on you to do something in 2020. But you spent your time looking at your business model, and communication strategies during COVID. I encourage you to go to the ZeaKal website. I love what you've done, and how you're presenting the company, and how you're presenting the solutions. It's really great. I think a lot of what Ingrid was talking about of really being good communicators around science and science products, I think you've done a great job with that. What was it like to continue your operations, and then make some of these business changes during COVID? What was that like for you?

Han Chen:
Yeah. 2020 was definitely, I would say, the year where my expectations were the exact opposite of what they were going to the New Year's. I remember, January 1st, I said 2019 was such a great year." It was one of those breakthrough years for ZeaKal. Our team was growing, we signed two major partnerships, closing investment, and 2020 was going to be that upward trajectory as well. Then, COVID hit.

Han Chen:
Very quickly, I remember spending February and March seeing which of our operations were shutting down, and saying, "Well, how many milestones do I need to adjust now?" I remember thinking, "Gosh, how am I going to tell my investors that we're now at beginning 50% capacity, ooh, maybe now at 70% capacity, and how do we manage those expectations?" I remember the best I could do at the beginning was saying, "Well, everyone's in this boat, so maybe it's not that bad."

Han Chen:
But then around April and May, and this was one silver lining I would say, of COVID, is CEOs of startups, we rarely get quiet time. We rarely get a time to pull back and actually analyze our business, and what we really believe in, and what we're doing. It's because of that constant pressure to deliver, that constant need for focus.

Han Chen:
Without travel, without the conferences, without constantly putting ourselves out there, we stepped back and we said, "Well, what is it that we have, and what is it that we're really trying to solve?" To Jacqueline's point, I had a number of great Zoom meetings. It felt like, the so-called gatekeepers and those key holders went all the way. People were more willing to have honest, transparent, and really authentic conversations about what they wanted, who they were, and there's nothing like seeing someone's dog or kid run through and photobomb Zoom call in order to have that connection in real time.

Han Chen:
That led us down this journey of actually broadening beyond what we were focused on as a seed genetics company, and speaking to end users, speaking to the supply chain about, "How has COVID impacted you, and how do you feel about innovation in the space? What are your priorities?" Surprisingly, when we had that conversation and we learned so much stuff that we don't really talk about publicly, the ZeaKal experience, and our focus right now primarily in the major row crops, we started seeing that there's a lot of, I would say, disconnects in the value chain.

Han Chen:
Those disconnects were leading us to come to the conclusion that, maybe in addition to innovating great science, we had to innovate a better business model, and in turn, communicate those two things at the same time. And Vonnie, that's where you're saying, with the rebranding. For the first time, as a science company, we felt like we could actually build a brand, a message that could go all the way through to the consumer around science that was really at the front end of something, at the genetic side. That's really been our COVID journey and our, I will say, repositioning and recreation of who we are.

Vonnie Estes:
Thanks. Ingrid, you talked about building better business models, and better science, and improve communications as things that you look for to invest in, and that's really important in your portfolio. Is that something that's specific to Finistere? Do you think that's a branded Finistere thing, or do you think that all AgTech investors are starting to think more that way?

Ingrid Fung:
I think, recently, with the increase in food tech investment and some of the really, really headline numbers that are coming through from, really what our food ingredients companies that are creating a consumer brand, there's been an increased awareness across the agri-food investment value chain around the importance of branding. I think, I wouldn't say this is a unique Finistere thing. It's something that we have pushed our portfolio companies to do quite a bit, especially over the last year when digital presence has been more important than ever.

Ingrid Fung:
I would say, as an investor, Finistere really focuses on technology first. We're very technically trained team. I'm a molecular biologist by training, one of our managing partners is a geneticist by training. We want really, really good science. But the flip side to where we've seen the challenge of science adoption has been really around the communications piece. This is where I think, at Finistere, we focused a little bit more on in the last year in encouraging our companies that, while small, can build a really strong digital presence where they can punch above their weight compared to a lot of the corporates out there.

Ingrid Fung:
I remember chatting to one of my girlfriends at the beginning of the pandemic when everything hit, looking through the Twitter accounts of all of the major ag chem and seed companies, and they had a really fragmented presence, the branding wasn't aligned. We realized, at that point, that our portfolio companies really could capitalize on this digital presence piece and this captive audience that we'll have during the pandemic to really make a presence and a brand for themselves, that they otherwise may not have the opportunity to do. I would say, while at Finistere, we've always pushed our portfolio companies to communicate market, and so forth. More than ever, over the last year, we focused on that. Clarity of messaging, brand positioning, and clear science communication piece.

Han Chen:
On that note, it's because of Ingrid's actual introduction to Canopy Rivers, that's how we got our 2019 investment, and I often talk about this. But we always look for investors that bring more than capital. I would say that, one of the strongest assets that came out of that Canopy investment was, I got to meet a much younger team that was very much focused on marketing and branding in a highly regulated sector, right? I realized that, all those lessons could translate into agriculture.

Han Chen:
If you like the way our website and our materials look, I got to think Alessandra, from Canopy Rivers, who handles all this. We had none of that at the beginning. We didn't have an Instagram, I was barely on Twitter, someone on LinkedIn. But I realized that, we're doing great things, but we weren't talking about it. I think that's the biggest weakness in ag is, we often win over the minds of people, but we rarely win over the hearts of people. When we don't do that, it allows this vacuum to exist. Unfortunately, what fills that vacuum is often misinformation.

Han Chen:
One of the things that we just never thought about in the early parts of our journey is, do we need to communicate anything other than data? We always said, "The data speaks for itself." Data rarely ever speaks for itself. You really need to have someone get it to a point where it's honest, it's accurate, but it's also accessible and meaningful to the people that need to interpret it. Until that happens, startups will compete in a very limited space about how we can make impact and make a difference.

Vonnie Estes:
How is that different messaging being received? What feedback are you getting, and who's reacting to it?

Han Chen:
I've been pretty surprised, to be honest, Vonnie, because we always thought that the startup message, when we got out there, we'd be a little drop in a very big ocean. What we've been really surprised about, even among very large players throughout the supply chain is, "Wow, this is refreshing." We have actually not heard of a seed genetics company that is trying to use genetics to understand how we can make this better for processors, how we can make this better for end users, and that in turn, how can we create something that's relatable and important for consumers?

Han Chen:
Because they say, "That bean goes into one part of supply chain, we have no idea what happens afterwards." At the end of the day, they call themselves a silent majority. They say, "We might be some of the largest customers and consumers, but we have no power or say over how this innovation happens." I don't think it's malicious, I don't think it's intentional. But it is a series of unintended consequences that's emerged from an agriculture system that's prioritized volume, that's prioritized efficiency and scale, that hasn't really stopped to say, "Well, why are we doing this? Who are we doing this for? And do we even need to communicate why we do this?"

Han Chen:
I would say that, with our messaging and our ability to go in there and our tagline as carbon to nutrition, we want to capture more carbon to meet the needs of environmental sustainability, and produce more oil, more protein, healthier foods. That is something that's really resonated because right now, that's not a message that's getting out there, at least, the money changing the fundamentals of biology.

Vonnie Estes:
Jacqueline, you say that you use drug discovery technology for crop inputs. What does that mean, and how are people responding to that message? It certainly falls into the better science category and I'd love to see that happening, but maybe you could talk a little bit about what that means, and how people respond to it.

Jacqueline Heard:
Sure, sure. Really, for decades, the agriculture industry has used the same tools to solve increasingly urgent problems and more difficult problems. As a result, these R&D methods are really proving to be too slow and too costly to deliver what consumers and farmers need, so as a result, the pipelines are stagnant. But if you look at the healthcare industry over that same time period, they're using a target-based approach, and a modern toolkit of AI, and computational biology to solve the increasing challenges for disease treatment.

Jacqueline Heard:
If you take, for example, cancer drugs, if you look at them a decade ago where they would non-specifically target any growing cell in the body versus now, they can be very specifically targeted, I mean, it's just been a revolution. We're trying to take the advances that pharma has made in designing these very selective molecules to the crop health space. That's what we mean by applying healthcare and drug technologies to agriculture.

Jacqueline Heard:
What we do is, we really zero in on solutions to very specific challenges, whether it's a fungal disease, or a resistant weed. Then, we specifically designed molecules that will effectively target, and target the control of those pests without harming humans or other species in the environment. We've really proven out our technology pipeline can deliver, so we have a really diverse pipeline of molecules that we think will be game changing in agriculture.

Jacqueline Heard:
In terms of how it's being perceived, I think, small molecules for healthcare, they're very well accepted by consumers. I mean, I take a drug every day, a small molecule every day for thyroid. I see the result, I know how important it is. But when you think about food production, it's very difficult for consumers to understand, or they're very removed actually, from what happens to grow the food, to what they actually see on the grocery store shelves.

Jacqueline Heard:
We really see pest resistance challenges and growers really face some huge problems today. We're trying to communicate this idea of using these really novel innovative technologies to bring better, safer solutions to agriculture. So far, the reception has been welcomed. We just came out of stealth mode in June, so we are just starting on this journey of branding. But like Han said, transparency is going to be essential.

Jacqueline Heard:
We recognize that consumers are key stakeholders of us, even though our customers are going to be growers. We see this role of a small startup bringing this awareness and technology to this industry and seeing the improvements, and the impacts they can have on sustainable agriculture.

Vonnie Estes:
That's a very different way of talking about crop protection and crop inputs. I think it's, people think about that, they think about, what I put in my body to take care of myself, it's very specific. It's made very specific and targeted to what's happening in my body, and you think about, that's what you're doing with your crop as well. I think that, that is a great way to communicate that.

Vonnie Estes:
Switching to supply chain, there's been a lot of focus on supply chain in the past year, especially in the produce industry, we've had our share of issues. It's clear that innovation is needed to create new and different supply chains in all parts of ag. Han, this has been something you have focused on, and you talk about harmonizing the supply chain. What do you mean by that? And can you give some examples?

Han Chen:
Sure. As I mentioned earlier, our major focus is on the major row crops. But when we were reinventing the business model, we actually borrowed a lot of lessons from the organic sector as well as high value produce like berries, fruits and nuts, et cetera. Because in these high value sectors, you can't get away with being anonymous. Your brand is on that product, even though it is a supply chain. Ultimately, what you grow in the field ends up in the hands of the consumer that would then judge you based on your nutrition, your tastes, your appearance.

Han Chen:
In the major row crops, I feel like we've let opaqueness and anonymity become, I would say, a shield for doing things the way they are, and this race to the bottom mentality. I'll give this example. When you look at what an end user of soybean wants, they want oil and protein. That's what soybeans are grown for. When you talk to a processor, they'll tell you, "Well, I want the best margins from taking that bean and make it into those components." Then, when you go to the farmer, and then you go to the seed innovators, they only get paid on yield.

Han Chen:
Between what an end user actually wants and needs and what the growers are actually being paid on, it's completely disconnected and different. When I mentioned earlier that there's a lot of unintended consequences, everyone has said, "Oh, you can't create a value added trait. You can't create a technology that's based around an identity preservation at a scale that's meaningful." Yes, we have high oleic soybeans. Yes, we have an organic market. But these are still relatively small compared to the overall size.

Han Chen:
That was, again, one of the first things where we said, "Well, why is that assumption necessarily true?" Why do we have to continue to race to the bottom where we keep producing more and more yield? But that yield, what people don't talk about is, that comes at the expense of quality and nutrition. I spoke with a large end user who said that his rations of soybeans went somewhere from 20%, a few years ago, down to 10%, and now declining.

Han Chen:
The reason is, is because the quality has dropped year on year per bean. Because as we've briefed or so-called yield, what we're really putting in there are more carbohydrates as, so-called, filler material. I've heard soybeans issue be called styrofoam, I've heard it be called empty calories, little black holes. What do they do? They're looking for alternatives. They're moving towards other crops, they're moving towards corn DDGS, synthetic amino acids. That's all fine, but who does it ultimately hurt though? When this supply chain is a race to the bottom, who ultimately bears the cost of this?

Han Chen:
Well, it's who we all care about. We all say, "We care about the farmer and the grower," but that is the group that's ultimately bearing this costs. They're the ones that ultimately say, "As this crop value decreases, we're going to see long-term challenges." Yes, we have boom-bust cycles where, this year, it's a great commodity crop season, but let's not forget the past eight years, where soybeans was at $8, $9 per bushel.

Han Chen:
How can we actually increase the margin of farmers? How can we actually increase the value that they create, diversify either incomes and actually connect that grower to that end user? And that has to be a reinventing of the supply chain. One of the investment thesis that we're challenging right now is, is a startup better at re-inventing a supply chain, or does it come from the majors?

Han Chen:
I think this is something that Jacqueline and I have talked about over the years. I'm sure, Jacqueline, you remember when I was sitting, when you're starting Monsanto saying, "Well, do these large companies, these large ag companies behave like pharma?" Are they going to integrate new innovations in this pipeline and feed the beast, if you will. We don't really see that in agriculture. I think a lot of the issues are, is that agriculture is ladened with legacy assets, fixed infrastructure, possibly, outdated business models.

Han Chen:
One of the things that we're thinking about right now is, do we partner, and who do we partner with, and what parts do we need to recreate? Given the fact that we're a startup, given the fact that we're a blank slate, and we might be, to recreate some of this. ZeaKal, right now, what we want to do is to have an end user that can value the higher nutrition sustainability index. Build that integrated supply chain, and get the grower paid on metrics other than yield that can then increase that resiliency of the supply chain and the food supply in the long-term.

Vonnie Estes:
Ingrid, in what you're looking at in small companies versus large companies, I mean, do you see that the large companies are going to make more innovations? Or do you think more innovation, it's going to come from smaller companies?

Ingrid Fung:
I think there's a balance. I certainly see large companies continuing to invest in their innovation pipelines. But even from the conversations I've had with R&D leaders at the large ag chem corporates, at the large companies, they do say that, there is an inherent culture within each company. They're focused on the way they've done things. For ag chem companies, that's high throughput screening. It's, they've invested in a lot of infrastructure in terms of talent, in terms of equipment to be very good at this one thing. It makes it very difficult for them to shift and pivot and look at novel ways of innovating.

Ingrid Fung:
I think we're going to continue to see innovations coming out of the ag corporates, but the truly unique and different approaches are going to come from startups. I think, when we think about business model innovation, these large companies can try, and some of them have tried, for example with premium cotton products, to integrate that to consumer through gene brands, and so forth. But they're not very good at it, and it costs them a lot, in-house, to run these things, right?

Ingrid Fung:
I think it's going to be a balance. What I hope to see, ideally, is, startups like ZeaKal innovating on the business model on the technology front, and then large corporates following suit or acquiring, but I think it's going to have to come from both. Really, the model that Enko has, I think is quite interesting. They both partner with the large companies to work with them as well as develop molecules on their own to build value within their company. I think, it's going to be this double-pronged approach that will win in the end.

Jacqueline Heard:
Yeah, I really agree with that if we want to take this any further. Because I see a huge role for startups serving as disruptors of the supply chain. Without those challenges, I think it would be more difficult for the large companies to innovate. Our role is to really look at agriculture 10 years from now. What does it look like? What could it look like? And then bring technologies that service that future. It's a little scary, but it's also a really exciting thing about being a startup.

Jacqueline Heard:
In the input space, I think we're pretty unusual in that, we're a small company trying to bring innovation to something that has traditionally been held with the ag R&D majors. But we think that the situation has been provided to us in a way, in that, there's so much resistance that's developed, and the speed of innovation, and the pipelines today is inefficient. It's not going to deliver on what's needed. There's an opportunity to really think about things differently.

Jacqueline Heard:
We're not developing things that have to work with trait, for instance, in row crop agriculture. We can drive selectivity with the molecules that we deliver. That gives all farmers, globally, the opportunity to have solutions for their pest and disease problems on the farm. I should highlight too that, we see eye to eye with the Gates Foundation. So the Gates Foundation led our Series B and we partnered with them to deploy our technologies to underserved markets.

Jacqueline Heard:
That's a critical component of the... Yeah, the supply chain today has driven these inequities that not all farmers have access to technology. For us, the partnership with the Gates makes a ton of sense, and will allow us to bring our technologies to global markets including underserved markets at a reasonable cost. So we were very excited about that partnership.

Han Chen:
I mean, Jacqueline, you make a great point, which is about access to innovation, but also just the nimbleness of innovation. I wonder, one of the things that we feel is that, startups, despite not having the same resources, the same scale, size... Look, I've visited a lot of the large company facilities. It's like Christmas. Every time I go, I'm like, "I wish I had that machine, I wish I had those 10 benches." But the reality is, is that, we're also innovating without any of those constraints. I think Enko Chem is a great example of lower cost, nimble innovation, and that's something that ZeaKal has always prided itself on as well.

Han Chen:
For us, any acre that we get on is a win. That's one acre we didn't have for, whereas large companies have a lot to lose. Every time they see a new idea it's, "This is exciting." But if I get 1% of the market, it's incremental at best, and it might be cannibalizing what I have, so why do this at all? I see those ships not being able to change direction very fast, and as they get bigger and bigger with consolidation, probably not at all. Till you feel like, startups, there's an asymmetric advantage here as we're able to target smaller markets, more localized, and this whole theme of, COVID with resiliency going more local, that if we take that all the way back to the innovation space, that there's actually competitive advantage there.

Vonnie Estes:
Looking forward, I'd like to hear from each of you, what you think how things are going to play out in 2021, where will investment go, will investment go up or down, and what do you see for your companies? Ingrid, why don't we start with you?

Ingrid Fung:
Yeah, for sure. I'm actually quite excited about 2021. I think that, where the shock of all this disruption that came with COVID has passed a little bit. We're all hitting our stride in terms of figuring out, how to make investments, how to look at companies. You're starting to see companies come back around to, one, seek investment, and two, establish new partnerships. I think it's going to be a pretty interesting world to be in, in this world of Zoom where, as Han spoke to, a lot of the gatekeepers have gone away and you can get a lot more meetings with people. You can have a lot more conversations. Yes, it is more work, but it is certainly worth digging into.

Ingrid Fung:
Investment-wise, I'm still very bullish and excited about crop protection. I think, we spoke briefly in our prep call about technology flows. I think there's a lot of technology flow from pharma that can be leveraged to do really interesting small molecule discovery with a sustainability, and safety lens put at the forefront. I think, any company that looks at sustainability, not just environmentally, but economic sustainability for growers, as well as equitable access, will start to succeed and define themselves differently.

Ingrid Fung:
So, very excited about plant sciences, crop protection as well as animal health. We're starting to see a lot more companies pop up in the animal health space, trying to be strategic, trying to push for better stewardship around small molecule active management in mammalian health, in general, because human health and animal health are linked. Those are the three buckets that I think we'll continue to see a lot of investment and a lot of useful innovation flow out of.

Vonnie Estes:
Jacqueline, how about you? What do you think the year is going to be like?

Jacqueline Heard:
Yeah, I think it's going to be a good year for ag, but I'm always optimistic. I've spent my whole career in ag, I've got to think it has promise. Yeah, absolutely. I don't think ag is going anywhere. It's the oldest human technology on the planet, so I think it's definitely here to stay, and I see a lot of interest in generalist investors coming to agriculture, so that's positive. I also think that COVID really was something that revealed some of the vulnerabilities that we have in our supply chain. I think that, that revelation has provided opportunities and a clear target for focus capital.

Vonnie Estes:
Han?

Han Chen:
Well, I mean, so far 2021, unfortunately, it feels like a bleed through 2020. I would say, personally, my goal is to create more barriers between my personal life and my professional life. Because it literally feels like-

Vonnie Estes:
Good luck with that.

Han Chen:
Yeah, good luck with that, exactly. Because literally, you're in my guest bedroom and everything just flows through from one to the other. That's a personal goal. But with that being said, we spent a year, like I said, in this meditative state, really trying to have clear minds and open ears, listening to what industry really wants, listening to what the needs of the supply chain are, and our ambitions have become a lot larger.

Han Chen:
Before, we just wanted to create the best science, I think right now we're trying to create better business models. We've launched two major initiatives, our Carbon to Nutrition. The idea that, plants are photosynthetic monsters, they eat carbon for lunch, let's have them eat a little bit more with PhotoSeed, and we're really pioneering a NewType of agriculture. Our NewType model is based on this idea that, we want pillars of sustainability, and sustainability is about resource sustainability. So obviously, the inputs, the environment, but we can't forget about the major resources and the most important in agriculture, which is, the people.

Han Chen:
The people that grow the crops, we have to make sure that their incomes, their mental health, their appreciation by society, that all of these things are sustainable. That requires bringing the grower closer to the end user, letting the end user embrace the innovation that we're producing, acknowledging the sacrifices, the hard work that these growers do every day. Getting up way earlier than I would to plant the crops that we need to feed the world.

Han Chen:
We just announced a partnership with Gro Alliance yesterday that gave us access to a network of growers and seed producers across eight states in the Midwest, and we're building the supply chain piece by piece from the ground up with no preconceived notions. We want to see other people come to the table and say, "We can do better, we can, and we will." It's not going to take a lot of resources. I think Jacqueline and I, hopefully, I've proven that point today that, the limitation is not capital. It's culture, it's willingness, and it's courage.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com, and wherever you get your podcasts. Please, subscribe, and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

Hide transcript

Description: 
Join the conversation with Nate Storey of Plenty and Scott Komar of Driscoll’s about their R&D collaboration. Driscoll’s and Plenty are partnering to bring berries with superior flavor to all regions of the world.  Plenty will incorporate Driscoll’s proprietary genetics and berry expertise into its advanced, indoor farming technology using its plant science, data science, and robotics expertise. Through this controlled environment, Plenty can consistently deliver great flavors from Driscoll’s varieties, while also optimizing for texture and size. The indoor environment allows companies to meet the future needs of consumers worldwide, including geographical locations that are not hospitable to growing strawberries.
 
Speakers:

•  Nate Storey: Co-founder and Chief Science Officer, Plenty
• Scott Komar – Senior Vice President of Global R&D, Driscoll’s

Vonnie Estes: 
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of Technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So I can attest, it's hard to navigate this ever-changing world and developing and adopting new solutions to industry problems.

Vonnie Estes:
Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsors Sensitech. Sensitech’s innovative supply chain solutions help customers retain quality, manage supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need when you need it to increase efficiencies. Learn more about Sensitech suit of real-time visibility solutions at Sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than a hundred years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries.
In this episode, we dive deeper into the R&D collaboration between Driscoll's and Plenty. In case you don't know Plenty, they are a vertical farming company in South San Francisco, California that has raised a total of $500 million. Their last round that closed in October was 140 million series D that was led by existing investor SoftBank and Driscoll's as a new investor. The two companies had been working together on a joint development agreement to grow strawberries. Driscoll's was so impressed with Plenty's technology they decided to invest in the company and deepen their R&D partnership. This is such a fun conversation, to hear about a collaboration that is really successful and is, "One plus one equals 10," as Nate says, the two R&D groups are top-notch and are able to work and react quickly to their learnings, given how fast things can be tested in an indoor environment. Nate and Scott, talk about where the partnership can take them globally with superior berry attributes. Let's jump into the conversation with Scott Komar, Global VP of Driscoll's R&D a Nate Storey, Co-founder and CSO of Plenty. So welcome Nate and Scott, thanks for being here.

Nate Storey:
Thanks for having us.

Vonnie Estes:
Great. Well, we're going to start with the Driscoll's story. So, Scott, if you could tell us a little bit about Driscoll's?

Scott Komar:
Sure. Well, I'd like to start with our mindset Vonnie, which is really embodied in our mission statement and it's very straightforward, it's to delight our berry consumers. And so I hope I'm talking to a berry consumer here of Driscoll's?

Vonnie Estes:
Oh yes.

Scott Komar:
Okay, great. All right. We're off to a good start here. And so we want to continuously delight our berry consumers through alignment with our customers, our retailers, and our berry growers, our independent berry growers. And we're privately owned, our family, the Reiter family is still very much leading us through our growth and expansion of the company, now is over a hundred years old. And today we reach over 350 million consumers, 22 countries, six continents.

Vonnie Estes:
Wow.

Scott Komar:
A little over 4 billion in sales. You can see the products in the background, strawberries, blueberries, blackberries, raspberries, and from an employment standpoint, we're now around 7,000 or so direct employees of Driscoll's. And then through our grower network, these are all independent growers working with us, there's over 900 of those growers. And we estimate that their employment reaches around 115,000 employees worldwide. So it's quite an enterprise and just a reflection of the huge demand for berries around the world.

Vonnie Estes:
That's an amazing footprint. And I appreciate it every time I open my refrigerator door.

Scott Komar:
Okay.

Vonnie Estes:
So what does the marketplace, the consumer and other customers value in terms of product innovation?

Scott Komar:
Yeah, well, yeah, I think we can see through, take your favorite retailer, but when you visit their store, you can see how prominent produce is set within that store and going a step further berries have really been put to the front of that part of their store and category. And the reason for that we believe is that the consumer is really looking for something healthy and flavorful they can bring home to their families. So our mindset really centers around flavor, and that goes back to our mission statement, continuously delighting consumers. We want to delight them through flavor. And so our brand first and foremost, conventional organic really stands for that consistent, delightful flavor, but we can go a step further. And I think today we'll probably have an interesting conversation about breeding and genetics and so forth, of plants, but we can go a step further with flavor, and there are occasions where we can offer something just really remarkable.

Scott Komar:
I mean, something that you're just thrilled to bring home to your family. And so our innovation, for us, really comes on those two levels. Every year, we're adding to our core offering of products. And so we'll introduce a new variety that continues to notch up the quality and flavor of our everyday offering. And then at certain times of the year, it could be under a Sweetest Batch label, or a Rosé maybe you've seen those products?

Vonnie Estes:
Mm-hmm.

Scott Komar:
But they're really an exceptional flavor and eating experience. And so both of those levels provide us a nice avenue for introducing new product innovation.

Vonnie Estes:
And how do you look at trying to service and delight customers in different cultures around your flavor profile? Do you think about different parts of the country and what they might, or the world, they might want differently?

Scott Komar:
I think this is an interesting question, because it gets at the heart of what... Are there strong consumer preferences that are distinctly different by continent? And I would say at this stage in our journey, Vonnie, we have a mindset where we're really just trying to satisfy the demand that we see globally. So I'm talking about not only North America, but throughout the European Continent, Asia, Australia. And so that's the stage I'd say we're at where we're really striving every day to provide that delightful flavor. But we do see on a horizon that there could be differences, how a European consumer values a certain flavor profile of a strawberry we think could be different than in Asia, for example. And so this is something that we're going to explore as we stay close to our consumers. And we do believe it's going to unlock a level of product innovation that so far we really haven't crossed yet.

Vonnie Estes:
So that kind of brings us to what we're here. So why invest in Plenty and how did you guys end up talking to each other and getting interested in working together?

Scott Komar:
Yeah, well, I'd like to start with really the wellspring within Driscoll's, which is our R&D group. And so these flavorful varieties that we bring to the consumer come from many years of dedicated breeding and careful selection. And so of course flavor is our strongest trait that we breed for, but clearly also yield and certain characteristics about the mouth feel the color of the fruit, all these aspects, so it's a very complex picture. And Driscoll's has a dedicated R&D group, which I think sets us apart at a certain level of innovation. And so it's that wellspring that is feeding our system globally, that I mentioned earlier. That being said, what Plenty has innovated we find particularly interesting in a couple of ways. One is that there are regions in the world that are very difficult to reach even with the most capable supply chain.

Scott Komar:
And so I can share an example, like in the Middle East, where there's not much of anything growing out in some of those regions, and yet we have fantastic consumers there that enjoy our fruit. And so we see with indoor farming possibilities where we can reach globally in partnership with them that we could not do with a standard supply chain, so we're very intrigued by that. Now other conversations that Nate and I are having is that there are varieties that come out of our R&D group that probably are not going to adapt very well to say traditional growing methods, but they have a really intriguing flavor or some aspect that we think the consumer would really appreciate. And we have a hunch we're just starting this journey with Plenty, but we have a hunch that there'll be some of these varieties that will just flourish in an indoor farm. And so there we can bring another level of innovation to our consumers, continue to grow the category and continue to delight our consumers.

Vonnie Estes:
Wow. Yeah, I've done some work with your R&D group in different functions that I've had over time, and I've always been so impressed on how, just interested in looking outside, you guys are which is different than a lot of breeding companies where everyone's looking at what's going on outside, that we can bring inside and continue to improve and innovate. And I think that's unusual for a breeding company, in my experience anyway.

Scott Komar:
And it's a fun experience. We, if I can think back a couple of years ago when I was at our research center and a couple of our scientists had come back from Hawaii and found a wild species of blueberry that was off colors. And so I was like, "Well, let's bring it in the program." So yeah, they can come from all corners of the globe very that's the amazing part is we all know of science. I mean, the possibilities when you understand how complex and vast the plant genome is, then we know the possibilities are truly limitless. I mean, it's just truly, every day is a wonderment.

Vonnie Estes:
Yeah. I did a podcast that came out this week on looking at personalized nutrition. And it was interesting in that everyone I talked to, I was pushing them into saying, "Okay, we can know this now," like, "You're going to tell me you're going to make my food mode more nutrient dense, and I'm going to be able to know what that is. And I'm going to be able to know from my personal genetics, what I should eat." And basically I kind of got the information that we're not quite there yet, but, I think that in the work that you're doing and the work that you're doing with Plenty, I think that brings us a step closer in starting to understand what can we do around nutrition in addition to flavor? Are you guys talking about that as well?

Scott Komar:
Well, I can't say that we've... That Nate and I kicked that around yet. We've got a lot of work ahead of us and I'll let Nate share... So he's got a heavy lift going on right now for sure.

Vonnie Estes:
Yeah, great. Okay, just...

Scott Komar:
You're right. Vonnie, you're right. There's this wave of food is my medicine and I can understand the connections between my own unique genetics and how food responds, but also how food can benefit my health. And we see that entering really the mainstream of the consumer thinking. And so no doubt as we continue to unravel the genome, we're going to come across some really interesting insights from a nutritional standpoint as well.

Vonnie Estes:
Yeah. I think it'll be fascinating. And so I want to pivot and get over to Nate, but just, I've heard you talk about this, Nate, a little bit just about around, because you're able to dial so many different things up and down in your farms that you're going to have some good control on being able to do some nutrition work, at least in the greens that you're working in, but stepping... Why don't you answer that first and then go into just talking about Plenty and give us an idea of who Plenty is.

Nate Storey:
Yeah. I mean, control is at the heart of what we do, right? So, we really view Plenty as being on this continuum where we started in the field and the field was a rough and rugged place 10,000 years ago, you're out there with a stick scratching a furrow, right and planting feed by hand. And you look at where we're at today, right? It's been this constant evolution of the field towards more and more control, we're out there and we're laser leveling. We're controlling our fertilizer inputs. We're controlling as much as we possibly can outside of the weather. And we view Plenty as being at the end of that continuum, right. We went from the field and the greenhouse industry arose starting around 150 years ago. We started to see this idea of more control is good for humanity, it's good for society, it allows us to grow things out of season. And that evolved, evolved, evolved, and Plenty is at the end of that continuum.

Nate Storey:
So yeah, we think about environmental control, but to your point earlier we're thinking about nutrition, we're thinking about flavor. We're thinking about all the things that we can manipulate. We've got our genetics, we've got our environment, how do we go out there and manipulate both, right? To get to the right outcome? And that's the right outcome for plants, that's the right outcome for people, that's the right outcome for the planet. See how I worked our mission in there?

Vonnie Estes:
Yeah, very good.

Nate Storey:
But at the end of the day we are kind of kicking open the door to things like personalized nutrition, we're kicking open the door to being able to grow things that people want and need. And that's really at the heart of this partnership with Driscoll's. There really aren't that many folks out there who care about both the genetics and their consumers. They're always separated from their consumers, right, by growers, by distributors, by these other things. And Driscoll's is one of the few companies in this space that deeply cares about the consumer experience. That cares about giving their consumers something really awesome. And so that really stood out to us as we were looking at this, because I think we're really well aligned there around going out and giving consumers something that's delicious, something that's nutritious, something that's consistent and giving it to them year round.

Vonnie Estes:
Yeah, I hadn't thought about that as far as the alignment between the two companies. I mean, if you walked into my kitchen right now and opened up, you'd see boxes of Plenty and boxes of Driscoll's because I lived close enough to buy Plenty, but the two companies actually have that alignment of you're producing and you're involved in the production side of it. And you're involved in thinking about, "How do we grow? What's the genetics? What do we do here?" And then you're also touching the consumer. And so you really... And the whole supply chain. And so you really are very vertically integrated both of you and you have that consumer voice in your ear, which is different than a lot of companies. You can't not listen, right? You won't sell product. That's very cool.

Scott Komar:
I think it's a great call-out, Vonnie, that as the two companies are partnering here, not only is the end to end starting with the genetics all the way to the consumer, that's directly connected, but you can imagine the turn time that we have is greatly shortened. So in fact, just yesterday, Nate and I were meeting and we check in every couple of weeks and we were just discussing about, "Okay, well, some of these plant varieties are showing this indication." "Okay, great. That's working nicely." Okay. Now I can go back to my team and say, "Well, let's find some more of that and we'll bring it forward." And then we put it in Nate's magical factory over there and we'll see how it performs. And so we anticipate the cycle time of input from the consumer, here's what they like. Okay, we go right back to, "Great, let's pull forward these genetics, let's maximize the Plenty growing system get in front of the consumer." What do they think? That cycle time, it may be a record-breaking cycle time for our industry. We'll see.

Vonnie Estes:
Yeah, yeah. I would bet, and you don't have to contend with what season is it? And do I need to go plant this someplace else? And that really does get you much faster. So Nate, most of the people in the US probably know who Plenty is, but there's a number of my listeners who are outside of the US and may not have read as much about you. So can you just give us some background on Plenty and what you guys are working on and kind of what the state [inaudible 00:19:43] you are development right now?

Nate Storey:
Yeah, you bet. So Plenty is an indoor farming company or vertical farming company. And we grow plants in giant warehouses, basically we build farms indoors. And what that does is it gives us complete control over the environment. It allows us to really manage the plants for maximum growth, maximum flavor, maximum nutrition. And that's been our focus. We started the company because we realized that the world needed basically three times as much fresh fruits and vegetables as it produces today. So globally we're only producing about a third of what we need to, to feed this growing population, the growing middle-class, the demand that is rising around the world. And there's only so many places that we can do this really well and economically at scale. And so Plenty was really created to grow the size of the world, the production capacity of the world, so we built Plenty to that end. And today we are building our first mega-sized farm down in Compton. It's going to be the first of many mega, mega-sized farms. And these farms are really-

Vonnie Estes:
Are you saying what size it is publicly? Are you guys saying how many...

Nate Storey:
So, I'll put it this way, if we went out and we bought enough land to produce the same amount of value, we would have to go buy around 720 acres in the Central Valley. So a little over a section of land, a section and a quarter, condensed into a building that's roughly two acres. So that gives you an idea of the scale and also an idea of how much land we can basically pack into a pretty small package. And if you were to walk into that farm, you'd see the actual growing space is probably only about a third of that total floor layout.

Vonnie Estes:
Square footage, yeah. And when are you planning on opening Compton?

Nate Storey:
So we're going to be running Compton about midway through this year, it's going to be up and going, and then we're going to spend several months getting it going. And by the end of the year, we should be pretty close to a hundred percent capacity at that farm and debugged and running smoothly.

Vonnie Estes:
Wow. And is it... I just have to be careful because I'm so interested in what you guys are doing and I don't want to ask stuff that you don't want to answer. That's not public. So just tell me if I asked you that, but yeah. Are you growing the same crops that you're growing in South San Francisco or is the product mix going to change a little bit?

Nate Storey:
We're going to be growing the same crops plus a number of others. So we're going to be taking a larger product portfolio to market down there. Yeah.

Vonnie Estes:
And did you iterate much? I mean, I know you guys, you guys are the King of iteration and the South San Francisco, the number of... I actually got the privilege of spending some time there when you guys were first building and you were tearing things down and building things and tearing things down and building things every time I went up there, it was like something was torn down and built up, which is amazing that you can iterate like that. And I think that's why you've grown and learned so quickly. So, is the Compton farm, a complete iteration from what you have in South San Francisco? Or is it kind of the same?

Nate Storey:
It's a massively leap forward for us. So technologically and frankly from a product standpoint too, to Scott's point, this ability to go really fast is one of our fundamental advantages, right? We're growing out a crop a week, basically. So what many farmers in the fields, it takes them many, many years, right, of learning to accumulate the same amount of data and understanding of their crop conditions, the market factors. And we can do that in a week, right, sometimes less. And so for us, just this iterative cycle, it is at the heart of what we do, build the data, right. Understand the data, make decisions off of the data. And that's at the heart of... I think one of our advantages in this space, right. And one of the reasons we've been able to go as fast as we've gone. It feels slow sometimes because we're impatient-

Vonnie Estes:
To you.

Nate Storey:
To us, real slow, but it really is quite fast in the agricultural timescale.

Vonnie Estes:
Yeah, definitely.

Scott Komar:
One comparison I might give if we get a little techie here for a second, is that the data that's being collected through the Plenty system, it is really impressive. It's unlike anything I think I've seen in other forms of growing. And in a way, if I use an analogy it's, back in the day, if something's going on, and then the physician says, "Well, let me take an x-ray and we'll see, Oh yeah, here it is." That gave a certain level of insight. But now with a cat scan or an MRI or whatever, it's a whole nother level of insight into what's going on. And that's kind of the analogy here with Plenty, they're running their trials.

Scott Komar:
And then they're sending back to our plant physiologists and breeders data, it's rich data, and it's giving us deeper insight from a scientific standpoint. And of course in this full picture, you can see the ways in which artificial intelligence, machine learning is just... Nate, you can call it here, but I would imagine this couldn't even be done without that core capability and harnessing these data sciences. So, this level of data sciences is a whole new level, I think we're seeing certainly for our experience. And I would say for our industry.

Nate Storey:
Yeah. I mean the opportunity to collect this kind of data, as you have these farms that are more and more controlled, right. So in a field you've got to figure out how do you power device out there? How do you control for all of the conditions around that device in trying to understand the plant experience? You've got to control for a lot of things that have nothing really to do with the plant and in our farm we can measure the plant directly. We're able to go in there and take temperature and humidity measurements, and these vast arrays in the canopy outside of the canopy or measuring all of the energetics of the system at any given second, microseconds in time, light levels and all of these things because they're consistent and because they're controlled, they're now measurable.

Nate Storey:
And we're able to kind of go down these layers of data getting into fluorescent state of getting into these forms of data that have historically really been constrained to the lab, right. Because what we've built is a giant scaled lab in a way. And that gives us an opportunity to understand plants and plant metabolism and their physiology at a whole new level. And we're far from perfect, we've got a long ways to go on this, but it's pretty amazing how that data becomes really, really useful. And as a scientist... I know we're off track here, but as a scientist-

Vonnie Estes:
No, this is perfect.

Nate Storey:
As a scientist, the really exciting thing is historically it's been very difficult to bridge the applied and the fundamental sciences, right? This bridge, or this divide formed about 20 years ago especially, right there was this separation of the fundamental and the applied. And what we're seeing is that in our farms, we're bridging that gap really effectively. And now, this really fundamental physiological data about the state of the plant becomes useful in our decision-making and our understanding of the farm and our understanding of growth rate, our understanding of quality, our understanding of all of the things that matter to us economically as a business.

Nate Storey:
And so I think we're on the cusp of an entirely new kind of agriculture of an entirely new opportunity for the world and for people to eat really great food. And for us to produce that food with incredible efficiencies and in a way that's really great for the planet. So data is at the heart of the business, we couldn't do it without it. And certainly we couldn't achieve the massive multi-fold yield gains and improvements in quality and shelf life, and all the things that we're focused on over the last couple of years without it.

Vonnie Estes:
And, Scott, have you had to hire differently? It must be hard to keep up with these guys? So have you had to hire some data scientists and some people that can interface and understand how to use the data in what the work is that you're doing?

Scott Komar:
Okay. Well, I want to call out the competitiveness of the Driscoll's team here, because for us picking Plenty was we saw an opportunity to have two groups that are very aggressive and very innovative coming together. And so we're challenging ourselves with these learnings and the feedback loop that's going back and forth between two companies. So, that's kind of fun. Now, what I'll say is, let's take this as the core of the indoor farming wave, okay. And, Nate, he might want to touch on also... I don't know when the last time you had a chance to tour their facility, Vonnie, but some really cool things around robotics, for example. And look, we know when we work with our growers that are growing outdoors, they might be growing in soil. They might be growing in table tops. Those are challenging environments for robotic machines to rove around and try to get that exact pick at a certain speed that's commercially attractive.

Scott Komar:
And they'll get there but imagine building on Nate's comment about this indoor lab, this indoor factory. It really does provide some advantages where we can innovate quicker, let's say with something like robotics, you can imagine the harvest of the strawberry being done. And we know that some level of these learnings, we can take back to our other growing systems around the world, whether it's traditional greenhouse or hooped growing or just open soil. So there'll be a certain benefit that'll come back to all forms of growing and lift that whole sector. But we expect some really neat breakthrough innovation will come first from the teams working together in this environment.

Nate Storey:
Yeah. I've got to jump in and say the Driscoll's team brings incredibly deep expertise to the table, right. So we have, before we started working with Driscoll's, we were working on strawberries for a couple of years. So we kind of got to learn the ins and the outs of how do you work with this crop? How does this crop behave in the systems? And working with the Driscoll's team has been a breath of fresh air and trust me, they have no problem keeping up with the data. They've looked at similar data, right, for decades, and we're just starting to touch on it. And so this really is like a one plus one equals three, or maybe like more like a one plus one equals 10 scenario, right. And both of those teams are phenomenal. And it sounds like I'm just marketing the partnership at this point, but I'm not. It's been remarkable how great the teams have worked together. You've got two teams that are passionate about the same thing. Right.

Nate Storey:
The Driscoll's team's like, "What does quality look like coming out of the system?" It's new, it's exciting. It's interesting. We're measuring things in ways and with kind a frequency, that's impossible in the field. And you've got the Plenty team who's just soaking up how can we learn more about these strawberries? How can we work together to make the right decisions around cultivar selection? How can we make the right decisions around the environmental aspects of the farm? And so, even though it sounds super rosy, like we're really just marketing the partnership at the end of the day, it's been a delight. It's been a lot of fun.

Scott Komar:
It is a lot of fun.

Nate Storey:
A lot of fun.

Scott Komar:
Yeah.

Vonnie Estes:
That's great. That's really wonderful to hear. That's the kind of partnership where you do the contract and you put it in the drawer.

Scott Komar:
That's exactly right, it's just a document somewhere in the background.

Vonnie Estes:
Yeah, exactly. So I know that you're focusing on flavor. What else can you tell us about the hopeful outcomes of the program? And I know some of this is probably not talked about publicly, but whatever you can talk about of what you're working on in addition to flavor and a variety selection?

Scott Komar:
Well, I guess I'd highlight two things. So I'd go back to the robotics, for us labor is a shortage worldwide. Okay. That's no mystery for our crop or any crop. And so our ability to innovate with a robotic harvest is a big deal. And if we can do, if we can get some breakthroughs in our working with Plenty and their environment, then that's a big deal for us. And we hope that, that day comes in the near future. In addition to that, there are ambitions we have with our global footprint. I mentioned earlier being on six continents and so forth, I can tell you that getting fresh berries to the consumer every day in Shanghai is a crazy complicated supply chain. Okay.

Vonnie Estes:
I'll bet.

Scott Komar:
That is just, it is a puzzle, but so are most... Every major city in the world. I mean, they weren't built for easy distribution of perishable goods. And so we envision this footprint of these large indoor farms, like the one Nate mentioned in Los Angeles, but that's our ambition. We see these being placed around the world and probably going to be in mega urban environments or these extreme environments, like the Middle East that we talked about early on. And the beauty is that indoor farm can be replicated around the globe and between our two teams, we've already identified the optimal genetics for the optimal growing system. And so we can then start to build this global network and have a way of getting some really special fruit to these consumers every day, just 52 weeks, a year, super fresh. So there's a really intriguing global network here that we have in mind.

Nate Storey:
Yeah. I mean, I would just add to that to say, for us, working with Driscoll's, especially to this end of growing the global supply of berries, right. Growing the global opportunity to consume really great, fresh, delicious strawberries anywhere in the world is a great demonstration of really what we set out to do. And obviously we've got a lot more work to do, but it's a great demonstration of this idea of growing the world's agricultural capacity, right. Growing the size of the planet and growing it to meet the needs of people.

Nate Storey:
And so I think Driscoll's has led the world for a long time in genetics and quality for strawberries, but there are still these incredibly difficult problems to solve that are so tied to just the way agriculture works, right. We can produce in one place, we've got to get it to another place and that's a problem that we need to help. And so I think this is representative of really what we set out to do. Obviously it crossed a lot of crops ultimately, but for now showing how this problem of getting strawberries to everyone in the world can be solved with indoor ag and with Plenty.

Vonnie Estes:
I hope you enjoyed that conversation with Nate and Scott. As indoor farming is growing and taking its rightful place in food production, I see additional advantages to this collaboration. What they learn about robotics and plant science and breeding will be a great advantage to both the indoor and outdoor growing of fruits and vegetables. The speed at which we can gather and analyze data around breeding in the environment will support and grow the industry. That's it for this episode of PMA Takes On Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

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Description: In this episode, we continue our virtual tour to Brazil to explore the AgTech explosion. We discuss the flourishing tech and innovation ecosystem developing in the country. Startups in Brazil have access to a market with one of the highest levels of mobile saturation, a wide range of investment options from local and international Brazil-centric funds, and support from a government that has made driving business growth one of its key priorities. In agriculture specifically, Brazil has transformed itself from food importer into one of the world’s leading producers in less than 30 years. Brazil is the first tropical country to be among the world’s leading food exporters. It is now the leading producer and exporter of sugar, coffee and orange juice, and the second largest for beef, soybeans, tobacco and ethanol. With such growth in tech, innovation, and access to capital and talent in an Ag powerhouse, the AgTech sector is thriving. Listen to our discussion with the top people in Brazil making it happen.

Guests:

• Francisco Jardim – General Partner at SP Ventures
• José Tomé – CEO and Co-Founder of AgTech Garage
• Mariana Vasconcelos – CEO and Founder at Agrosmart
• Mario Portela – Partner in Circularis Partners

Vonnie Estes: 
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of Technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So I can attest, it's hard to navigate this ever-changing world and developing and adopting new solutions to industry problems.

Vonnie Estes:
Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsors Sensitech. Sensiech's innovative supply chain solutions help customers retain quality, manage supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need when you need it to increase efficiencies. Learn more about Sensiech's suit of real-time visibility solutions at sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than a hundred years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries.

Vonnie Estes:
Anyone who knows me knows I love Brazil. I started traveling to Brazil in 2005, looking at using sugar cane bagasse as a feedstock for second gen biofuels while I was with Syngenta and Versa. I continued traveling to Brazil with positions at DuPont and Codexis, also working on second gen biofuels. Partly because of the business opportunity and partly because I loved going to Brazil. In 2013 to 2015 I worked with a Brazilian company, Gram Bio to help discover and deploy technology for second gen fuels and chemicals. It was wonderful to spend more time in the country and work with a group of people with a great vision. As you will hear from my guests today on the podcast, the ag-tech ecosystem was just beginning during that time. There were very few startups and the culture of entrepreneurism was just beginning. That's why it's so exciting to witness the growth there now.

Vonnie Estes:
When I was planning this episode, I wanted to get people I knew together and have a party. Well, this is the closest thing. We will hear from leaders in the ag-tech industry in Brazil about the development of the ecosystem, how Brazil is able to leapfrog technologies and in some cases go from notebook to the cloud, bypassing all the steps in between. Also, we will hear how using technology in fintech is making a big difference to farmers in Brazil. This is a crowded episode because I wanted to get the opportunity to catch up with so many people. I may have to do some more episodes on Brazil. We will start with Francisco Jardim, general partner of the SP Ventures in Brazil. Francisco gives an animated background on the growth of the industry and Brazil's strength. Let's drop in to the conversation with Francisco.

Francisco Jardim:
How difficult it is in Latin America for entrepreneurs and even medium-sized businesses to raise capital and to fund their operations, no? And when I looked at what pillars of the economy here, the capital markets were missing entrepreneur finance, capital that came with risk appetite for entrepreneurial activity that brought a value-add in terms of intelligence and governance. All these things were clearly something that mature economies such as American economy had, and we saw that our entrepreneurs who didn't.

Francisco Jardim:
So, we decided to start the business back in 2007. The business SP ventures, a venture capital firm, focused in Latin America tech in early stage companies. We had no ag-tech focus at the time. So we really went out generalists, openhearted, to look at the best opportunities, the best verticals, to be able to invest in tech in the region. We raised the very first fund back in 2007 and we went out thinking that we would be investing in software, e-commerce, AI, all these things. And 50% of our portfolio, the first fund that we invested was an ag. We did IT, biotech, livestock, entomology widespread range of sectors within the ag space. And during those first years, we received a barrage of ag entrepreneurs and we started to devour a lot of reports on where ag was going and what was going to happen to the global food production system.

Francisco Jardim:
And that's really when we started to gradually one day at a time, and this was a process that took many years, fit the puzzle and really take a step back a couple of years later and look and say, "Wow, what an opportunity it is to be investing in ag-tech in Latin America." And the team, myself included, we read during those early days, Peter Thiel's book, Zero to One where he explores the contrarian truth concept. And we just could not get around saying, "Wow, if there's ever going to be a contrarian truth, something that we're fundamentally convinced and sure, and we think it's a no brainer in which the rest of the market disagrees and thinks we're crazy for believing in, it's going to be ag-tech investing." The fundamentals are there. Nobody believes in the thesis. So let's bet and jump face first in this. And that's exactly what we did.

Vonnie Estes:
So how did ag-tech come to the surface? Given that you were looking at all these different markets, and looking more at tech. Did some of your team have an ag background? Or did ag-tech entrepreneurs find you? Or how did it raise to the surface of what you invested in?

Francisco Jardim:
That's one of the things I think it's most beautiful. We're pretty much no ag background, right? So we were really looking off an open heart. I mean, the team didn't have deep operational expertise in any of the major tech industries, let's say in health tech, in ag-tech. In the IT, the internet, so we're looking pretty much from a blank slate. And when we started looking at the fundamentals, there's one thing that I think is critical. When we look at ag and we look at markets like the US and Australia, it's usually not very representative from the GDP perspective and from population perspective. Meanwhile, in Brazil specifically, ag is 23, 24% of our GDP. In Australia, it's up at around 3%. So even in an economy that is strong in ag, it's still not as overweight. And here ag is very overweight and very representative of everyday life. That's one point.

Francisco Jardim:
The second point is when we looked at the sectors where we had global presence, and we were competitive globally. I mean, we can find companies here in Brazil, like Embraer, that will be very competitive in the aerospace sector. But it's tough to say that Brazil as a whole has a vocation is competitive in the aerospace sector. But when we look at ag, it's the direct opposite. We are a market leader, a global leader in pretty much most of agriculture commodities. By leader, I mean top three, right. Either leader, runner-up or third, but we're on the growth state.

Francisco Jardim:
So I mean, we lead in soybeans, we lead in cotton, we lead in cacao, we lead in coffee, we lead in several verticals of the animal protein value chain, such as beef, poultry. We've been growing in swine. So we are a powerhouse. And not only a powerhouse in production, but also in market development. I mean, we have strong market share in China and Asia. We have a strong market share in Eastern Europe. So we've developed a lot of markets. So when we look at the ag story from where we're coming from, it's very difficult to be ignoring it. So I think that that was one point.

Francisco Jardim:
The second point is when we look, and this is a story that I think as a success version is very common in places like the US and Israel and these other places. But when you look at a country like Brazil, you really have to dig deep to be able to find a success story like ag, and what does a success story mean? In 1976, Brazil was a net importer of food. So we were very different stage. And then through deep tech investment, doing a lot of R&D with Embrapa, with University of Ag in Sao Paulo, developing technologies that would allow us to go to the center west of the country and prepare soil and create agronomical methods such as the Santa Fe method, such as the integration between forestry, grains and livestock and several of these other methodologies allowed us to conquer our savanna which we call our cerrado and transformed a huge region, our Midwest, into a huge breadbasket.

Francisco Jardim:
So and then of course, what enabled this besides R&D was the entrepreneurial activity of small farmers and very risk-propense farmers that left the south of Brazil and went with nothing except a little bit of capital they managed to raise selling their houses and their smaller farms and bought cheap land in this region. And then seeded, planted, harvested, went bankrupt several times, continued to plant and to believe in the development of the region. And after many, many years they built these huge success stories. Success stories like the Mahji family and the Logman family and these other ones where they built literally empires of hundreds of hundreds of thousands of Hectares being farmed. Right.

Francisco Jardim:
So it's an entrepreneurial activity with entrepreneurship, a lot of technology and a lot of risk-propense appetite, which reminds us of very well developed ecosystems like Silicon Valley. So when we started to discover this back in 2007, 8, 9, 10 when we're starting the company, I think this caught our attention.

Francisco Jardim:
Another thing that caught our attention, Vonnie was in a region like Brazil, and I think this is valid for Argentina, for most emerging markets. When you look at a sector that does not depend on the government. And you look at a sector that is pretty resilient to external and internal domestic economic shocks of political instability, it also gets a lot of points. And when we look at ag, even before 2020, we always show investors the peak crisis years. Years when Brazilian GDP fell 3%, 4%, 5%, 6% and we show how ag continued to grow very healthily, even in those years, right.

Francisco Jardim:
So the fact that it's denominated in hard currency, in dollars, because of the fact that food specifically but also fuel is at the bottom of the Maslow hierarchy of needs. So it's a very inelastic demand. And because of the power that the ag economy has developed from a lobby perspective, and also from a private sector perspective, it's become a very resilient value chain. So even when the countries perform very poorly, the sector tends to go well. So the story was eye catching. The resiliency and the defensiveness considering the sector also impressed us.

Francisco Jardim:
And then the last factor that really impressed us Vonnie was, besides all these things, which would be normally associated with a very safe and secure investment, the growth opportunity in ag in the region was fantastic. So when we looked at the projections of the possibility that the plan here was going to consume 60% to 80% more food in the next 30 to 40 years. And we saw where this was going to come to, in terms of who was going to take up the most of this demand. Of course, from the various geographies that could benefit from this. But when we look at Brazil, and the greater tropical agriculture surrounding us here, I mean, we're very comfortable that we can bite 40, maybe even more percent of this delta, this incremental leap that we're going to have in food demand.

Francisco Jardim:
So there's also a growth aspect. So it's a big growth opportunity. It's a defensive opportunity. And it's a very unique success story in our region. I would say these were the general concepts that caught our eye. We had been studying for many years already also the carbon markets. We we're betting that the carbon markets were going to take off in 2008, 2007. At the end of the 2008 crisis, I think it took a step back. But we had already been introduced to the science behind climate change. And we did expect climate change to become a reality in terms of increasing the risk profile of farming globally. Raining more where it's not supposed, to less where it's supposed to, and simply transforming the business of food production to a risk your business, which is more dependent on technology for risk management.

Vonnie Estes:
So do you expect that you'll be investing in some carbon and climate mitigation and carbon strategies? Is that an area do you think Brazil is going to get strong there?

Francisco Jardim:
For sure. I mean, I think that the correct pressure that is being applied to Brazil from investors globally, and I say correct, because I think it's not only very effective, I think it's already giving results. We're seeing not only deal flow in the sector, very interesting companies coming up with carbon models. But besides that, we're seeing technologies that we've invested in the past that are starting to get the wind in its favor because of the carbon markets.

Francisco Jardim:
I'll give you a very good example. We invested in a spinoff from Embrapa a couple of years ago in the soil analysis or testing business. And the original investment thesis that we had was that through chemometrics, which is data science applied with chemistry, and innovations in spectroscopy, we're going to be able to do remote soil sampling much cheaper than the traditional model of having to collect samples, put them in the mail, send them to a laboratory 400, 500 kilometers away, use chemicals to be able to do the formulations and then have to wait a couple of days to get the results and then you have these leftovers that are dangerous chemicals. So I mean that whole process which is expensive, slow, difficult to do is what's holding back a lot of the soil sampling that would enable precision agriculture in terms of variable rate applicants of fertilizers.

Francisco Jardim:
So the investment in that company was very much base that we would be able to have a much cheaper, easy to use technology that would democratize access to variable rate fertilizer application. That was the thesis that we backed. What we realized was, over the past two years, the entrepreneurs have really been very successful in doing this is that they discovered that what their technology really has a mega-power and is unique globally is that it's probably the cheapest soil sampling technology in the world for testing carbon, right?

Francisco Jardim:
So we all of a sudden have a huge new market for this company. And they partnered up with Bayer, about a few months ago. And I don't know if you remember, but Bayer ran a test or a pilot here in Brazil with 500 farmers, where they started using carbons as a potential way for these farmers to finance their farming activities with Bayer, right. And Bayer tested a few very sophisticated technologies, one of them was these guys. And the results have been very impressive. So we're seeing not only business models that are coming natively focusing on carbon nowadays. But we're also seeing business models that were originally focused on soil sampling, on water efficiency, on optimization of farm equipment, use all these things. They discovered, "Wow, we can monetize this in another way, which are these carbon markets." So it's transforming the business models of existing technologies. And I think it's very exciting.

Vonnie Estes:
Yeah, that is exciting. And it's great to see that coming from Brazil. I think a lot of the things that we're seeing that you're doing is kind of leapfrogging maybe what we're doing here that... We've got kind of entrenched ways of doing things and things that slow down progress. But I think Brazil is able to leapfrog some of the things that we have in place and bring new technologies to market with these new business models faster.

Francisco Jardim:
You're 100%, right. And I think for you to leapfrog and to really create a business that leapfrogs, there are a few things that you need to have in place. One is you need to have these holes in the business value chain, right? Which we have. Another one is you need to have technology, let's say, disruption or rapid adoption. That's another point. And if you look at places where you had these things going on over the past, you need to have a very large addressable market. So you need to have big enough to be able to recreate this infrastructure. If you look at places where this has happened, let's get China for example, where they had all the core factors that we're looking at, when we look at Brazil ag-tech. They had a barrier to entry. So the government blocked the major technology giants from abroad.

Francisco Jardim:
Brazil is not blocking companies from abroad, but because we're a tropical agriculture ecosystem, and we're seeing all these technologies that were developed for mature temperate agriculture, we do have a natural barrier to entry. It's much more difficult for you to scale a company in the US and then bring it here in the ag space going into Mato Grosso. So we have a natural barrier to entry. We have a very large addressable market, probably a top three ag market, when we look at the size of the hectares being farmed, and the growth. So that's also super important. And three, we have all these holes in the value chain. And I'll tell you, maybe two or three.

Francisco Jardim:
One of these is we don't have a rooted financial services industry for ag. So we have a weak penetration, small penetration of ag insurance, we have a small penetration of ag credits, and even that ag credit, it's divided between barter from industries, subsidized loans from the government. And we don't think the industries want to continue to finance farmers through barter programs, I think they do it to enable sales, that's one.

Francisco Jardim:
Second, the government was already intent on reducing its size in the ag credit sector, because their balance sheet is taken and they ended up crowding out private markets, private credit. And now with COVID, the balance sheet of the government exploded, so they're being forced to do quicker what was going to be done. So, I mean, you have this perfect environment for you to create these leapfrogging businesses, which we hope will create businesses similar to what the Chinese created in their leapfrog activity, which as we know, you have Tencent, you have Alibaba, you have Baidu and then you have the entire new generation. Companies that really innovated in using technology and business model experimentation. And we're seeing this I mean, I meant I mentioned SPEC Labs, SPEC saga which is our abrupt spin off in the soil sector.

Francisco Jardim:
But we also have companies like Aegro, which is a leader here in the farmer management system in Brazil. It's probably one of the most efficient companies in the world in the ag space in terms of using digital marketing for customer acquisition, customer onboarding and customer retention. And then when we see this company operating we say, "Well, why are we just an FMS selling software to small and medium farmers? If we have the farmer, we have is data, we have access to all that he's transitioning. The data belongs to the farmers. Why can't we be more efficient than a bank or an insurance company in assessing and distributing financial services to this farmer?" And those are the things and I hope that we can create something similar to what Jack Ma created and Alibaba with Ant Financial and we can move to create and Ant Financials in the ag space in Brazil, distributing and democratizing the access to financial services and products.

Vonnie Estes:
Yeah, I think that's really an exciting piece in this podcast. I also talked to Mariana and she talked a little bit about what they're doing. And I hadn't realized she'd gotten into kind of the financing space as well. But it sounds like that's a really important part of making the whole ecosystem work and allowing farmers to adopt technology and allowing them to try different things. What do you see are some of the barriers of producers adopting technology and having technology really work there?

Francisco Jardim:
Yeah, and even a step before moving on to the barriers Vonnie, you mentioned Mariana from Agra Smart. It's an interesting point, because it's one thing for me to come here and say these things are happening. It's another thing when Bradesco, Brazil's second largest private bank, anchors the series A and moves to finance Mariana at her company or when BTG, the Latin America's leading investment bank anchors around on Agra now and other portfolio company. And then we've been seeing large financial service institutions in the region not only doing venture deals behind these leading ag-tech companies in the ecosystem, already betting that this will be the future of financial services for the ag economy, but we also see acquisitions happening. So we have the largest bank and broker in the new discount broker model, XP acquiring an ag fintech company, do aggro early last year. We saw Banco Santander acquiring an ag fintech company in June when they acquired Cheetah.

Francisco Jardim:
So we've been seeing a lot of them in activity from financial services players buying ag-tech companies in the region, always thinking that this will be a way to drastically reduce their transaction costs in act so they'll make it cheaper for them to source farmers' price. The risk of those farmers structured the credit, so structure the collateral, all from a digital perspective. And last but not least monitor those collaterals once they've done it all. So instead of sending physical teams to be able to go to the farm and inspect if he really planted what he said he was going to plant and how the plants are growing, to be able to do that remotely in a much cheaper, less fraud-prone and assertive fashion. So I think it's really something that's under the right direction.

Francisco Jardim:
Concerning the biggest bottlenecks for tech adoption. I mean, I get that question from investors all the time. So Brazil had never had a unicorn until 2018. Since 2018, till today, we've had maybe 12 unicorns. It's huge. And of these 11 or 12 unicorns, let's say seven or eight are in the fintech space in payments and credits across the board. And then you have three or four that are in consumer tech, such as last mile delivery and some of these other opportunities. And then they always ask, "Well, why don't we have any ag?" I mean, ag is very representative, it's a huge part of our economy. We know that it's very lacking in certain technology. So why haven't we been able to build an ag unicorn so far? And the answer is exactly bottlenecks behind the industry that have made it progress and mature a little bit slower than consumer tech. I would say the biggest bottleneck was connectivity. For you to build any exponential business you need connectivity infrastructure, to be able to collect data, to be able to process data and give that data back and serve clients in an efficient, scalable manner.

Francisco Jardim:
So I think connectivity has been a very big pain point. And then with connectivity, comes a lot of other things, which is digital literacy, with farmers being very well versed in contracting a loan, in contracting insurance, in selling their goods and services. And then I think this has been probably one of the biggest bottlenecks. But besides the connectivity, I do think it's also a little bit more... It's a little bit slower for you to develop, launch and scale a product in ag even if the connectivity is there. Because farmers, they have this very strong seasonality culture here in Brazil, at least where they have the months of the year when they're looking for technology for seeding, planting, crop protection, a harvest. So you don't have a 12 months a year of window to be able to sell the same product, the same technology, even in Brazil when it's a continental farming country where you have different seasons and different crops, and then you can end up being busy all year long.

Francisco Jardim:
Still, each specific segment buys during a time of the year. So you have to be able to do proof of concepts. You have to spend a lot of time showing the farmers that technology works, and then increase the area that he's acquiring that technology for every single year. But it takes a few harvests for you to get 100% rollout. So, I mean, these are some of the bottlenecks that I think it just makes ag a few years behind and a little bit slower on the tech adoption curve than traditional consumer technology. But at the same time, I think it's slower, but it's sure. It's definitely more constant than more directed.

Vonnie Estes:
Yeah, I think that those things are all true here as well. In North America, I think we have the same types of of issues. Well, thank you very much for your time. I really appreciate it. There's so many other directions we could have gone. But I really appreciate hearing about what's going on. I really miss traveling to Brazil. So it's great just to talk to you and at least pretend I could actually be there. But next year, maybe.

Francisco Jardim:
It was an honor to have you here. Recently when you came, visited us and hope you can come back ASAP and we can hopefully straighten our ties.

Vonnie Estes:
Next, we will hear from one of Francisco's portfolio companies. Mariana Vasconcelos, founder of Agra Smart. She is bringing digital ag to developing countries and is adding product features to serve growers as fast as they are needed.

Vonnie Estes:
So tell me about yourself and your company.

Mariana Vasconcelos:
Well, so I'm 29 years old, I come from the south of Minas Gerais. A countryside resident state that is very known for being a farming region, especially in coffee and other crops. And I started this company AgroSmart because I really wanted to help farmers to make better decisions, and therefore become more resilient and make their business more profitable. And in Agra Smart, what we do is we are a digital transformation platform, where we use sensors and satellite imagery in order to monitor farms, and help farmers to make better decisions like how much to irrigate. We have the most precise weather forecasting in Brazil to help their planning their operations where we can forecast with ease. But we also support the whole supply chain not only the farmers themselves, but from the input companies, food industries and banks and insurers.

Vonnie Estes:
Great. So you have a lot of different kinds of clients. You have farmers, you have input and corporate clients. And so what do you offer each and what kind of services do you give to these different kinds of clients?

Mariana Vasconcelos:
Okay, so starting from the farms. We follow their digital transformation journey. So the first step collecting data, right? It is still in emerging countries, especially like Latin America, when activities in issue like having data collected automatically is still an issue. So we provide certain sensors and a connectivity solution to allow us to read weather stations, rain gauges, soil sensors and so on. And combine that with the imagery so they can buy a monitoring package. And then on top of that, we sell insights such as irrigation management, the disease forecasting model, the weather forecasting model, alerts and so on.

Mariana Vasconcelos:
And to the corporation's it differs from each one. We generate collective knowledge out of the farmers, so we can support the supply chain. So for example, we have input companies testing new seeds. They want to understand how seeds performs in different microclimate and which one would be the best feed for drought, for example. So we help them to monitor their research sites, and come up with more efficient protocols for the usage of their products. And therefore we many times create digital offers together.

Mariana Vasconcelos:
On the other side of the supply chain. We work with the food companies like Nestle, Carfil, Coca cola, AvianBag that are sourcing from smallholder farms to their industry and their main concern is about climate resilience and sustainability. So we monitor these small farms, but we generate to them reports on their water footprint impact on carbon footprints. We help them to allocate their labor and agronomists in order to understand which farmers need more attention up to long-term planning of that supply chain. Or I guess, "Climate is changing. When and where should I source this product from," or for example, "We are building a barley disease model. So how do I understand the risk of disease, and therefore I can predict price variations." And of course, that comes with the traceability to tell the consumers.

Mariana Vasconcelos:
And last with the financial sector that send data, supports risk evaluation. And by understanding better the risk we can price better financial products. So for example, we did a partnership with a Bradesco in Brazil to distribute the digitally, credit. And that credit has more competitive fees than going directly to the bank. Because we understand that farmers that have data and more informed, they have less risk. And also creating new financial products in terms of insurance and so on. So it's more accessible for the farmers.

Vonnie Estes:
Oh, wow. I didn't know you were doing that. Is that new, going into kind of the financial services part of it?

Mariana Vasconcelos:
Yes, we were interested by the corporate ventures arm of the Bradesco bank in 2019. So it's the last few years where we started working on it, and we see growing a lot our interactions with the food chain, and the banks and insurance, as we think everything is connected with the new regulations of the carbon markets, and green balance and so on, and how sustainable practice in the farm will communicate with financial instruments.

Vonnie Estes:
Which is really needed everywhere. But in Brazil and Latin America, that's going to be a really great service for all your different customers. Yeah. So what crops do you work in across... in all the different types of markets, but what are the types of crops you work in?

Mariana Vasconcelos:
Well, we today work with more than 30 crops. And on the PMA, like interest, I would say we would have orange, watermelon, melon, lemons, garlic, any kinds of vegetables. We have a platform because Brazil is huge and we work with so many crops at the same time. And we have so many different microclimates, that we built a generic platform that actually can support any size of the farmers, any microclimate and almost any crop. So independently, if we already work or not with the crop, it's very easy to create the parameters to support any new crop into the platform.

Vonnie Estes:
Ah, okay. And how do you deal with connectivity issues? I've spent quite a bit of time in Brazil and I know there's lots of places where I don't get cellphone service. So, how do your products work in areas where there's not connectivity?

Mariana Vasconcelos:
Yeah. Last week, there was a report that said that 76% of Brazilian farmers did not have connectivity. So that's a big challenge for accessing... and not necessarily sometimes they don't have at all, but in the majority of the cases it doesn't reach the field themselves. And the way we work with, right in the beginning, I come from a region in Brazil that's where the telecom industry was born. So we have a lot of connections there and some of my co-founders have expertise in telco and hardware in general. So we create our own mesh network using radio frequency, where we would get long range communication between sensors like up to 15 kilometers. Then we would carry the data until we find a point of connectivity.

Mariana Vasconcelos:
But today, besides that we work with Sigfox, with Narrowband IoT, with satellite communication, whatever is more convenient. We provide a service to the farmer and the connectivity is our problem. So we just make sure that the data arrives, and we have this modular hardware, but we will choose what is most convenient to each region and therefore cheaper as well.

Vonnie Estes:
Oh, that's great. So that it becomes your issue to solve, not their issue. 

Mariana Vasconcelos:
Yeah, exactly. And we gained a lot of expertise, with more than six years now. Collecting real time data everywhere in Latin America.

Vonnie Estes:
Yeah. So what other geographies are you active then?

Mariana Vasconcelos:
We're mostly focused in Latin America. We do have projects in the US. We have some projects in Israel, for example, but they're more oriented to research or to corporates. The majority of the farms, they are in Latin America, like Brazil, Argentina, Paraguay, Colombia, Peru, Guatemala, Costa Rica. We have more than nine countries in total where we are operating with projects.

Vonnie Estes:
Wow. And how do you do that? How do you staff that you can go across so many different countries?

Mariana Vasconcelos:
We made partnerships, important partnerships for a while like for distribution agreements and so on. And those partners help us get into the countries and we just started having our first employees outside Brazil in Paraguay and in Argentina.

Vonnie Estes:
So in the work that you do, how much do you think about sustainability and climate change mitigation as part of your main reason for being and how can your products help with those issues?

Mariana Vasconcelos:
All the time. I think we in fact business and we were born focusing on how we could support farmers and climate resilience was there since the beginning, because when we started, there was a huge drought in Brazil. And Brazil is so abundant in water that it was a surprise. So we have always been there. We address the different Sustainable Development Goals. We are highly engaged and impact community like in the World Economic Forum. We recently joined the Natural Climate Solutions Alliance. We are also a member of the UN Global Compact. So we really dedicate our work on how technology is an enabler for a more sustainable and productive agriculture.

Mariana Vasconcelos:
So it's literally at the core. And the reason why we support is by having the data and especially climatic data, it's so important to coordinating the operations. And when farmers do inform the decisions, they are able to reduce water, they're able to reduce inputs, usage, energy fees, and so on and increase yield at the same time. There's a direct savings and reductions that is natural. That's what happens when you go to the historic culture. But we literally focus on that. And we took it to another level in this whole climate resilient issue, especially engaging these small holder farms. So we created this framework with the companies, with the corporations to be able to make this solution available for the small holders. We've got lots of farmers in regions that are under stress. And by having the data and supporting their insight, we help them to adapt.

Vonnie Estes:
Great, that's really fantastic. So stepping back a little bit, how have you seen ag-tech develop and grow in Brazil? And what's the ecosystem like there? And how do you see it going forward?

Mariana Vasconcelos:
It grew so much. When we started, you have outtakes of the younger generation, the older generation, let's say like that, like Sodin, Fitech, and now you've got Agrotools. They are ready as technology companies for the art, but in the new art, and we and Trigger kind of started in the same time. And it seemed like there was only us, and we were literally trying to understand what was going on and educating the market was so complicated. And then suddenly it became a boon. And especially in Brazil where our agriculture is so representative within our economy, that everyone saw it as an opportunity, right? We can provide value. We can aggregate value. We also produce technology here. So we can scale just as we did with agriculture in general.

Mariana Vasconcelos:
So we saw it growing a lot, and the ecosystem got more mature. There was no ecosystem. Now you have many hubs such as the Ag Tech Valley in Piracicabas, in Cuiaba you have the AgriHub. Londrina in Parana you also have another ecosystem. So it's growing and becoming something unique. And capital is also coming, little by little. It's not the same as in the US but still. It is still a taboo for many investors to look into agriculture. But it's growing. So I'm very excited for it. And I think there is great opportunity for consolidating our region and to reach agriculture  around the globe. I think there is no more space for farmers to stay out of that movement.

Vonnie Estes:
And is most of the capital coming from within Brazil or people from outside of Brazil coming in and investing? Or both?

Mariana Vasconcelos:
Both I would say. In the beginning, more inside Brazil. One of our early investors was SP ventures, Fransisco. They are one of the main ag-tech investors in the world and for sure the largest in Latin America. And for a long time, it was only them. And now we see more appetite. We have, for example, two corporate ventures, from Bradesco as I mentioned, from Positivo that are industries that somehow interact with agribusiness. We have a family office and then some from the US and some other a small firms there that also are in the agriculture industry and looking into Latin America as an opportunity to expand their business.

Vonnie Estes:
Yeah, it's so exciting because agriculture is so important to Brazil, both for food that you export but especially around produce. There's so much that you grow for yourselves just because you guys eat a lot of fruit and vegetables, which is wonderful. So it's wonderful to see the technology be developed there. And then some of the technology that's being developed there being deployed in other parts of the world, instead of the other way around. So it's great to see that movement happening in Brazil.

Mariana Vasconcelos:
Yes, and I think it supports a movement that will help we've produced. That it's like it's commoditization, right? How we can aggregate value to the consumer in the end and then I think technology will play a role in developing the produce industry in Latin America as well.

Vonnie Estes:
Next up is José Tomé, CEO of AgTech Garage, one of the most important ag innovation hubs in the world. Tomé and I have known each other for years since he was at CTC and it's wonderful to watch him build this hub. Let's drop into the conversation.

Vonnie Estes:
Tell me about yourself and AgTech Garage.

José Tomé:
Thank you. I'm José Tomé. The people call me Tomé. I'm the co-founder and CEO of AgTech Garage. I'm a chemical engineer. I have been working with R&D and innovation since 2008 but since 2011, more foots on open innovation and entrepreneurship and everything about the innovation ecosystem. And I was the co-founder of AgTech Garage in 2017, two years ago. We're very excited about the results. Our network with partners and the startups are growing fast. And the results about the interaction between these actors is very interesting.

Vonnie Estes:
That's great. And you actually have a facility where you have people in that I got to visit last year. That's quite an exciting place.

José Tomé:
Yeah, we have the hub, the physical place. But also, we are working a lot in a virtual mode, to connect everyone around Brazil.

Vonnie Estes:
So what do you see are the barriers for ag-tech and technology adoption in Latin America?

José Tomé:
Sure, it's a good question. And I can say that, in general, we are following the natural adoption curve. Always when we talk about new technology, we face the challenge to accelerate the adoption curve, and not only in the agricultural space, the people need to learn how to use different tools and advice. But if we can point to all three aspects, very specifically in ag, we can say about things about connectivity, and also distribution for entrepreneurs, how they can escape, how they can support the solutions, it's because in Brazil, specifically, large, large areas.

José Tomé:
But also we need to consider who is our target. We are talking about the small farmers, large farmers. In Brazil we have large farmers. I think that when you talk about this profile, another point is how they can manage the innovation process. I think that we can accelerate the adoption curve if these guys start to manage the innovation process, because if they just test one, two technologies in a year, it's not enough. But if we can have the team, have the process to test to validate the new technology and start to test five, eight, ten new technologies in a year, you will accelerate the process. Then I think that we start to see a lot of farmers come to the hub and start to pay attention in how they can manage the innovation process. It's pretty new, because some of them finish the... how they can manage the financial aspects in the best practice. And now they start thinking about managed innovation.

Vonnie Estes:
I've seen in the states anyway, sometimes there's just not people on the farm that understand how to use the technology. So are they learning themselves? Are they hiring consultants? Or how do they manage bringing innovation onto their farm?

José Tomé:
It's very interesting. They're starting to build the specific teams to manage innovation. Some of them are using consultants to start the process and establish this culture in the organization. And after that, they connect in the hub like us and sometimes they ask us if we prefer some people inside the team or will we hire from outside to manage this process. And we can say that most of them are using internal team, internal people with new activities and fictions.

Vonnie Estes:
Great. So what different types of technology have you seen developed in Brazil? And specifically around the hub, what kind of technologies are you working on? And what are new technologies coming up?

José Tomé:
Yeah, a lot of new technologies. Nowadays, we have more than 1600 startups connected with the hook. But I would like to highlight robots, for example. A lot of partners come and say, "I need some robot solutions." It's growing very fast. Also fintechs use new business model based on new technologies to monitor using satellites. And also credits, different ways and more specifically, using the risk and monitoring fintechs are also growing a lot. And of course, that some aspects you related with sustainability also, traceability also. I think that's the top three highlights about new technologies that we're starting to see in the world.

Vonnie Estes:
Interesting. On traceability, is that all the way through the food chain? Is that mostly on the farm or are you seeing technology after the product leaves the farm that's helping with traceability.

José Tomé:
It is. Yeah, you start to see solutions to monitor and track all the evolution, from the production into the trade market.

Vonnie Estes:
So tell me about the ag-tech ecosystem. When I spent time in Brazil, eight years ago, there wasn't much of an ecosystem and now because of people like you, there's such a great ecosystem. So how has it grown? And where did it start? And where is it now?

José Tomé:
Yes, we are very excited because the ecosystem is growing and growing a lot. It's very new for a lot of people. But just to have an idea, our network with partners, we doubled in one year. We also doubled the network with startups. Nowadays, we have 440 corporate partners, leaders in their segments. Also, more than 600 startups connected. One year ago, it was just half of these numbers. We will also start to promote a lot of innovation challenges for the community. It's become a practice and it also attracts new entrepreneurs. Entrepreneurs that have succeeded in other sectors. They start the second journey in ag and choose ag as the sector of choice to build the new solutions, a new startup. It's very interesting. And also the researchers in the academy also start to use lean, startups' concept and also more able to be partners with the corporates. And one and another connecting and both the ecosystems are growing very fast.

Vonnie Estes:
And with corporates are you working with companies mostly in Brazil or also corporations outside of Brazil?

José Tomé:
Yeah. Nowadays we are starting to become more connected globally. Our inclusive connections for example, is an important program. It's the first addition now that it's Latin. Then we start to be more driven to connect outside. Some problems with Singapore and other countries. Yeah, it's a start. We are in the infancy learning how to connect cyber geo, practice the business model and partnership with the startups. And I think that the next level will be connecting Latin and abroad.

José Tomé:
Last year, we launched the version of our digital community for startups on our platform in English. Also thinking about connecting outside. Nowadays we have some startups, one from Australia, one from Xavier, two or three from USA. We're starting to have some startups here in our hub as the residents. It's very interesting.

Vonnie Estes:
That is interesting.

Vonnie Estes:
I wanted to get a view on technology that starts in Brazil and expands out. Mario Portela is a partner at Circulars Partners, an investment firm focused on supporting technology enabled companies that advance the circular economy, promote sustainability and enhance resource efficiency. Circulars invests globally with offices in Brazil. Mario and I worked on at least three different projects together on second gen fuels and chemicals, and it was great to catch up with him here. You will hear him mention one of his portfolio companies Solinftec, a digital ag company, and how that company has expanded from Brazil to the US. Let's jump into the conversation where Mario talks about the ag-tech ecosystem in Brazil.

Mario Portela:
We found early on entrepreneurs and the dynamic ecosystem over the last decade, both in entrepreneurs as well as venture funds, and the willingness to adopt new technology, which is typically a resistance. Everybody says that farmers don't like to adopt technology. That's really not true. It's no different from any other industry where you have the early adopters, you just have to show ROI. And of course, you have the seasons. And if you don't make it this season, you have to wait for the next season. But we have by and large been able to find a good group of people to invest with. We found amazing founders and entrepreneurs.

Vonnie Estes:
Mario talks more about the arbitrage opportunity between Brazil and the US.

Mario Portela:
So we've been kind of confirming this investment thesis that there's a significant arbitrage to actually bring entrepreneurs and technologies that have been proven and developed in South America, in Brazil in particular, to the US.

Vonnie Estes:
Yeah, that's what we were talking about before we started recording is that yours and my experience before has always been, "Let's develop this technology in the US and then bring it to Brazil and try to-

Mario Portela:
I think it works there. See how people adapt it.

Vonnie Estes:
Yeah, and done by people who don't understand the culture, don't understand the growing conditions and it's exciting to see. And I think my time there, more 10 years ago, there was less entrepreneurs, there was less capital, there was less of that going on. How have you seen that grown over the time you've been investing in the last decade or so?

Mario Portela:
It has surprised us favorably because it has grown even faster than we had anticipated. The number of startups in 2017 in ag-tech was I think in the three hundreds. It's over a thousand today. The quality and what they are doing, whether it is the opportunities in logistics, in inputs, in digital, in marketplaces, traceability. They have started some sort of a carbon management recovery reaction program, which is RenovaBio, that has been in the design phase and testing for a while. And last year was the first time they actually put it to work. So, we have seen the number of funds that are now dedicated to South America, and the amount of money raised, the quality and number of the deals being done... and has become a vibrant ecosystem, even in a shorter period of time than we had anticipated.

Vonnie Estes:
So what do you attribute that to? Is that just kind of a momentum of more money means more companies means more success or how do you think that got going?

Mario Portela:
That is an interesting question. And I think Brazil has a very high quality education. People actually spend a lot of time in different parts of the world, also for their education. There is a huge influence from the US. There is a significant influence from Europe. But for example, Europe still lags behind in our view when it comes to early stage investing, and it's certain in the sector in particular. Whereas, for example, there is more of a comparison with China. With the advent in China of the big tech firms and a lot of universities and a government-sponsored, digital revolution. This has created a lot of startups and ecosystems and hubs where you have incubators, angel investors, strategics wanting to come in, et cetera, which all of these ends up generating the flywheel because it takes time.

Mario Portela:
The interesting thing in Brazil is this is happening in spite of the government, because there is no government policy to encourage these things. It's much more the entire kind of desire of the economic and social fabric to make things happen. And it's been very interesting to see a lot of these startups beginning to actually have visibility for huge IPOs. They have attracted a lot of talent, even from the outside. It's common for us to actually see not just Brazilians, but for example, Solistec is a group of Cubans that went to Brazil. You have a lot of Argentinians that are brilliant in very strong education. But Argentina is a much tougher environment to make things happen because of the issues that the country has been going through. But I think more and more-

Vonnie Estes:
Brazil is actually drawing people then. 

Mario Portela:
Yes. Brazil is drawing people from all of these. And we see very often in these early stage companies and founders, either Brazilians that were educated elsewhere, Brazilians that grew up in Brazil, but a lot of other foreigners, Europeans, Americans that have come to... which is a sign of vitality. Yeah.

Vonnie Estes:
Yeah. Interesting. Well, is there any other point you think we should know about your experience of investing in Brazil? And what things are like?

Mario Portela:
Yes, I mean, in general our experience is that offshoring, just kind of going there and finding a few places, and putting money to work if you don't have a local presence, is not a recipe for success. We have our partner, Ruh Calieh, that has been based there. For years, we have had a very strong network of investors and new relationships, whether it is with the strategics, with the ecosystem, making a huge difference.

Mario Portela:
It's very important to be there on the ground, to be able to kind of put the work and nurture and support these entrepreneurs. And it's also important to be able to have the perspective of looking beyond Brazil, so that you can also understand and bring the best of breeds from other geographies. But to be able to chart the path as we've done with Solinftec, and we've done with other companies in other sectors. To bring them to North America, and create that arbitrage. The opportunity in North America for Solinftec, for example as a digital, ag, real time, online company is much bigger in the US. But they have a very strong foundation in South America from which to go, but a lot of things to adapt to when they come to the US, in kind of a much more different structure of how the market is established in terms of the size of the farms, the growers needs, the infrastructure that exists today in terms of connectivity, the channel, all of those things. Whether it is for large acreage crops or perennials or different types of crops.

Vonnie Estes:
So, when they do that. When companies come to North America, does the management team move to the US and set up an office or do they hire people in the US and they stay in Brazil? Like how did they make that happen?

Mario Portela:
That's an excellent question. We've spent so much time trying to figure this out. Of course there is no real recipe for it. Each company has its own characteristics. But I can give you the recent examples of the companies, including Solinftec that we've gone through. We've debated, "Do we go to Silicon Valley and be closer to where the action is-

Vonnie Estes:
Well, some sort of action.

Mario Portela:
... or do we go closer to the customer? Like in Midwest. Or do we go to Indiana, and tie ourselves to a university like Purdue that has an amazing ag school and engineering school." And this is actually a very good ecosystem for us to hire people, to partner with universities and to partner with kind of all of the actors already in place to deploy your solutions and you learn and adapt your products.

Mario Portela:
Fast forward two years into this now, the biggest part of product development that exists in Solinftec is the solution needs that are much more cloud-based in North America, that feeds all of this product development back to Brazil, which is where we have the R&D again. And we thought we hire a US team, we hire a head of North America, we hire locals. But we ended up with issues of, "If we do, it's much more challenging to have that adapt well with the culture of the company, and the pace at which, and how you get things done."

Mario Portela:
So we chose to send a scout team in the beginning, who understand the market, understand the needs, and with the idea that it's always the marketplace that is going to tell you what the need is. You can bring the best technology, you can say you have all of this ARR that you have in other countries. In many respects, it doesn't mean anything. What is important is when you come to the market, to spend the time to understand where the needs are. And where you see the opportunity to make a difference in terms of providing a service or a value or ROI.

Mario Portela:
Because many times it's not what you thought, it is the marketplace that is going to tell you. That's why you need to do so much testing, and proof of concepts. And in the US, it ended up being 60% of farmland is covered by co-ops and the co-ops were in dire need of getting more efficient and they were very receptive to the technology as long as you could show that you could develop their solutions. That they can implement. That they're going to deliver ROI now, not in the future. But in this season. And that has been a huge success. But it started with bringing a team of people that understand very well the technology and have the ability to read what the market needs and spend the time there. And then progressively we start hiring more people locally to become not an antenna of a Brazilian company, but an entity unto itself in North America. And progressively the idea that this is actually the center of gravity and it's going to shift towards the US.

Vonnie Estes:
Well that's it for my quick trip south. I would love to see all these people in person when we can all travel again, hopefully in Brazil and with a caipirinha.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables and we will see you next time.

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Description: We would all like to know what exactly we should eat to make and keep us healthy and to support maximum performance. And some of us would follow the advice! This would require knowing our genetics, immediate environmental factors, and the nutrient make up of the exact food you’re are eating. This requires data from your body and the food. I would love to open an app and have it all there for me. Listen to this episode to find out where we are in the that process. We hear from Dr. Sarah Laskey, a data scientist, Dr. Haven Baker from Pairwise and Greg Shewmaker from Teak Origin talk about what their companies are doing to make and keep us healthy.  

Guests

• Dr. Haven Baker Pairwise
  
• Greg Shewmaker Teak Origin
  
• Dr. Sarah Laskey 

Vonnie Estes: 
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of Technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So I can attest, it's hard to navigate this ever-changing world and developing and adopting new solutions to industry problems.

Vonnie Estes:
Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsors Sensitech. Sensitech's innovative supply chain solutions help customers retain quality, manage supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need when you need it to increase efficiencies. Learn more about Sensitech's suit of real-time visibility solutions at sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than a hundred years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries.

Vonnie Estes:
This episode was a personal journey for me. I'm really interested in how we use food to make and keep people healthy. And what do we know now at the human genetics, plant genetics, and food density level, to make the best choices for ourselves personally?

Vonnie Estes:
Today, I have three amazing guests who are brilliantly working on all pieces of this knowledge chain. What I found is that we are, unfortunately, not as far along as I thought. Doubtful that next year I will have an app that tells, me per my genetics, what specific piece of produce I would benefit most from. But we do have so much information at our fingertips to make better choices.

Vonnie Estes:
Genetic testing companies can tell us what diseases we might be more susceptible to, and we know diet plays a big role in that. Pairwise, a breeding company is breeding for convenience and taste to have us eat more produce. And teak origin can give us a better view of the nutritional intelligence of the food we grow, sell, and eat.

Vonnie Estes:
Let's start with Dr. Sarah Laskey. Sarah is a data scientist and health product R&D at a genetic testing company. Sarah's bio says, "I am a data on a small team focused on developing the next generation of a consumer-health platform. We develop predictive models for human health that utilize genetics, lifestyle, and environment." How cool is that? Let's drop into the conversation with Sarah.

Vonnie Estes:
So, Sarah, what do you do? And what's your background

Dr. Sarah Laskey:
My background is that I have a PhD in bioengineering. And actually for my PhD, I studied immunology and pharmacology of HIV.

Vonnie Estes:
Now Sarah is a data scientist. I asked her what did data scientists do?

Dr. Sarah Laskey:
Data scientists like me put that information together to make discoveries about health and wellness. And so some of these are our published research discoveries. So we publish papers...

Vonnie Estes:
Sarah talks further about how she uses all of these data.

Dr. Sarah Laskey:
And so that is the work that I do, is using genetic and non-genetic data to develop machine learning models of health and wellness, make discoveries about health and wellness, and then return them to our customers in the form of a product features.

Vonnie Estes:
So, in this episode of the podcast, what I'm trying to dig into is just thinking about personalized nutrition. And I realized that this is not something that we can do today, we don't have all the information throughout the chain, and so what I'm trying to think about is what do we know now and what are all the different pieces that need to come together so that people can know, personally to them what, what do I eat that's good for mem, me as who I am not just a white woman at a certain age, but be personally. So what can we know through testing and genetics about what people should eat or not eat on a personalized level to keep them healthy? What do we know now? And then talk about what you think we'll get to in that?

Dr. Sarah Laskey:
Yeah. This is a very big question. There are a lot of angles and a lot of details here. There are some things we know now. I think what we know now is more subtle at times than people want it to be. I think people are really excited about the future and they want things to be possible that aren't possible yet.

Vonnie Estes:
But we do know some things. An example Sarah gives is a particular saturated fat and weight report.

Dr. Sarah Laskey:
And this reports on a specific genetic variant where if you have this variant, then having higher levels of saturated fat in your diet is actually linked to weighing more even if it's the same total amount of fat, like replacing saturated with unsaturated fat in your diet would be associated with losing weight for people with that genetic variant.

Vonnie Estes:
Oh, wow.

Dr. Sarah Laskey:
So we do know some things, but the effect of that is pretty small. You're not going to lose 20 pounds from that. It's subtle, and it's something that is easier to measure on a population level than on an individual level. And I think a big part of that is because genetics is important, but it's not the whole story. If you think about, let's say a high school kid who runs cross-country and eats 3000 calories a day, versus a new mother who's breastfeeding, and it may be in her late-twenties versus a senior citizen who has Crohn's disease and is overweight and pre-diabetic. I've just described three people who could all be the same person over the course of 50 years.

Vonnie Estes:
So they have the same genetics they're just in different stage?

Dr. Sarah Laskey:
Identical genetics. But you could imagine that these people have very different nutritional needs. And so genetics alone will never be enough to tell you everything you need to know about your nutritional needs because there are all these other factors in your life that play a role. And I find this exciting because I'm a data person, and so the answer is like, "Oh, we just need more data to learn more data. One more thing and then with all of the data, we can make all of the discovery." So that's great. I love it.

Vonnie Estes:
It's job security for you, right?

Dr. Sarah Laskey:
It means I won't have to be worried about intellectually interesting work for the rest of my time. But it's challenging because nutritional data is notoriously challenging to measure. And this is true of the food itself. So this is what you're talking about earlier in the episode where even for something that you'd think is fairly well-defined, an apple, there's dramatically different potential nutritional values for different apples.

Dr. Sarah Laskey:
And then on top of that, as an individual person trying to participate in a study, measuring nutritional intake is really challenging. Anybody who's ever tried to count calories can tell you. It's like a total nightmare. Especially if you're trying to count calories for something that doesn't have a nutritional label on it. Produce is particularly challenging.

Dr. Sarah Laskey:
This is why I think that it's so hard even... Forget personalized nutrition on a population level. It's hard to know these days what's even healthy. What's healthy, what's not healthy? Is it that fat is good and sugar is bad or sugar is bad and fat is good? Maybe there's good fats and bad fats, or maybe some carbs or fiber is a good carb, but then added sugars a bad carb. There's so much nuance and so much complexity. And it's incredibly challenging to study and actually tease these things apart, even at a population level, let alone for individuals. I guess that's the bad news.

Vonnie Estes:
That is the bad news.

Dr. Sarah Laskey:
Good news is that... I think that digital technology is changing that. It opens doors to new kinds of studies that can solve some of the challenges that we're used to having.

Vonnie Estes:
So what could it look like... I guess I hadn't thought about it as far as thinking about personalized nutrition, there's so many nuances and there's, what's going on with your genetics, and what's going on in your environment, and then what's going on with your food, the food all the way through the supply chain, which is a whole other incredibly variable situation where you don't even know what the nutrition value is through there.

Vonnie Estes:
So what can you imagine... If you look way in the future and someone does a test and get some genetic information, what could be done with that? What could that be put into some sort of database on you as a person, and then just help you? Maybe it wouldn't tell you exactly pick up this apple and he thought apple, but what could it possibly tell you that would help you as an individual? What are some of the things? I know it's not going to be broad until your whole diet, but what kinds of things do you imagine?

Dr. Sarah Laskey:
I guess what I envision is a test where you're measuring, not just your genetics, but also different things. So that allows you to tell more things. But maybe I'm not being futuristic thinking enough. So what I can think of that I can definitely see a clear line of sight to nap out, is an experience where you measure your genetics, you fill in some information about your current health status, but then you also try different things. You consume different foods, and as you're consuming them, you measure how your body is responding in real-time.

Dr. Sarah Laskey:
I think one of the really exciting things that is going to be possible in a way that it never has been before with the fact that everybody's carrying around a computer that's constantly connected to the world in their pocket, is they call this an N-of-1 studies. So it's a study, and the sample size is one person. You're doing a study on yourself to figure out how do I personally react? How does my body react to the choices I'm making?

Dr. Sarah Laskey:
And I think that that, to me, is the clearest line of sights that truly personalized insights, is measuring them yourself on yourself and understanding what's the best thing for me today? And maybe that's something that changes over time.

Vonnie Estes:
Yeah. That makes a lot of sense, because you are an N-of-1. And if you're testing yourself... And I think we all do that already. It's like, "I went on this run and I hadn't eaten and that felt really bad. So maybe I should eat before I go for a run." And so we're kind of all... Those of us that are paying attention to what's going on, but I think that genetic component of it is going to be one component. And I think especially around disease, right? Like if you know that you have a higher chance of having susceptibility to certain disease, then that will have some effect on what you do as well. But it's probably going to be awhile before something pops up on our phone and says that apple doesn't fit with your genetics.

Dr. Sarah Laskey:
I want to have a snack, should I eat an apple or a banana? Which one's healthier?

Vonnie Estes:
Exactly.

Dr. Sarah Laskey:
But yeah, I think that's where genetics comes in, is in guiding what are the choices that you should try? What do we recommend? What do we think is likely to work for you? Or alternatively, what are the things that you personally might want to be optimizing for. Based on your genetics, you're at a particularly high predisposition for diabetes, so when you're looking at nutritional choices, you should be looking at nutrition specifically with the lens of what's going to optimize my likelihood of developing diabetes, for example.

Vonnie Estes:
And then I think even things like life changes like pregnancy, you would have more information about what you need when your body's going through sort of that thing. And so that would be really helpful. And then I think the other pieces on the other people I've talked to on the podcast about how do you breed to get the highest nutritional density so that that's an opportunity that people can have. And then on the testing, the nutrient density testing, you just know more what you're getting. I'm in my own head just trying to put together what would the pieces look like so that I know personally exactly what I should be eating right now, but that may not be possible anytime in the near future.

Dr. Sarah Laskey:
We'll get there. We'll get there.

Vonnie Estes:
I think so. All right, Sarah. Well, thank you so much. I appreciate your time. And just thinking out of the box on this, because I know a lot of people have questions about how we're going to get there, certainly genetic testing and understanding your own body is helpful piece of information. And lots of data, and lots of more work for you to do.

Dr. Sarah Laskey:
That's music to my ears. That's what I want to hear.

Vonnie Estes:
Next we have Dr. Haven Baker, co-founder chief business officer at Pairwise. Pairwise is focused on exploring ways to use gene editing and leveraging the natural diversity in crops to address global food challenges from row crops to specialty crops. As you will hear, Pairwise is working on making food tastes better and more convenient so we eat more healthy food. I was hoping Dr. Haven would tell me they had breeding for nutritional value all figured out, but as we will hear, that's really complimented. So tell us about Pairwise.

Dr. Haven Baker:
Pairwise, when we found that in 2017 and the mission of our company is to lower the barriers to eating fruits and vegetables specifically. We use a technology called CRISPR technology. It's been used widely in healthcare to work on genetic diseases and provide cures for diseases we haven't had medicine. But when we think about the uses of food and agriculture, it's about taking advantage of the genetic variations of nature's already-produced and bringing them into the fruits and vegetables that we love to try and get better results.

Vonnie Estes:
Great. So what barriers keep consumers from choosing healthy, fresh foods, do you think?

Dr. Haven Baker:
Well, this is a good time to maybe tell a quick story about my daughter. And I think we experienced it the same but maybe perceive it differently. So in our family, my kids have to make their own lunch. Back when they used to go to school, they'd make a sandwich and then there'd be a place for snacks. And so in one of those little containers, you get crackers or cookies, and then the other had to be a fruit or vegetable.

Dr. Haven Baker:
So you go to the pantry and there are nine kinds of crackers and cookies that go in there, right? And that little compartment would be completely full. And then when you look at the fruits and vegetables, you can take with you while the apples get brown, the berries smash, acuity can go in there, it gets a little tired of them, seedless grapes once you pick them off the vine. So what ended up happening is I'd see baby carrots most days. And they would go to school, they'd come home from school, because they weren't getting eaten.

Dr. Haven Baker:
And so this idea that we make a lot of our decisions based on convenience. Now, tastes is important, shelf life's important, those are barriers, but we think one of the big barriers is making fruits and vegetables as convenient as some of the other fruits we eat regularly. And that's one of the barriers we're focused on, more nutrition, but specifically better convenience.

Vonnie Estes:
Great. Unless you eat it, it can't be good for you, right? Because it never gets in you. So you got to start there.

Dr. Haven Baker:
That's right. That's right.

Vonnie Estes:
So you talked about using gene editing and CRISPR as your technology that you're working on in breeding. And how might that technology impact consumer options for personalized nutrition?

Dr. Haven Baker:
We step back and we look at the problems across produce. And again, something can all relate to is that what we buy today, we might have a good experience, but we go next week and we might have a bad experience. And then we don't buy it. Maybe we wait two or three months to buy that again. Now, a couple lead items are pretty consistent, the box salad industry and the apples, they're pretty consistent day in day out, but most of the rest of produce either has a consistency or a shelf-life issue, and the flavor is not the same.

Dr. Haven Baker:
I think the technology will enable the focus on specific nutritional profiles eventually, but where we are at today is trying to get the consistency in the produce just so we can get that fresh, healthy food and have to be consistent for us every time we buy and every time we consume it.

Vonnie Estes:
Yeah. That's really true. That's true for me personally. Especially around stone fruits and some of the summer fruits. Yeah, the consistency really has a big impact. So how does breeding interact with farming practices? Meaning that you're working on getting the genetics right, but if you come in with this amazing potential, amazing seed with this amazing potential, what impact is how things are grown? Don't they have to grow at a certain way to keep that nutrition or to keep those certain traits intact?

Dr. Haven Baker:
Sure. It is a complicated supply chain, right? It starts out with genetics. And those are embodied in varieties that are either seed or plantlets the farmers plant. Then the farmers plant them and they harvest them sometimes at different times. And then sometimes they get stored, maybe a day if it's berries and maybe nine months of it's an apple. And then it's shipped two, three, sometimes 4,000 miles to those finished markets on the East Coast.

Dr. Haven Baker:
The varieties we have today are optimized for the whole chain, but specifically the first part of the chain. More of that farmer is a main store because if the farmer's not successful, we're not going to have that variety. And so when you create a new variety, it's almost like starting over every time from scratch. You're taking an own variety that might be successful, and then they're crossing it with something else and you have all this progeny and you have to test it and test it and test it to make sure it's right.

Dr. Haven Baker:
We're working on cherries. A new cherry variety, from start to finish, it's about 25 years. And so you have this really long development cycle. And so what we're doing with CRISPR technology is we can take an existing successful variety, and we can add single genetic changes that don't change anything else except what you want to change. Again, my of example of cherries is we look at...

Dr. Haven Baker:
One of the things that's helped drive great consumption is the seedless grapes. I don't think my kids have had grapes with seeds or barely heard them. And so is track transformational on our lifetime, that we've gone from a seed grape industry to a much larger industry that didn't have seeds. And we think the same thing can be done with cherries and a number of the other fruits. Again, it's about convenience and also the choking hazard.

Dr. Haven Baker:
And so we would use CRISPR technology to get rid of the pit on an existing successful variety. And so you don't take some of those risks you might've had at plant breeding. Breeding is really important. It's taking advantage of what nature has, but it is slow. And so we're just accelerating it.

Vonnie Estes:
That's great to hear. I actually did my graduate work on cherries here in the Central Valley in California. So I spent a lot of time in those cherry orchards. I was looking at a couple different disease interactions. But yeah, as cherries have a special place in my heart. So that's great that you're working on that.

Dr. Haven Baker:
We should talk about that old plan. I didn't know that sometime... One of the problems in Californian cherries, specifically, is they hit the market earlier, but they're not as sweet. And that's a genetic variation. And that is something we also think could eventually be addressed.

Vonnie Estes:
Yeah. And it's tough with crops like that because they stay in the ground for so long. It's not like you get to plant a new variety every year. It really is a long cycle to be able to change those out.

Dr. Haven Baker:
True.

Vonnie Estes:
So what other products are you working on in addition to cherries?

Dr. Haven Baker:
Well, the cherries just speak complete. Canada's a long-term project. It'll take us about five years to create a pitless cherry. I think we're getting close to the halfway point. And then it's another five or six years to get the orchards planted, just to bring it to market. That's the longer term, but we do eventually see that application across all of stone fruits, which you mentioned earlier, the peaches, plums, and nectarines.

Dr. Haven Baker:
But on the shorter term, we're working on berries. Falling on that pitless cherry concept, the seeds and blackberries, and also in raspberries, are a barrier for many consumers. They get in their teeth or they bother them. Also the consistency. And so we're working on both a seedless blackberry and raspberry as well as one that has a more consistent flavor profile across the year.

Dr. Haven Baker:
We expect to launch those products about 2024, is when they'll start getting the market. Of course, they'll expand to them. And then even shorter term, moving more closely as we're working on new salad greens that have much, much higher nutrition profiles. And lowering the barriers to bring those to market.

Vonnie Estes:
Oh, great. That's really interesting. In this particular episode, we're talking about nutrition and so how long do you think it'll be before you get those to market? More nutrient-dense and different profile.

Dr. Haven Baker:
So we're planning launches in Q3 of 2022. So right around the corner, we'll have to grow some... And I think maybe a little bit more explanation stepping back that the salad categories, at least 10 billion in some biggest part of produce, but third of its iceberg and a third of its romaine. Those of us that care about nutrition know that you're better off eating kale, but most people don't like kale, unless it has a lot of less massage, has a lot of oil, lots of other things.

Dr. Haven Baker:
So we're working on greens that have the nutrition of a kale eat more like a romaine. And we think that's a key opportunity for those nutritionally-conscious consumers. I think the other thing is... I'm sure, Vonnie, you're a big salad eater, but there are a lot of options, but what we find that salad... Our market research says half the salad lovers are bored with the options and would love more options. And so-

Vonnie Estes:
In the types of greens you mean, or just salad?

Dr. Haven Baker:
Yeah, that's right. It's the best. I've got a friend that was just from Seattle. And she said, "Look, I know I should be healthy. We're not buying Romanian iceberg, but my kids won't eat kale. So the only thing we ended up buying spinach." So if you're looking for that healthy, but tastes good category, that actually gets pretty slim.

Vonnie Estes:
That's fabulous. So what's your business model with those? Once you have the varieties developed, how are you planning on getting them to market?

Dr. Haven Baker:
One of the things that we think about, and this is appropriate for this time, is going into the super bowl, look at those commercials, and then how many of them are for things that we shouldn't need as much of, and how many of our things that we should eat more of? They might be an avocado commercial, but there won't be anything other than fresh produce commercials.

Vonnie Estes:
No. They said they want it to be fried, right?

Dr. Haven Baker:
All right. Some heavily processed food that's fun to have, but shouldn't be a major part of our diet. So when we're enabling a business model, we can more marketing spend. And we think that's important for cashiering consumer's attention. I mean, the brands, we love Starbucks, Frito-Lay, they got new things every quarter. But when you go into your produce aisle, what's new there? And you might get a new apple variety every couple of years, but there's not a lot of new and fresh.

Dr. Haven Baker:
And so we think a brand that approach is pretty appropriate. And we're looking to partner with an existing partners to roll out this brand to bring out new products, but we want to enable it where there's some margin structure that enables advertising. I think that's really important. I think that's one of the things that, if you look at Cuties or Halos, that they did really well. Those are good businesses. They're good for consumers. They've been good for the retailers and farmers too. So that's the kind of success we're looking to emulate.

Vonnie Estes:
And that has that convenience piece that you're talking about as well.

Dr. Haven Baker:
Yep. Exactly.

Vonnie Estes:
Thinking about personalized nutrition and knowing that it's in the future, and we've got ways to go, what other pieces do you think need to be in place for consumers to be able to make decisions based on information about what's for them?

Dr. Haven Baker:
There's a why... Our view is, maybe a little narrow one is there's a wide variety of healthy fruits and vegetables. And if we could just get them consistent, then consumers could make better choices or easier choices for what fits them specifically. But I don't think most consumers know which fruits and vegetables they should be having specifically, should they be having one's with high antioxidants? Should they be having ones with more fiber?

Dr. Haven Baker:
And so we've got to... As we step back the broader question, how do we connect the trends of what we need to eat with the foods that have them? And I think that's getting back to market it. And that's one of the things that produce industries could do quite better.

Vonnie Estes:
Yeah. I agree. And I'm in a position to help with that. Greg Shewmaker is co-founder at Teak Origin. Teak Origin is building the world's first nutritional intelligence platform by accurately measuring nutrition in the foods we grow, sell, and eat. We will hear about what Greg is working on to allow people in the food supply chain to understand the nutritional value of what they're getting. We just touched on the surface of what Teak Origin is doing. So I would suggest you go to their website to see more. Here's Greg. So tell me what teak origin does.

Greg Shewmaker:
Well, maybe just 10 seconds before what it does, is why we're doing it. And so today, despite all of our scientific and technological advances as humans, it's impossible to know just how nutritious the foods are that we grow, sell and eat. Which seems just criminal. It seems insane that with all the things that we understand about all the different products in our lives, food is the least known of them.

Greg Shewmaker:
So at Teak Origin, essentially what we've invented, something that we call nutritional intelligence. And it's really just accurately and practically, it's an important combination, we measure the key nutrients and fresh foods anywhere in the food system. And we do it in a matter of just a few seconds. We don't destroy the food and the person that's doing the measurement or the analyzing of the food doesn't need to have a scientific or a technical background. So that's kind of it in a nutshell.

Vonnie Estes:
So who are your customers now and who will they be in the future?

Greg Shewmaker:
So right now we're really focused on large retailers, primarily in the U.S and in the UK. And it's for a number of reasons. One is we just happened to come out of retail. So that was where a lot of our relationships were years ago. So we invented this original concept about seven-plus years ago now, while we were at Tesco in the in Hong Kong. It just had its roots in retail. But the other main reason why we're really focused on retailers right now is because we need to collect a massive amount of data.

Greg Shewmaker:
As I mentioned in the setup, there's just isn't good information around fresh foods. It's static, it's decades old, it's irrelevant, the nutrition label for an apple doesn't represent the millions of apples that are moving through the food system on a daily basis. And so we thought by starting with retailers, that was a great place to collect a lot of data, on a lot of different types of foods, from a lot of different parts of the world.

Greg Shewmaker:
And then one last thing is that as we build solutions and we gain insights, retailers have the greatest ability to push those back to the supply chain, as well as bring those solutions to many more consumers than we ever could as a startup. So, starting with retail.

Vonnie Estes:
Yeah. I think that's fascinating. And reading your story, that makes so much sense because, one, retailers are gathering so much data about what's going on, so they have the ability and kind of the mindset to do that. So I think that's a really interesting place to start in his whole chain of what are people eating. And the other thing I found fascinating is, as you mentioned about somebody tested an old apple, probably 50 years ago, and said, okay, this is the nutritional value in this apple. And it really has nothing to do with the apple that you buy at the store as a certain variety, has been grown a certain way, and has gone through the supply chain in a certain way. And all that variability, it's just not in our thinking right now, right?

Greg Shewmaker:
Not at all. Red apples are a great example. That USDA tested I think it was three red apples from a single farm, from a single harvest, 20 years ago. And that is the basis for red apple nutrition labels. So you think, well, no big deal, who uses the label, but that information is in every retailer website, every product ingredients that uses apples, Google Search, MyFitnessPal, Apple Health app, all these things. So it's underlying our entire understanding of apples, and yet it was three apples, 20 years ago, from Maryland, ad nobody eats apples from Maryland. No offense to Maryland, but it's just not the market. So yeah, it's just there's no way we can make accurate decisions based on that type of data.

Vonnie Estes:
So how far away do you think we are from consumers having the nutritional information as they shop? Like what's in the food? Should I eat it? Does it fit my overall health and nutrition plan to avoid disease? And does it support the life that I'm trying to lead?

Greg Shewmaker:
Well, I think we're there today to some degree. So what we've identified as three buckets of value, if you will, in terms of the insights from inside of our foods, the first one that we needed to establish was just benchmarking. We just want it to be able to collect enough data to say, look, here's what we think is inside of that apple. Based on nutrition labels, or maybe based on a retailer standard, or an industry standard, or whatever, here's what's actually inside of these apples. "Hey, so basically, am I getting what I'm paying for? Whether I'm someone in the supply chain or a retailer or a consumer.

Greg Shewmaker:
So we had to get to that phase first really understand just how far off are we and how dynamic is nutrition. The next phase that we've now entered into is what we call relevance. And that is, okay, now I want it to have a much more nuanced view of this. Hey, which Apple is the best for baking a pie? Which one should I put in my child's lunch because it's packed full on nutrition? Or which one's the best overall value? Or hey, which one is riper or maybe tastes a little bit sweeter? And so I think those questions we can answer today, and you're going to start to see a lot of retailers use this information in their online communications as well as in store communications to help make that shopping trip much more relevant to their customers.

Greg Shewmaker:
The final bucket, if you will, or a final pillar of all this is, what about me? So what's the right apple that I should be eating? And what's it going to do to me in the short-term and the long-term? I think we're still a ways off from that because we just don't have enough information. I don't think it's 10 years, but it's probably two or three years before we start to see any capabilities like that in the world.

Vonnie Estes:
Yeah. And that's what we're talking about on this episode of the podcast with the other guests as well, is, I think, we all kind of want to get to this, what does this mean to me? How does this support me? And I think you're a piece of it... There's lots of pieces to putting that chain together of this personalized nutrition, and your piece of it is really important because if you can't measure what's there and you don't know what's there, then knowing your genetic makeup or having the right food, you're missing that piece and it's, I love the term that you use, the nutritional intelligence.

Vonnie Estes:
I think that's such a great way to talk about it. It sounds like the technology that you're developing is, as we move along, going to get us closer. How do you see it getting into consumer's hands where they'll be able to make that decision for themselves and kind of put all those pieces of the puzzle together?

Greg Shewmaker:
Well, we hope if we're successful, it won't be directly from us. It'll be through all the different ways we access that information today. The information will just be much more relevant dynamics. So I envisioned, down the road dynamic, food labels. And, hey, maybe it's something that is in a retailer's app, or some store communication, or maybe it's your favorite health app, or whatever. But I think that we have to meet people where they're already at. I don't want to create TeakOrigin app that you have to download to understand what you're actually eating.

Greg Shewmaker:
So this information should just be feeding all of the different things that are out there, whether it's Google Search, or a retail website, or the applications, health platforms, food and agriculture technologies. I just don't feel like this information will be ubiquitous and it will be involved or integrated into lots of different technologies.

Greg Shewmaker:
And we're starting to see that to a very, very small degree now, but that's giving us hope that that is the right path that we're on. I think it's really important, the bookends, if you will, in terms of, hey, what is this going to do to my personal health? And also how do we produce more nutritious foods or how do we produce better foods? I think those are... Connecting those dots are critical because what we've realized in gathering all this information over the last few years is that, like people, there are no two apples that are alike, whether they come from the same tree or the same farm, or, hey the apples that are picked to this year from an orchard are completely different than the apples picked from the same orchard last year.

Greg Shewmaker:
And so I think it's really important to have that understanding and the ability to roll with it as things change, as climate change. And as we ship things differently or we go direct to consumer and the supply chain is becoming altered, we just need the ability to go with that and be much more dynamic than we are today.

Vonnie Estes:
Yeah. No, that's a good point. What do you think is the biggest reason this is so hard to do? And why isn't it being done today?

Greg Shewmaker:
Well, I think it's that point too just touched on, is it's so dynamic and it's so different. It's like saying, well, tell me who the average man or woman is. It's impossible. Because there's too many layers and too many complexities. And food is no different. Hey, maybe this apple got a little bit more sun, or it was a wetter summer, or the soil conditions are different, or it was shipped differently, or whatever.

Greg Shewmaker:
So it's really, really hard. And we've dealt because food is so important. And hey, the most important thing is getting it to people so that we can eat and survive. And so that's been the priority. It hasn't been to understand it to a lower level. So the bookends are there again, if you want to truly understand nutrition, then you send a food off to a lab. And by doing so, hey, we can understand every single aspect of that individual food.

Greg Shewmaker:
So I think we have a really good grasp on what different nutrients do to our bodies. And then I think the other end of the spectrum is, hey, we can walk into the store today, we're all consumers, even if we work in the industry, and we knock on the melons and we sniff things, and we look at the berries and we’re all experts.

Vonnie Estes:
Like we know what we're doing, right?

Greg Shewmaker:
Well, exactly. But we have to do that, because that's, one, is how we've been doing it for ever. And two, it's the only mechanism we have. So I think what we're trying to do is come up with something in the middle that satisfies that. We're not going to try to say, hey, you no longer have to sniff the tomatoes or knock the melons. We're all going to still do that, but there's somewhere in between having to send to an individual item off to a lab and then have it analyzed. So we're trying to come up with a practical solution, I guess. And I think that's the biggest challenge, is just meeting somewhere in the middle with a lot of problems.

Vonnie Estes:
Yeah. So in the interface with your product and what you're doing, you're supplying the data and information to these different points along the chain, whether it's retailer, where you're starting now, or later as we talked about the information just is out there for consumers. Do you see yourself as the data information provider that goes into different platforms or how do you engage?

Greg Shewmaker:
Yeah, that's right. And we were very careful about calling a nutritional intelligence because that's kind of how we see it. And years ago, I was in the military and it's kind of how the military uses intelligence. It's information that's constantly updated. And that information is passed to the people that need it. And they're then armed with better decision-making. And so we don't want to be the party that says, hey, you should be eating this apple instead of that apple, or donate apples, or whatever. We don't ever want to have an opinion. We want to provide the information so that a business and/or consumer could make better decisions.

Greg Shewmaker:
And so there's two parts to nutritional intelligence today. The first part is our teams, on a daily basis, throughout the U.S and in the UK right now, go out and they just buy lots of different fruits and vegetables at all the top retailers and some other places too, the primarily retail right now. And they bring those back to a central location, primarily home right now, and then they analyze those fruits and vegetables. And then we aggregate that data on a daily basis. So we do tens of thousands every month.

Greg Shewmaker:
The other half of nutritional intelligence is our customers do the same thing. So we'll send them an instrument, we'll train them for a few minutes, they'll use those instruments and, hey, maybe one customer's looking at blueberries, or another customer's looking at avocados, or another customer is looking at all fresh foods, or whatever. And so we aggregate that data too. And so then we, hey, if Kroger is doing that, we're not going to share it and say, hey, here's Kroger's data, but we'll aggregate it to say, hey, in general, we've gotten now all this information on avocados this month and here's some trends that we're seeing. So that's how we develop this intelligence on real-time basis, I guess.

Vonnie Estes:
Wow. That's great. Well, is there any other additional information that you wanted to bring up about the company or about the work that you're doing before we close?

Greg Shewmaker:
No, I think just, again, we're excited to be in the mix of those that are really trying to work on solutions for individual humans, to improve health, and also on the other end of the spectrum where they're trying to figure out the best ways to optimize nutrients. So it's not... It's, complicated. And I think both of those organizations and both of those industries have a lot more cut out for them, because it is so messy and complicated. So we're excited to be in the middle and just provide information.

Greg Shewmaker:
And we hope we can benefit from what they're doing, and also they benefit from what we're doing. I think to that point, I think the thing to mention, which you and I've talked about before is, I think one of the greatest challenges in the food system, which is really frustrating, is that it's so fragmented that it's really impossible to work well with others.

Greg Shewmaker:
And so how food is grown, how it's shipped, how it's sold, and how it's consumed are all completely interrelated with one another, and yet those are all completely separate industries. They have different priorities, they have different horizons, they have different investors, and businesses, and supply chains. And it's really difficult to span all those worlds on a regular basis to find the synergies and the unity that is needed in order to create those solutions.

Greg Shewmaker:
So I think what you're doing in terms of connecting all of us just in this small little example is great, because I think too few people and organizations are looking at it from a system standpoint. And if we don't look at it from a system standpoint, we're never going to solve systemic problems.

Vonnie Estes:
Great. Okay. Well, thank you very much, Greg. It was great to talk to you.

Greg Shewmaker:
Yeah. You as well. Thank you so much for having me on.

Vonnie Estes:
So I'm not going to know exactly what's best for me to eat today based uniquely on my genetics, my environmental situation, and the food itself. But as an N-of-1, I'm always testing and thinking about what makes me feel best and perform better. And that is eating more produce. All of these fields give us helpful information on how to eat better for our health, it's just isn't all tied together in one app yet.

Vonnie Estes:
In closing, I wanted to mention one more thing about this episode. And that is the variety of different types of journeys and careers that are open around food and ag. Sarah's role as data scientists, driving the development of predictive models for human health that utilize genetics, lifestyle, and environment, is fabulous. The more bright minds like Sarah that enter into food, health, and nutrition, the better off we all are.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe. And I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

Hide transcript

Description: PMA Takes on Tech hits the virtual road to explore what is happening in other regions. Agriculture is an important and growing industry in Australia. The country has thriving agtech clusters and world-class life sciences institutions that support industry, investment, academia and government to commercialize new products and processes.  However like most regions, global warming and diminishing natural resources present challenges to agriculture along with the rising cost of energy, labor, fertilizer, seeds and herbicides. Searching for solutions to these challenges with in-country support has created a good environment for Agtech to grow and prosper. We talk to Sarah Nolet and Matthew Pryor who are center stage for this growth. And also two entrepreneurs: Dr. Nancy Schellhorn from RapidAIM using the Internet of Things sensor technology to take the guess-work out of pest management and Andrew Bate from SwarmFarm Robotics, who has developed and delivered autonomous robots to commercial farmers. Here is the video mentioned of work in the apple orchard. 

Guests

• Sarah Nolet, Founder and CEO, AgThentic; Co-Founder, Tenacious Ventures
• J. Matthew Pryor, Partner, AgThentic; Co-Founder, Tenacious Ventures
• Dr. Nancy Schellhorn, Co-Founder & CEO, RapidAim Pty Ltd
• Andrew Bate, CEO, SwarmFarm Robotics

Vonnie Estes:
Welcome to PMA Takes On Tech, the podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, Vice President of Technology for the Produce Marketing Association, and I've spent years in the ag tech sector, so I can attest it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
PMA Takes On Tech is powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries and blackberries. With more than 100 years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of only the finest berries. We are also powered by supply chain visibility leader, Sensitech.

Vonnie Estes:
Hello, and welcome to this episode of PMA Takes On Tech. As I promised, I'm going to do some virtual travel this year and focus on technology and regions outside of North America. In this episode, we travel to Australia. In 2018, the National Farmers' Federation set a goal to grow Australia's agriculture to a $100 billion industry by 2030. Although there seems to be a lot of talk about that number being too small and that they are already falling short, from a distance it seems to be a great ambition that drives action.

Vonnie Estes:
Global warming and diminishing natural resources present obstacles to meeting the goal. So too, does the rising cost of energy, labor, fertilizer, seeds and herbicides. These challenges have created the perfect environment for ag tech to grow. Australia has thriving ag tech clusters, world class life sciences institutions that bring together industry, academia and government to commercialize new products and processes.

Vonnie Estes:
I'm lucky to speak first to Sarah Nolet and Matthew Pryor, partners in both AgThentic, an advisory group, and Tenacious Ventures, an ag tech-focused VC. We have an enlightening conversation about why ag tech innovation is happening in Australia now. Australia has had early exposure to climate variability with a brutal drought. Water efficiency was needed and driven by policy and innovation. Australia is also looking at creating marketplaces around sources like soil carbon and Australia, like most everywhere, is suffering from a labor shortage.

Vonnie Estes:
Sarah and Matthew saw an opportunity to help develop the ag tech ecosystem in Australia by advising, investing in and supporting startups. Let's drop into the conversation with Sarah and Matthew. Well, thanks both of you so much for speaking to me today from Australia. It's great to have you.

J. Matthew Pryor:
Happy to be here.

Sarah Nolet:
Great to be here.

Vonnie Estes:
Great. So, in prepping for this I had to look back on your backgrounds and how long you've been working together and everything, so you've been working together, at least in your current ventures, for two-and-a-half years at AgThentic and then now at Tenacious Ventures as well, so how did you meet and how did this start?

Sarah Nolet:
Yeah, Matthew's actually one of the first people I met when I came to Australia five years ago now. I came, didn't know anyone in Australia in agriculture or really in Australia, and was interested obviously in getting involved in agriculture and ag tech. And there had just been a conference, I think, where Matthew wrote some kind of op ed about ag tech and the opportunity, and so I reached out to him, wanting to connect with folks in the space.

Sarah Nolet:
And I think I'd been here about two months, hadn't really been out of my apartment because I was writing a Master's thesis, and he was like, "Yeah. Yeah, just call me." And I remember being nervous because I was like, "He's going to have an Australian accent and I haven't talked to any Australians yet, so I don't know how that's going to go." And I called him and obviously he was super nice, and also he was like, "Oh, I'd love to co-write an article with you about this, or we should work together," and was just super knowledgeable and helpful about the space.

Sarah Nolet:
I think we were talking about irrigation at that time and there happened to be a conference coming up in Sydney that he was going to, and so I ended up getting a ticket and we met there, and then sort of for the next two years ended up seeing each other every couple months at different conferences and always made time to kind of catch up and hang out. And I think over that course of what ended up being a couple years, just continued to find that we were really aligned in what we want to achieve and the opportunity to work together.

Vonnie Estes:
Very cool. So in looking at both of your backgrounds, Matthew, you're a computer science software guy by training, and Sarah, you probably never get introduced this way anymore, but you went to MIT and Tufts and probably nobody talks about that any more, but also in computer science and engineering. Matthew, why don't we start with you, but why ag? How did you end up in ag?

J. Matthew Pryor:
Yeah, I think one of the reasons that Sarah could understand me is I actually lived and worked in San Francisco for seven years kind of in the dot-com era. I'd grown up in a decently large country town and sort of grew up in and around agriculture, so I kind of had a bit in my blood I suppose, from childhood. But yeah, had done my kind of tech tour of duty, at least from an Aussie point of view, kind of spent pretty formative six to seven years in the kind of late '90s, early aughts, with a company that I was co-founder of.

J. Matthew Pryor:
It was amazing to see and to be there through that whole kind of dot-com madness, but I think I probably also came out the other end feeling a little bit jaded, a little like computers and technology held such promise and the best we could do was kind of financial services software and a whole lot of things that really didn't seem to add up to much on the other side of the dot-com bust, and so when I moved back to Australia, actually through another mutual friend, kind of got an opportunity just to actually apply technology to agriculture.

J. Matthew Pryor:
And it was really the first time I had thought about that, and really from that minute onward, it was just so obvious that that's what technology should be doing. There were so many opportunities in Australia at the time. It was kind of in the teeth of a very long and extended drought, and so water use efficiency, and just seemed like there was any number of really big challenges that kind of what I had learned in that Silicon Valley experience seemed perfectly well applied to.

Vonnie Estes:
Cool, and Sarah, I was listening to your wonderful podcast this morning, AgTech...So What?, when I was running. And there was the episode with the four women who didn't come from ag and I loved that. It's such a great episode. I recommend it to anyone to listen to some really different voices. So, how did you end up in ag?

Sarah Nolet:
Thanks. Love the plug for AgTech...So What? Thank you. I guess a few pieces came together, so I didn't grow up on a farm, grew up in Silicon Valley, but we had a hobby farm since I was about 12 that I spent time on. I always joke that it was a rock and squirrel farm, because we didn't grow anything commercially, but spent a bit of time there, definitely had parents that cared about the environment, spent a lot of time in the woods, but very much thought ag was something that you do later in life as buy a farm and have the hobby farm kind of thing. I just didn't really understand it at all.

Sarah Nolet:
It wasn't until I went to South America on an accidental, year-long gap in my career and lived on a bunch of farms, that I really became hooked on everything Matthew just said, the full potential of technology to revolutionize the food system and really break some of the trade-offs that have currently existed around sustainability and productivity and helping improve the life for farmers and give consumers what we want to eat in the ways we want to eat it. And so that was a massive opportunity for commercial outcomes but also impact outcomes, and I went down the ag rabbit hole and haven't come out since and don't plan to.

Vonnie Estes:
Great. So the company that you first started, AgThentic, is mostly a consulting company, right? That's most of your work. As far as I can tell, you're still doing that and you're still doing the podcast, which is amazing to me, and then what made you start Tenacious Ventures? What made you think that was something you wanted to do and that there was a need for that?

J. Matthew Pryor:
Yeah, I mean, so we talked a little bit about how Sarah and I started to work together more and that's really where the advisory type business kind of comes into it, so still a lot of what we do is helping bring those kind of forces together across technology, of investment and of agriculture and agricultural research. The more we spent time in those areas and kind of bringing those ties together, we would just keep seeing opportunities where there were these very promising young companies who had the right combination of inside and applied technology in the right way, not technology for technology's sake.

J. Matthew Pryor:
But we really struggled to convince other people to invest in them, and not because there wasn't passion, not because there was an understanding of how big the opportunity was, but just it's a complex area, right? Getting your head around what do farmers really want and how are we going to see a return and what kinds of technologies are going to be really impactful here? You do have to get a lot on board and eventually it just became obvious that the right solution is a VC firm dedicated exclusively to kind of broadly agro-food innovation, and that's what Tenacious was.

J. Matthew Pryor:
That's why we started it, and that was kind of coming to the journey, was just realizing that you just had to be fully convicted in that area and have a VC firm that was doing that, and that nothing got-

Sarah Nolet:
Sorry, Vonnie. It also gave, I think, a real opportunity for us to implement and take action on the insights we were gaining from the advisory work and personally, and Matthew would be the same, I think, neither of us wanted to be consultants or see ourselves as consultants in any way, because the idea of just writing a report or a PowerPoint that doesn't get actioned is not particularly interesting to either of us.

Sarah Nolet:
But having the opportunity to dig really deep and solve problems for our clients who will implement it, and also leverage those insights to figure out which founders to back, who will also implement, just gives us multiple ways to really catalyze action and impact around the things we're learning, and kind of close the loop between insights around what actually gets adopted and action around innovations that need to be created.

Sarah Nolet:
And so that's why I think how it kind of comes together in terms of doing both the investing and the advisory work, and then the podcast and content platform to bring it to life and create opportunities like this to speak with others in the space.

Vonnie Estes:
That's really interesting. I mean, I started working in... We didn't call it ag tech but it was a lot of advanced breeding technologies and GMOs and that type of thing very early on in my career many, many years ago, and have worked on trying to develop new technologies and get new technologies out there, and then living here in Silicon Valley in the last eight years or so, and suddenly ag tech is a thing. And watching this evolution of the VCs in this area, where at the beginning there weren't any that really understood ag, and it was all what you were saying.

Vonnie Estes:
It was just people didn't understand it. They were used to product 1.0 comes out in six months, product 2.0 comes out in a year, and especially my area was more in biology, and trying to talk to them about, "No, this could be 10 years." It was a real struggle, and it's been interesting to watch that evolution here and it sounds like you guys are going through the same thing and kind of making that happen and facilitating that in Australia, which is super exciting. So what are the biggest problems that you see need to be solved in the ag and food system in your region, where you are?

J. Matthew Pryor:
Yeah, I mean, some of it goes back to the kind of early analogy of there are some things about Australia and Australia's kind of climate that really create some of that opportunity so I think if we talk about what Australians now call the kind of Millennium Drought, it's very extended kind of seven to 10-year period where it sort of felt and I think now feels a lot like we were sort of on the leading edge of being exposed to significant climate variability.

J. Matthew Pryor:
And to our government's credit, there was a lot of innovation there in a water policy sense. You can spend a whole episode of a podcast talking about just that, but what the innovation really kind of drove sort of showed that there was significant kind of opportunities both in sort of policy incentive areas but also technology, so if we wanted to really move the needle on something like water use efficiency, that technology was going to be something really important here.

J. Matthew Pryor:
We're now kind of seeing it also play out in kin areas like kind of soil health and the relationship between soil health and soil carbon, so it's kind of this kind of early exposure to climate variability and what is going to be a response to that. We're seeing that also play out now in kind of nature-based solutions and intersection of creating marketplaces for nature-based solutions and how farmers are going to meaningfully participate in those sorts of things. Those are two pretty clear ones.

Sarah Nolet:
I would add just another one, kind of not totally unique to Australia but on the forefront of many minds right now is labor availability, which of course is true in the US, but exacerbated by COVID and border restrictions again globally, but especially in Australia, and one that is particularly well-suited to technological solutions. I wouldn't say either of us believe robots will fully replace humans and we should all just live on the beach and drive our drones, but for sure there are technology-enabling factors that can help improve those labor challenges and we expect Australia to be a leader there as well.

Vonnie Estes:
Great. So, in your work with startups and advancing technology this way, sometimes startups are good, sometimes VCs are good, sometimes maybe it's better to have a larger company that has more staying power. How do you see how startups fit into the ecosystem and how maybe policy or other ways might be better solutions?

J. Matthew Pryor:
Yeah, I mean, we talked a little bit about why Australia and some of that is, we have always largely defined ourselves as a producer of food and fiber, and significant for export, but at the same time, we're one of the least-protected agricultural economies in the world, and the way we've achieved that is actually by being a really significant investor in, or are engaging in, agriculture research. It's in the order of $700 or $800 million a year in Australia, which is a significant sum in kind of relative terms.

J. Matthew Pryor:
And so there is this baseline of research-based innovation that has kept us roughly at kind of 2% improvement over kind of three decades in terms of gross kind of farm output productivity. That's been really significant but that doesn't really account for how do we take those innovations to the rest of the world, so I think increasingly this idea of kind of research as a way of coming up with core innovations, startups and investments, and it's really a new kind of vehicle to see those innovations being taken to market.

J. Matthew Pryor:
It's definitely working well in Australia and still sort of emerging and growing, but also thinking about that being as, okay, that's also a platform where those innovations can be taken to the rest of the world. Yeah, I think we are absolutely convinced that startups are one of the key mechanisms, not because they're necessarily replacing or supplanting anything else that's there, but really significantly augmenting the ability of those kind of core innovations to get powerfully into the hands of farmers in ways that farmers want to take delivery of them.

J. Matthew Pryor:
There's one thing that startups do really well. It's kind of eventually find the right way to take a solution to market, and that pivoting and all that kind of stuff, that's the way that you find how customers actually want to take hold of that innovation and powerfully use it, so that's why I think startups will deliver really well in agriculture, not because any given one of them gets it right eventually. They get it right where you have that 1,000 shots on goal. Eventually someone kind of cracks the code and I think that's really why we see a lot of power in the startup column.

Vonnie Estes:
Was there a culture? I know I worked in Brazil years ago, and there was certainly not a culture in Brazil that startups made sense, and I talked to a number of people in Brazil about it and they said, "Look, when you start a company in Brazil, you're starting it to pass it on to your children." That's the culture. If you have to sell your company, it means you did something wrong. And so that's certainly changed over the last 10 years.

Vonnie Estes:
There's a great startup culture in Brazil now, but it really took... They were sending tons of people to Silicon Valley and trying to kind of train in entrepreneurship into something that didn't exist in the culture as much, so do you find that that thinking of doing a startup, that that's in the culture, or have you had to develop that a little?

J. Matthew Pryor:
Yeah, not naturally. I'm really smiling because the first company I was co-founder of, which we took over 10 years to kind of build, it was basically acquired, and my father-in-law's horrified and he said, "You can't sell it!" And it's like, "It's your thing." So yeah, I would say decently similar in that way. It's changed a lot, but I would say in this current generation is really where that change is taking place.

Vonnie Estes:
I think seeing some exits, that's always a good motivator and you were one, right, so that's a positive.

Sarah Nolet:
I would also add, for me, kind of only been here five years, but the just shock of how culturally different it was in terms of startups, I probably wasn't prepared from having lived in the bubbles of Silicon Valley and Cambridge, Massachusetts where you go to a Starbucks and everyone's talking about the idea they're going to hatch and pitching their Dad or grandfather, grandmother on it, left and right.

Sarah Nolet:
And I remember working with startups in the early days of AgThentic and they were trying to hire and grow the teams, and I would meet people and say, "You should come check out this company and come work with us." And over and over again I met young people and talented people who would go through the interview process with these growing companies, get to the end and go, "No, I'm going to go work for a bank. No, I'm going to go work for a consulting company."

Sarah Nolet:
And it was like, "My parents said, and my grandfather said..." all these influences of just getting the safe job and taking this tried-and-true career path, and I was really floored in the beginning. And so a lot of the early thinking in terms of AgThentic and ecosystem growth and now Tenacious was around, "How do we get more talent and how do we inspire more people to consider innovation?" And that's including non-traditional innovators like farmers and others who aren't maybe thinking about entrepreneurship in terms of what they do, but that's absolutely what they're doing, and we need those kinds of people to be involved in the ag tech ecosystem. Otherwise, it won't be successful.

Vonnie Estes:
Yeah, this is great. So you touched on this a little bit, and it may not be quite a fair question, because neither of you have spent your whole careers in ag in the US, but what do you see are kind of the differences about agriculture and about the ag tech ecosystem between Australia and the US?

Sarah Nolet:
Yeah, I would say again, when I first came here, started looking around for the commodity corn and soy markets, that didn't last very long in Australia, because they don't exist here. But that said, there are significant grain markets here and they look slightly different but the similarities between Australia and the US very much do exist. A couple differences that are interesting, we export as Matthew had mentioned before, 60+% of what we produce here in the Southern Hemisphere, different kinds of growing seasons.

Sarah Nolet:
In terms of ag retail, I think there's some really interesting differences there that we've dug into, that maybe Matthew will touch on, but just briefly in terms of ag tech, it was just such a smaller market here that the number of dollars being spent, the number of players there are. Tenacious launched in late 2018, early 2019, and we're the first dedicated ag tech VC firm, and there's plenty of room for others and lots of collaborations, but it's just the scale is much smaller.

And that plays out in a couple interesting ways. You've got a much smaller consumer market, so thinking about food tech and last mile delivery and those kinds of things just don't make a ton of sense when there's only 25 million Australians and they're in sort of three places. It's just a very different kind of company you build versus solving that in New York City or LA, let alone Seoul or somewhere like that, so I would say size of the market and therefore size of the ecosystem is really different.

Sarah Nolet:
But that said, in terms of ag tech, we're building an ag tech ecosystem on the back of quite an established startup ecosystem in Australia, so we've got leaders like Atlassian and Canva in terms of unicorn successful companies, and talent coming out of those companies and becoming VCs and starting to close that entrepreneurial loop that we need, and government and policy support. So we've got great R&D tax incentives for innovation. We've got the kind of scheme that Tenacious Ventures has set up under, in terms of tax incentives for our investors into the fund, so there's a number of kind of cultural and ecosystem phenomena and structural policy phenomena that make Australia startup ecosystem great.

Sarah Nolet:
And then ag tech coming into that, albeit slightly late to the game, means we can build on strength in ag and in startups, but also sort of learn from the lessons of other global ag tech ecosystems to solve ag tech challenges in different ways, like bring in distribution earlier, involving farmers earlier, more collaboration, et cetera, that I think other ag tech ecosystems maybe haven't done as well at, because they were having to go first and we're getting to learn from their ups and downs.

J. Matthew Pryor:
I think actually going back to your cultural question, the other thing we kind of got to get used to is this idea that Australian companies will leave the country, but the best kind of success is for Australian startups to end up in the US or Europe or wherever, create successful founders who will eventually come back to the country and bring that experience with them. So we kind of need to embrace that as, like you're saying, going back to that kind of 10 to 15-year time horizon, that's really the kind of length of time that we need to be thinking.

Vonnie Estes:
So my last question, this one's for Sarah, and kind of a different kind of question, but what I admire about you most as I watched your work with the podcast that we referenced and also with some of the conversations that I've been lucky enough to be in with you, is that you have this gift and interest in finding and amplifying new and different voices. And I think that's partly maybe because you're in a different country, but that's what had you go to a different country is because you have that interest.

Vonnie Estes: 
But I work really hard at that, is trying to make sure that I'm listening to different voices, especially younger voices, and voices outside of the mainstream of where we normally work in ag, and I look at you as one of my sources for new voices, so through the podcast and other conversations, but do you think about this? Is this a conscious effort, or is this just driven by your natural curiosity?

Sarah Nolet:
I would say, first of all thank you, I really appreciate that. Definitely both, I mean, the podcast in particular started because a culmination of I like having these kinds of conversations and wanted an excuse to do it and found it really hard. I'm naturally an introvert and so going to the conference or a workshop with often a bunch of farmers or ag industry experts who are older, who have work experience in the industry, who bring a very different perspective than I would bring or I bring a different perspective than they would bring, just the excuse to say, "We have this podcast and do you want to come share your story?" I find is a really helpful conversation opener and way to build a relationship.

Sarah Nolet:
And that creates so many opportunities and also interesting content that we can leverage and they can leverage and kind of get these different ideas out there. So that was kind of a selfish reason, I suppose for it. And then what's exciting about agriculture and maybe the world we live in with ag tech and venture capital, but also farming and the equipment and retail and chem, is that is all changing.

Sarah Nolet:
And there are both absolute critical needs for the longstanding experts in this industry who have been doing the innovation, have been building these companies, have had this expertise, but also new voices to think about these kinds of things differently and challenge perspectives and bring in different kinds of skills. And if we don't embrace that, then I don't think we can be successful in building the kind of food system we all want in the future, and so giving a platform to and highlighting the ideas of really different kinds of voices is part of having an impact and so we're excited to play a small role in that.

Vonnie Estes:
That's great, that's a great answer. Thank you for that. I was talking to a company here in the US yesterday and they have been doing this big landscape of listening to different voices and trying to figure out how they fit, and they were saying one of the things that they found in interviewing hundreds of people in ag in the US is that, well, there's a changing of the guard of leadership. A lot of the leadership in ag is starting to retire and move into other interests, and people are kind of looking around for like, "Well, who should we listen to now?"

Vonnie Estes:
And things are changing so much, and so I think it's this really important time to be so much more inclusive globally and types of people of all different diversity to really bring different conversations into ag, so I appreciate the work that you do there. And I appreciate both of you so much for having this conversation. It's been really interesting and I look forward to talking to you again.

Sarah Nolet:
Thanks so much, Vonnie.

J. Matthew Pryor:
Thanks, Vonnie.

Vonnie Estes:
Sarah and Matthew are really pioneers. I watch closely to what they're interested in. Next we will hear from two companies in Australia about their technology and products. First up is Dr. Nancy Schellhorn, the co-inventor and co-founder of RapidAIM insect sensing technologies. I really love what they are doing and the effect they will have globally on pest management. I think you'll enjoy her story.

Vonnie Estes:
Secondly, we will hear from Andrew Bate, founder of SwarmFarm Robotic Agriculture. SwarmFarm is one of a handful of companies globally to have delivered autonomous robots to commercial farmers. SwarmFarm's autonomous machines have sprayed, weeded and mowed more than 200,000 acres of farmland over the past two years. Both of these entrepreneurs say Australia is a great place to be, and both have global expansion plans.

Vonnie Estes:
Nancy says in Australia your solution has to solve a real problem. There's no money for hype. She also gets the benefit of product development without seasonal delay with the country's large latitude span. Andrew says most of the major machine manufacturers release and test in Australia before they release their product on the global market, due to the tough farming environment there, so if you can make it in Australia, you can make it anywhere. Let's jump into the conversation with Nancy. So please tell me about your company.

Dr. Nancy Schellhorn:
Well, we're RapidAIM, pest forecast news and alerts, and basically, we help farmers reduce the risk of loss and cost from insect pests. So as we know, insect pests are a huge threat to food crops but so is the way that we manage them. Insecticides are really precise tools to kill insects, but mostly farmers use insecticides as insurance just in case a pest is present because they can't take the risk. Insects are super small, they're highly mobile, they can move into a crop and lay eggs and larvae can hatch and start to feed before farmers even know that there's a problem.

Dr. Nancy Schellhorn:
And so, it's really a way to minimize risk but what's happened is that there's tremendous amount of overuse then and insecticides end up where they shouldn't, and I think one small example of this is, now we're seeing some of the most effective tools in the world being banned or restricted. So crop protection is really changing and moving much more to digital and biological and that's where RapidAIM comes in, so basically we are an enabling technology for efficient delivery of crop protection, and it's a digital solution.

Vonnie Estes:
That's great, and one of the pests that I see that you've focused on is the fruit fly. That's one of the things that you've done a lot of work on, right?

Dr. Nancy Schellhorn:
Yeah, we started with fruit fly because it's the world's number one bio-security barrier to trade, so basically no country wants another country's fruit fly pest. There's many, many different species so it means that there are mandatory requirements around monitoring for fruit fly, and this is done today manually, so millions of fruit fly traps that contain an attractant, mostly from male fruit flies, are placed in areas of production and then even through urban areas.

Dr. Nancy Schellhorn:
And then someone goes out and checks these by hand every seven to 14 days. As a small example, you'd be familiar with the situation in California with fruit flies, there are about 94,000 fruit fly traps in California alone, and at peak season the staff is about 400, and all they do is they go around and they look inside these traps to see if there are any fruit flies whereas 98% of the time they're empty.

Dr. Nancy Schellhorn:
And so that's why we started with monitoring for fruit fly, to basically have a real-time alert so there wasn't a delay, so you can imagine that delay of seven to 14 days also means hundreds of fruit fly eggs and babies can be laid into fruit and so the problem can take off very, very quickly, but also just the cost of managing that is huge. So that's why we started there, because of the already in place mandatory requirement, but now we are absolutely moving into pest management more generally.

Dr. Nancy Schellhorn:
And we also started with high-value fruit and nut agriculture because any time I think you bring a technology to play, and we deal in low volumes. Just the cost, so the margins are a bit better in high-value, but now we're moving into row crops, trying to address the early detection and suppression of highly-mobile global grain pests, particularly fall armyworm.

Vonnie Estes:
How interesting. That's interesting. Yeah, a lot of companies go the other direction because especially in the US, row crops are so much bigger. And I work with a lot of companies that say, "Well, if we can only get 1% of the US corn market, that's a lot," but it's hard to break into that. But I love that you started in the crop area that I care the most about, and I think it's fascinating, the work that you've done there. One of the things, when I was reading about the actual product, is that it's a sensor. It's not a camera, right?

Dr. Nancy Schellhorn:
That's right.

Vonnie Estes:
So talk a little bit about what actually you're putting out there and kind of how it feeds information up to the Cloud.

Dr. Nancy Schellhorn:
Yeah, so our IP is really about our novel, ultra-low-power sensors, so it's a capacitive sensor, which is the same type of technology that you use on a smartphone when you unlock it with your fingerprint ID, so it's based on disrupting electrical fields and so there are two sensors. As an insect encounters the trap, if they come into the trap to come towards the attractant, then there are algorithms that sit underneath these sensors that allow us to detect and discriminate the insects that are entering the trap.

Dr. Nancy Schellhorn:
Insects have a range of shapes and sizes and behaviors, and that's what our algorithms do. And then there's all the smarts are there in the piece of hardware, the trap, and so it's edge computing where some onboard processing happens. And then the data is sent to the Cloud and then to the end user's mobile app in real time, so there's no backend processing of images. We started with camera-based technology, which most of our competitors used in 2010.

Dr. Nancy Schellhorn:
We moved away from it because our objective has always been to have a tight link with management so that growers could actually see where and when a pest showed up and have a really targeted management strategy, and then to know whether their management was working. And so that meant that we needed to deploy sensors at the appropriate density, whereas camera-based technology is deployed at a very low density, so what you often end up with is a trend over time of pests, but not a very good spatial assessment of where the pests are.

Dr. Nancy Schellhorn:
So we took the risk and we moved away from camera-based technology to our ultra-low-power sensor technology, and that's proved to be a very good decision that allows us to scale massively. We only started our sales in January last year, not quite a year ago, and we have about 500 sensors deployed across the country from the top end of Australia all the way down to north of Melbourne.

Dr. Nancy Schellhorn:
And we can roll out grid. Our go-to-market strategy is, we like to go in and take over an entire horticultural region, so we deploy sensors across an entire region first and that allows us to deliver our alerts and forecasts and then we upsell to growers so they can put multiple sensors on their property to really have a... Like in their on-farm security about where and when the pests are showing up on their farm or in their orchard and then that's just there. They just get to see their own data and then act quickly.

Vonnie Estes:
So the actual producer is your customer. That's who you're selling to?

Dr. Nancy Schellhorn:
Mm-hmm (affirmative).

Vonnie Estes:
But you had sensors over a whole area, like you said.

Dr. Nancy Schellhorn:
Yes, that's right.

Vonnie Estes:
That was the thing that was so interesting to me is a lot of times, with the type of data that we're gathering, you have to go to growers. They have to be willing to give you their data, you have to collect their data, then you have to get everybody else's data and try to integrate everything and it's really difficult. But with your sensors, being able to go across the whole area and seeing what's coming and seeing what's there and be more predictive is, I think, what makes it really exciting.

Dr. Nancy Schellhorn:
And I think this is really an important part of our business strategy, but most importantly too about the way in which we manage pests, so global pests don't recognize farm boundaries. They really work across huge areas and therefore our technology needs to basically align nicely with that, so by going in and putting out sensors across an entire region, what we can do then, is we can see where the pests are across an entire region, but it also means a low barrier to entry product.

Dr. Nancy Schellhorn:
So that first product for us, our Forecast & Alerts, is just delivered as an SMS to a grower and it basically tells them what's happening in their region, how close is the problem to their property, and so it's not a huge investment by the grower. It's a first start to get a feel for what RapidAIM can deliver to them and then once they see that, we upsell.

Dr. Nancy Schellhorn:
For their farm, we can send them the sensors and they can roll them out, so it's a super simple to use, plug and play device as well. And in fact, during COVID, we demonstrated that we're COVID-resilient and it's basically a low-touch system and customers can self-serve. So we ship them the devices, they download the app, they scan the QR code. Those traps then all become registered to their property. They plug in the battery, hang it in a tree and the whole grid goes live.

Dr. Nancy Schellhorn:
There's no big star pickets with solar panels or batteries. And again, that's one of the advantages of using ultra-low-power sensors as opposed to camera-based, because our batteries, we use two small lithium ion batteries and we get a maximum of 18 months battery life and a minimum up to 12. So again, the goal has been low-maintenance, scalable, but delivering valuable information to the grower to be able to have confidence about when pests aren't there, and to know when their management's working.

Vonnie Estes:
In this particular episode as we've talked about, I'm trying to look at companies and what's happening outside of North America, and it's very interesting to see, there's so much innovation in Australia. It's just amazing to me, and as we know, these insects, and especially fruit flies are really a worldwide problem. And as you talk about, this is a really huge barrier to trade because everyone's concerned about crossing different global lines, so this is obviously worldwide problem. What are your plans to expand outside of Australia?

Dr. Nancy Schellhorn:
Yeah, well, I guess a couple things, so we do have plans to do that and I know some companies do that very, very quickly. I think Australia's a fantastic... Well, it's more than a testing ground, but agriculture isn't subsidized in Australia, with the exception of water. Growers get some government rebates at times for water, which means that solving a problem, you can demonstrate the value of your solutions very, very quickly because there's no subsidy, so it has to solve a grower's problem and it has to provide value for money.

Dr. Nancy Schellhorn:
So if you can make it in Australia, I reckon you can make it anywhere because of that. The second thing is, where we sit on the planet in terms of the latitudes, just by moving up and down the eastern seaboard, we go from a tropical, to sub-tropical, to Mediterranean and temperate climates just by going up and down the seaboard a couple 1,000 kilometers. You can really continue to test and develop your product without a seasonal delay, and so again, I think that's a really good thing about Australia.

Dr. Nancy Schellhorn:
For example, with fruit fly activity, of course in the winter down south there's very limited activity of fruit fly, but here in Brisbane they're going all year round. And even we have a slight lull in the winter in Brisbane, if we go north five hours, there's no delay and the same for a lot of these pests. And also, I think that's why Australia has such fantastic fresh fruit and veg, because the production is happening just with slight moves up and down the eastern seaboard.

Dr. Nancy Schellhorn:
But in terms of going overseas, Australia's a very small market so from a business perspective we absolutely have interest in going overseas. We've had great conversations with LA County. LA County alone has about 20,000 fruit flies so we'd like to start some trials with testing our technology with that group. Also, we're now integrating other pests into our sensors. They're not just rapid fly for fruit fly, but for production systems such as apples and pears and stone fruit that also deal with a moth pest.

Dr. Nancy Schellhorn:
We have a combo of rapid fly and rapid moth together so for example, we're now starting the monitoring for things like codling moth and fruit fly within the same sensor. So I think that will be highly attractive to producers in California and we'd like to say in the next six months or so we will connect with a group in California to start the testing and trialing. Every time we deploy in a new geography, because there's new pests, there's new situations, we end up learning a lot about how our technology performs.

Dr. Nancy Schellhorn:
Sometimes we need to make small refinements and so I think that's a good way to start is with a couple small grids in Sacramento Valley and San Joaquin Valley to see how our technology's performing there and also the value of our technology for those growers.

Vonnie Estes:
That's great. I was in southern California in the '80s so I was there with all those malathion sprays and really realized the problems that can come from these pests. Well, I didn't get to half the questions I was going to ask you, but we need to wrap here, so thank you so much for your time and I wish you the best of luck on this great technology of solving a really big problem, so thank you.

Dr. Nancy Schellhorn:
Absolute pleasure, Vonnie. Thank you so much for the opportunity.

Vonnie Estes:
Great conversation with Nancy. I hope she has much success in Australia and is able to expand worldwide. We could certainly use that product in California. Now we will talk to Andrew. Welcome Andrew Bate, founder of SwarmFarm. Tell us about your company.

Andrew Bate:
SwarmFarn Robotics is an Australian ag tech company. We build autonomous robots. We're probably a little bit unique in that we're very much a soil up company, rather than technology down. We started out in rural Australia and Australia's a very sparsely populated country. We're based right out in a farming area. Our closest capital city would be 700 kilometers away. I'm not sure what that is in miles, but we're right in the heart of farming area, and that's where our customers are and I'm a farmer myself, so that's probably a big part of our background. Yeah, we're kind of unique in that way, in that we're not in a capital city and we do all of our development out of regional areas in Australia.

Vonnie Estes:
So I was doing prep for this and just looking at your website and watching videos, and you work across many different crop areas. And I watched the video you sent over about your work in apples, so why don't you describe what your technology does in apples and kind of where you are in product development there?

Andrew Bate:
The work we're doing in apples is, I guess, a more interesting project and kind of a little bit higher end, so what we're doing there is work on an industry project actually. There was an industry call to develop technology that could help with flower thinning in apple trees and so what we're doing is actually working at the stage that each individual tree in the orchard's at, and then we're actually treating each tree when it's at the right stage.

Andrew Bate:
So traditionally in apple orchards, farmers go through, they make a decision to thin the flowers and they spray the entire orchard in one hit. And when that decision's made, some trees are still immature and not quite ready and they get sprayed too early. Some trees are almost finished flowering and it's a little bit too late, so it's kind of a bit of a hit and miss approach in that you're averaging a whole orchard.

Andrew Bate:
What it will do is allow farmers to cut back on their thinning costs, so after the first initial flower thinning, there's a lot of hand thinning that goes on where thinning groups are sent through and they pull the excess apples off to thin the population into what they want. By doing this earlier in the season with computer vision we can actually massively impact the actual costs, the man-hours of actually thinning those apples later on in the season.

Vonnie Estes:
So, I was watching the video and I was thinking then, so how if you're just spraying the orchards and the tree when they need to be sprayed, are you going through the orchard a lot more times then? How does that work on the timing?

Andrew Bate:
Yeah, it is and that's one of the beauties of robotics. I mean, if you look at some of the early adoption use of robotics, there's some really high-end things that people want to do, picking fruit, pruning trees, all sorts of stuff that is still quite hard for robotics to do. And then this company's work in that area and it is coming, and it will be revolutionary when it gets here but still a little bit more work to go.

Andrew Bate:
A lot of the early use of robotics is really about timing and the number of passes, and we talked to a lot of agronomists and even our early adopter customers about robotics and how it fits an operation. It's more about "How many passes can I get in one season" rather than "How many acres can I do in one day?" because the more times you can be in a crop, the more opportunities you have to manage and intervene with that crop to do things you're not doing now.

Andrew Bate:
And so, in this case, traditionally with thinning flowers in apple orchards, it might be two, three thinning operations at the flowering stage. Ultimately what we're heading towards here is daily thinning operations that might be done 10 times over a two-week period, so each tree gets treated exactly on the day that it's due and that's something we don't do in agriculture now because it's not practical. But with a robot, it becomes practical, so it's actually changing the agronomy and the decision-making and ultimately growing better crops, so that's a big part of what the robotics can do now in these early stages.

Vonnie Estes:
What data are you using and how are you analyzing that data to be able to know when the different flower stages and when you need to apply if there's any chemical?

Andrew Bate:
Yeah, I guess there's two things, I mean, the technology meeting the agronomy. So we've collected massive data sets over a period of three years now, flowering, and then we've gone and validated those results with agronomists, so actually sort of drawn this out, we've tagged trees and collect all that data and put it together. And so then we train our algorithms off of that. So to start with, the original approach was we just wanted to know the number of flowers on each tree, which ended up being kind of a crude indication of what we actually wanted to know.

Andrew Bate:
And we soon discovered that what was more important is what stage the tree's actually at. Has it got the King Bloom yet or is it still earlier on in the flowering process? So we end up retraining our algorithms then to actually pick when King Bloom's occurring and so we can base our spraying decisions around that, so what's interesting is, we build these data sets, is that we can start to do predictive work earlier on and figure how many days to King Bloom, so that we can get in and kind of predict when certain trees are going to be sprayed, even ahead of when they're actually due as well, which helps operations as well.

Vonnie Estes:
Great, so you recently, well October, somewhat recently, just closed a round of funding. Can you tell us about that and what that process was like, and how much you raised?

Andrew Bate:
Yeah, we did. It was an interesting time, so we were COVID-closed so we were close to closing just before COVID came in. But that was the first time we'd raised so we're a first time company to now, and the issues agriculture has around labor and expertise didn't go away with GSV at all, but it's been interesting in this downturn. Agriculture's just screaming out for people. It's worse than ever in agriculture trying to find skilled people and staff and also field staff and pickers of fruit and vegetables and that sort of stuff.

Andrew Bate:
Australia's at a really critical stage now with fruits rotting in the field because it just hasn't enough people, and so it's been interesting reflection of some of those interesting conversations we've had through the closing stage about what was going to happen to agriculture through COVID. If anything, agriculture's stronger than ever. It's a great industry to be in and I think demand for the sort of technology we're developing is stronger than ever as well, so it's pretty exciting as well.

Andrew Bate:
But yeah, we raised $4.5 million Australian. Our initial investors was Tenacious Ventures. They're Australia's dedicated venture capitalists in ag tech, which is fantastic. We've worked with them for quite long previous to them being a VC, so we're really excited to have them joining. Also, Artesian as well, so Artesian is Australia's biggest VC. They have a fund dedicated to the grains industry and also to clean energy, and so they invested through those two funds.

Andrew Bate:
Quite exciting for me personally, I guess, in that I'm from the grains industry myself and I'm still a grain grower myself, so to be invested in from my own industry was really exciting. And we also have a government fund here from the Queensland government to get more technology and more, I guess, investors in our state, and the state government invested as well through the Queensland Business Development Fund, so really good to be backed by our own state as well, so pretty exciting for us. And we also have a US investor invested in us as well, undisclosed at this stage but we'll talk more about that in the next few months as well.

Vonnie Estes:
Ha! That's interesting. I'll have to speculate on that. That kind of leads to my last question, what are your plans to expand outside of Australia, because obviously your technology would be really valuable here in California and the whole apple-growing area. How do you think about expansion? I mean, you're a pretty small company, a small group and really finding your niche there, and then what's next?

Andrew Bate:
Yeah, and look, I guess we've done really well to date. We've had paying customers commercially running our robots for two years now and originally one of the first companies to commercially hand over the keys and deliver real autonomous robots and we're really proud of that. We are a small team and we've developed all of our technology in-house. We've got 12 robots out deployed now. We're building one a month, so we'll have another two bit folding robots very shortly and we're scaling up from there, so I guess I think of it that we're lucky that we started in Australia.

Andrew Bate:
Australia's kind of like a testing ground for ag tech. Even big players like Deere and others in the farm machinery game always deliver into Australia before they deliver into other world markets because it's a testing ground. It's a very tough farming environment, and we're really good at pushing technology to its limits and breaking technology here in Australia because you have to push the machinery so hard.

Andrew Bate:
We have a really good early adoption, I guess, mindset over here with ag tech, so these early years in Australia have been really good for us, but in terms of overseas, we're thinking about which markets we go to and which crops next, so we've had enormous amount of interest out of South America, North America and also Canada. For us it's picking the right first early-adopter customers in those markets and also which sectors we go into as well, so we've got robots going in a vineyard shortly, so which market we target will be interesting.

Andrew Bate:
I mean, to date our base has been around broad acre and row crop, but we're starting to more in horticulture now and orchards, so I guess we've got a better strategy we'll do now over the next six months as to which sector we'll target and which exact region because it's not about outright sales for us. It's about finding the right early adopters and the right industry to push into. Also, regulatory and those sort of issues, too. There's differences between different states as well, so finding the right region as well, so we are interested to talk to early adopters that want to be a part of this journey.

Vonnie Estes:
What I love about talking to all my guests today, is how grounded they are in what they do. Sarah and Matthew are working with companies on the ground, building an ecosystem. Nancy, along with other scientists, came from CSIRO as the developers of the science. They are using technology that works, not the most expensive, highest-tech cameras, but sensors that have a long battery life with a cost point possible for wide distribution. And Andrew lives and works in rural areas. He knows the problems that need to be solved. He, too, is not starting with the most expensive, difficult problems to solve, but creating robots that can be deployed now.

Vonnie Estes: 
I so miss traveling. It's not just the places, which of course I miss seeing new places, but I really miss meeting new people and new places with different points of view. I hope you enjoy this episode as much as I did, next best thing to being there. That's it for this episode of PMA Takes On Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we'll see you next time.

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Controlled Environment Agriculture, including indoor and greenhouse production, is a small but high-potential, rapidly growing part of the food system. CEA can play a role to ensure food security and supply chain resilience. And also meet consumer demands around transparency, traceability, and sustainability while supplying nutritious, high-quality products that taste good. CEA requires a fraction of the water of other types of production, often up to 90-95% less. In this episode we talk to Dr. Alexa Lamm about water conservation technology in CEA and then two giants in CEA: AppHarvest and Plenty about how they manage their water use. 

Guests

• Dr. Alexa Lamm, Associate Professor at University of Georgia in the Department of Ag Leadership and Communication
• Jackie Roberts, Chief Sustainability Officer at AppHarvest
• Dr. Sarah Federman, Research Scientist, Plenty 

Vonnie Estes

Welcome to PMA Takes On Tech, the podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host Vonnie Estes, vice president of technology for the Produce Marketing Association, and I have spent years in the Ag tech sector. So I can attest, it's hard to navigate this ever changing world and developing and adopting new solutions to industry problems. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes

This series of PMA Takes On Tech is made possible in part by the support of our sponsor TR Turoni. For more than 35 years, TR Turoni has supported fruit growing and horticulture companies with a complete range of scientific instruments, including specialized harvest and quality control instruments to monitor fruit ripening, sugar concentration, temperature and firmness. You can learn more about their complete range of measurement and control instruments at trterroni.com. That's T-R-T-U-R-O-N-I.com.

Vonnie Estes

Welcome to the first episode of 2021. It's been a rough start after a rough year, but we are here to learn about some exciting developments and reasons for optimism. We will be talking about the ability to grow part of our leafy greens, vegetables and fruits using the fraction of the amount of water normally required and to help build a resilient food system. By now most of us know the benefits of growing indoors, smaller footprint on land and environment, closer to population centers year round growth et cetera. I wanted to focus specifically on water use and indoor systems. What do we know? What do we need to know? To do that I'm speaking to Dr. Alexa Lamm, who will discuss partnerships around developing water technologies, and then to two controlled environment Ag companies actually growing products.

Vonnie Estes

Alexa is an associate professor at the University of Georgia in the department of agriculture, leadership and communication. She specializes in conducting research on how people make decisions individually and collectively. Specifically, she is interested in how targeted science communication efforts and educational initiatives impact the decision making process. Alexa has worked on so many interesting projects. I'm sure I'll have her back again on the show on a different topic. But the topic today is working with both greenhouses and indoor farms on using new technologies around water use. She works at the private public partnership edge communicating the need to scientists and then helping producers engage and adopt new water saving technologies.

Vonnie Estes

As we discussed, I have also spent a good portion of my career working on technology development, and adoption to build a better food system. Even more so today with so many new technologies, we need navigators and communicators to make this happen. Alexa will talk about some of the programs she has worked on. After Alexa, we will talk to two companies who are deploying unique ways of managing water indoors UpHarvest and Plenty. Let's jump into the conversation with Alexa. So please tell us about yourself.

Dr. Alexa Lamm

Sure. So I am an associate professor at the University of Georgia focused in science communication and I'm in the college of agriculture and environmental sciences and located in our department of agricultural leadership, education and communication. So all of the science communication research that I conduct is focused on how we communicate most effectively about agricultural and environmental science innovations or best management practices. I do that in terms of connecting scientists with producers to make their work more relevant and applicable to producers so they can adopt new innovations more readily, and I also study consumer acceptance of new scientific innovations in the food system.

Vonnie Estes

That's so important to me, a lot of work that I do and I've done over my career is at that edge of, “okay, we've got this great stuff now how do we get people to accept it and how do we get it adopted?” So it's really great work, it's been fascinating getting to know you and reading about your work and just seeing people working in this intersection because I think if you have the technology and nobody uses it, it's not worth it. So that's great. So in this particular podcast, we're talking about water use, and specifically around indoor Ag and greenhouses. I know you've done a lot of work in the greenhouse area and published a lot on that, and then are also starting to look at indoor Ag. So if you could talk a little bit about your work there and what your thinking is in water.

Dr. Alexa Lamm

Sure. So I've had the opportunity to work with some brilliant scientists from around the world who are trying to solve issues around water quality, and water quantity because as the amount of food we need to produce to feed our growing global population requires water. We also need to make sure we're protecting our water resources, and the quality of those resources that go into food production, as well as what's recharged back into the environment. So specifically for the greenhouse and landscape industry, I've had the opportunity to work with teams of researchers that have created all kinds of ways to treat water for recycling purposes, to capture water for water reuse, to ensure that that water doesn't carry pathogens into the system as it is used initially, and then also reused to protect crop quality and uniformity, as well as the disbursement then of that water eventually into the environment to make sure that it's safe for the environment.

Dr. Alexa Lamm

So the work that I do alongside with them is, how do we communicate about all these new innovations so that producers want to adopt these technologies. As I talk with food producers, specialty crop producers around the world on a fairly regular basis, every single one of them is an environmentalist, they care so much about the environment, because without a healthy environment, they can't grow their crops, they can't have productive systems. So they want to adopt these new practices, but we have to make them compatible with existing systems, we have to make them easy to implement, we have to create systems that aren't so complex and overwhelming that it's difficult to adopt them.

Dr. Alexa Lamm

So it's connecting those scientists and those producers together to create systems that really work in the real world, that's so important to ensuring that all the new science and all the new innovations are adopted and improving our food system.&

Vonnie Estes

So on the technology side, do you end up working with companies or more academics, or a mix of both? Or the technologies that you're involved with where do they come from?

Dr. Alexa Lamm

That's a great question. So both really, my job is to be the connector to get those two groups to talk to each other, to get producers to identify what their needs are, or even to explore new needs that they didn't even think possible to get them to think about what would that ideal system look like for them, and then to share that information with scientists in a way that they can then adapt their research goals to create those new innovations that those growers need, that those producers need to be most effective. So it's really the synergy of the two that comes up with the most innovative, most environmentally, sustainable systems that can help us with our producing high quality food.

Vonnie Estes

One of the things that I've seen across all of Ag tech and this is different working with the soil differently, or precision agriculture or many different technologies is that a lot of the responsibility and risk-taking ends up being on the producer. So the producer is like, "Well, I have to take my time and I have to spend my money, and this may not work." And there's no one kind of helping bridging that. So it's something I've been thinking about a lot is there, there are starting to be people that are kind of navigating that like you are and these connectors and so I really love hearing that. When you're working with producers, how do you kind of tackle the... are they running trials or are they buying systems or how are you alleviating some of the risk part with them?

Dr. Alexa Lamm

Sure. I mean, ultimately, this is a business for them. This is their livelihood. This is how they feed their own families and so taking risks in integrating new systems there is always a financial component. So the economics, the return on investment is so important. Of course, just like in every part of life, there are people who are more risk averse and more willing to jump in and try something than others. One of the things that our scientific teams can do is test things first. So they test in platforms. But one of the biggest complaints I hear from producers is that well, yeah, it works in a perfect lab setting but you bring it into my greenhouse where I have 30 different cultivars all next to each other, and I can't control temperature and water applications so precisely, I'm not sure it's going to work for me in that setting.&

Dr. Alexa Lamm

So, one of the things we've been moving towards is, as we work on new scientific innovation is partnering producers with scientists that they can go into real world application in a small portion of their greenhouse and test things in that real setting, in that real environment. That then we can showcase to other producers that have similar systems. So they can see them in action, they can observe what's happening there, whether that be a field day where people visit that facility, or we've been doing more and more with GoPros and video production to create online-

Vonnie Estes

Especially now, right?

Dr. Alexa Lamm

Yeah. Right. Online virtual environments where people can be even present and asking questions online as we're walking around in these greenhouses and showcasing that science in the real world. So I think there are opportunities to do that and I think the scientific community is starting to think bigger picture about practical application. So that partnership, that public private partnership is becoming more and more important.

Vonnie Este

Yeah. Great. So you've done work in greenhouses, we were talking about that earlier and you published on a lot of the findings that you've done there and then now your work is going to start to turn and focus more on indoor Ag. Can you tell me a little bit about the types of projects you're envisioning and what are some of the maybe the differences with indoor Ag as compared to greenhouses where you're still using the sun and more of the environment?

Dr. Alexa Lamm

Yeah, sure. Absolutely. As we're seeing our populations moving more into urban centers, and the realities of food deserts in these urban areas, I think having agriculture be present in urban environments where local food in that connection with our populations here in the United States is more important than ever. But also, the availability of space near urban centers or in urban centers tend to be inside, right? I was visiting Detroit last year with a team of scientists and even the old warehouse is being renovated and turned into food hubs, food centers where people are growing inside. But there are definitely complications with that like

Dr. Alexa Lamm

So moving into hydroponics or finding soilless substrates that work within those systems, that reduce the amount of water that needs to be applied because water availability in urban areas is very different than in rural areas where you can put in a well and pump as much water as you want. In some states, like the one I live here in Georgia, you can pump water out of a well and irrigate your crops pretty readily in a rural area where in an urban setting you have to pay for the water that comes out of the tap, that comes out of the hose.

Dr. Alexa Lamm

So the realities of that return on investment, that risk becomes smaller when you're having to pay for water to grow your plants. So when we think about those systems, indoor systems, especially it's a closed system, so we have the ability to apply water and recapture it. I've even seen facilities that have water tanks underground, built into their greenhouse, indoor greenhouse floors that recapture that put it into a tank, filter it and reapply. But there are fertilizers that we apply the plants, that plants can only consume so much of that. So there's still the existence of nitrogen and phosphorus in that water and higher levels that needs to be then distributed and maintained before it can be reapplied as well as pathogens because if we have a pathogen within a plant system, and then that gets into the water, we don't want to reapply that water back on to a new crop system until we're sure that that pathogen is no longer present.

Dr. Alexa Lamm

So there's some of those things that have to be addressed as we think about recycling and reusing water time and time again. So those are the things that producers moving into these urban settings, these indoor settings, they're having to think about those soils or soilless substrates that they're using, as well as how they filter how they recycle water, what those actual systems look like. Like the example I used with the tanks, but also how we filter that water and how we do that in natural ways, like using sand filters, or in chemical ways, like using chlorine to clean those systems. So there's a lot of different options and scientists are exploring the best ways to do that. So it's exciting, but it's also there's so much out there to think about and explore.

Vonnie Estes

Later in the podcast we'll talk to Sarah from Plenty. So they have a facility here in south San Francisco, and then they're building their new one in Compton, in LA. So they are full speed ahead on that facility and getting water from I mean, that's about as municipal city urban as you can get right in Compton. So yeah, I think that's really exciting and placing that greenhouse in a place like that, that's going to create really great jobs and it's a food desert and that's going to be a really interesting view of an indoor Ag facility that does all the things that you were talking about, really gets food to people. So that'll be an interesting test case to see how that goes.

Dr. Alexa Lamm

Yeah, I mean, there's so many sociological components to moving these systems to urban areas and utilizing indoor facilities. When you think about the childhood obesity issues in the United States, a lot of that is related to the lack of access to fresh food, it has nothing to do with the fact that kids and even families aren't willing to feed good, high quality food to their kids, it's just that all they have available is a gas station, or the local convenience store and buying a microwave pizza or chips is all that they really have available. So creating these spaces, like the ones you've just described which will provide access in these locations is so important to the future of America and I'm sure other parts of the world as well that are doing similar things. So yeah, there's so much potential.

Vonnie Estes

Do you see in your work any opinions that consumers have? Or, have you looked at consumer opinion around indoor Ag? Or probably greenhouses more acceptable. But is there any hesitancy of consumers about crops that are grown indoors?

Dr. Alexa Lamm

So I've done a lot of research on consumer acceptance of all kinds of different innovations in agriculture, agricultural innovations. I'm going to touch on first I've studied people's perceptions of local food, how they define local food is vast and diverse. Many people consider local food that which is grown within their own country. So here in the United States of it's grown in the US, they consider it local, where others consider it within their state and then even some consider it within a certain like mileage of their home. 30 miles, 100 miles when you're thinking about delivery miles and that carbon footprint, right?

Dr. Alexa Lamm

So the definition of local food is very different. The majority of Americans when we survey them are willing to pay more for local food. They expect it to be fresher, they expect longer shelf life, all of these things. Now in terms of actually growing local food most Americans really have no perception of what that actually entails. But we have examined consumer acceptance of some of these water treatment techniques, not necessarily in indoor environments, but in greenhouses and water recycling which the public is wildly in favor of any type of environmental sustainability, especially water conservation, which includes water reuse, and as we know water quality and water quantity goes so hand in hand, you have to treat water to reuse it.

Dr. Alexa Lamm

So chlorine is the one that consumers are very skeptical about. Probably because chlorine is something that resonates personally with us all. We swim in it in swimming pools, we smell it on our skin, in our hair. After we get out of that swimming pool, we think of it as a pretty harsh chemical. So that's the one that the consumers would like to eliminate or not think about being on their food. So, yeah.

Vonnie Estes

I think it's interesting and just with COVID, the whole local, people are more interested in local, both to support local and then just worried about the food chains and food security. So it seems to me that people would be really positive about indoor Ag, the only thing I've heard is, and this is more from the growing community, not necessarily consumers is the whole idea around soil, some people think that soil is part of what matters so much. But I think just the accessibility of having leafy greens or tomatoes, or these types of things year round, and going into different areas that we couldn't go into before, I think is really a positive. Well, is there anything, any other points that you want to make about this topic or?

Dr. Alexa Lamm

I just think it's a really exciting space, if we can think about the holistic food system and how we can take everything we've learned, whether it be about soils, or soilless substrates, or water treatment technologies, or water reuse technologies, filtering techniques, and we can integrate them into these indoor systems, we're going to be delivering a food source to communities that never have access before, we're going to be lowering chronic disease, we're going to be lowering dependence on the health system. I mean, these are the long term effects of public support legislative support for agriculture in these environments and that is huge impact.

Vonnie Estes

I love the work Alexa is doing and the impact it has. Next we will speak to Jackie Roberts, chief sustainability officer at UpHarvest and hear about the innovative way UpHarvest is obtaining and using water. After Jackie, will we move right into our conversation with Dr. Sarah Federman, a research scientist at Plenty about that company's use of water. Well, Jackie, I really appreciate you taking the time to talk to me today. UpHarvest is in the news everywhere right now and I just know a lot of my listeners and a lot of people that I know, it feels like you guys just exploded onto the scene. Of course, you've been working really hard in the background. This wasn't a company that just started yesterday, but a lot of people are curious about the company and what you're doing. So I really appreciate in the midst of all this explosive growth and your busyness that you're taking the time out to talk with us. So thank you for that.

Jackie Roberts

Sure, happy to be here.

Vonnie Estes

Great. So tell us a little bit about UpHarvest just for people who have maybe just seen, oh, it's Martha Stewart or whatever, just tell us a little bit about the company.

Jackie Roberts

So first, I think it's important to understand that at our heart, we are trying to build a resilient food system for America. So what UpHarvest is doing is we're developing and operating using applied technology in large scale controlled indoor farms. That means that we can produce U.S. grown fresh produce for national growers right here in Kentucky.

Vonnie Estes

That's great. I know from listening to Jonathan that being based in Kentucky is really important to him with the jobs and bringing that industry into the state and that's really exciting as well.

Jackie Roberts

I think it's also got great assets it's bringing to us, one of which is a great workforce, and the other is the natural resources that are here, particularly water, which I know we're going to talk a bit more about.

Vonnie Estes

Just so people know, what are the first crops or the first crops that you think that you'll commercialize or that you'll be sold under from UpHarvest?

Jackie Roberts

The first crops, we're going to be producing our tomatoes, and right now they're being produced in our Morehead facility, which is obviously in Morehead, Kentucky. We have 30 acres of that 60 acres already up and running and we will be about to start our first harvest. So stay tuned, I think consumers will start seeing us in grocery stores hopefully very soon.

Vonnie Estes

That's so exciting. So as you mentioned, what I wanted to talk to you about and what we're covering in this podcast is some unique ways of managing water and this has been for indoor Ag and greenhouse and different ways of growing, it's different than outside. Water is an issue for everyone but it's an issue for indoor because of some of the places where you're located that you may not have access to the same kind of Ag water type of rights. So from what I've talked to you all and read on your website, you guys have some really unique ways of managing water. So can you tell us about that?

Jackie Roberts

Sure, I think at the heart of sustainability is really placing your business in a region where the available resources are really a good fit, and I think looking at the opportunity for indoor controlled Ag water is one of those key resources. The ability to be located in a water rich region like Kentucky enables us to be what we as far as we know, we're the first large scale facility to be run entirely on rainwater. So that 100% rainwater means that we are using both our roof as a capture system and a large retention pond. Most of the rainwater is actually captured on the roof but some obviously also is going into the retention pond, and then the rainwater is piped from the roof into the retention pond so that we have a ready and available source of water to bring back into the greenhouse and bring to the plants in a very measured control system so there's no waste of water but also it's really a free resource for us.

Vonnie Estes

That's so exciting. I would think a lot of municipal water systems that people have to tap into have all sorts of additives that may cause some problems. So you just completely don't have to deal with those types of things.

Jackie Roberts:

Yeah. I mean, right now if you want to grow something whether you're at home or a big commercial facility you actually, you either have to use wells or you've got to tap into city water or do your own cistern or retention pond. Two of the three of those, sometimes you don't quite know what you're getting with particularly the city water. So you're right I mean, one of the ways in which we've really been able to bring technology to bear is lots of data and sensors and measurement which in today's day and age is very cheap to do.

Jackie Roberts

So we can get constant data on the quality of our water, obviously we filter it before we bring it into our pumping system to get to the plants but in a fairly standard way using sand and UV, we don't have to do any chemical treatment of the water and that's the real benefit, both it's good for the business we don't have to again spend money treating water with additional chemicals, but also it gives us the ability to really know exactly what we are bringing into our plants and then how to add the nutrients that they need so that we produce a really stellar product.

Vonnie Estes

That's great because it's such an important resource and I live in here in California, we talk about water and shortage of water a lot, so that you guys just get to use a resource that's already there is pretty amazing. I guess in Kentucky I mean it's pretty consistent, right? You're not going to have big drought years I mean, it's going to be pretty consistent.

Jackie Roberts

It does and in fact with climate change water patterns are changing and we watch that and Kentucky is actually becoming more water rich. Other areas are becoming less water rich. But regardless, even with today's water availability, we know droughts really aren't part of the climate in Kentucky. But we do know our retention pond would enable us to withstand three months of a drought if it did happen to happen. But, I think that one of the things we've seen that the US Department of Agriculture they have their Economic Research Service, I'm sure you're familiar with it has estimated that climate change is going to increase water scarcity from 20%, to more than 50% of different major agricultural areas in the central and southern mountain Pacific plains region by 2060.

Jackie Roberts

Now, we've got time, but that's a big shift into understanding where regions of water scarcity are emerging, and where regions are that are getting to continue to have sufficient water. We're very confident that we are in Appalachia in a region that is going to continue to have good strong supplies of water and that is one of the keys to our ability to produce a very cost effective high quality set of produce starting with tomatoes.

Vonnie Estes

Yeah. Great. Well, thanks. That's really helpful. So as we close up, can you just give my listeners some thoughts on what 2021 looks like for UpHarvest?

Jackie Roberts

Sure, as I said at the beginning, we're about to start the first harvest. Stay tuned. We think consumers will start to see us very soon in grocery stores, we're very excited about that. We were excited about what's coming off the lines, we've had a chance to taste test it, it's delicious. We also have two sites that we've already announced that are underway under construction in Berea and Richmond which will be bringing in more products, and we actually have announced that by 2025 we hope we're going to have nine additional sites and we've got our eyes on that.

Jackie Roberts

So we really do want to be a supplier that's very climate resilient, very stable and also what's great about our system is we can produce tomatoes and other vegetables in the winter months. So we hope that this will help people think about nutrition and bringing more vegetables into their diet 12 months of the year, not just when summer garden blooms, which is always a great time. I love these first tomatoes of the summer but it's important that we're eating vegetables year round and I think that what we're able to do in terms of delivering really high quality vegetables that tastes good is important for families nutrition.

Vonnie Estes

Now we're speaking with Sarah Federman, a research scientist at Plenty. Sarah and I actually met at the Atlanta conference in 2018, where I was giving a keynote on urban agriculture's role in the smart city. Sarah has a PhD in Ecology and Evolutionary Biology from Yale, and when we met she was an AAAS Science and Technology Policy fellow with USDA focusing in part on indoor Ag. For those of you not in the know AAAS stands for the Association for the Advancement of Science. We had a great conversation and I was impressed by her breadth and depth of knowledge. At that time, I was doing some work for Plenty, and I ended up asking her to help me on a project, then she got a job there, which was great. Sarah is amazing and I'm so happy to have her on the podcast.

Vonnie Estes

This is also a reminder of how great in person events are for making contacts. So I'm really looking forward and we can all get back to meeting people serendipitously at conferences. So Sarah, most people listening to this podcast have heard about Plenty, but why don't you start telling us just a little bit about the company?

Dr. Sarah Federman

Oh, Vonnie, first, thank you so much for that introduction. That was so, so kind of you and meeting at that conference was so serendipitous and wonderful because I feel like it really changed my life. I live in California now and I work for Plenty, because I met you, really so thank you.

Vonnie Estes

Great.

Dr. Sarah Federman

So sorry, Plenty. So, Plenty is an indoor vertical farm. We grow pesticide free leafy greens in a completely controlled indoor environment. Because we grow in a controlled indoor environment, our farm is what I like to call climate agnostic or protected from outside elements. This means that we can grow year round regardless of outside weather conditions and season. So this growing strategy really allows us to tailor an optimal environment for our plants, and allows them to reach kind of peak flavor and nutrients. When I say controlled, I don't just mean in terms of light and other environmental parameters. We've also automated a large portion of our production process and our goal is at the first person to touch our greens is the consumer who's opening a package in their kitchen.

Dr. Sarah Federman

On a personal level, though, what really drew me to indoor agriculture and Plenty in particular, is its very real potential to provide solutions to challenges facing our food, energy and water systems. So these include the ability to provide reliable food supplies in an increasingly unpredictable climate especially an increasingly unpredictable climate with decreasing land availability. So we're losing an estimated three acres of farmland every minute to development, and all this is coupled with a vulnerable supply chain. This is something that we've all experienced firsthand during our current COVID crisis. So I think it's something that we're all very aware of right now.

Dr. Sarah Federman

Finally, we're experiencing increased water scarcity all on the face of increasing populations and increasing food demand. So I think that indoor farming is one industry that can provide, because can speak to a lot of these challenges that we're facing and I'm really excited to be a part of it.

Vonnie Estes

Great, thanks. Can you tell us a little bit about your role? I know like any startup, I think you've probably done a lot of different things. But what are some of the things that you focus on personally?

Dr. Sarah Federman

Yeah, absolutely. So I'm a research scientist, first and foremost. I started here at Plenty with a goal of helping to develop food security products as you might have guessed from my spiel about my personal draw to indoor Ag. I recently transitioned though to a focus on sustainable agriculture, and how we can be more efficient with our resources to really drill down into our environment, sustainability and governance goals. I'm also kind of using my background in ecology and evolutionary biology, to think about how we can bring an ecological perspective to our statistical process control and production.

Vonnie Estes

Great. So one of the big benefits that you mentioned, when you were talking about it with indoor Ag is water savings. Can you tell me a little bit about how much water you use or how much you save and how that's possible? What are the things that are in place that allow you to use so much less water?

Dr. Sarah Federman

So saving water and land is one of the big benefits of indoor vertical farms, we can build a farm without cutting down a single tree by recycling urban infrastructures, and we use a fraction of the water required to grow in the field. Our new farm in LA we're estimating that it's going to save over a million gallons of water per week compared to similar crops grown outdoors.

Vonnie Estes

Wow.

Dr. Sarah Federman

Super exciting. Just to kind of really emphasize the water scarcity issues that we're facing, we're extracting groundwater at breathtakingly unsustainable rates. So right now, it's estimated that in the US 80% to 90% of all ground and surface water usage is for traditional field agriculture, and with climate change, we're projected to increase water scarcity through factors such as increased aridity and decreased snow packs. So without intervention and innovation to our farming system, we're really risking an American and global food and water crisis.

Dr. Sarah Federman

So I think it's really important to think about how we can be continuing to provide high quality, nutritious food to our rising populations while protecting the environment. At Plenty, what's really exciting is that with our platforms, we're aiming to provide high quality, nutritious produce while conserving water resources and grow at scale in traditionally water stress areas such as LA. So I'm super excited that our next farm is going to be in Compton because we can really kind of prove out these roles.

Vonnie Estes

So how do you in Compton and in south San Francisco, how do you get the water because it's not like typical Ag water that you would get in agricultural land? Where does it come from and are there any issues with quality of water?

Dr. Sarah Federman

Yeah. No, thanks for asking. So just two levels that again in the field most water is lost to evapotranspiration, which is the process by which water is transferred from the land to the atmosphere by evaporation from the soil and by the oxidation of water from the stomata of leaves or transpiration. Because of this and agricultural runoff lost during transit, about half of the water that's used and field irrigation can be reused. This is part of why it takes so much water to grow outdoors. In our control growing system, at Plenty we're able to capture transpiration is condensate, and we incorporate it into our recirculate. So this is part of our water saving strategy.

Dr. Sarah Federman

In terms of where we're sourcing our water from, it's coming from municipal water supplies. So we're really trying to integrate our growing strategy into municipal structures and frameworks and kind of like re-evaluate what agriculture is and how it can be incorporated into urban communities.

Vonnie Estes

Yeah, I know in talking to some other people about the Compton facility, I mean, the number of jobs and just having kind of that bright light in that community is going to be really great too.

Dr. Sarah Federman

Super excited. This is a total separate conversation but part of our environment, sustainability and governance program really involves community involvement and engagement and I'm happy to speak about that in another conversation.

Vonnie Estes

I'd love to do a podcast on that. So just my last question in finishing up, what will we see from Plenty in 2021? What are some of the plans and you talked about Compton a little bit and what's kind of the timing of that?

Dr. Sarah Federman

Sure. Yeah. So as you were alluding to the biggest change that we're going to see in 2021 at Plenty is that we're opening our new farm in Compton, California. This is going to be the world's first high output indoor vertical farm. Our plan is to supply hundreds of grocery stores from a single farm the size of a big box retailer store. So you might also see some new types of leafy greens this year, we haven't decided anything definitively. We've tested thousands of crops so far. So really, right now, it's about kind of picking the ones that consumers want and that will thrive in our farm.

Dr. Sarah Federman

We've also started R&D on some of Driscoll’s variety strawberries, and you've probably seen our joint development announcement last quarter. So this is already in progress, very exciting. I've tasted some they are delicious. Strawberries have a longer growth cycle and we have to figure out which ones exactly work best in our system. So unfortunately, you can't expect to be shopping for those in your local store anytime soon, but very excited to continue the R&D process.

Vonnie Estes

Right. Well, speaking of shopping in your local store, there's a part during the pandemic where we were trying to only go to the grocery store every two weeks just like everybody else and I was so happy that I lived in the area where I could buy plenty greens, because we would buy six boxes at a time. I had like six boxes in my refrigerator and I took a picture of it and sent it to your CEO and I was like, "I'm supporting the company." But by the end of like the second week I'd opened the box up and it was still fresh, was amazing.

Vonnie Estes

As controlled environment agriculture attracts more investment, over a billion dollars in investments in 2019 and 2020 alone, we are seeing what they can bring to create a healthier world. CEA is not going to replace outdoor agriculture but I'm hoping it makes the pie bigger in part by growing product closer to food deserts and producing year round. As Alexa said, consumers are wildly supportive of water conservation and locally grown produce, CEA can help deliver on that need.

Vonnie Estes

That's it for this episode of PMA Takes On Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on, for now stay safe, eat your fruits and vegetables and we will see you next time.

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Description:
Join this conversation originally recorded at Crusonia on the Delta: Food is Health Digital Forum in November. We dig into three areas: the consumer, the modern food system and action for progress. We come at these topics from different perspectives and experiences but all with an eye to make food healthier and more accessible for a healthier planet.

Guests

• Michelle Gloeckler, 30-year Retail and Consumer Goods C-level Executive; Walmart, Hershey’s
• Matt Crisp, CEO, Benson Hill
• Vonnie Estes, VP of Technology, Produce Marketing Association (PMA)

Vonnie Estes:
The second season of PMA Takes On Tech, the podcast that explores the problems, solutions, people, and ideas that are changing the future of the produce industry. I'm your host, Vonnie Estes, Vice President of Technology for the Produce Marketing Association. And I've spent years in the agtech sector. So I can attest, it's hard to navigate this ever-changing world. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. As with season one, my goal is to outline a problem in the produce industry today and discuss several possible solutions that can be deployed now.

Vonnie Estes:
This series of PMA Takes On Tech is made possible in part by the support of our sponsor, T.R. Turoni. For more than 35 years, T.R. Turoni has supported fruit growing and horticulture companies with a complete range of scientific instruments, including specialized harvest and quality control instruments to monitor fruit ripening, sugar concentration, temperature, and firmness. You can learn more about their complete range of measurement and control instruments at trturoni.com. That's trturoni.com.

Vonnie Estes:
Welcome to the last podcast of the year for PMA Takes On Tech. I want to take a moment to thank you, our listeners, for being willing to spend some time with me exploring important problems and solutions in the produce industry. A weird thing about podcasts is that I have no idea who you are. I know you are global. We have listeners from around the world. North and South America, South Africa, Europe, Singapore, Australia and Israel are our top countries and regions. Outside of North America, South Africa has the most listeners. So Hey to all of you, whoever you are. Next year, we are taking the podcast on the road, unfortunately by microphone and Zoom, not in person. I so miss traveling. I'm planning episodes on South Africa, Brazil, Australia and Israel right now, and will continue with other countries and regions. We just clocked over 20,000 listeners with episode nine. Thank you again for listening and I would love to hear any feedback and suggestions.

Vonnie Estes:
For this last episode, we will hear something a bit different. Back in November, I sat on a panel as part of Food is Health Digital Forum, put on by Crusonia on the Delta. You can find the link in the show notes on how to listen to other great panels from this event of that day. This conversation was titled, The Need to Engage the Consumer in the Food, Ag and Health Story. With Michelle Gloeckler, a Walmart, Hershey's veteran, Matt Crisp, CEO of Benson Hill, and me. We dig into three areas, the consumer, the modern food system and action for progress. It's a great conversation with the three of us coming from different perspectives and experiences. Let's jump right in.

Michelle Gloeckler:
Hi, I'm Michelle Gloeckler. I'm retail and consumer veteran of Walmart and Hershey. And today we are discussing the topic of the need to engage the consumer in the food, ag and health story. And I'm joined by Matt Crisp, who is the CEO of Benson Hill and Vonnie Estes, who's the VP of Technology for Produce Marketing Association. But for our session today with Matt and Vonnie, we're going to dig into three key areas around food is health, and that's the consumer, the modern food system and then action for progress. We've heard a lot of proof points and a lot of data today, but we'll conclude our section with a discussion of action for progress. So let's start with the consumer, and I want to start with Vonnie. PMA is a recognized leader in fresh produce, obviously, from consumer trends, sustainability supply chain, safety and your area, technology. So tell us Vonnie, how tech is using consumer insights to develop breakthrough progress.

Vonnie Estes:
All right. Thank you, Michelle, and thanks for having me. It's great to join this conversation. And yeah, the consumer, as we've seen, has the ability to transform industries overnight. Especially in fresh produce, we have to listen and try to meet their needs. So the biggest consumer trends that we're seeing right now around fresh food is consumers looking at food for health and immunity, consumers wanting localization of their food and convenience. And technology plays a really big factor in being able to bring consumers what they want in these areas. So if you look at health, using technology to grow more nutritious crops through better farm input management and genetics, so upping the nutrition profile in the food that we're supplying today. And then also, improving supply chains in marketplaces through digitization allows for fresher, more nutritious foods once it gets to people from the farms.

Vonnie Estes:
To look at consumers needed to address local, since COVID, there's been a desire to not rely on these big global supply chains from a food security point of view, but also supportive local communities and the desire for increased freshness. So technology can play a big role in developing online marketplaces, making connections that never existed before to grow, buy sell crops in local areas. Also, as we're seeing, indoor farms and local communities will help supply fresh produce with a shortened supply chain.

Vonnie Estes:
And then lastly, around convenience, these numbers are staggering to me. A year ago, 81% of U.S. shoppers said they never bought groceries online. Online shopping was around 3% of all grocery sales, or about 1.2 billion. But in June, online grocery sales in the U.S. hit 7.2 billion. Technology will aid development of these supply chains and also the last mile delivery with robots, drones and mail services and the software that's required to deliver this food to consumers.

Michelle Gloeckler:
Thank you, Vonnie. Appreciate it. And you hit on some key areas there. I love the local part, especially when you're in the stores and it tells you what farms the produce comes from. And you also talked about some supply chain and using technology for that, which is great. Matt, Benson Hill is obviously built on technology, data science from seed and beyond. Tell us how tech is benefiting the economics of fresh food for both farmers and for consumers.

Matt Crisp:
Sure. Thanks Michelle, and thanks to the organizers for getting the conversation together as well. This bridge between the grower and the consumer and our perspective is imperative. It's something we can't lose sight of. The consumer is certainly shifting the system, helping advance the system. It's demanding frankly, attributes of our food that our current system isn't really built to provide. And we think technology is a pivotal input in order to meet those needs to bridge the grower and the consumer. And when we say technology, broadly speaking, it's data that come from the crop itself, but the food and ingredients that it produces, the formulations, ultimately that comes from those.

Matt Crisp:
So when we think about this integration or this layering effectively of data science of plant science and food science, it's the synergy between those three that allows us to create effectively a fast track for product developments and to develop novel approaches, to doing what Vonnie just talked about, increasing nutrition density, enhancing the taste and the flavor profile. But I really want to focus also in that mix on affordability. There's an accessibility to food that I think it's garnering appropriately so more and more headlines. And we don't want to lose sight of the fact that it's not just again about the premium or the premium product and helping consumers realize the fact that food is health, but it's making it accessible to the broader population as well. And technology becomes a linchpin as part of the solution to do that.

Michelle Gloeckler:
Good. Matt, thank you for sharing that. Vonnie, when you started, you used the word consumer and then you followed that immediately up with listen, which I love that because I think that consumers have the voice and the power, more so today than ever. The days of push marketing are nearly extinct. Everybody has a voice. Influencers have a voice and a platform to shout, if they wish. People want authenticity, people want trust. I also heard you say at the very end of yours, this consumer voting for online and especially during COVID how they're changing. Two big retailers that reported this week, both Walmart and Target, I think Walmart was up 70% online, Target up 155% online. That's of course not all food, but there are things like grocery pickup and curbside pickup were up in the several hundred percentage points. So the consumer has definitely changed and they have the power. So when you think about building the story of food is health, you got to think about it with the consumers in mind. What consumer insights or facts do you think about that are often overlooked? Vonnie, let's start with you.

Vonnie Estes:
One thing of trying to do this is really thinking, “how do we move to a more personalized nutrition?” And I think part of this, as Matt was saying, is really thinking about the accessibility. And so we don't want this just to be for people who can afford to pay more, but really thinking about the guidelines and the dietary guidelines that people need that have different diseases, or they're trying to live with diabetes, or a lot of these different diseases that they may be able to eat differently. So we have these average dietary guidelines, but nobody's really average. So consumers really want information on what they eat for health, for their particular bodies. We're seeing a few examples of doctors in healthcare institutions prescribing food and diet instead, or in addition to medication. But what is the right diet for a diabetic?

Vonnie Estes:
And can we develop boxes, and can that be a prescription that can be sent to them to have the right diet for that person? Or can we send a box that's a correct diet for a 40 year old woman who's a cancer survivor who likes to run? So how do we start moving towards using genetic information and personal information, and our understanding of food is health and make that accessible to all people?

Michelle Gloeckler:
That's great. I love the concept of personalized nutrition and with the one-on-one interaction that's so prevalent via social media and otherwise, it's really a possibility. It's no longer just an idea. It's absolutely a possibility. Matt, anything that you would like to add into that consumer discussion?

Matt Crisp:
I'd only add that we've got to do this one product at a time. We've learned that when you lead with technology, it often leaves consumers wondering, "Well, gosh, that sounds really fascinating, but what can it do for me? Help me understand exactly what the tangible benefit is. What am I going to eat, that's going to allow me to access these benefits?" And so we need, I think, as an industry to listen, to use Vonnie's point, and engage thoughtfully. But we need to provide tangible examples of benefit to consumers in order to land with them, the value proposition.

Matt Crisp:
My wife goes shopping. She doesn't necessarily know how to dissect the label, but if we can distill this to, "Hey, it's better for you. It tastes better and it doesn't cost any more, or it provides these types of benefits that help combat cardiovascular or other chronic diseases over the long haul," that's a big deal. Okay, now I get it. It's starting to become real to me. And again, I think one product at a time we can achieve that, both at the ingredient level and the food level.

Matt Crisp:
The other component of this, that people we know are caring more and more about is what is this not just doing for me, but what is this doing for the planet? And again, this makes it real. You mentioned local before. This is a perfect example. Local, in a lot of ways, means that I know where it came from, and therefore I have trust. And we have to develop trust at the same time that we present these value propositions.

Matt Crisp:
We can't just say, "Hey, this is really great for you," and we use some approach and we grew at somewhere. We have an obligation, I think, in order to really advance the food system the way that it deserves to be advanced, to be very transparent proactively, transparent and deliberate with explaining how food was developed, where it came from, what the attributes are. And the more visibility we can provide, and the more tangible outcomes that we can use to demonstrate the benefits, the more, I think, we'll ultimately be able to lift up the food system as a whole, from end to end.

Michelle Gloeckler:
Matt, I think that's great. And what's sticking in my mind from your piece there is one product at a time. And there was an earlier session today where they were talking about the retailer's role for some of the things that you mentioned, like labeling and showing the benefits of products, all things that the folks that are out there listening have the power to do. When you think about the modern food system, which as you mentioned, and you gave us a personal example of your wife shopping as well, but you are both in positions to lead the transformation from where we are today to a modern food system where the benefits are plentiful. And I mean, benefits like sustainability. Matt, you mentioned our planet. Benefits like nutrition, speed, access. Access has been talked about in a lot of the sessions today, as has affordability.

Michelle Gloeckler:
Other benefits, obviously an overarching reducing healthcare costs, farm economics, supply chain, waste reduction, and obviously importantly, taste. None of this really works unless the consumer can get a great tasting product. So those are a lot of areas of benefit. Can you each select an area and share how your team is leading the transformation in that particular area or that particular benefit? And Vonnie we'll start with you?

Vonnie Estes:
Well, I'm going to cheat. So PMA, the Produce Marketing Association, is an association that works across the entire supply chain from crop inputs, from seed genetics, all the way through to the consumer. And we have dedicated professionals that work in supply chain and sustainability, traceability, produce safety, consumer experience, and retail. So all the things that you mentioned. So for us, our job is to educate and bring people together to create a healthier world. So it'd be really hard for me to say, here's the one thing that the team is doing. So we're trying to tackle it all and really communicate across the supply chain all these benefits of fresh.

Vonnie Estes:
But in my group, in the technology, we're really focused on four areas. Meeting the changing consumer preferences. So what are these preferences and how do we meet them using technology through the whole supply chain all the way from genetics to retail. Looking at labor, how do we deal with labor and the issues around labor? And a lot of that ends up being, looking at automation and how do we use our labor better. Extending shelf life, so that we have less food loss and shrink. And farm optimization, so doing more with less. So those are the areas that I'm focusing on right now.

Michelle Gloeckler:
Great, thank you for sharing those. And I know that with such a broad responsibility, PMA can do so many things. And thank you for the work that you and your organization are doing. Matt, when you think about all those benefits of the modern food system, tell us a little bit about one of the benefits or a couple of the benefits you and your team are leading.

Matt Crisp:
Well, the lever that we're most excited about that we talk about, it's a cornerstone of our purpose as a company, is leveraging nature's natural genetic diversity. And it's all the technologies I talked about before that ultimately allow us to do that. But if you zoom in, and let's use a specific example of nutrition density. So plants have an incredible capability to produce protein, especially soybean, we call it sometimes the king of protein, because it can produce more protein per input, per unit acre, per any really metric that you would ever look at than any crop in the world. Farmers know how to grow it. But the way that we think about soybean today, and that most would, if asked, would be as a commodity. It's a commodity that's been bred for what? Yield. Yield, yield, yield. That's how big ag seed companies sell seed as they breed for yield, and they have been doing so for decades.

Matt Crisp:
But let's go back in time and look at the natural genetic diversity that soybean has. Let's look at the amino acid profile that soybean has the capability to produce. And you realize that it's actually extremely powerful. We can look at using that natural genetic diversity to increase nutrition density, to levels that are so high that we don't even need some of the processing approaches that we use currently in the supply chain.

Matt Crisp:
At a foundational level, this is how you can use what nature gave us for all of the benefits that we just talked about, more healthy, nutritious, better tasting, higher quality, protein, more sustainable in spades, such that again, we produce what it is that we need at the crop level and then go from there. So some people have put this to us as it sounds like you're producing a more whole food. It's kind of an interesting way to think about it, right? Because if I produce something that you really want in the field and you harvest it and can move it directly into your food without having all of the processing steps that may be required otherwise with a commodity crop, hey, we've hit a lot of birds with one stone, but it all starts with that natural genetic diversity.

Michelle Gloeckler:
That's fantastic. Just in that brief moment, Matt, you really outlined the transformation that Benson Hill is after. And that's not easy work because there's an economic model out there that you really have to disrupt. And I can tell that you have had this conversation with many folks and you know big ag well, and that these soy products are bred for yield, yield yield, as you said. But the real breakthrough and the transformation comes from disrupting that economic model and coming up with what you called nature's diversity and getting things even better. And then once you can break through that, you make them taste great and then you're home with the consumer. But this does get complicated and we've heard that throughout the day. And I don't want to shortchange the fact that there is an economic model out there that really has to be disrupted. And I thank you for the work that you and the Benson Hill team are doing. And with folks like PMA supporting that, I think that's a really big deal.

Michelle Gloeckler:
I promised at the beginning, we would talk about action. You guys each shared what your companies are doing. There's accelerators for our progress. In many ways, COVID has forced some innovation and has also forced some progress. I'm interested if either of you just in our closing minutes have experienced any positive impacts of COVID, any accelerations or any recent drivers of action that you can share with us? So, Matt let's go to you on that one.

Matt Crisp:
Yeah, sure. So COVID has clearly revealed, and I know it's been talked about and is being talked a lot about at Crusonia and otherwise, that it's revealed vulnerabilities in our food system. But it's also revealed some opportunities and some opportunities for growth and for development for business and otherwise. I point to two things, maybe. One, we can all, I think, appreciate that an opportunity area that's emerged or rather accelerated is alternative plant-based protein space. So when we think about the drastic growth of this category, the need for ingredients, like I alluded to with soy and also yellow pea and other legumes and pulses, there's a highlighted benefit there. And it helps us realize that the consumer, maybe it's because we're all locked at home, but we're thinking a lot more about health and what we put in our bodies and the planet and we're more aware. Okay that's all, I think, terrific.

Matt Crisp:
But there's another side of that sword where there's a population that can't afford, as Vonnie put it, to buy the premium, et cetera, that's forced into, I'll call it staple options, center aisle options. And that makes for a wonderful bump in business with the CPGs. But what I'm glad that we're seeing the CPGs do is take this opportunity, maybe it's because there's a little bit more in the black than in the red all of a sudden, to innovate, to think about tomorrow and not just today, and to think about how we can ultimately make these types of healthier options affordable for a broader audience. Because as it stands right now, what COVID has done is it some part separating our system. It's almost creating two systems, one of folks who can afford these premium options and another that is really reduced to or pushed to the center aisle. And I just think that it's worth highlighting and I'll stop my comments there. But that's a call to action that I think a lot of companies have an obligation to play out at any level they can make happen.

Michelle Gloeckler:
Absolutely, Matt. This is complicated. It will take all of us. Vonnie, anything, any accelerators to our progress that you and your organization have experienced?

Vonnie Estes:
Yeah. I know we're running out of time, so I'll go quickly. But three areas, I think I see a lot in, is trust in using the technology. A lot of the technology has been around sensors and around data analytics to help people figure out how to move product around. They're now trusting the analytics. They don't just have to see it with their eyes. So that's great. I think it's making the system better.

Vonnie Estes:
Second is around labor. One of the reasons we have this global food supply chain is because labor costs less than other places. So as we automate and use more automation, we may re-localize our food system using more automation.

Vonnie Estes:
And then third is around this huge change in the ability for marketplaces to connect people with no prior existing relationship. So at the beginning of COVID, we had so much food that was slated for food service, that ended getting stuck in the supply chain because we didn't know what to do with it. But marketplace is just spraying up, all of these marketplaces sprang up, to figure out how to route that food differently. And now that we're engaging with the marketplace in that way, there's no going back. So there's a lot of changes that have happened in the supply chain around that. So I'll stop there. But I've seen a lot of things that were just not being accepted before COVID and we got forced into using technology across the supply chain in different, very positive ways.

Michelle Gloeckler:
Great. Well, thank you, Matt, CEO of Benson Hill and Vonnie, the VP of technology for Produce Marketing. You've been informative, you've been interesting, and you've been inspiring. Thank you for your time today.

Matt Crisp:
Thank you, Michelle. Thanks everybody.

Vonnie Estes:
Thank you. Bye.

Vonnie Estes:
That's it for this year of PMA Takes On Tech. Thanks for being part of the journey. Please be safe and find ways to celebrate your life, your friends and family, and the gift that we get to work in an industry that feeds people. See you next year.

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Description:
Regenerative Agriculture is one of the most talked about trends in the food supply chain – from producers to consumers and large food brands. In some circles it has a emotional following based on strong beliefs, not science. Having to adapt has become the norm for many farmers across the world. Changes to weather patterns, climate unpredictability and the need to protect our natural environment means that producers are now looking for new ways to enhance the resiliency of farms, boosting sustainability and biodiversity in the process. Regen Ag is farming for outcomes in a specific location considering the entire ecosystem, not using the same playbook across all systems. In this episode, we talk to two brothers working with their family farm to transition to regenerative agriculture. We get a real life understanding of strengths and weaknesses and the need for more technology, not less. We also talk to the CEO of Monarch Tractor, a “tractor as platform” company that is a great tool for companies transitioning to Regen Ag.

Guests

• Tim Nuss, Senior Manager, Customer Success at Apeel Sciences, Co-Founder at The Modern Acre, Partner of Nuss Farms
• Tyler Nuss, Group Manager, Commercial Purchasing at Rivian, Co-Founder of The Modern Acre, Strategy & Marketing for Nuss Farms
• Praveen Penmetsa CEO/founder of Monarch Tractor

Vonnie Estes:
Welcome to the second season of PMA Takes on Tech. The podcast that explores the problems, solutions, people and ideas that are changing the future of the produce industry. I'm your host, Vonnie Estes, vice president of technology for the Produce Marketing Association. I've spent years in the Agtech sector, so I can attest it's hard to navigate this ever-changing world. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. As with season one, my goal is to outline a problem in the produce industry today and discuss several possible solutions that can be deployed now.

Vonnie Estes:
This series of PMA Takes on Tech is made possible in part by the support of our sponsor TR Turoni. For more than 35 years, TR Turoni has supported fruit growing and horticulture companies with a complete range of scientific instruments, including specialized harvest and quality control instruments to monitor fruit ripening, sugar concentration, temperature, and firmness. You can learn more about their complete range of measurement and control instruments at trturoni.com. That's T-R-T-U-R-O-N-I dot com.

Vonnie Estes:
Today I'm taking on one of the most talked about trends in production, regenerative Ag. I'm interested in digging into this topic for my own education and my conflicted thoughts on the topic. I came into Ag years ago, developing biological controls and working on breeding techniques that would decrease inputs and be better for the environment. So given my decades in this space, I should be primed to jump on the regen train. What holds me back is some groups use it as a label with no data behind it. There's no question that soil health is important, that nutrient dense foods grown on healthy soils are better for everyone, but where is the data that underpins those claims? How do we know that what is happening on the farm is resulting in the improvements requested by consumers?

Vonnie Estes:
I'm talking to Tyler and Tim Nuss about their regen Ag journey on Nuss Farms. The journey is different for every producer, but I wanted to hear about what they're doing two guys deep into technology. One thing clear is that with Nuss Family Farms and many other producers transitioning to regen, they're responding to what the consumer wants. But they know they have to prove with data what they are doing on the farm will have the intended outcome of low impact climate friendly farming. What is exciting to me is that we are developing the technology and tools to gather the data to support regen Ag. More than ever before, we have these tools and the people to build and deploy them to put rigor around this trend. The other exciting piece is the business model innovation that Tim and Tyler will talk about. Producers are getting closer to consumers and delivering what they want. Let's jump into the conversation.

Vonnie Estes:
I'm so excited to talk to you both, I can't imagine that anyone that's listening to this podcast that doesn't know about your podcast, The Modern Acre, yours was the first Ag podcast I listened to, and this was an inspiration for this podcast. I still listen to it every Tuesday morning on my run, I have you guys in my head, it's great, and you both have day jobs on top of that. Tyler in an electric truck SUV company, Rivian, and Tim at Appeal, which is a PMA member company focused on preventing food loss. But none of that is what I want to talk to you about today. You both grew up on your family farm in the Central Valley, a fifth generation farm that focuses on specialty crops, and you're both involved with your dad when you can, and also the farm is transitioning to regen Ag. So that's what I want to talk to you about. I don't know how you guys do all that stuff plus two babies and dogs and families and everything else, it's pretty amazing. So welcome.

Tyler Nuss:
Thank you so much for having us and thank you for the high praise of the podcast, really appreciate. You're one of our longest listeners, so we really appreciate that.

Vonnie Estes:
Well, no kidding, I'm out running in the hills in the Bay Area at 5:30 in the morning getting jazzed up on Agtech, so it's great

Tyler Nuss:
It's awesome.

Vonnie Estes:
So tell us about the transition. Well, tell us a little bit about the Nuss Family Farm and then go into a little about your transition to regen Ag, and why is that an important issue now?

Tyler Nuss:
Totally. No, we love talking about this topic and thanks for having us on, this is Tyler. I think it's helpful to take a step back. Funny enough, the podcast really ties into our journey to regenerative Ag. As you mentioned, Tim and I represent fifth generation of our family's farm and we grew up in and around agriculture, but we both decided that we wanted to go away from the farm. For me personally, it was just seeing the stress of being in a farming family, what that did to my dad and the stress it put on him and just the family. I always wanted to chart a different path, so Tim and I both left the farm. I studied engineering, got into the tech industry, worked at Apple, and now I'm at an electric car startup, like you mentioned, Rivian. Tim got into international business. So he actually got into the produce industry side of things and did-

Vonnie Estes:
Silly him.

Tyler Nuss:
Seriously produce, right. So his experience is in international trade doing import export category management of fresh produce. He most recently has been involved in a few Agtech startups himself. But a few years ago, Tim and I are always talking about entrepreneurship and bouncing ideas back and forth to each other, and we started just becoming more interested in the food and Ag space and curious about what was happening back at the family farm. So as we started researching what was happening in the industry, we felt like there wasn't a great place for the next generation to really learn and connect about what was happening in agriculture. So that was where the idea of the podcast came from, and so we started it almost three years ago, interviewing people every week on or off the farm, founders, farmers, entrepreneurs, thought leaders in the industry.

Tyler Nuss:
So in parallel to learning and hosting this podcast, we became much more involved with our family's farm in the strategy in the operation and talking to our dad more about where we were going as a family farm. We started talking to these people on podcasts and learning more about this term called regenerative agriculture which, like you've mentioned, it's been widely talked about is, is quite a buzzword and quite polarizing. We became really interested in it and how it could maybe impact and we could leverage it on our farm. So around this time, about two years ago, our dad got into a major accident on the farm. It was an equipment malfunction and he actually broke every rib in his body. It was a very scary moment, he's fully recovered, but it was a moment for us as a family to look at each other and be like, what are we doing here? What are we doing with the farm?

Tyler Nuss:
We farmed for some context on our current land for about 50 years, we've been doing vegetables, specialty crops, and farmed conventionally. So we had this moment as a family, what are we doing and where are we going? In parallel, Tim and I are networking in the industry, learning more about regenerative agriculture, and that really catapulted us onto the journey we're at today and why it is important now. It was about a year and a half ago, we applied to be Kiss the Ground Scholarship recipients with the Kiss the Ground Scholarship Program. Basically, what they do is they help fund things like soil testing and educational resources and that really set us off on a crazy last 18 months of jumping into our regenerative transition. So that's the background and some context to how we got where we are now.

Vonnie Estes:
Oh, wow. I haven't heard of them, who were they funded by or where does the money come from?

Tyler Nuss:
So Kiss the Ground is actually a nonprofit. I would encourage anyone interested in the regenerative Ag space, Kiss the Ground actually just released a pretty impressive documentary on Netflix aptly titled Kiss the Ground. But it features a ton of celebrities, a lot of star power, unfortunately Tim and I did not get the nod on that. But it's an amazing documentary, just really highlighting regenerative agriculture. You can say what you want about the film, but I think ultimately what it does well is bring consumers into the conversation about why this stuff is important. So I'd encourage people to check that out.

Vonnie Estes:
So what practices are you using and what are you changing? And from an operational point of view, what's different now on your farm than there was before you started down this path?

Tim Nuss:
This is Tim. It's definitely been a big culture shift for us on the farm of how we're applying the principles of regenerative agriculture. There's a lot of components that I'll talk through, but one of the most difficult ones to implement is livestock integration, especially here in California. Often livestock and fresh produce is decoupled in the food system where it's very rare that you see it in operation that has fruits and vegetables and also livestock, it's usually one or the other. So we've actually connected with a company called Pasturebird who we met via the podcast, we'd interviewed their founder a year or so back. But we're actually taking 100 acres out of conventional Ag production and planting a permanent pasture, and on that pasture we're going to be having pasture raised poultry. So we're in the process of constructing very large coops that are autonomous and solar powered that everyday rotate to a new piece of pasture. So it's almost incorporating pasture into our typical crop rotation. So that's been one of the paramount first moves of us applying the regenerative principles.

Vonnie Estes:
So you had to learn how to do that, that's a little different than almonds or vegetables, right?

Tim Nuss:
Yeah. Our dad has grown a lot of crops but he's never grown a pasture, so it was a little bit of a trial and error. I think that's one of the barriers to get into this space, is there's so much unknowns where you've never grown a pasture or you're trying to select the right seed variety. Earlier this spring, when we were trying to plant the pasture, we selected the wrong seed and we got hot weather right after we planted and the crop didn't germinate, so we had to go and buy new seed and replant the pasture and add the cost into it. So we're definitely learning as we go, which has been fun.

Vonnie Estes:
I understand you're going to or you have moved into some branded products communicating to the consumer about how the products were grown, how's that going? And is the consumer polling the whole regen Ag movement through the supply chain? When you talked about this movie, so are you educating the consumer and then expecting them to pull this through or how are you thinking about that?

Tyler Nuss:
I don't think we're quite there yet. I don't know if the consumer is pulling it through the supply chain quite yet. I think we as a company, as business are bullish that it will, but I don't think we're quite there. What I think we're focused on is really developing the business. So for context, most of our contracts today are with processors. So we're growing 100 acres or 200 acres of tomatoes or of sunflowers or of cucumbers and in large part, they're going to processors. So in the case of the tomatoes, it's going to a cannery being canned, or the cucumbers are going to get pickled. So that's how our contracts are structured. A few months ago, if Vonnie, you wanted to get some Nuss Farms produce, there wasn't really an avenue or a context by which to do that, and so what we've been really focused on is developing the business and trying to add some revenue channels to our existing business.

Tyler Nuss:
So a few ways we're doing or thinking about that one, is can we take our existing commodities or our existing high volume crops and go directly to food brands? So there has been, we talked about consumers polling, which hasn't quite got there, but we were seeing a lot of food brands that are really interested and they're bullish on this movement as well about the focus on soil health, the focus on nutrient density. So we've engaged in some discussions with different food brands that want to try to really optimize the supply chain and work directly with farmers. So we're seeing some of that and we really want to approach that piece of the business as being a regenerative ingredient supplier. So that's one piece, but then as far as getting closer to the consumer, we're also looking at that as well.

Tyler Nuss:
We did a small trial of Row 7 produce this year, which is a unique seed company that's instead of focusing on yield or glyphosate resistance, they're focusing on taste. It was developed by a chef and they're really focused on nutrient density, on taste. So we did a trial variety of a few different crops of squash, of peppers, of snow peas, and we're looking to distribute those in some unique ways be it small. But a few examples is we started working with a local restaurant and doing shipments of our squash to them, we've also done produce box delivery, which is pretty exciting for us. So that's actually happening right now, anyone can go check us out and order a squash box, we like to call it, and it's a box of two different varieties of squash that'll be delivered on a weekly basis, delivered anywhere in the country. Which has been super exciting to see as we ship those boxes out and print the shipping labels, seeing people from all over the country getting shipped Nuss Farm's produce, it's pretty exciting and exhilarating to be honest, so that's another area.

Tyler Nuss:
Then the last one is we're also developing a consumer brand, so this is focused on shelf stable products. I won't get into too many details because we're currently really in the middle of product development, but it's taking some of those Rows 7 crops and developing a product around it. So really the message of the brand is it's a regenerative brand focused on sourcing ingredients directly from regenerative farmers. So the idea there is that we can communicate to the consumer the different practices that we're doing, to mention livestock, we're also incorporating cover crops, and reducing tillage across the farm. So we're working with Ray Archuleta, who's one of the leaders in the regen Ag space to help us with our cover crop mix and help us with how do we think about tillage.

Tyler Nuss:
So one example is that on our tomatoes, on our cucumbers, on our sunflowers, we're going to be implementing cover crops on those fields, but we're going to leave a portion of them that we're actually not going to eliminate, but we're going to use a roller crimper, and then no-till into that. So we're exploring some of these approaches and strategies even with our current high volume commodities.

Vonnie Estes:
Wow, I have so many questions I want to ask. I'm trying to think which direction do I want to go. One thing that I wonder about, and just a lot of the practices that people are doing is really as we try to define regenerative Ag and as we try to define improving the soil, how are you judging? What is the data that you're gathering? And how are you measuring? And is that whole science starting to come about in the industry so that we can talk about it from a data-driven point of view so that you can know how you're improving?

Tim Nuss:
Yeah, that component of it is definitely still in its infancy. There's a few main areas that we're focused on how we can provide and get better data. One is looking at carbon sequestration, that's a big buzz word that gets thrown around with regenerative and drawing down carbon into the soil. So there are companies exploring that space, Nori being one of them, so still working through that, also soil testing and quantifying the increase in organic matter of the soil over time, and the last one being nutrient density. So really for us right now, we just really need to get an accurate baseline. So what we've done is done some pretty extensive soil testing across the ranch so we can really quantify how these practices are improving the soil over time.

Vonnie Estes:
Is that over years? How long will it take for you to start seeing one, really advantages in the soil and then two, advantages financially in farming this way?

Tim Nuss:
Looking at it annually right now as far as the soil testing goes. So we did our first really extensive test this past fall and we'll be following it up here before the end of the year. So we'll get a year-over-year indicator of how things have gone this past year. But it really does take multiple years to see the investment that you're making in the soil reap its benefits.

Vonnie Estes:
Just going back, I wanted to ask one more question about the branding. So I think that's really fascinating, and that as you're learning as a whole skillset of its own to brand and to sell and to be in that part of the supply chain. Not that I'm trying to develop your business model for you, but would you think about buying things from other people that are growing using these techniques and moving them through your brand, are you thinking about going that direction?

Tyler Nuss:
Yes, absolutely. So of course, to start, we're going to be the primary farm just because we obviously, to your point, we need to develop the market, develop the brand, but that really is the goal. In fact, right now I'm working even on the product label design and what we're going to do on every product is feature a farm that's one of the primary ingredient growers and call them out. So obviously a little self-serving at first, it's just going to be Nuss Farms. But yes, 100%, in the future, we want to bring more farms into the brand and be able to highlight and showcase what they're doing on the farm.

Vonnie Estes:
Yeah, I think that's so great, and you've talked about this in some of your podcasts of just that doing that is so difficult and to ask small growers to do that whole piece is insane. So if you can build that muscle and build that capability and support other producers, that would just be fabulous for everybody I think.

Tim Nuss:
Yeah, we're super excited about it. I think it's really rare that there's a truly CPG company that starts at the farm level. It's typically companies that have an idea for the product and source backwards and find a distributor that makes the products that they want to put in their ingredients. So really starting at the farm and working back that way I think is a unique approach.

Vonnie Estes:
So you guys talked to a lot of investors and are involved in that whole community as well. So who's investing in this whole area of regen Ag? Is it people looking at tools, looking at brands, looking at farms, where's the funding going to come from to help really launch this whole idea?

Tyler Nuss:
I think it's all of the above and that's why I think it's super exciting. In fact, we actually had an investor on the podcast this week, Lew Moorman, and he has a fund called Soilworks and they're really focused on investing across the supply chain. I've talked to a number of different folks interested in the space and I think a few companies that come to mind on the tool side is Equipment Providers, one is Greenfield Robotics, I think Clint, he's been on our podcast as well. He's developing robots that go and do weeding, it's autonomous robots doing weeding so you can farm without chemicals. So that's one example on the tool side. Then on the brand side, there's a ton of companies that are really looking at this space. A few are Patagonia Provisions, they're making a big play in the regenerative space. A few CPG brands, Simplemeals, Cuddle on Fire are really pushing the regenerative story, and Planet Forward as well, which is Julia Collin's startup. There's a two and one, they're developing a platform to connect farmers and brands, but they're also developing a brand of their own, so I know they're doing well.

Tyler Nuss:
Lastly, on the farm side, I think it's a little simpler to invest in a company, not tech startup or even a CPG company, but on the farm side, I think it's really being developed right now. I think there's a great podcast, where the host, Koen, really dives deep in this space and about what does it look like to invest in a farm and how can that work for both the farmer and the investor. There's different people looking at the transition finance space. Matt Agriculture is a great example of a company that's focused on helping fund farmers transitions with really business friendly loans. I know Replant Capital just launched a new fund that's focused on this as well. So I think a lot of really exciting things. But what I love about the regenerative space is it really is the wild West right now and there's so much opportunity to optimize the tools, to invest in brands, and to really, most importantly, focus on the farmer.

Vonnie Estes:
A lot of people when they're talking about regen Ag start moving into talking about carbon credits and how that might be part of the business model. Are you getting any carbon credits? Is that part of your business model? And how are you working with that?

Tim Nuss:
Not yet. We're definitely keeping it on the radar, but it's not something we're banking on as far as our business model and plan for the near term. I think it is going to be a nice to have in the future as that system gets more developed and standardized.

Vonnie Estes:
Okay. Yeah, that'd be interesting to watch to see how that moves forward because certainly it'd be great for people to have that source of income while they're doing the transition.

Tim Nuss:
Totally.

Vonnie Estes:
So regen Ag is more about getting a particular positive outcome from improving your practices, whereas organic standards are more of a playbook following specific rules. How do you think both the farmer and the consumer response is going to play out with these two?

Tyler Nuss:
Oh, man. Really you're not holding anything back Vonnie.

Vonnie Estes:
You guys have all the answers, you have to sit in the hot seat this time.

Tyler Nuss:
Seriously, man. No, in all seriousness, it's something that Tim and I talk quite a lot about. Let's start with organic, I think the founding of organic principles, I think came from an incredibly sincere place and an authentic place. It was really a commitment to focusing on the crop and growing it in the best way possible. Unfortunately, what Tim has seen a lot in his career, and we've both seen, and I'm sure you've seen is because it has become, like you said, a playbook of specific rules, I think what we've seen at scale is that being manipulated and it really not coming down to what it was originally intended for. An example is you can have a huge high volume organic production that tills the soil, that uses an incredible amount of chemicals, all be it organic certified chemicals, but still chemicals and really not have a focus or a care for one, the environment and the soil and two, for nutrient density.

Tyler Nuss:
So I think what we're going to see is I'm really bullish on those two points of regenerative agriculture. It's focus on the soil and by extension the environment and also on nutrient density. I think consumers are going to be more and more interested in this space, brands are going to be more and more interested in telling that story and differentiating themselves, and organic doesn't really solve for that and I think regenerative is able to actually put the focus on those two areas.

Vonnie Estes:
Yeah, I totally agree. I think the organic bucket for so many years was just a very easy way for people to feel good about, they didn't really understand what was going on on the farm. It's like, okay, it's organic, so I'm doing the right thing for my body, my family, and for the environment. I think, like you said, it started that way and I think there still are great people doing organic things, but I think we're learning so much about that using a little bit of herbicide is better than tilling. There's just practices that they're using a balance and understanding what's affecting what in the soil and in the environment, it's more complex than just putting an organic label on it. Which nothing negative against that, but I think we're able now to understand more, partly with some of the data tools that we have to understand what's going on. So I really look forward to seeing how that plays out both on the farm and with consumers as they understand it better.

Tyler Nuss:
Totally. I think just to add quickly is we we're trying to take a really broad approach and parallel path in things. So we currently actually have 100 acres in transition to organic with the goal to be certified regenerative organic, which is an upcoming certification. So I think we're looking-

Vonnie Estes:
Which will be even harder I'm sure.

Tyler Nuss:
Totally, without a doubt. But I think looking at all these areas of opportunity, we mentioned carbon credits, nutrient density, some of these certifications and we're really trying to evaluate and be open to all options because what you said at the top, is are we ultimately going to get a poll from consumers and that's what's important. So we want to be prepared regardless of what happens.

Vonnie Estes:
So my last question, it's another softball, easy one. So in my view, regen Ag as a term is both polarizing just saying, okay, if you're not doing regen Ag, what are you doing? Degen Ag, so just the term is almost polarizing and there's been a lot of hype. How do we move away from the emotionally charged debate on semantics and also give it a science-based foundation that will make more farms willing to give it a try?

Tim Nuss:
Yeah, this is a fun one that Tyler and I talk about as well. It's definitely become very buzzy where every week you see a new article about so-and-so company that's becoming regenerative, I think Walmart is now a regenerative company. But in all seriousness, I think really farmers often use this kind of debate as an excuse not to give it a try and say it's not working. But I think we really need early adopting farms like ours to figure this out and solve the problems because I think to really scale this, it's going to take people to jump in and take some risks and really learn by doing.

Vonnie Estes:
Yeah. Well guys, thank you so much. This is so fun to have you on that side of the microphone and get to ask you questions, and I really continue to enjoy to listen to your podcast. Thanks for coming and talking about your experience. I really appreciate it.

Tyler Nuss:
Yeah. Likewise, Vonnie, we love what you're up to with this podcast and we really appreciate you having us on.

Vonnie Estes:
I love talking to those guys. I suggest you check out the Modern Acre Podcast and also information on Nuss Farms. Next, I will be talking to Praveen Penmetsa, CEO/founder of Monarch Tractor. Monarch Tractor is one of those tool companies enabling regen Ag. I love listening to Praveen talk about a tractor as a platform, but you will agree it makes sense. He has turned the compact tractor into a data hub as a next generation tool. So tell me about your company.

Praveen Penmetsa:
Yeah, so my company is Monarch Tractor that I'm the CEO of. Our whole mission statement is how do we advance clean farming. With that in mind, we've build an all-electric driver optional tractor that works as a data hub. It's basically a compact tractor in the 40 to 70 horsepower class just to segment our product.

Vonnie Estes:
Great. So we were talking a little bit before and you were telling me a little bit about your background and so you're a tech guy, how did you end up here?

Praveen Penmetsa:
I started off as a mechanical engineer working on things like electric cars and battery systems back in the early 2000s, when those things were still research projects, and this was all before even Tesla existed as a company. I was just tired of working on these research projects that were not getting to market, so I started a company called Motivo Engineering, which was all about electric cars, electric boats, electric planes, we did battery systems, and amazing consumer facing products like that. Along the journey, we came across this grand challenge from USAID called Powering Agriculture. Basically it was a call to action saying agriculture or the world needs energy, a lot of it, whether it's in the form of diesel, or nutrients, fertilizers, you name it and how do we do this sustainably?

Praveen Penmetsa:
So as a part of that, we developed an electric tractor solution, and that was my introduction to agriculture. Actually, let me rephrase that, that was my reintroduction to agriculture because I come from a farming family, my dad still has rice fields out in our village. But I would be lying if I said I know anything about rice farming. But with that introduction into powering agriculture, we developed an electric tractor solution that was the genesis for Monarch Tractor today. Also that electric tractor then brought me back to California and then I started looking at all the US farmer challenges in my previous company and we started working on a lot of technology solutions for planting automation, harvesting automation, cultivating robots, et cetera.

Praveen Penmetsa:
While we were doing that, we realized that between this electric tractor that we had and these are robots that we were deploying, there was a big gap. Farmers basically did not have a platform and these custom robots are not viable or scalable on a global scale. So the thought process was if we can develop a next generation tractor platform, one that is sustainable in the form of being all electric, one that helps by being automated so that it can solve the labor problem, but also provide a hub for all of these new generation of technologies that are coming in and act as a bridge between the old implements and the next generation of smart implements, then that would really kick start their digital transformation of farming.

Praveen Penmetsa:
So I said, "Okay, that's great." And that's when I reached out to a couple of my friends, and together we formed Monarch Tractor, which is myself, Carlo Mondavi from the famous Mondavi Wine family, Mark Schwager who's from Tesla Manufacturing, and Dr. Zachary Omohundro who he and I have now worked on three companies together, he brings the technology side. So the four of us started Monarch Tractor to build this next generation tractor and make it available to farmers today.

Vonnie Estes:
Wow, it sounds like a great group. So how is that different than what John Deere is doing? I see all sorts of advertisements by them, they have all these dashboards, and so what is what you're doing as... It's interesting you can tell you're a tech guy because you talk about it as a platform, tractor as platform. So how is it different than what other people are doing?

Praveen Penmetsa:
So it's completely different in the sense, number one, we reimagined the tractor from the ground up and we are building a compact tractor. So like I said, it's a 40 horsepower tractor, it's the kind of small tractor that you see all over the world, not just harvesting combine that you see when you look at these big ads that agriculture equipment companies have. So it's still a tractor, number one, it's a small tractor, and into that small tractor we have made it electric, we have made a driver optional, and we have made it have all the capabilities of a data hub. So nobody right now is focusing on the compact tractor, Vonnie, which we think is a big gap.

Praveen Penmetsa:
Amazingly the compact tractor is the most commonly used mechanization tool in global farming. So 1.4 million of these compact tractors are sold every year globally, which is amazing. They're also the most utilized common mechanization tool in farming. So it's also called a utility tractor and you'll see every farm has at least a few of these. They use it for attaching it to a trailer, moving some stuff around, it's the most common tool. but it's treated as a commodity tool with low margins, so none of the big Ag equipment companies focus on the compact tractor.

Vonnie Estes:
I see.

Praveen Penmetsa:
So what we said is if we can actually transform this compact tractor and make it a next generation tool, now suddenly it's a tool that a global farmer can use. Whether it's a farmer in Japan, whether it's a farmer in India, Asia, Africa, Europe, or America. Amazingly, we started off on this journey four years ago, and interestingly the market is coming to us. Compact tractors in America this year are seeing an 18% year-on-year growth. Also what's happening is the food ecosystem, like you know, is going more towards regenerative practices, smaller farm sizes, more operations which now need to be done in a sustainable manner. So all of that is driving more compact tractor usage. So we decided that we should basically build that compact tractor, really make it a next generation tool.

Vonnie Estes:
That's what got me interested in talking to you. Earlier in this podcast I talked to the Modern Acre guys about what they're doing on the Nuss Family Farm, and I asked them, who could I talk to that's involved in regen Ag that they have worked with and they suggested that I get in touch with you. So how are you involved and how do you tie yourself to the regen Ag movement?

Praveen Penmetsa:
That's a great point. Nuss Farms is a great example of our archetypical farmer that we think of and we say, who is going to buy our tractor and who are we targeting? So these farmers now want to change their practices, which often requires them to spend more time out in the field. You talk to Tim and Tyler and you know that time out in the field comes at a cost, it's a lot of effort, also fairly dangerous, you heard the story about how their dad was injured operating one of the farm equipment pieces, and agriculture is the third most dangerous industry after construction and mining. So more practices, more time in the field, comes with a cost both on the dollars and cents side and on the time side. How do you do more in a sustainable manner so that you're not adding to the emissions challenges while you are trying to take care of the soil health? So those are the three challenges, Vonnie, that we're hearing from people like Tim and Tyler.

Praveen Penmetsa:
So that started us off and we started fashioning our Monarch tractor by saying let's make it all electric so that one, we are not adding to the emissions by doing more, let's make it driver optional and put some smart sensor technologies into this compact tractor so that we can make it safer for the driver, and also maybe after they do the practice runs, we can remove them from the driver's seat so that they're not stuck on a mundane activity at 3:00 AM in the morning. Then the third one is the informational piece. How can we allow this... Tim and Tyler, for example, talked about the journey that they went on in terms of learning about these new things that they needed to do. So how can we make a tractor that with our sensors, cameras, and the micro weather station that we have there provide them the data and the insights to accelerate that journey on their side and go into regenerative practices. They talked about like for the first time they had to grow a prairie to feed the livestock.

Vonnie Estes:
Yeah, with the chickens.

Praveen Penmetsa:
Yeah. It's like, how can we do that with the livestock and how can we help them? Our sensors can give them the information, not just capturing it. But also if you have that... I'm still a tech guy at heart I guess, I like to use the word the platform, allows us to now have a channel back to them of providing some insights on, hey, if you're doing this, think about this. Oh, by the way, in real time because you and I know farming is very reactionary. It's 50% in fruits and veggies is planning, the other 50% you react. If you're in commodity crops, like where the other big Ag equipment companies are, it's more 80%, 90% can be automated. That's why you see the screens, that's why you see the big combines, and they always show you it's corn, soy, wheat, cotton. Those are 80%, 90% planned and 10% you react.

Praveen Penmetsa:
But when it comes to people like Tim, Tyler, all the fruits and vegetable people, it's 50% plan, 50% react. So our tool also helps them not only on the journey of learning from new practices, but also react faster without having them be out in the middle of the field day in and day out, night and day. So that's the magical combination we see is all electric, plus automation, plus data, all in a very accessible "common platform," the tractor is the magic. So that's why our name of the company is not Monarch Data, Monarch Agtech, it's Monarch Tractor. So we feel very strongly about the product and making sure that it fits the needs of the farmer today, not some futuristic product that's going to solve some data problem in the cloud.

Vonnie Estes:
That's what I love about this so much, and I pressed Tim and Tyler on this as well, is that we really need to have tools to be able to move towards regen Ag and know what we're doing and make better decisions and make better reactions and I think that's been missing. So then people think about regen Ag as something that's not science, data-based, and it is very much science and data-based. So I love hearing about you developing this platform in the form of a tractor that can actually go out and help farmers with that.

Vonnie Estes:
I hope you enjoyed this dive into regen Ag. There are as many aspects and ways to talk about regen Ag as there are farms. We heard a specific example of how Nuss Farms is using data and changing practices to develop a new business model to deliver what the consumer wants, I wish them the best of luck. As an industry, we don't know exactly how to implement regen Ag practices for all farms globally and things don't always go as planned. As I like to say, it's biology and for now, does not always do what we expect. We need to be comfortable with the gray area. There is capital from both inside and outside the industry interested in building new tools for more precision, better analysis, and great outcomes for the farm, the environment, and the consumer. I'm excited to see where it goes.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all of our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions on what you might want me to take on. For now, stay safe and eat your fruits and vegetables, and we'll see you next time.

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Description:
Pollinators are essential to the production of many of the micronutrient rich fruits, vegetables, nuts, seeds and oils we eat. In fact, 5-8% of global crop production depends on animal pollination for sustained production, yield and quality. In this episode we will talk to 3 experts in the field. We will first hear from Dr. Christian Maus- Entomology & Pollination Science Lead at Bayer Crop Science. He has been studying pollination globally for over 20 years and will talk to us about the importance of pollination and some of the challenges. We will also hear from two startups, Omer Davidi, CEO & Co-Founder of BeeHero https://www.beehero.io/ and Ellie Symes CEO of Bee Corp https://www.thebeecorp.com/ about their two different high tech solutions to monitor and improve the health and lives of bees.

Guests

• Dr. Christian Maus, Entomology & Pollination Science Lead, Bayer Crop Science
• Omer Davidi, CEO & Co-Founder, BeeHero
• Ellie Symes, CEO & Founder, The Bee Corp

Vonnie Estes:
Welcome to the second season of PMA Takes on Tech. The podcast that explores the problems, solutions, people, and ideas that are changing the future of the produce industry. I'm your host, Vonnie Estes, vice president of technology for the Produce Marketing Association. And I've spent years in the Agtech sector. So I can attest, it's hard to navigate this ever changing world. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. As with season one, my goal is to outline a problem in the produce industry today and discuss several possible solutions that can be deployed now.

Vonnie Estes:
This series of PMA Takes on Tech is made possible in part by the support of our sponsor TR Turoni. For more than 35 years, TR Turoni has supported fruit growing and horticulture companies with a complete range of scientific instruments, including specialized harvest and quality control instruments to monitor fruit ripening, sugar concentration, temperature, and firmness. You can learn more about their complete range of measurement and control instruments at trturoni.com. That's trturoni.com.

Vonnie Estes:
We all know if we stop and think about it, that bees are important to food production. But before I spoke to my guest today, I didn't understand how important they are and the various challenges to obtaining peak pollination for peak crop production. Pollinators are essential to the production of many of the micronutrient rich fruits, vegetables, nuts, seeds and oils we eat. In fact, five to 8% of global crop production depends on animal pollination for sustained production yield and quality.

Vonnie Estes:
Today, we are talking about the vital importance of pollination to the produce industry. We will first hear from Dr. Christian Maus, entomology and pollination science lead at Bayer Crop Science. Dr. Maus has had a fascinating career studying and understanding pollinator health globally. We will then talk to two startups with different business models, who are helping to support healthy bees, precise pollination, and the necessity of a strong colony to get the most out of crop production. Let's drop into our conversation with Dr. Maus about his love of bees.

Dr. Christian Maus:
There's a long history actually behind my interest in pollinators and bees. I've been already since I was a child found insects, very interesting and observing insects, their behavior, how they are living and their diversity. And so I studied biology with a focus on entomology. Again, 20 years ago, I joined Bayer and my first position was leading the eco toxicology lab for bees and so-called non target Archer quotes. And from that point of time on yeah, I was working on bees and other pollinators and it's still festinating in the first day I have been having a closer look at that interesting group of interesting group of organisms.

Vonnie Estes:
Great. And I gave this five to 8% number, but how can you talk a little bit more about how important pollinators are to our food production?

Dr. Christian Maus:
Pollinators are of great importance for our food production, for our agriculture. There are many crops which are relying on pollination by insects. We can say that five to 8% of global agricultural production is depending on pollination by insects or a few other animals, which is quite an impressive figure because it corresponds to several 100 billions of dollars per year. So there are crops which are almost entirely depending on the pollination by insects, like for example melons or almonds, some are partly dependent, but on the other hand, there are also some important crops especially crops like cereals, corn, rice, or potatoes, which do not require pollination. So that shows how diverse this whole topic is. But definitely we can say that there is an outstanding importance of crop pollination for our agricultural production.

Vonnie Estes:
And certainly in the area that I work in and then a lot of my listeners work in produce. As you mentioned, it's hugely important. So I live in California and when I drive in the Central Valley or in different areas, and I see stacks of beehives out in the field, especially like an almond orchards, like you mentioned. And so what's the difference between managed bee colonies. I mean, obviously those fees have been sat there and wild bees and who manages these bee colleges for agriculture, what's the business like there?

Dr. Christian Maus:
Yeah. Honey bees have been managed for centuries or even millennia by humans. They are managed by beekeepers and nowadays beekeeping, well, there are two main aspects on one hand, beekeeping for honey production, which is a big business, but also, especially in some regions, like in North America of great importance, beekeeping for pollination. Speaking about all of them, that's one of the most notable crops. In that context is a huge growing area in California that requires some millions of beehives being brought there every year for pollination purposes. And so far, honeybees are an important productive factor for the cultivation of this kind of crops. There are some other crops where we also manage pollinations like for instance blueberry or melons, but probably, alma is one of the most impressive examples of managed pollination.

Dr. Christian Maus:
You also mentioned the non-managed bees. So here we have to differentiate non-managed honeybees and non-managed wild bees. The honeybees, of course the original condition of them was living in the wild, which we call a feral bees, feral bee colonies. So they have been living in hollowed trunks in forest and so on. And of course there are still feral colonies existing. And for instance, in regions like South America or Asia, there are quite, or Africa, they're quite significant in numbers. In North America and Europe however, they are not so many feral colonies still existing because there is a parasite the so-called Varroa mite, which makes it hard for them to survive without the assistance of a beekeeper. Coming to the third group actually, which is the wild bees, the solitary bees, they are not living in colonies and living on their own. And they are extremely diverse. We have some 20,000 species worldwide and of course they are also important pollinators of crops.

Vonnie Estes:
Oh, okay. So what would happen if you didn't bring in an almond orchard, if you didn't bring in managed bees, would they, would you just have lower yields or would they not get pollinated, what happens?

Dr. Christian Maus:
Yeah. It depends to some degree on the dimension of the orchard, but if it's a big growing area which cannot be covered by the more native pollinators of the region alone, then you definitely will need manage bee colonies, which are brought there. If there is not enough pollinators in almond for instance, the yield will be yeah, not really good in terms of quantity, but also in terms of quality.

Vonnie Estes:
Okay. So you mentioned the mite, that's causing problems with bees. So we've heard a lot of people talk about colony decline. What does that mean and what are some of the causes?

Dr. Christian Maus:
There we have to differentiate between two different aspects of the issue. On one hand, let me speak about pollinator decline. It means that the numbers of pollinators are decreasing. So there have been for some times bee concerns because number of managed honeybee colonies in North America and in Europe were declining. Luckily this trend is reverted in the meantime. So the numbers are everywhere, stable or increasing again. And the reason for that decline was typically a decreasing number of beekeepers because yeah, beekeepers manage bees, they are of course thriving when there are beekeepers attending them. But it's the same, with cattle, if there are many cattle breeders, there are many cattle and the same with the bees when there are many beekeepers, then there are many beehives.

Dr. Christian Maus:
So, another aspect of the issue is a bit different, which is colony mortality. Which is that for instance, bee colonies are not surviving the Winter and that can have different reasons. One of them is the Varroa mite about which we have been speaking. So in the last, approximately 20 years, we have seen increased numbers of colony mortalities in some region, especially North America and Europe. So what is normal is overwintering mortality of five to 15%. But currently we see numbers of up to 20, or especially in North America, even up to 50%. And yeah, the reasons for those mortalities are multifactorial. They can be diverse, but one of the key factors causing that is very likely the Varroa mites.

Vonnie Estes:
So, are there any other big challenges to pollinators and Ag today in using them and in the business?

Dr. Christian Maus:
Yeah, well, there are always certain challenges. This is very different between different crops, for instance, and this huge cropping systems, which depend on managed pollinators it's of course always important to fulfill the demand of pollinators. So it's not trivial to bring some millions of bee colonies at one time of the year in a quite limited area. This is certainly a certain challenge, other crops there we have more the situation that they are doing well without pollinators, and they can be grown without managed pollination, but there are hints that the yields could be even further increased with managed coordination, but here in many cases, we don't know exactly the details. So those are cases where for instance, first new research would have to be done to get a better picture, what we can gain with improved pollinator management.

Dr. Christian Maus:
Another challenge again, we have for instance, in some tropical crops, especially where honeybees are not the best pollinators or not efficient as pollinators at all. Because they are relying on certain native bees, but they are not easy to make available in the very regional better crop is grown. For instance passion fruit is pollinated by this big black and yellow carpenter bees which are nesting in Deadwood. So here, for instance, there have been projects for instance to establish from nesting places for these bees to attract them to the whole farms. So challenges for pollination in agriculture can be quite diverse and there are quite diverse approaches to tackle them.

Vonnie Estes:
I've heard some comments and also, I know you've done some research on the effect of pesticides on bee colonization and pollination. Can you talk a little bit about what your studies have shown?

Dr. Christian Maus:
Yeah, definitely. Well, we see that, of course in agriculture, we need both, we need crop pollination, but we also need crop protection. So we have to make sure to ensure that pesticide that we are using are safe to pollinators. And this is something where in our industry, a lot of effort is taking a lot of studies. A lot of researchers are undertaking. For instance, in order to register a product, to develop a product, quite an extensive range of different studies are conducted to make sure that the products are safe to be, which is starting with a simple laboratory study. And we can reach to some highly complex field studies, which may last as long as three years.

Dr. Christian Maus:
And so far, we have, whenever we bring a product to the market, we have done the extensive work to study that product exactly. And to learn what it's characteristic in terms of environmental safety and especially pollinator safety are. And on that basis, we can design use pattern label for the product, which is making sure that it is used in a way which is assuring that bees and other pollinators are not harmed when the product is correctly applied.

Vonnie Estes:
So, what are some of the new technologies that you're seeing that are being developed and used to meet some of the challenges that you're seeing? I have seen companies out there trying to use artificial intelligence and just trying to understand hives better. And what are some of the technologies that you see?

Dr. Christian Maus:
I think this is definitely one of the important approaches where various companies are looking at digital methods in agriculture and in crop pollination. For instance, there are quite some positive experiences and it's a kind of rapid development on the sector of remote hive monitoring. So when you have to handle a huge quantities of beehives in managed pollination, of course, it's a great benefit when those hives can be monitored from remote, how they are doing, whether they are healthy, whether they are active without having to check each and every individual hive. So there's a great potential with digital methods to have a positive impact on one hand, well improve bee health, but also to improve and to optimize crop pollination.

Vonnie Estes:
The other way I see it helping especially in California is if you don't have to have a lot of people going out and checking the hives, then it just helps with labor as well. So you can do that remotely instead of having people there.

Dr. Christian Maus:
And it's a great advantage.

Vonnie Estes:
I have one last question for you. So I was surprised when I went on the Bayer crop science websites and was just looking at all the different things that Bayer is involved in around pollination and bee health. And so can you tell us a little bit about some of the activities that the company is involved in?

Dr. Christian Maus:
Yeah, definitely. Well, we have since a long time actually been involved in quite a broad diversity of activities to ensure bee health and be safety. And I just can give you a few examples of what we are doing because it's really yeah, quite a broad spectrum. We have to give you one instance, we have been quite intensively working for the development of new testing methodologies to be able, not only to test honeybees, but also wild bees and bumblebees for the safety of pesticides, for instance. So this is not an easy task because the behavior and the needs of honeybees and bumblebees are completely different. So we cannot just take a honeybee test design and test will be stripped that sometimes we really have to start from this crunch to develop a new design and that we are doing in collaboration with authorities and with research institutes.

Dr. Christian Maus:
But we are also looking for instance, at the crop pollination. One example is a long-term project in Brazil, where we, in collaboration with a university are evaluating in how far native bee species can be made accessible for managed pollination of crops. Because yeah, as mentioned, especially in some tropical cultures, we are lacking the right managed pollinators to have a really efficient crop productions in some parts or a third example is another last tail activity in different Latin American countries where we are doing again with collaborators in the countries and in the regions doing monitoring of honeybee health, because we know quite well, what other factors, which are affecting bee health in North America, in Europe, but not so much in other regions.

Dr. Christian Maus:
We can have completely different factors. So there is research lacking on that and this gap you're right to fill with this large scale initiative and on the basis of the findings of this monitoring, we are all collaborators and doing capacity buildings among beekeepers in those Latin American countries where bee are active like Chile, Colombia, Peru or Argentina. So just three examples. I could give you some more, but it shows a bit that we are not necessarily only focusing on one aspect of the health of bee health or pollination but try to be broad because it's broad and globally relevant topic.

Vonnie Estes:
Next, we will talk to two new companies with different approaches supporting the industry. First is Omer Davidi, of BeeHero. BeeHero's business model is to partner with beekeepers to offer precision pollination services to growers. Using sensors and analytics, they're able to understand what is happening in the hives on site, in transit, and before shipping to a grower. Their goal is to provide a full solution suite for successful pollination. Ellie Symes, the CEO and founder of The Bee Corp, will then tell us about her company, which uses high-tech infrared sensors to grade the hive. They act as a third party appraisal tool for the grower. Let's catch up with Omer followed by Ellie.

Vonnie Estes:
Before we get into talking about your company, which I'm really excited to hear about. I really hadn't thought that much about the business of beekeepers. I mean, I was on driving in the Central Valley. I can see them and I see big boxes, but I hadn't really thought about kind of the science and what it takes to really take care of these creatures. So these are your clients. Can you talk to me a little bit about what beekeepers do and how they do it?

Omer Davidi:
Sure. I think it's a very ancient profession handling bees. Mainly it was done in order to generate honey, the honey that we consume and most of us really like. So you get those boxes of bees and you try to get them forage in different areas and collect nectar and pollen. And this nectar will, at some point become the honey that we consume. And that was their main job for the last 1000 years. And the last 10, 15 years when we've started to see the industrialization of the farming industry and where bees and insects becomes more and more essential to the process of pollination, the main revenue stream for beekeepers became providing pollination services. So actually taking those hives that used to be static in one location and move them from one crop to another crop to make sure that you have a good enough of insects in your field, while the flowers bloom.

Omer Davidi:
And this profession involves a lot of challenges. Like first of all moving the hives from one place to another, the logistics aspects of it. But also some of the new changes of the environment and the use of pesticides and others, created a lot of pressure on beekeepers. So they physically inspect their hives every several weeks and they treat their hives and unfortunately they still lose somewhere between 40 to 50% of their hives every year. And that's the challenging part of being a beekeeper today.

Vonnie Estes:
So how often are they moving them on a normal year, I guess it depends on the crop, right?

Omer Davidi:
Yeah. So basically what we see here in the U.S. pretty much all the commercial hives and dealers will arrive at California for almond pollination, somewhere between February and April. That's the blooming season. Then some of the hives will go to pollinate apples in Washington. Some will go to the Midwest to plant other crops. Some might go even to the West Coast to pollinate berries and other crops. Usually you'll move the hive somewhere between three to six times a year. And then you have the location for the Winter process, which will be three to four months of trying not to move the hives a lot because they prefer to be in one location while they're hibernating throughout the Winter.

Vonnie Estes:
And did they move them by trucks? They just load them up in a truck or a van. Is that it?

Omer Davidi:
Yeah, I'm not coming from this industry. I'm coming from the tech side. My co-founder is actually the beekeeper. So a lot of those things that you just ask, I was amazed to learn when I started this journey, but basically when we are all asleep, there are trucks of hundreds of thousands of hives moving all around the states basically using forklifts to pile up those pallets with the hives on them 400, 500 hives on a load and they just drive them to the next location.

Vonnie Estes:
Wow. Who knew, what have you seen are the biggest problems that beekeepers face?

Omer Davidi:
So I think the main challenges are the high mortality rates, I mean, think of losing 40 to 50% of your business every year, and then working very, very hard in order to revive those dead hives and get back to the same baseline of number of hives that you have. And that's the main challenge. Those colony loss are caused by different stressors that affects our environment from the use of pesticides, environmental changes, urbanization, pollution, globalization, and many other stressors that makes beekeeping much more hard than it used to be. Adding the, let's call it the friction with the farmers, because now they need to not only generate honey, which is what they use to make for thousands of years, but now they also need to provide those hives to farmers to make sure that they get good quality of pollination and you get, in many cases, weak hives that does not pollinate well, and you need to handle the farmer and make sure that you can satisfy everyone and it's quite challenging.

Omer Davidi:
So, I think one of the main challenges is reducing the mortality rate and of course the operational costs and improving the quality of the hives. And also we don't see the new generation enter this industry. So you could have been a third, fourth, or fifth generation commercial beekeeper. And the business becomes so tough to handle. And sometimes, and we see it in many cases, the next generation decides to do something different. And I think this is a huge risk to the entire industry because in 10, 15 years from now, we need people to keep bees. We cannot survive without them.

Vonnie Estes:
Yeah. That was interesting. From the farmer's perspective, what are some of the biggest issues that they have in dealing with the bees themselves and also dealing with the beekeepers and kind of the business of pollination?

Omer Davidi:
From the farm perspective, we've seen a huge change in the last six, seven years in terms of moving towards precision agriculture. So you can optimize pretty much everything in the field from irrigation, to pest control, to nutrients and others. But there's a tiny component in this process, which is the pollination that must happen otherwise you don't get the flowers to turn to food. And 70% of everything we eat depends in a way on bees. Sometimes it's not immediately by generating the food, but even the chickens depends on crops that are being pollinated by bees. So if we cannot get sufficient pollination services for those 70% of crops that we depend on, we'll be in a big trouble, probably eating mainly corn and rice, which is boring with time.

Vonnie Estes:
Thank you. So let's turn to your company. Tell us about BeeHero and what you do, and give us the background on that.

Omer Davidi:
Sure. BeeHero's main focus is to help farmers optimize pollination cycles. I mean, we've mapped the entire value chain from the tiny bee to the food that we need to eat. And we try to figure out what components in this value chain can be optimized and improved to generate good quality of pollination, full pollination. So we started by developing off the shelf units, super simple, super low cost and that was the main focus, so we can scale the business. The beekeepers get from BeeHero and put inside their bee colonies. The beekeepers in a way are ours partners, they are not our customers but we work very closely with them. We provide them the units and our goal in life is to help them to reduce mortality rates, reduce operational costs, improve the quality of the hives. From that point, from the point that we work closely with the beekeepers, and we know their hives very, very well. We address the farmers together by offering them precision pollination services, where we can actually commit to the number of bees that cover every single acre.

Omer Davidi:
And this is crucial for getting the full pollination or the optimized pollination really depends on the crop. So combining the in-hive information together with some additional aggregation of data that we do regarding the specific block, the farm, orchard that needs to be pollinated, the density of trees, the amount of flowers and so on, we can actually provide a full pollination suite for every single crop. And that's been the main focus for the last two and a half years.

Vonnie Estes:
Oh, that's fascinating. So what kind of information are you getting from the hives?

Omer Davidi:
So from inside the hive, we collect things like temperature, humidity, sound, magnetic field. We have an acceptable method and GPS and some other cool sensors. We aggregate this data with environmental parameters, like crop geo-location, topography, microclimate and so on. And this enables us to address those two main issues. So on first sight, we can predict beehive disorders. So if the queen is in failure or you have high level of mites, or the bees go through salvation situation and so on, we can actually address or detect those patterns in very early stages. And at this point we provide the beekeepers with the information, with the insights and they can go and physically treat those hives and fix the problem. In many cases, if you know the problem early enough, you can fix it and the bees will not get into stress at all.

Omer Davidi:
The other aspect is to assess the expectation of every single hive in terms of providing the pollination services. So for every box, you have a level of energy that's going to be deployed in the field, and it affects the amount of flowers that this specific box will cover when you put the hives there during the blooming season. And now we can actually suggest the optimized deployment of hives in a way that will maximize the number of flowers being pollinated. So the combination of those two things enables us to mitigate the gap between getting a box of bees that you don't really know how many bees inside, even towards how many flowers do I need to pollinate.

Vonnie Estes:
I didn't realize that you worked with the beekeepers and then took kind of that business to the producers, which is a really interesting business model. So how do you charge, let me say are you charging the farmer? Are you getting a percentage from the beekeeper or what's the business model there?

Omer Davidi:
Yeah, I think you are touching an interesting point and this is something we struggled with for a while because it could have developed the sensors and it provides a lot of value and can just give it as some sort of a subscription to beekeepers. And this will help the beekeepers to improve. On the other hand, we have now the ability to track and monitor the activity level of bees doing pollination. So we can also offer the product for the farmers to measure the beekeepers. I think that having those two sides of the equations independently will not solve the real problem because beekeepers do not provide weak hives for pollination because they want to, they provide weak hives because it's very hard to maintain strong hives in this environment. And also farmers, if they know better about the hives, it might just put more pressure on the beekeepers.

Omer Davidi:
It will still not solve the problem of getting good quality of pollination. So we have to get everyone together in a way that everyone wins. And this is when we pretty much shifted the conversation from providing beekeepers with the service, to providing a full pollination suite, a full solution suite for farmers and beekeepers. What we've done in order to help farmers as well is to put a fixed price per acre. So the model today talks about how many boxes, how many hives you put their acre and you put per box per hive.

Omer Davidi:
Our conclusion is that it's not a question of boxes. It's a question of bees. So if we want to simplify it, if I have 10 million flowers that I need to pollinate in an area there's X amount of bees that I want to have there, knowing that 30% of the bees will go out to forage and a lot of statistical boundaries are put into those models and you can actually assess how many bees you need to have there. And we can commit to this number of bees per acre, and we can also measure it in real time. So we sell pollination as a service per acre for fixed price. And the supply of hive is something that we take care with our partners, with our beekeepers.

Vonnie Estes:
So now it also must give some labor savings as well as if there's probably some boxes that are fine, so people don't need to drive out and look at them. So that's probably an advantage to everybody, especially given the time of having problems with labor?

Omer Davidi:
Yeah, it's really tough, especially in the peak season when you need a lot of labor for the farming, which is very seasonal. It's hard to get labor on time and good quality labor that you can trust because a lot can go wrong. You're raising a very interesting point. We've noticed things like beekeepers that go to visit their hives while everything is okay. And they just spend three, four hours driving to bee hive. And everything is perfect. And in some cases they drive three, four hours and it's already too late. So being able to understand what happens inside the hive remotely helps you to manage your employees in a way that optimize your operation.

Omer Davidi:
Besides this we've seen beekeepers that want to know in advance, which hives they should send for pollination, some of the house might not survive the trip. So we can also offer insights about what hives worth sending and what hives you prefer to live where they are. So they can become stronger, maybe can join the next pollination cycles. Those are the things that we are still improving and doing together today because the industry it's really working blind and that stuff.

Vonnie Estes:
Well, thank you so much for taking the time to talk to me. And this is really fascinating, I'm so excited to have learned this important part of agriculture and thanks for the work that you do.

Omer Davidi:
Thank you so much. And I think it's a super important that you can spread the word of the importance of bees and pollination. Many people are not well familiar with how we rely on bees and I think it's super important and we enjoy doing it. So it's a win-win.

Vonnie Estes:
Yeah, I think for the produce industry specifically, so it's more important than in other parts of the agricultural supply chain. So I think it's important that people know that we got to keep the bees healthy. So thanks.

Transition from interview with Omer Davidi, CEO and Co-Founder, BeeHero to interview with Ellie Symes, CEO and Founder, The Bee Corp

Ellie Symes:
So we've interviewed over 100 commercial beekeepers back in 2018 when we got our National Science Foundation grant to narrow in on the issues this and so a big pattern we heard a lot is no different than a lot of the produce growers is labor. So beekeeping today is still extremely labor intensive and it's not automated at all. And so like a lot of produce operations, beekeepers struggle to basically complete all the tasks they need to do in a year and often have to fall short on certain things like maybe the hive doesn't get a fat as much as it should, or maybe they miss a treatment.

Ellie Symes:
So that was one of the biggest costs and issues we heard from beekeepers. And the other main one is Varroa mite. That's the single most devastating health issue that they face. And they're spending a lot of money on Varroa treatments. And it's a significant labor costs to do those treatments, but it's also a significant reason that you have a high of health issues.

Vonnie Estes:
Great. So on the flip of that, what are the biggest problems that you see that growers face in having to use bees and working with beekeepers?

Ellie Symes:
Yeah. We were really happy to hear that even though so we talked, we work mostly with almond growers. So even though almond growers rent, something like 75% roughly of the nation's beehives, they actually don't have too many problems securing the population. So beekeepers have done a really good job with it's called hive splitting to get their populations up, to meet the demand of the almond industry. They typically can get them on time, even though sometimes those trucks are stacked up at the California border stations, looking for fire ants. But I think one of the complaints we heard is just the risk of getting high quality bees. So it's very important for growers to have a really good beekeeper that they trust, which is why so many growers have been working with their beekeeper for 30 years.

Ellie Symes:
And I think the challenge that they have is that just like in growing any other crop, sometimes the beekeeper doesn't have total control over his hive quality, especially in February when those hives are coming out of Winter. And there's not a lot of time to correct health issues. So getting enough hives is typically not a problem. Getting strong enough hives is a challenge and is why we decided to focusing on helping growers check their hive strengths before they come in.

Ellie Symes:
And then the other complaint you will get when talking to almond growers is the costs. It is as extremely significant cost for them now. And what we were hearing before we offered verify was they really wished they had a better way to ensure that there's value in that cost, that they're getting what they're paying for. So those two problems are what we've honed in on really the growing side of the relationship.

Vonnie Estes:
Great. So tell us about your company and what you do, and what your services are?

Ellie Symes:
Yeah. So The Bee Corp, we help growers who rent beehives to pollinate their crop, assess the hive quality on the hives that they rent. So we're basically a third party appraisal tool, much like you would get an appraisal on your home when you're buying a home. Where we're basically it's called grading the hives is the industry term. We do a hive grade and this information helps our growers ensure that the hives that showed up are strong enough to pollinate their crop and get a good yield and to make sure that they're getting what they pay for. So it often is the terms that set the contract price as well. So we do this, grading's been around for many years especially in the almond industry. But what we're improving upon is we're grading through infrared image analysis. So once we capture the infrared image of the hive, the model that we've worked on spits out a prediction on the colony size. So the population size or number of bees, frame strength as the actual industry term for the growers and a web report.

Vonnie Estes:
So how do you do that? So the hives get taken to say an almond orchard in the Central Valley or someplace, and then you go there, you have to send a person there that does that before they start using the hive, or do you have sensors or how does that work?

Ellie Symes:
Yeah, it's a great question. So it's a service-based model. So our folks come out and take the infrared images. The infrared cameras exist outside of the hive. So we're capturing the hive surface. So basically you can have one camera capture, tens of thousands of hives which definitely helps. So we capture the image for growers. The reason that we're doing it or our partner organizations are doing it, it's just because it's quite complex to accurately operate an infrared camera. And it's really important to get good, accurate images. So we come out, capture the images. We do this at night, run around the orchards and with the beekeepers that are also working at night and the folks work in the orchards are working at night that time of year, too. And then by the next morning, our growers wake up to a web app report that has their strength information.

Vonnie Estes:
And what does that look like? Is it on a dashboard or what is the information they're actually getting?

Ellie Symes:
Yeah, so it's a web app dashboard and it's actually, there's a public demo account available to be viewed on our website. I just would go to the verified page to navigate to it, which allows folks to see everything they would see with a real report. So it allows growers to not only view their hive strength results, but also filter by site and by beekeeper to assess what's going on. We have a mapping tool that allows our growers to narrow in, on areas of the orchard. They either need their beekeeper to feed, or they need their beekeeper to replace hives on, or which blocks need extra bees. And then lastly, the last thing that was important to our growers was they can export any of the reports they create through filtering. They can export them to share with either different team members to keep on file or to forward to the beekeeper as well. So it's been built for the last few years by just getting growers feedback over what they wanted and how they wanted to be able to manage pollination.

Vonnie Estes:
So with that report then did they go back to the beekeeper and say, this is not what we wanted or expected, or we need to fix this, or what kind of conversations does that force between the grower and the beekeeper?

Ellie Symes:
Yeah, it's a great question. So we did find some hives that were low hive strength last year, and what our growers were able to do since we were out there early before bloom had started, they were actually able to contact the beekeeper. And when the hives were very weak, their beekeepers were really good about replacing the hives. For one of our growers, they have in their contract where if the hives can't be replaced, they actually get deductions off the contract price.

Ellie Symes:
So it saves the grower money. Again, it's that piece of paying for what you get and the value of what you've received from the beekeeper. And then some of them were just fine. They just needed to be fed a little bit. I would say those are the exceptions. The majority of the time, we are happy to give our growers good news about their bees and that just strengthens the relationship with the beekeeper. And we're working with some of our growers this year to integrate incentives for their beekeepers. So those beekeepers are getting rewarded for those strong hives that we found.

Vonnie Estes:
Fascinating to talk to these three, who all have the same goal, keep bees healthy so they can do the job of pollinating and producing great food for our industry. That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all of our episodes at pma.com and wherever you get your podcasts. Please subscribe. And I would love to get any comments or suggestions on what you might want me to take on. For now, stay safe and eat your fruits and vegetables, and we'll see you next time.

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This episode is a rebroadcast of a live PMA Virtual Town Hall held in September. In this episode we talk about the Last Mile for fresh produce and meal delivery. It is a truism in the on-demand industry today that the very last step of the supply chain is the most crucial, as well as the most problematic. Owing to its place in the end of the chain, it is often referred to as the ‘Last-Mile Delivery’. Distributing produce and prepared food direct to consumer was gaining traction prior to the pandemic and we have seen more mainstream acceptance as a result of it. We hear from Ashley Tyrner CEO and founder of FarmBox Direct, Manoel Coelho CEO and founder of Speedbird Aero and Bobby Healy CEO and founder of Manna Drone Delivery. Here are the videos mentioned in the podcast: https://drive.google.com/file/d/1HouJtmM0cIv0UfDu3pQjcQgu2QrzwGjR/view?usp=sharing and https://drive.google.com/file/d/1UyBUdgy2krxXqU7VTaP2ZslVdUwrQ26P/view. Lots of cool drone talk in this episode!

Guests

• Ashley Tyrner, CEO & Founder, Farmbox Direct
• Manoel Coelho, CEO, Speedbird Aero
• Bobby Healy, CEO, Manna

Vonnie Estes:

Welcome to the second season of PMA Takes on Tech, the podcast that explores the problems, solutions, people and ideas that are changing the future of the produce industry. I'm your host, Vonnie Estes, Vice President of Technology for the Produce Marketing Association. I've spent years in the Ag Tech sector. So, I can attest it's hard to navigate this ever changing world. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. As with season one, my goal is to outline a problem in the produce industry today and discuss several possible solutions that can be deployed now.

Vonnie Estes:

This series of PMA Takes on Tech is made possible, in part, by the support of our sponsor, T.R. Turoni. For more than 35 years, T.R. Turoni has supported fruit growing and horticulture companies with a complete range of scientific instruments, including specialized harvest and quality control instruments to monitor fruit ripening, sugar concentration, temperature, and firmness. You can learn more about their complete range of measurement and control instruments at trteronie.com. That's T-R-T-U-R-O-N-I dot com.

Vonnie Estes:
In this episode, we take on the last mile. The last mile of getting food to consumers has been a challenge that has only gotten worse with COVID. Today, we'll hear a rebroadcast of a PMA virtual town hall recorded in September with three innovative companies. We'll here from Ashley Tyrner, CEO of Farmbox Direct, a direct to consumer farm box company, and two drone companies, Manoel Coelho, CEO of Speedbird Aero in Brazil, and Bobby Healy, CEO of Manna in Ireland. I think you will find this a very interesting conversation on the last mile. Let's drop into the conversation.

Vonnie Estes:
Today, we're going to talk about the last mile for fresh produce and meal delivery. It's a truism in the on demand industry today that the very last step of the supply chain is the most crucial, as well as the most problematic. Owing to its place in the end of the chain, it is often referred to as last mile delivery. Distributing produce and prepared food direct to consumer was gaining traction prior to the pandemic, and we have seen more mainstream acceptance as a result of it. Here's a quick recap of the digital delivery wars that are happening in grocery currently.

Vonnie Estes:
In April, Amazon announced plans to offer free same day shipping to Prime members. In May, Walmart launched its next day delivery service of about 200,000 items in four US cities. In June, Amazon expanded its same day delivery services in the UK. Meanwhile, Walmart unveiled Delivery Unlimited, their version of Amazon Prime, offering free next day shipping on all products for a yearly fee of $98.00. Kroger Ship claims it will deliver in as little as one hour in some locations, and Target started same day delivery via their partnership. So much is happening in this space, and it's very competitive.

Vonnie Estes:
So, in this spirit, today we will hear from Ashley Tyrner at Farmbox Direct about her passion of getting health produce to people who need it most during these times. There's also been a change in how food is delivered in that last mile. The areal logistics capability of drone delivery is becoming increasingly sought after, yet regulatory restrictions have proven to be the primary barrier to large scale adoption. However, with COVID-19 restrictions, an increasing number of drone delivery companies have gained additional traction. Drones are proving their value as important tools for creating more resilient supply chains and socially distanced delivery services.

Vonnie Estes:
We will hear from two drone companies, Speedbird Aero in Brazil and Manna in Ireland, on how they are tackling this problem and delivering food and other supplies by drone. So, we're going to start with Ashley Tyrner from Farmbox Direct. Thanks, Ashley, for being here.

Ashley Tyrner:
Thanks so much for having me.

Vonnie Estes:
So, why don't you start by telling us about your business and how, and why, you are getting healthy food to people during this time?

Ashley Tyrner:
So, Farmbox Direct has been around for almost seven years. We deliver a CSA style farm box directly to consumers, to 49 states here in America. We have a new initiative, which is our initiative in healthcare, which is Farmbox RX, where we partner with different health plans to send produce boxes to individuals on the health plan who have diet or chronic related disease. In that, we've created a new space, which is food as medicine.

Vonnie Estes:
That's really exciting. So, what's changed since COVID? What are you doing more of? What are you doing less of? What's harder? What's easier?

Ashley Tyrner:
Well, in COVID, Farmbox Direct grew basically overnight by 2,200%. We were very fortunate. Liberty Fruit in Kansas City, Kansas is our packing partner. We were very fortunate that they were able to scale up with us literally overnight to feed America. We've noticed that our consumer has turned an older demographic. People who are 65 and older, most at risk in COVID, they need to stay home. So, we've noticed people like myself, that would maybe send a box to my elderly parents or grandparents. Our consumer has shifted.

Ashley Tyrner:
One, I think, very important piece is that people who never had shopped online before, they had to shop online. So, if a consumer had always went to their local grocery store to get their groceries, all of a sudden overnight they had no choice, if they wanted to continue getting groceries, and to stay home and stay safe, with the mandates to stay home, they had to go online. So, the consumer's mind has definitely shifted now post-COVID.

Vonnie Estes:
What about looking for fresh food? Do you think they've driven more towards, "Oh, I really need to stay more healthy?" Is that something else that's changed some?

Ashley Tyrner:
Yeah. I just read this morning, I think it was actually in the New York Times, that oranges are a hot commodity right now. Everybody's wanting the vitamin C. Oranges are selling off the shelves. Same thing with us. We've noticed that our most popular box used to be a small box. Now it's our large box. People are really paying attention to strengthening their immunity and to changing their eating habits to make them the most immune to what their surroundings can be. We were selling a cold and flu kit, where it had extra oranges in your box, ginger, and it would immediately sell out on our site within an hour. So, I think people are now paying attention to what can they eat that can help strengthen them for their environment around them?

Vonnie Estes:
Yeah. I saw that New York Times article. It's a great article, just really comprehensive about what's happening in grocery today and some of the big trends. Certainly, online shopping and the change at the grocery store was one of the big trends that they talked about. So, Ashley, what have been your biggest challenges in getting your products to consumer and looking at that last mile?

Ashley Tyrner:
By far, our biggest challenge has been UPS delays. So, UPS was also hit with the same problem that we were hit with overnight. They are beyond peak surges that they normally have, that they spend three, four months gearing up to in the holiday time of Cyber Monday, Black Friday, and Christmas shopping. So, that's been our number one problem, the delays that they are experiencing. I'm not shipping a book. I'm shipping fresh produce to consumers' houses. There's a lifespan of how long this box will survive during its transit.

Ashley Tyrner:
So, we've had to, very much now, pay attention to our last mile of delivery. We have now implemented where we have refrigerated trucks that are taking our boxes. We used to ship everything from Kansas City, and it would survive one, two, three days of transit during normal circumstances. Now we have refri trucks that are taking our boxes to certain hubs for UPS, different parts of the country, to make the transit time less that the box is outside of the cold chain, because we have to calculate now for the box was going to be a three day box, it's now a four or five day box.

Vonnie Estes:
Hm. How large of a cost is that last mile delivery to your overall shipping?

Ashley Tyrner:
Yeah. So, it's a lot. Right? So, the last mile delivery is usually the most expensive part. It has taken a hit on our COGS and our cost of goods sold. What's interesting is that if you drop a box in Pennsylvania, and you've trucked it from Kansas City to Pennsylvania, it becomes a local shipment up and down the eastern seaboard. So, there's a little bit of a price break there. So, it's a local box with UPS. Right? So, it helps calculate in the cost of what the refrigerated truck costs us on our margin.

Ashley Tyrner:
At the end of the day, it has taken up ... It's been about a 10% increase for us, that we, as a company, have to eat. I've had massive blowups with UPS over, "Because you can't get the box to the consumer, we are paying for it, as a company, and having to eat that cost." So, I think something that's very interesting is what companies are going to heavily grow in that last mile space, where we used to not necessarily pay a huge amount of attention. Right?

Ashley Tyrner:
It was just the box can leave from Kansas City. It gets there in one, two, or three days of transit. Maybe a very small percent of our boxes would have a delay. But it was maybe two, three percent a week. It was nothing for us to really worry about, and the box can really survive the fourth day of transit. So, now we have had to, in the middle of the company growing by 2,200%, and me homeschooling my child at home because she went to remote learning, we had to completely change all of the logistics of our shipping, which is a huge component of our business.

Vonnie Estes:
Wow. That's amazing. So, I think that's a great transition into two companies that are trying to solve some of that problem at the very end for you. So, thank you, Ashley, and please stick around. We'll have some questions for you at the end, as well. Thank you very much. Now we have two drone companies that we're going to talk to about the changes and challenges on how food is being delivered in that last mile. We'll start with Manoel Coelho from São Paulo and Speedbird Aero, and so happy to have you. Manoel, thanks for joining us.

Vonnie Estes:
To start with, I'd love to hear you tell us about your business, and the company, and what you're doing. You have a video that we can play whenever you're ready, and part of the description. For the people listening to this on the podcast, we will post a link to this video, so you can see it. Because who doesn't want to see drone videos? I mean, they're the coolest thing. So, I'll turn over to Manoel just to talk about your company and what you're up to.

Manoel Coelho:
Thank you so much for having me here. Speedbird Aero actually was born in Phoenix, Arizona in the US six years ago when we were working on a telemedicine project. I come from a telemedicine background, over 20 years. We felt that medications could not get to the patient on time, even though the medical advice could. So, that being said, two years ago, we moved to Brazil, where, with little capital, we were able to obtain here support from the regulators and [inaudible 00:13:13], other powerhouses here that have the engineers to help us develop a product, nationalized with local costs, that could deliver food, medicines, and important groceries, important items to the hands of whoever needs it the most.

Manoel Coelho:
So, that's how we started our company. As you can see in the video that we will share with you, this is the first drone delivery company in Latin America to obtain the initial certification from the regulators here.

Vonnie Estes:
So, what you can see from that video is that you have a two-stage delivery. The food is brought to a central point, and then it's taken either by scooter, or motorcycle, or walking, or some other way to the direct consumer. So, how does that two step work? Do you think that you'll keep doing it that way, or is that a step towards getting directly to people?

Manoel Coelho:
It's a combination of modalities. Right? It's extremely important to understand the terrain that we work. We're working in the city and one of the largest urban places in the world, which is São Paulo. Right now I am in Campinas, Brazil in the middle of a shopping mall, probably one of the largest in the country, making these connections. Right? Then it becomes very difficult in a vertical city, like São Paulo, or New York, or Manhattan, for example, to deliver with safety to somebody's home without a preplanned flight plan or a landing location that we can actually deem secure to do so.

Manoel Coelho:
So, the combination of modalities are extremely important today, considering that we need to earn the regulators' confidence that this can be done securely, and then take it one step at a time. So, today we were connecting strategic points in the city, where in different neighborhoods, passing through critical areas of the city that is very well known for huge traffic jams. Therefore, we can actually enable one delivery person to make three, four more deliveries an hour than if it were actually to cross the city and go through these terrible traffic jams, for example.

Manoel Coelho:
So, this is one of the bets that we're having here. With the multi-modality, you can actually make it much more affordable, in case of what Ashley was just mentioning a few minutes ago, ensuring that your produce can actually arrive within the right time, and it's expected from the consumer. Because that experience is extremely important, to receive your french fries that are fresh, or your produce that is actually fresh, as well. So, iFood is the largest food delivery company in the country. That's what they've seen after the pandemic. Now, with my acceptance and more utilization, once the pandemic winds down, you want to keep the same type of experience that you had, if you had gone to a restaurant, now ordering from home. So, these technologies are here to help and complement what's being done already by UPS and by others in the logistical arena.

Vonnie Estes:
So, you just recently got regulatory approval. Right? That just happened recently. I know, in Brazil, that's not always an easy thing. So, talk to us about what that was like and what the process is going forward.

Manoel Coelho:
Yes. The reason we left the US to come here ... Both my co-founder and I were working in the US at that time. We saw as an arbitration of markets that Brazil is well known for aviation, because of the third largest aircraft manufacturer here, Embra air. So, the regulators are very used to dealing with high technology. No one actually saw that. We were fortunate enough to be the ones landing here and working with them.

Manoel Coelho:
The regulations are being formed around the world. Our colleagues, as well, can probably share the same ... the UTM, the unmanned traffic management. We're going through to the first stages of proving the safety and the reliability of this technology. But then it has to be inserted, also, in how we will coexist with demand airspace that is above us today. So, that's actually one of the major concerns that we have, is not only proving that the device itself, the aircraft itself, is safe, but, also, how are we going to actually coexist with helicopters? I'm in the city here that is deemed to have the number one traffic helicopters in the world. So, how do you actually write the rules so we can all do what we need to do safely, without creating any harm for those that are underneath and completely unaware of what's happening up there?

Vonnie Estes:
Yeah. I've spent a lot of time in São Paulo in traffic. There was many times where I wish I had a helicopter to get to the airport. So, your project with iFood, has that launched? Are you still in pilot? What's happening with that right now?

Manoel Coelho:
It's launching officially in October. Tomorrow we have the biggest Brazilian network here covering announcing this amazing thing.

Vonnie Estes:
Congratulations.

Manoel Coelho:
Yeah. Thank you. It's really exciting to see the public acceptance, as well. Since COVID, as well, I think we're seeing an improvement on public opinion, which is fantastic for everyone. So, we need to actually continue to earn the respect and the confidence that we can deliver this one step at a time without overstepping our limitations, I should say. Along with the regulators and with the companies that are here betting on this technology, doing one step at a time until we can reach to, first, condominiums here. We could reach the high rises, and safe areas to land so people can actually share. Manoel Coelho Once you open one route as a public utility route, they can fly produce. They can fly medication. They can fly cell phones, all kinds of materials that are needed, and you don't want to leave your home. Brazil, we have some issues here with, obviously, traffic jams, as you mentioned, but, also, security. So, if you don't want to be moving about, around, without a reason to do so. So, that's extremely important, for us to take, like I said, one step at a time in this process through iFood. So, October will be when we launch a few deliveries per hour, eight hours a day. Then we're going to expand the routes from two routes initially to more routes, as we earn that confidence.

Vonnie Estes:
So, how is that going to work going forward, as this starts catching on and people want to deliver, like you said, pharmaceuticals and people's medications, and they want to deliver food, and deliver anything? Will there be an air traffic control type of position of people that will look at where the drone paths are going to be, so that they don't bump into each other?

Manoel Coelho:
That's correct. That's correct. Our software allows that to happen. So, we share that with the Air Force here, that regulates the airspace, so they're following. But they're also in ongoing discussions with many technologies around the world, along with the FAA, or AAZA and the European Union to ensure that all they're doing, as well, we're following very similar rules. What they're seeing in what they call the UTM, the unmanned traffic management software they're going to use, the technology they're going to use, we also use it here. Aviation only works because of conventions. That's extremely important, that we are also all connected.

Vonnie Estes:
Yeah. Are you thinking about where you might expand to after Brazil, or focusing on Brazil only right now?

Manoel Coelho:
I think Brazil is already a tough ask. It's a really, really large country, being asked to fly some very important materials, including the vaccine when it arrives here, to Amazon region. So, we have a lot. We started with the most difficult. Right? Flying inside the major urban cities. Now we can use this same technology, with a combination of multiple aircraft that we have, to complete missions in the Amazon region and the northeast, which is access to some locations, very challenging due to the road infrastructure not being as efficient.

Manoel Coelho:
So, that's what we are aiming to help, as well, during this COVID situation, that, actually, we can leave a legacy behind for those that are actually coming, as well, other companies that will join drone delivery, the unmanned areal logistics, as we call it, that they do it safely. Right? That the most important is for the industry, is let's do it safely, let's do it with the regulators in mind, pushing them into seeing us as that we're going to coexist with the regulations today. So, without the demand, as well, from companies, like iFood, that's betting on this technology, and there are a few others that are joining us on this flight, we will see that we can do this and accomplish it very soon. Ashley's company takes off with products, can be delivered on time without putting in jeopardy the quality of what they do.

Vonnie Estes:
That's great. How many people do you have in your company right now? What's your size?

Manoel Coelho:
About 15 people working today. So, it's really small. We're still focused on the first steps, and then gradually expanding to operators. We're calling them drone operators, not pilots. We want to make sure that we do this safely, but also efficiently. Right? The same, our designs, we're nationalizing as much as possible, the technology, because import tariffs are terrible in Brazil. We all know this. So, once we start importing, and the tariffs actually put a big toll on the cost here. So, we are now aiming to be very equivalent and the same level as the delivery services that are actually happening in the city today.

Manoel Coelho:
So, that's how we're going to try to expand. First of all, equating the cost of the delivery to what's being done today. Tomorrow will be a fraction of that, as we know very well. We'll be much more efficient, much greener, no pollution, and we can actually guarantee that delivery on time. Now, I still believe that there are some limitations to the technology. Heavy rain, and that has to be respected. But we will win, if we combine with the other modalities that already deliver on the big centers.

Vonnie Estes:
Great. Thank you so much. Stick around. We'll have some questions for you. Now we will turn to Bobby Healy of Manna in Ireland. Bobby, are you still with us?

Bobby Healy:
I am, indeed.

Vonnie Estes:
Yay! Thank you. Thanks for overcoming your internet challenges. It's always interesting when we have these things, from people around the world, or even people in the same state. You just never know. I was on a call earlier this morning that just dropped in the middle of Zoom for no reason. I was really hoping that doesn't happen today in this call. So, thanks for joining us. So, I've looked at your video and looked at your company. Really exciting stuff that you guys are doing, as well. So, do you want to start by telling us about the company? Then we can run your video whenever you're ready.

Bobby Healy:
Sure. Yeah. So, we're actually based in Ireland and the UK, where we do our manufacturing. We're 35 people. We've raised $10 million, so far, from US based VCs for our mission. We have a different approach to Speedbird in that we deliver directly to houses. You'll see this in the video. Our aircraft is fully autonomous. There's no pilots. It flies five miles away from a store, be it a retail store or a perishable products store. So, think hot foods, or ice cream, whatever you want. It flies at 80 kilometers per hour.

Bobby Healy:
So, our maximum delivery time is three minutes from shop to house. The aircraft, when it arrives at your house, it'll hover overhead at about 150 feet. You'll get a notification asking for confirmation of delivery. When you do that, we descend to about 40, 50 feet above your lawn or your drive, and then we lower the product down, the cargo down, on a winch. So, the aircraft doesn't come anywhere near people. It doesn't land. Then we use lidar to delivery the product to your feet, basically.

Bobby Healy:
We've been live since March. We've done about just short of 20,000 flights now. We've just today, actually, announced a partnership with Tesco. For your audience, Tesco is the UK version of Walmart. It's the largest retailer, foods, and vegetable, and fresh foods, in the UK and Ireland. So, with that, we will be delivering. We fly off the roof of the premises directly to consumers' houses, and guaranteeing a sub-three minute delivery time. So, we believe that in order to satisfy both consumer requirements and the retailer requirements, it needs to be lower cost. It needs to be green. It needs to be safer, and it needs to be quicker than road based delivery, which, of course, drones are.

Bobby Healy:
Our fully loaded cost per delivery is about 20% the cost of using the road for delivery. So, that was a pretty big announcement that the CEO of Tesco made today. It sets the tone for a new level of normal in the space that we're serving. As I said, we've been live since March, and the people that use our service now, they're not the tech propeller heads that everyone thinks or might expect. They're mothers, fathers, daughters, sons, grandmothers, grandfathers. You name it, it's everyone in the community. 95% of the rural community that we're serving in Ireland today is using the product.

Bobby Healy:
It very quickly becomes normal, very quickly becomes accepted and adopted. There is no noise. You can't hear the drones flying when they're cruising. There's no privacy issues that sometimes people think about, because we've no recording equipment whatsoever, no customer data. Of course, it flies like a bullet to your house. There's no traffic lights. Technically and practically, it's just a far better, more sensible mode for last mile than using the road. To echo what Manoel said, the USA, unfortunately, is one of the most conservative regulatory environments in the world. Not to say that it's not moving quickly, but given its nature, it's going to be a couple of years behind the rest of the world.

Bobby Healy:
We have three markets to announce towards the end of this year, that we will launch pilot projects in. So, as I said, we're about 20,000 flights now. We'll have about 150,000 flights by the end of the year. So, it's still tiny volume. There's no drone company in the world that's saying, "Today, we're launching." That's not what we're doing. What we're doing is we're experimenting and learning. For us, the audience of about 20,000 to 50,000 customers, it's about getting the details right, in terms of what are the products that people need? What's behavior look like? How do we model a small Irish town? How do we model a large suburban US town? How do we model these different profiles of demographics, really, or population densities, population dispersion? How do you operationally cover them?

Bobby Healy:
I certainly see the point to point model that Speedbird employs as being a good solution for cities as beautifully crazy as São Paulo. But we look at the business, I think, commercially, for us, it's more realistic to think in suburbs and rural towns, not densely populated cities. That's just an easier problem to solve, and probably likely more commercially viable early on. So, we think dark kitchens. We think large retail premises. We think collection of retailers, food producers, food sellers in centralized locations within the community. Ultimately, we think scaling, real viable commercial scaling, of this industry happens from the next 18 to 24 months onwards, and probably takes three to five years for deep market penetration.

Vonnie Estes:
Wow. That's amazing. I have so many questions on that. Do you want to roll the video? Because I think it's ...

Bobby Healy:
Yeah. Go for it. Yeah.

Vonnie Estes:
It's great. I would say, again, to the people listening to us on the podcast, we'll put a link to this video.

Vonnie Estes:
I just love that. I can't imagine my mother talking about drones.

Bobby Healy:
Just some background on that, that's Fidelna Glease and she's 75-years-old. Although, she told BBC News Service that she's 70-years-old. That was a partnership. That's still live. That's a partnership with the public health service in Ireland, to use their ... They've got this full digital stack of video consultation with doctor qualified online prescription directed pharmacy, and then we fly it from the pharmacy to the house. It's a small part of our demand. In the end, pharmacy is probably less than two percent of demand, relative to grocery or to convenience store. But still, important that when we, as an industry, put ourselves forward as a new technology, a new platform, something new for consumers to think about, that it's not just, of course, it's a commercial angle, but there's also real, genuine aid that we can provide in the pandemic.

Bobby Healy:
So, we're delivering COVID test kits. We're delivering pharmacy. Ultimately, we're not there yet, but we will be able to pick up COVID test kit swabs, as well. So, that's another way to look at it. The whole industry that we're in needs to tread very carefully for hearts and minds, that we make sure that everyone's happy with what we're doing, that everyone loves it, everyone wants it, and, oh yeah, by the way, you can get your hamburger and fries.

Vonnie Estes:
Yeah. So, how is it that there's no noise? All the drones that I've been around are really noisy.

Bobby Healy:
Yeah. Yeah. Totally. It's the number one concern when you ask people about drones, is noise. The number two is privacy. Number three, believe it or not, is job loss. So, we have specially designed propellers. That's simply it. We rotate very slow. They're large propellers. There's eight of them. So, they rotate 50 times a second, which is very slow for propellers. So, you end up with a frequency just less than the idle frequency of a diesel engine. Because we're at 80 meters up in the air, the altitude's very low. So, you actually can't hear it as it travels over.

Bobby Healy:
Most importantly, when we descend the 15 meters to deliver, you will definitely hear it then, but the sound doesn't travel through windows. So, if you order a product for 9:00 PM, and your neighbor's children are in bed asleep, they won't hear it. That's critical to make drone delivery work directly to houses. You have to be totally silent.

Vonnie Estes:
Yeah. I live in Silicon Valley. Before they outlawed so many drones, there was drones all over my neighborhood. People just playing with them. They would hover in your window. You could hear them all the time. So, that was not a good way to start out my feelings about drones.

Bobby Healy:
Drones have a bad reputation, like at the airport. I can name you a ton of reasons why drones have a bad reputation, but that will quickly be overshadowed by the positive use cases that we'll be ... medical delivery. There's a ton of different delivery services that are going to be happening over the coming years with drones, that just really bring a really positive benefit to society. I think, hopefully anyway, those positive stories will drown out the occasional moron that flies his drone into an airport or something like that.

Vonnie Estes:
Yeah. Talk a little bit more about your relationship with Tesco, and what you're going to be delivering, and how that's progressing.

Bobby Healy:
Yeah. So, we just announced it today. It goes live third week. So, the 28th of September. So, I should be panicking, but I'm not. We're already ready for it. So, we'll be delivering. So, we fly off the roof of the Tesco building. There's about 4,000 houses in the community. So, I think it's a population of about 10,000 people. We have about 950 of the products in the Tesco store. So, it's not the full Tesco range. It's 950 products. Customers can come to the Tesco website. They enter their air code, which is a zip code in Ireland. That's if they pay for it, and it'll arrive, depending on the time, and we don't know this yet, but we don't know how optimized our getting the product from the shelf into the drone.

Bobby Healy:
The maximum flight time for the drone, once the product is loaded, is three minutes. The average would be just over two minutes. We can fly in heavy rain and heavy winds. The partnership, it's a bit of learning, really. Tesco will learn operationally what it's like to have drones flying off your roof. We'll learn a little bit about the hand off between an entity like Tesco, that has already a click and collect product, where products get batched into vans, into shelves, that then get batched into vans, that end up on the road. This is far more granular.

Bobby Healy:
We just got an order for a coffee and a sliced pan of bread. That's got a 10 minute guarantee on it from order to arrival. So, we need to get those time slices ironed out. There'll be a lot of learning in this. It's the biggest thing we've done yet. It's new for Tesco. It was the CEO of Tesco that announced it today. For me, it's a good endorsement of this space. Obviously, it's positive for Manna and drone delivery. We've done a very good job of getting our platform safe, ready, and regulated. But I think it underlines that the space is real, and it's not some fun, crazy thing that technologists love. This is going to replace road based delivery for everything below.

Bobby Healy:
In our case, we carry cargo five to eight pounds of weight. So, practically speaking, you can see the aircraft behind me there. I'll just get out of your way. It's the size of a large seagull or a small dog. That's the way I describe it. If you think about volume, the cargo goes inside, and it's about the size ... It's 15,000 cubic centimeters, which is five 15 inch pizzas, enough McDonald's for six or seven people. It's a lot of space and a lot of weight. It's probably 90% to 95% of convenience store visits can be served with one delivery. If we can't serve it with one, we send three, which is an armada, or five, which is a squadron. They fly in formation to the destination.

Vonnie Estes:
You had said earlier that you were looking at delivering just places that were fairly close to the Tesco, or to wherever. How would you expand that range, if it's someone way out in a rural environment?

Bobby Healy:
Yeah. So, our range now is 16 kilometers, or 10 miles. We can extend that range, but practically speaking, it doesn't work well. A copter design that we have, rather than a fixed wing, is, for me, the best design for last mile, because it can handle tough winds. It can hover in really difficult weather situations. It's very safe to maneuver. It's not as efficient with energy as a fixed wing, as something that flies along the wing. For suburban or rural, you look at 90% of demand will travel less than 1.5 miles today. In Europe, that's the way, the data we model.

Bobby Healy:
There will be a 10% to 20% cohort of longer tail, of two to 10, even 15 miles. Those won't be practically covered with low value products. Those will have to go out a different way. Yes, we can do it, but it wouldn't be financially viable. The other reason, apart from just battery, not the energy, but the battery depreciation, which is a big part of the cost. You also factor aircraft utilization. So, one of our aircraft does six to 10 deliveries per hour. Right now we're flying 100 deliveries a day per aircraft. If you start to go from a maximum six minute round trip, average four minute round trip, to 15, 20 minutes, your aircraft utilization goes through the floor.

Bobby Healy:
Just like airlines configure themselves as low cost carriers point to point and short range to maximize aircraft utilization so, too, will drone delivery companies. So, our target population density is 1,000 people per square mile and upwards. Anything less than that is not likely to be viable.

Vonnie Estes:
Great. Well, thank you. I'm going to move into the Q and A. As I look at the questions, I wanted to circle back to you, Ashley. One of the things that I loved when I was researching you and your company is just your passion and how you got into this business to begin with. Why did you start this company? What were some of the drivers in your background and your life that you wanted to form Farmbox Direct?

Ashley Tyrner:
Yeah. Farmbox Direct has always really worked to eradicate the food desert problem that America faces, which we've just given it a cute name here in America, the food desert. It's really a global issue. It's food nutrition insecurity. So, where it's really interesting, and I listened to these two gentlemen speak today about the rural areas that a drone can service, as far as food delivery. Not a lot of people ... I take that back. Here in COVID, now people start to understand the food deserts more than before COVID.

Ashley Tyrner:
I think what COVID has done is brought light to that there are many people who just do not have fresh produce accessibility in our country. So, for us, that's our sweet spot of our customer. We deliver to people that an Amazon or a Walmart doesn't deliver food to, at this time. So, really, at one point in my life, I was on food stamps and pregnant with my, now nine-year-old, daughter. So, if you think about our low income individuals, the 24 million Americans that live in a food desert here in America, half of that number is considered low income. So, they don't have accessibility to fresh fruits and vegetables. So, last mile delivery of drones for something, like sending food or medicine to individuals that live in these rural areas, is lifesaving.

Vonnie Estes:
That's great. So, I have a question here for Manoel. Are there any third party privacy concerns with your technology?

Manoel Coelho:
Yes. Absolutely. One of the concerns, as Bobby mentioned, is privacy. For the same reasons, we don't have any cameras that can actually compromise this. Nothing is being recorded. So, we are able to demonstrate that, as well, which alleviates some of those concerns.

Vonnie Estes:
That's great. So, Bobby, how are you managing risk? Danger to people, children, animals, or managing other air, ground congestion issues?

Bobby Healy:
So, you separate risk into ground risk and air risk. So, ground risk is, obviously, chance of an aircraft hitting the ground, and the potential of injuring someone on the ground. That's the easiest one for people to think about. That aircraft behind me has all of the technical and safety features of a commercial aircraft. It has three flight computers, any of which can fly the aircraft. It has three separate batteries, any of which can power the aircraft. It has eight propellers instead of four. So, we can fly on four.

Bobby Healy:
Literally, everything on that aircraft can fail, multiple things can fail, and we still fly. Then, finally, we have a parachute on the aircraft that's independently powered. So, if we get it wrong, or if, for whatever reason, something catastrophic happens, the aircraft will descend to the ground on a parachute. So, you design it that way, and that's all ... I'm an engineer. The theory's all great until something goes wrong. Right? Theory doesn't make you sleep very well at night, if you're the CEO of a drone delivery company.

Bobby Healy:
So, then we proceed to volume testing. So, we have robotic battery changers that simply run aircraft 24 hours, seven days a week. All they do is fly. That's nonstop flying. We go through iterations of fixes we might see, design flaws we might see, a software flaw, whatever. We'll be at 150,000 flights by the end of the year. That doesn't give us ... I'd prefer to have a million, but 150,000 certainly says to me that, "You know what? We're pretty safe." We've got, so far, 20,000 flawless flights. We get to 150,000, we have a bit more confidence, too, to gradually ramp up.

Bobby Healy:
So, that's the process. You design based on best theory, best practice, and then you test, in our case, very large farms or over the sea in Ireland. We test in horrible weather, rain, wind, you name it, at different temperatures. That's the process. It takes time. For air risk, I think Manoel spoke about this. There's software systems called UTMs, that are like air traffic control, but they're automated software systems that allow drones to coordinate with each other's flight plans. So, that part is a lot easier to get right. It's purely technical, and protocols, and multiple technical entities cooperating together with known standards.

Bobby Healy:
For example, ambulance helicopter, police helicopter, or whatever emergencies, we all cooperate, and we get out of the way. That's actually a very easy problem to solve. The harder one is, let's say, we're flying in a large city or a large town, and some hobbyist buys a cheap $1,000 drone and starts flying in our airspace, what do we do about that? In our case, in the case of a cooperating commercial company, like us, there's two approaches. One is detect and avoid. That's where you use radar, or you use 5G mast, or you use very certain technologies to identify drones in the air that you're not expecting. It's the same technology you would use to protect an airport from drone incursions, for example.

Bobby Healy:
So, that area has evolved and getting better, but still not fully there. The industry still does have a risk. If it was at scale, really large scale, the industry has a risk that it needs to address, but the technology is there, thereabouts, and, ultimately, by the time we start to scale, there'll be good solutions for that, as well. So, I think, for me anyway, we're way ahead of people's expectations of how safe we are. Our calculation now puts us at 10 to the minus eight of critical incidents per operational hour. That's the same as commercial aviation. So, if you have an Airbus A320 flying over your head, we should be just as safe as that.

Vonnie Estes:
Great. Thanks. Manoel, do you have anything you want to add about managing risks?

Manoel Coelho:
Absolutely. It's very similar to what Bobby has mentioned. It's managing the ground risk, for us, is extremely important. That's why we have the optical recognition software, as well. So, if you have someone, some foreign object, or a person in the drone landing place, they will abort the landing. We have multiple redundancies, including a parachute, as well. We are showing that we can do this safely. Extremely important to take one step at a time. I agree 100%. Mentioning that what compromises sometimes the operations is the number of leisure drones that are in the skies. Without much control, without oversight, and that actually gives a bad name.

Manoel Coelho:
Including our head of safety here is the chief operating officer of the São Paulo Airport. So, he works with us, as well. So, we have aviators working with us and minimizing and mitigating these risks, including all the technologies that were mentioned before, from the UTM, from the drone avoidance technologies, looking at what other drones are in the vicinity. How can we actually avoid them? Right? Obviously, we also track all the aircraft traffic, police helicopters, helicopters, because we fly slightly below the helicopters, but then police helicopters is a whole different deal. They can actually go out and about without the predetermined routes.

Manoel Coelho:
For our drones here in Brazil, in the big cities, we actually have to have the routes declared. That's why we fly from point A to point B. We can actually have multiple routes inside the city, but we have to issue what's called a NOTAM, a notification to airman, and be in the air or maps of the city. Right? So, we know, for example, what airports are nearby, what helipoints are nearby, and we actually coexist with them nicely. So, that actually keeps the air risks much lower.

Manoel Coelho:
On the ground, obviously, having the operators, like I said, our drones are entirely autonomous, as well. But the regulators here require an operator to be attached to each drone. So, that's one of the first steps that we're going to overcome in making this technology even more scalable and more affordable, is when one operator can actually control multiple drones. At this time here, we have, actually, one operator for each drone, just to monitor the drones in case of any incursion by a foreign aircraft, another aircraft. Then we an actually have multiple ways to mitigate that.

Vonnie Estes:
Great. Thanks. For Ashley, how are you implementing traceability for consumer deliveries? Can you trace back to the field?

Ashley Tyrner:
Yeah. So, we're very lucky, again, of our partner, Liberty Fruit, because we sometimes joke that we're just one company, at this point, since they handle all operations. But they also handle all of our buying. We exclude some lead buy from them. We've grown so much we have our own buyer there. It's their employee, but works with us to source from different farms.

Ashley Tyrner:
So, if there's a recall, salmonella or something, this happens, listeria, they would trace it back to the grower at Liberty, and it would be rectified immediately. They have every certification. We're a USDA Certified Organic handler ourselves at Farmbox Direct. But Liberty has every certification you could have as a distributor. We have a whole implementation if something like that happens, of how we can tell our customers. The different lots that get shipped out to our customers are logged into our IT system, around oranges to these specific customers came from this grower.

Vonnie Estes:
Great. Thanks! Bobby, I'm going to ask you this one, given your background in all things transportation. Are autonomous drones going to link to autonomous truck or freight companies? How do you see these technologies integrating?

Bobby Healy:
Yeah. I think there's definitely a case for linking modes. If you think about UPS made some announcements in this space, and I think Amazon would be the same, where you have a medium sized leg might be 10 to 15 K, and then a truck arrives at the side of a town with 50, 100 parcels in it, and then drones take it the rest of the way. That's a logical connection, like a hub and spoke system that an airline would use. So, that is going to be tied together. I do think that the volume and the interesting play will be more like urban fulfillment centers.

Bobby Healy:
If you look at what Tesco have in their urban fulfillment centers, they have what are essentially dark warehouses that are robotically powered that have the bulk of the Tesco products set, with a great footprint, with no consumer facing footprint, but they stock that with trucks or vans, whatever. Robots then line up the carts based on online ordering, and drones will carry that the rest of the way. It's a really nice marriage and an efficient marriage of different modes of transportation that would be far more profitable and actually far more scalable than what we currently do.

Bobby Healy:
It's what we're doing with Tesco and with others in the dark kitchens side, centralized availability or fulfillment of products, and then distribute them via the many given spokes via drone. If that makes sense.

Vonnie Estes:
Great. Thank you. Well, we're coming up to the end of our time. What's really been inspiring to me in talking to the three of you, your three companies, is the real focus on doing good in the world right now. With Ashley looking at food deserts, getting healthy food to healthy people, and Bobby and Manoel focusing more on COVID and all the things to alleviate and help with that right now, but then, also, focusing on food delivery. I just want to thank the three of you for the work that you do and for taking the time out to talk to us.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all of our episodes at PMA.com and wherever you get your podcasts. Please subscribe. I would love to get any comments or suggestions on what you might want me to take on. For now, stay safe, and eat your fruits and vegetables. We'll see you next time.

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Description:
We start Season 2 of PMA Takes On taking on the "first mile." The first mile in the produce industry is from harvest through packing and shipping and on into the supply chain. This includes the technology used for harvesting, shipping, packaging, storing, transportation and tracking. It is the first part of the “messy middle” and is very messy. We talk to Seana Day Partner at Better Food Ventures about defining the first mile and the challenges in making our industry run. We then talk to Gary Loh Founder and CEO of Dimuto and Ken Bui Global Head, FreshCloud Infrastructure and Analytics at AgroFresh about how their companies are helping the produce industry globally with these challenges.

Guests

• Seana Day, Partner, Better Food Ventures
• Gary Loh, Founder & Chairman, DiMuto
• Kim Bui, Global Head, FreshCloud Infrastructure and Analytics, AgroFresh

Vonnie Estes:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, the Vice President of Technology at the Produce Marketing Association. And I've Guests: Boaz Bachar, CEO and Co-Founder, FieldIn, Carolyn Mooney, CEO and Founder, nextmv.io; and Lou Perez, Co-Founder and VP of Technology, Apeel Sciences spent years in the ag tech sector. So I can attest it's hard to navigate this ever changing world. Thanks for joining us and allowing us to serve as your guide to the new world of produce and technology.

Vonnie Estes
Welcome to the second season of PMA Takes on Tech, the podcast that explores the problems, solutions, people and ideas that are changing the future of the produce industry. I'm your host Vonnie Estes, Vice President of Technology for the Produce Marketing Association, and I've spent years in the AgTech sector, so I can attest it's hard to navigate this ever changing world. Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. As with season one, my goal is to outline a problem in the produce industry today and discuss several possible solutions that can be deployed now.

Vonnie Estes:
This series of PMA Takes on Tech is made possible in part by the support of our sponsor TR Turoni. For more than 35 years, TR Turoni has supported fruit growing and horticulture companies with a complete range of scientific instruments including specialized harvest and quality control instruments to monitor fruit ripening, sugar concentration, temperature and firmness. You can learn more about their complete range of measurements and control instruments at trturoni.com. That's T-R, T-U-R-O-N-I, dot com.

Vonnie Estes:
Welcome to episode one. I'm so excited to get started with season two. Today, we're going to be talking about the first mile of produce. My next episode, episode two, will discuss the last mile where produce gets to the consumer and there is much conversation about the importance, and all of the changes due to COVID, on how people get their food to their refrigerator safely. But as you will hear from my guests today, the first mile is equally gnarly and important. My guests will discuss the messy middle of the supply chain where much disruption has occurred in the previous months. The first mile of that messy middle is from harvest, which is on farm, through packer shipper. So this includes harvesting, logistics, storage and standards.

Vonnie Estes:
Two threads I heard, in this, and many conversations I'm having are around technology adoption and trust. Because of COVID we can't go out and just look in the orchard or pack shed. If there is a problem with your supplier you can't just fly there, check it out and work out the problem. These technical tools of tracking product quality from harvest, like computer vision software, various sensors, data analytics are all on our phone and have been available for a long time, but it has always been easier just to look. But our eyes don't see what data analytics will tell us, so people are finally adopting and using these tools as they were meant and it's working.

Vonnie Estes:
The second thread is around trust and transparency. Consumers are asking for it, and buyers are getting more sophisticated on tracking and are putting pressure on processes to use tools to provide integrated data throughout the chain. This type of behavioral integration, and the structure to use, it will engender trust. My guests today are, Seana Day of Better Food Ventures, Gary Loh with DiMuto, and Kim Bui with AgroFresh. Let's jump into the conversation with Seana.

Vonnie Estes:
I'm so happy to speak with Seana Day of Better Food Ventures. If you don't know Seana, or you don't know Better Food Ventures, I really suggest that you go to their website and look at the farm tech landscape that Seana put together. It's a really comprehensive view of what technology looks like in this area right now. And whenever I'm trying to remember who's working where and in what space I always go to that landscape and go, "There they are!" So it's a really great view of the industry and what's happening in technology in farm tech. So welcome Seana, great to have you.

Seana Day:
Yeah, and it's a pretty literal interpretation of that space between the farm gate, and, the processor, the packer shipper. And really my business partner, Brita Rosenheim, and I now are in the midst of a very messy food supply chain tech deep dive and we'll be rolling a new landscape in the next couple of months, because really that messy middle for me is, like I said, from farm gate through to packer shippers, to processors, and really even beyond that to the retailer, to the point of sale, to the food service marketplace as well. But yeah, I think today we're going to spend a little time talking about that first mile and we can go a little bit deeper there.

Seana Day:
I think the long story short there is, it's incredibly complex and one of the things that I found when I started to unpack this is it's really essential to look at the different value streams. I think so often when we're talking about food tech and AgTech, especially on the AgTech side, we're sort of broad in terms of what commodities, or what products we're thinking about. I found it really instructive to start to unpack, like I said, those different value streams from dairy, to protein, to fresh produce, permanent crops, specialty crops, and of course commodity row crops. Grains and oil seeds, and seafood as well. I would add, that's another stream that has its own set of complexities, so we've really looked at all of those.

Seana Day:
I'll spend a little bit more time today talking about the fresh side. I think that will be more relevant to your audience, but boy, I think the real take away is just how complex. And I don't need to tell your listeners that who are in the industry, but if you're coming, maybe, from outside the industry, you're an investor, you're an entrepreneur looking at this space, it's really important, I think, to distinguish and really start to dive into those different value streams to understand where the challenges, where the friction is, where some of the bottle necks exist, and certainly throughout this COVID reset, I guess we're calling it, we've really started to understand where some of those, perhaps, systems that hadn't been invested in or hadn't really been evaluated, being thrust into the forefront in terms of modernization.

Vonnie Estes:
As I mentioned, in this episode we are talking about the first mile. I have an upcoming podcast about the last mile, which is the very last step of the supply chain where the product gets to the consumer. And in produce, it's likely when it gets to the consumers house. By truck, or car, or drone, or robot, it's often very crucial and problematic, and because it's the last step it's called the last mile. But I think, what's interesting to people who spend a lot of time thinking about that piece, is to really think about the first mile, and that, from what you often talk about, the first mile can be equally important. Can you tell us a little bit more about that first mile part?

Seana Day:
Yeah, absolutely. When I think about first mile, and I think about some of the technologies that we're seeing in the first mile, it's really around a couple of different pillars, or categories. So I include harvest in that. I think harvest is really important, because it has such a big impact on timing, on quality, on logistics, on resource allocation. So, although harvest happens within the farm gate, I think it's essential to look at in that first mile header. I also look at logistics. I look at market access. I look at things like quality and standards. There are quite a few companies that we're tracking that are focused on freshness monitoring, freshness applications, things to extend shelf life. So within that first mile, I think that's probably a good broad way to think about the different categories of it.

Vonnie Estes:
So you mentioned, a little bit, the tools, but what tools do you see being developed to help with the first mile, as you define it, and who's building those tools, and who's using those tools?

Seana Day:
It's interesting, and I think it's a great way for you to think about this podcast series in first mile, last mile. And really, what we've found, when we'd step back and do these market map, or market landscape exercises, these almost become a heat map for myself and my partners. We do the infographic and we can see all the logos, but behind that we're tracking where is the startup activity, where is the investment flowing, where are there a lot of legacy vendors, or maybe incumbents, who have multiple products in their suites. And really think about, what we've seen is this barbell of innovation.

Seana Day:
So a lot happening in the first mile, a lot happening in the last mile, but really of these big market vendors in the middle of the market processing, again, logistics, transportation management systems, whether we're talking about primary processing, secondary, and within that you have a whole manufacturing technology stack as well, where there's automation, maybe where there are opportunities for more automation, or industry 4.0. So, long story short, when I think about where those pockets of innovation are in that first mile, and where the start-up activity exists, we're looking at things from harvest and yield forecasting. We're looking at supply analytics. So how are buyers, whether they be retail buyers, food service buyers, or some other aggregator in the middle, how are they looking at market pricing, if there's a labor issue in a market, if there's a transportation issue, or a weather event that they need to be aware of, how does their ordering and buying pattern, or practices, how are they impacted by the supply, and what are the analytics.

Seana Day:
We're seeing more and more interesting companies there, certainly on the post-harvest monitoring. So from that farm gate to the processor, or to the packer shipper. You've got companies like Zest Labs, like AgroFresh, and several others who, really, their value proposition is around quality and shelf life. How do you extend, or how do you better manage that shelf life and freshness. You've got quite a few companies that are focused on cold chain monitoring, and freshness monitoring, and many of these are IOT type platforms, where you've got sensors around temperature or humidity and different conditions in the first part, and beyond, in the supply chain as well.

Seana Day:
And we've seen some interesting splashy companies on that freshness application side as well. Companies like APL and Morine, and some others in that category who are applying some sort of bio material to help extend shelf life. And then, of course, we've got some innovative packaging companies there, also. So sometimes packaging will happen from a post processing. But within that stack we really have seen quite a few start-ups. I still am not really seeing a lot of that early stage investment there, so these companies are doing a lot with very little.

Seana Day:
I look forward to, over the course of the next year or so, to see some more investment capital flow into this space, particularly as more and more attention is being shown on the supply chain, and where the opportunities for investment, and improvement and efficiency. And really the macro problem that, I think, many of these companies are trying to solve, and throughout the supply chain, is really waste. How do we manage shelf life better, how do we manage freshness better. How do we reduce this massive amounts of waste that happen from the farm gate, through the retailer, and into our refrigerators. And, I think, that's the big picture, trillion dollar challenge that many of these companies are going after.

Vonnie Estes:
I think it's interesting about the investment. I think more of our traditional farm tech type investors, or even further down, more food tech investors, they, for good reason, didn't want to step into the messy middle, because it's messy. But I think now, with the work that you've done, and others, who are shining a light on this part of the supply chain it’s really critical in getting food into people's hands. And so I think, like you said, we are seeing more people look at it. And I think they're more difficult business models. It's more difficult to say what's a return on investment, and how long is it to build, but I think, you know, we hear from AgroFresh after I talk to you, and one of the interesting things about them is, if they were an existing company that had a lot of products already used in the harvest time and keeping freshness. And so for companies like that to say, "Okay, now we're going to build this set of tools to really help all the way through the supply chain for transparency," is really important to have companies like that be involved.

Seana Day:
Absolutely. And one other, from an investor standpoint, when we looked at bifurcating the AgTech world into farm tech and food supply chain tech, it wasn't to suggest that these two aren't deeply, deeply interrelated, it was really to reflect the amount of activity, and new companies that were coming into the market, and we just need more space. But, the thing that I would also say about bifurcating those two landscapes is really... As an investor we're talking about enterprise software here for the most part. The sales channels not directly to a grower, although there are some vertically integrated grower packers, but for the most part, we're talking about software that's been sold as an enterprise package. And for a tech investor that's a lot more comfortable than the sales cycle associated with selling to farmers or growers, so I think, again, there's a learning curve here, and it's going to take some work for investors to get taught up on it.

Seana Day:
But there are some dynamics, I think, that are really encouraging. Those enterprise sales, software to service models, it's really well designed for that, and there's a hunger I think. When I talk to packer shippers, when I talk to others in the supply chain to say, "There's good technology out there. We're hungry for vertically focused ERP systems, vertically focused solutions for us." Because I think we've seen a lot of horizontal. You see big technology companies, and you've got horizontal, whether they be logistic solutions, warehouse management, ERP. But that ability to really have that vertical expertise, especially in something like produce, or dairy, for that matter, is really, really valuable. So I'm excited to see some companies that are really putting a lot of good work into this post-harvest management technologies.

Vonnie Estes:
So with all the moving parts right now, with COVID, and things changing, do you see these tools helping to build trust in the industry?

Seana Day:
Absolutely. We can't have trust without transparency, right? And historically those tools have been there, but the incentive to adopt has been tempered, at best. I think that's really changing. Not only is the consumer driving that change, but really, it's buyers, whether it be food safety concerns, again, freshness. How do I optimize my produce department? How do I optimize my buying or procurement if I'm a food service operator? So I think that the buyers are getting more and more sophisticated, demanding more and more. And it's putting a lot of pressure, frankly, upstream on the packer shippers, on those that are doing the processing, to really digitize and modernize some of their systems.

Seana Day:
And I think trust is a continuum, and I saw a really interesting keynote a couple of days ago that talked about the supply chain trust model. And that really resonated with me, because we talk so often about trust. It's just one big thing, like I mentioned earlier, in AgTech. But really unpacking what trust means, and how can technology serve to progress a stakeholder along that continuum. When you start off with that limited trust, where it's just short term goals, there's not a lot of incentive to improve efficiencies, or improve information sharing. But as you can start to advance along to more transactional trust, to relationship trust, and ultimately to more collaborative trust, I think that creates the foundation for some really interesting shifts in the market. But trust doesn't happen overnight, and we need tools to help engender that trust.

Vonnie Estes:
Do you think, with going through this process, and having this transparency, and building some trust, do you think that this is going to change the structure of the messy middle in any way?

Seana Day:
I do. I've written a little bit about this, and maybe it's optimism, but I also believe that it's possible. Today, I think there's a lot of disincentive to share information. And I've thought a lot about this concept of behavioral integration, and some really smart people have shared their insights on this with me, but really, when I think about behavioral integration, we know a lot about vertical integration, obviously, but it's having your stakeholders, your supply chain partners having enough trust to be able to share cost information, quality information, customer service, and really start to create more value driven relationships.

Seana Day:
Where in some cases, my dream is really that farmers are able to move from being price takers in this market to price optimizers. But that requires trust. That requires information sharing. And I think if we have this infrastructure in place, and the rules of the road in place, to how, and with whom, and when we share information, and how we get ourselves better integrated, it will help smooth out some of that risk reward, some of the asymmetry that exists in the risk reward equation now for growers, for packer shippers. And that's my hope for the future. I think, in perhaps, a more tangible, or immediate way as we are able better connect these sources of data, as trading partners trust each other more, our ability to deal and tackle a lot of these waste issues along the value chain, I think, become much, much more in reach.

Seana Day:
I think I read something recently that much of the food waste, as we know, happens from the farm gate to the retailer, and a lot of this is because they're temperature sensitive products. An hour here, or an hour there can have a big impact on shelf life. And I believe the figure that I had seen attached to that volume of loss was something like, 17 billion annually. And it just makes you think. The prize is big enough, it just takes alignment across the value chain to really achieve that. And again, we think about those foundational trust model, and how we use these tools to reinforce it.

Vonnie Estes:
Seana did a great job laying out the first mile, its issues, and why we should care. We will now hear from two solution providers working in this area. First will be Gary Loh from DiMuto, followed by Kim Bui from AgroFresh.

Gary Loh:
Well, DiMuto was basically set up to solve a problem that I was facing when I was running a produce company. It's a problem in the trade, where I feel that there was a huge problem, in that we usually know where our things are, but we do not know the condition of our things when the left, and the condition of the things when it arrives. And this lack of visibility in our commerce, or trade, really affected us, and this is why we set up DiMuto to tackle that problem. It's something that has been termed messy middle, and for us it's just trying to add visibility, transparency, and traceability into our commerce and our trade. So this is what DiMuto really wants to tackle, and this has been the mission. To really add some visibility to the way we do things, rather than working in the blind.

Vonnie Estes:
So who are your customers?

Gary Loh:
It all starts with the packing line first. I think the way we look at the supply chain, we did not see farm to table means that you start with farmers as the immediate source of the problem. I think where we tackle is at the packing house. And then it would become the distributors who actually receive. So we took the biggest point of our customers base as the packers. And then from the packers to the distributors, or the buyers. And then after that we worked backwards from the packers back to the farm. So it's like breaking down the problems into pieces, and then looking at trade in a way where, between a big packing house and a buyer, like a supermarket, we call it a big trade. But of course, between an aggregator and a pack house, that's one trade. Between a farmer and an aggregator, that's another trade.

So it's like working in a commerce in a manner where it's a delivery of goods going in one direction, and ensuring that money flows in the opposite direction. So the way we look at trade is almost like conjoined twins of goods being delivered and then money being received. And it's because of this lack of visibility that our flow of goods, and the flow of money has always been jerky, and at times, even more disruptive. So this is the customer base that we are naturally approaching.

Vonnie Estes:
That's fascinating, because I think, like you call it, the messy middle, I think so many people don't understand what happens in that whole space. And it's very opaque, and I think there are people that really benefit from the fact that it's opaque, so I think it's great that you're just starting to make this more visible. So, we talked to Seana Day, earlier in this episode, about the first mile. And she's started looking at technology, and looking at what's really happening in that first mile. And that's an area that people aren't paying much attention to, and in her definition it's from grower to processor shipper. 

Gary Loh:
Mm-hmm

Vonnie Estes:
So how do you interact, and what do you do in that part of the chain?

Gary Loh:
Yeah. It's interesting. I like Seana's description when she mentioned messy middle in one of her talks. And then we adopted the same language on that. It is messy. It is okay. And she was right. I think the way we looked at it is that, the general relationship of grower, processors and shipper, I think we work that process. Helping processors have the visibility that they never had. In a sense that they usually do what they do very well at the packing lines, and then the minute it leaves and it goes into the shipper quarter, they really don't know what's going on. At the same time we have to struggle with the information coming up from the grower, because some processors are growers themselves.

Gary Loh:
So where we are addressing this relationship is to really tackle the one where, extend your visibility beyond your four walls, beyond the factory that you have. And really try to change the mindset that it may seem like you're paying for cost at the beginning, but the value that comes to you from reputation, potential brand, or in terms of having the visibility to see who your ultimate customers are, and the feedback that you get, really change your whole business operation. That, instead of thinking that what you can control is within the four walls, now you can control beyond it because of that data that you get. So that's the way that we interact it. And sharing the information with our processors, and then sharing that information back to our growers, so that those information actually shared in a way that, what is the transit period, what is the shelf life period, and when was it the final harvest?

Gary Loh:
So all these things actually need to be added together. So how much yield you get requires you understanding what's going to basically be placed where, and sold where. So that means you need to know the transit time as well as the shelf life time. And if all these things are put together, I think the value that we can share with everybody in this first mile would be a lot higher. And that's the way we interact with them.

Vonnie Estes:
Is there anyone who feels uncomfortable with the data being shared back and forth? Do you have to go to the growers and convince them that it's a good idea to share this data?

Gary Loh:
Yeah. I think it starts off with some hesitation, because of everybody not being sure. But the truth of the matter is, the data is actually from the person who created it. So it's almost like a feasible relationship, where if it's your clients, it's your information, and it's your document, it's only kept with you. And if you do not use any of the services that, for example, you're not using it for financing, you're not using if for insurance, then I don't think you need to share it with anybody.

Gary Loh:
But the way we've been fortunate about that is that, we've given them a lot of pilot trials right from the very beginning and show how simple it is. And then show how this data is actually protected. And I think it takes a bit of convincing, but I think this environment has actually helped us, especially in COVID, because people can't travel. So this has played to our benefit, actually, in a strange way.

Vonnie Estes:
What else have you seen? What kind of changes have you seen since COVID?

Gary Loh:
I think the biggest changes, it's strange when in the past where, when something did go wrong most people would say, "Well, Gary, even if things are wrong I'll just hop on a plane to Arizona, or I'll just hop on a plane to Ohio." I think it's not so easy anymore, and I think most of us can't. But that is the biggest change. That even if your sales office is in Los Angeles, and you are now trying to go down to Vesalius, or in Netherlands, you could be in Amsterdam and you're packing house is three hours away. Or you could be in Bogota, and then you need to go to a pack house somewhere else.

Gary Loh:
This problem now, basically, amplifies quite significantly, and this is the changes that our systems allows you, to basically have the ability at where it's been packed to where it's been received. And we're using a lot of mobile applications to capture what a human eye would be able to see. We're basically taking that image back to almost central common. So in that end, the kind of communication that we've been able to share, basically allows people in COVID environment to still see the operation without leaving the house. So that the conversation from a sales person say, "Yeah, Gary, the things were packed. Everything looks good." And when it arrives on my side and I say, "Hey, sorry Bob. It wasn't as good as you said. Things are wrong." And then we go into a big discussion. And in this kind of COVID environment it was really one that was very helpful for everybody down the line, because we could see things before it was even shipped out. So that's what I've seen the biggest change.

Vonnie Estes:
That's fascinating. And I've seen it in a number of different, digital types of tools where people are finally having to trust the tools, and use the tools in the way that they were intended to be used, because I think so many people just, especially in our industry, it's such a relationship industry. Like you said, "Oh, I'll just get on a plane and go look."

Gary Loh:
Yeah.

Vonnie Estes:
But we can't do that. And I think people are seeing that the tools might be better at looking than we are, anyway. So I think it's pretty fascinating. How do you think your products build trust in the supply chain?

Gary Loh:
It takes a couple of technology enabling part of it. So we needed to take the IOT side of things, which is basically things that vision devises, scanners, and then, of course, we use the block chain. And most people have a misunderstanding of what block chain really is. It's not just about bitcoin. Really, it gives me the way to put a custody of truth and the burden of proof. So the way we looked at it is, it's a ledger. It's a ledger that where you put something on it you can't change it. So it's not trying to prevent the error of the trade. What you're trying to do is to prove the error of the trade, which literally means that, if somebody makes some mistakes and he uploaded something that was a mistake, through the system that we have you can see where the mistakes are made. And really not just a way to capture the mistakes that you want to penalize the guy, but, I think from an operation perspective, we can really now be able to know how to solve a problem without groping in the dark.

Gary Loh:
So I think for us, to build trust means you use technology, even artificial intelligence, for example. For us, we take a picture of the fruit before you close the box. But we don't just take a picture, because we apply AI to it, so now we can see the size, we can see the blemish. And one very good example was, we have oranges coming up from the central valley to Thailand, and it was a big fiasco, because the fruits that was packed was really orange. There was not green at all in it. So by the time it arrived in Thailand, and there was some slight delay, the amount of mold that was in the box was tremendous. But if we could really use that kind of form of detection, and be able to form some standards of using such tools, then I think trust will be built. And again, it takes a bit of time, but it definitely is in the right direction.

Vonnie Estes:
I saw on your website, you used the term collaborative commerce. So my last question for you is, what do you mean by that?

Gary Loh:
It's this mindset, I think, when we talk about collaborative commerce. It's one where, I understand that everyone is very protective about their data, but I can understand what's the price, the volume, the items that you're shipping and who you're shipping it to. But at the end of the day, I felt like that data can actually be taken, so that on one side we can protect that data, but in terms of collaboration, no man is an island, so we really need to change the mindset. What is happening in the US, or what's happening in Peru, or Chile, or Netherlands or New Zealand. It actually affects the people in Asia. For example, that's where we are selling our products in. So the collaboration needs to have that kind of a mindset. So that the world is actually a smaller place than what we think. And I use that word in a very holistic and philosophical way, that I think we just need to collaborate and work together to make a win-win rather than to think that this is a win lose situation. So that's the idea behind collaborative commerce.

Vonnie Estes:
Now I want to introduce you to Kim Bui, Global Head of FreshCloud infrastructure and analytics at AgroFresh. AgroFresh is a company that's been around for a while, since 1996, who have over 4,000 customers worldwide. Can you tell us about the company, and your core products that you've built the company on? 

Kim Bui:
Yes. Thank you very much, Vonnie, for having me on the podcast. So correct, AgroFresh primary focuses in the harvest side of the fresh produce space with our smart product call SmartFresh, which has really helped growers in the apple business for the past over 20 years in preserving the quality of apples. Since then, we have diversified into other areas of fruit preservation. One of the most interesting, and most fascinating area is around our new offering with FreshCloud. And what FreshCloud is, it's a digital platform that really looks at how do we bring all the different services that AgroFresh has to offer to customers in an integrated solution that can be scaled, but also deliver the insight that they need in real time.

Vonnie Estes:
So Kim, we've been talking to

Seana Day:
about the issues around first mile, and these are the issues from harvester, to packer shipper and beyond. How do your products help to keep the produce fresh through the chain?

Kim Bui:
Wonderful question, Vonnie. Our product starts in the field. We capture information such as the fruit maturity on the fruit. That information helps us really develop an appropriate storage profile. When to best harvest the fruit, how to store the fruit, and more importantly, the packaging and the preservation of that fruit as it leaves the pack house to the retail consumers. So the story here, Vonnie, it's all integrated data. It's bringing all the different pieces in the first mile to come together in an orchestrated fashion that tells how that fruit is being grown, and then what are the best tools and solutions to preserve the quality as it reaches the retail shelves.

Vonnie Estes:
That's amazing, and so needed out there working with these types of products. Can you tell me what types of customers you serve, and what are the biggest crops that you work in?

Kim Bui:
Yes. With the new digital platform it really opens up a broader base of customers for us, because it allows us to deliver the same level of service and customer intimacy, but through a digital platform. So in this respect, we're able to deliver our solutions not only to small customers, mid-sized customers, but to our existing large, vertically integrated growers. They can all benefit from having this information organized in a central platform that they can share across their organization. Another great aspect of our solution is that it scales very well to the growth of our customers. A lot of times we've seen our customers grow dramatically over the past couple of years, and we can offer the tools to, at least, support that growth that they're experiencing, or some of the challenges that we're experiencing when demand or supply is not perfectly aligned.

Vonnie Estes:
Which could be happening right now.

Kim Bui:
Exactly. One of the benefits of having a digital platform is that it allows you to have remote access of your orchard and yield data and be able to share that collaboratively with your various different coworkers in that orchard. So many people are working from home this year because of the Corona virus. What our tools allow the growers to do is share that information across other regions, and across other growers within their growing network. This allows them to have real time information of how their orchards are maturing, and when would be the best time to harvest that fruit, and therefore not having too many people in the field as the challenges are occurring.

Vonnie Estes:
That's really fascinating. That's one of the questions I've been asking a lot of people during COVID is, how are your tools actually working better than they were before. And I think, what I hear from a lot of companies is that people are finally using the tools the way they were meant to be used. So many people feel like they have to be out in the orchard, and they have to be seeing everything with their eyes, and being everywhere. And now they're actually depending on some of these digital tools, which they could have been depending on before, anyway, but now they're realizing the power. And so, I think there's a real power in adoption going on right now, because people are trying to figure out how to do things with less labor and without using their own eyes so much.

Kim Bui:
Exactly, Vonnie. And that's going to be the new normal as we work our way through this crisis here. I think our grower will be better off in the future. They're learning new experiences, they're becoming more comfortable with data, they're becoming more comfortable with collaboration across their organization and other growers. And I think this is all going to help, really benefit the producers in our markets, and the consumers will get a benefit by having better quality fruit and produce all year long on their store shelves.

Vonnie Estes:
So even though you are an established company, and you've been around longer than a lot of the companies that I talk to, but you also are really acting like a start-up with some of these new exciting digital tools that you're developing. Can you talk a little bit more about the FreshCloud Harvest View?

Kim Bui:
Yes. So Harvest View was a tool that we announced this year in support of our orchard apple growers in the Pacific Northwest, and the Eastern United States. What the tool does, it's a combination of a smartphone app that is aligned with a very powerful digital backend that does a lot of the image processing. So it allows scouts or contractors to go into an apple orchard, at a designated period of time and location, and look at the maturity of those orchards. And then have that information organized and processed in a way that the growers can make better decisions upon when would be the optimal harvesting time for those particular apples. But more importantly, how can they manage the labor requirements so they can better allocate labor to certain blocks for picking, and therefore allow less and fewer people into the field during the harvest period. It's a very wonderful tool in regards to differentiating the AgroFresh solution, but giving our customers an additional benefit of working with AgroFresh by utilizing some of these new digital tools.

Vonnie Estes:
And how do these tools use artificial intelligence and machine learning? What are you doing with some of the data, and how is it being analyzed?

Kim Bui:
With every machine learning, it's only as good as the data that you put into it, and really giving the computer these challenges. With nature and fresh produce there is never the same occurrence. There's always something unique and different, due to weather patterns, and sunlight. So all this information really enriches our back end system for recognizing disorders, recognizing starch on the fruit, to a point where, one day, a lot of this subjective, or human interaction will be done in more digital format, where we can scale the operations dramatically to analyze quite a number of fruit, and deliver a much more insightful and high resolution results to our customers around produce quality and maturity.

Vonnie Estes:
Well, Kim, I think that's the time that we have. Thank you so much for explaining to us what's going on at AgroFresh. I love seeing companies that have these great tools that have been supporting the produce industry for decades, and now you continue to innovating, evolve, and support the industry in new ways using new digital tools. So thanks for your work, and we'll talk to you later.

Kim Bui:
My pleasure Vonnie. Very interesting discussion. Thank you so much.

Vonnie Estes:
There are many reasons to care about this first mile and adopting new tools. One of the results of using these tools is reduction of food loss, which we all want. Another is transparency, leading to trust throughout the chain. What I really love seeing is the adoption and use of technology. Most technology that causes breakthroughs has been around for a while, it just wasn't seen as useful, or the barriers were too high. Think about all of us. The ability to do big work meetings from home has been around for close to 20 years. The internet, affordable laptop computers, and Skype came out around 2003 for the last piece. But it took until now for us to have the need to adopt it. The building and adoption of these tools will help make the messy middle a little less messy.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all of our episodes at pma.com, and wherever you get your podcasts. Please subscribe, and I would love to get any comments or suggestions on what you might want me to take on. For now, stay safe and eat your fruits and vegetables. And we'll see you next time.

Hide transcript

Description:
The COVID-19 pandemic is having a seismic effect on businesses in the produce industry, but there are lessons that can be learned. This is an opportunity to fine tune business continuity and contingency plans, and also a chance to define what is truly important and find new ways in which to grow. Join our conversation with three innovators who are responding with new solutions when challenges demand them. Discover how all along the fresh produce supply chain, technology formed in response to COVID is producing safer, more efficient tools for our industry.

Guests

• Boaz Bachar, CEO and Co-Founder, FieldIn
• Carolyn Mooney, CEO and Founder, nextmv.io;
• Lou Perez, Co-Founder and VP of Technology, Apeel Sciences

Vonnie Estes:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, the Vice President of Technology at the Produce Marketing Association. And I've Guests: Boaz Bachar, CEO and Co-Founder, FieldIn, Carolyn Mooney, CEO and Founder, nextmv.io; and Lou Perez, Co-Founder and VP of Technology, Apeel Sciences spent years in the ag tech sector. So I can attest it's hard to navigate this ever changing world. Thanks for joining us and allowing us to serve as your guide to the new world of produce and technology.

Vonnie Estes:
Welcome to episode six of PMA Takes on Tech. This is the final episode of season one. Today we will drop into a PMA virtual town hall recorded on August 5. PMA has hosted virtual town halls since mid-March as a way to communicate with our members about the pandemic, its effects on the produce industry and additional topics. Today's guests discuss how the pandemic has affected their companies and the use of their products. Let's jump right in.

Vonnie Estes:
So, innovators respond with solutions when changes and challenges demand them. Today we'll hear how all along the fresh produce supply chain COVID-19 driven technology is producing safer, more efficient tools for our industry. We have three different, diverse businesses involved in the produce supply chain that have been affected and have responded to COVID-19 in different ways. We'll talk to these three great panelists. The first one is Boaz Bachar, CEO and cofounder of FieldIn. FieldIn provides remote visibility into field activities to monitor mechanized cultural practices and give actionable, real time data to improve efficiencies. Second, we'll have Carolyn Mooney, CEO and founder of nextmv, a startup that provides developers with the building blocks to create and test models quickly providing logistic and operations solutions. And third, we have Lou Perez, VP of Technology and cofounder of Apeel Sciences. Apeel creates longer lasting produce that reduces waste and builds resiliency in the food system. We are excited to hear from our guests about what is happening to their companies during these times. So we'll start with Boaz and he's at the very beginning of the supply chain, working with producers. So welcome, and please talk about your product and what has changed with your customers since COVID-19.

Boaz Bachar:
FieldIn basically digitized the entire farm operation level. We developed platforms that combined in IOT devices that we put on any farm machinery that made them smart and start to send data to the cloud in real time. And we add to display of IOT data a set of dashboards that helps the grower and his team to take decisions from anywhere, any time and to see and to act after the execution of the operation in real time. And as I mentioned, our mission is to digitize the entire farm operation and to create new data. So basically, in order to digitize the entire farm, we developed three main models, one of them to cover the entire spraying and scouting operation. The second one is to cover the entire cultural practices that are happening in the farm and the last one, the deal with smart harvesting and basically FieldIn allowed the growers manage from the farm.

Vonnie Estes:
One of the things that we had talked about, too, is that people are using the app, the way you meant it to be used it or using the information and the data the way it was meant to be used before they would go out and look and see what's going on in my field, what's going on in my field. And now they really realize that by using the data that you're giving them, they don't have to go check the field all the time. And so, it actually COVID-19 is kind of, because people are stuck more inside, they're using it the way that they should be using it.

Boaz Bachar:
When we started the company, remember that some of our clients said that in the first time after this, after 20 years, they can take a vacation finally, because they control the operation from away from the farm. Obviously we see the adoption rate is just increasing because of that. So it's not for vacation, it's your day to day.

Vonnie Estes:
Yeah. Yeah. So they're really, I mean this data, I think one of the things that's going to happen coming out of COVID-19 is just people are having to rely more on data and really understand what the data is telling them and rely on it instead of thinking, "Oh, I need to see those with my eyes," but what we see with our eyes isn't the whole picture that you get from all the data. So I think this has been an interesting time where people are actually relying on data, and I think we'll hear this from Carolyn as well, people are relying on data and using data to plan and forecast their businesses better.

Boaz Bachar:
What we develop is three main models. One of them is scouting and spraying, to be able to manage the entire pest management cycle all in one place. So, we are talking about large scale operation, tens of thousands of acers all over California that's can start in Bakerfield, it can end in Chico. It covers, all other mechanized tests happening on the farm. And so talking about mowing, we're still keep talking about edging. And of course the last model is the smart harvesting. This is our latest addition to the platform Basically, we install IOT devices in all equipment related to harvest and being able to monitor and send alerts and get the benchmarks to people, to the grower, in real time. How can he improve its operation from day to day? Where is this weakness? And now we can become better for the day after of the operation, especially in this hectic time of harvest, which is like a whole season shoved into four to six weeks. And this is extremely important.

Vonnie Estes:
Let's move on to Lou. So Lou, your product keeps produce fresh through the supply chain. How has your product helped during COVID-19, and what are some of the stories that you're hearing from your customers?

Lou Perez:
Thanks, Vonnie. Yeah, so Apeel, I mean, the whole idea is since the beginning that we want to tackle the food waste crisis but using nature as the inspiration for the different tools and solutions that we build. So, with that, Apeel just quickly is a plant based arrive solution that can double, or sometimes even triple the shelf life of many types of fresh produce. So, the idea is that hopefully we increase resilience of the produce and reduce the need for as much refrigeration, plastic packaging and control that atmosphere and different things like that. So like I said, it's derived from nature. So our materials are found in every bite of fruits. It's a very thin edible layer on the outside of produce.

Lou Perez:
And what that does is create an optimal microclimate inside the produce itself, and basically reduces the rates of water loss and oxidation. But as far as recently, again, this is obviously a very difficult time for the food system. And our role has always been the idea is to help food businesses increase their resilience and operational flexibility. So the idea is that we give people more time with fresh produce. And when we say people, that includes suppliers, retailers and then the end consumer. So, if anything, what we've experienced so far during COVID-19 is just more, I think, amplification or more demand from retailer, suppliers and a lot also from end consumers. So as far as, yeah, the major thing for us is, again, is that we want to give more flexibility.

Lou Perez:
The idea is that now if you can make different decisions with your crops or with your inventory, because now if you have an extra several days or weeks to then decide, "Should this go here or should this go there?" Especially in times now where I think we're all really experienced in it, as you go to the retail store, you're making less trips, you're trying to get everything done in usually a single visit. As far as like customer testimonials, again, I think that demand has just been increasing more and more with the different suppliers that we do work with. I think a recent one yesterday, I believe it was in Fresh Fruit Portal where Nature's Pride is expanding their facility. And I think naturally Nature's Pride is a great partner and they're doing really well, but they also quoted as far as the demand for Apeel has also accelerated their need to expand. So that was really great to see and that was pretty recent. So I think more suppliers, retailers are recognizing the importance of adopting more innovations to the food system. And yeah, so I would say just things have just been growing or have been more amplified.

Vonnie Estes:
Yeah. I think it's amazing right now because the there's so much conversation about the supply chain and what's happening in the supply chain and how it's different than before. And I was talking to someone that buys from growers and sells to chefs and she was saying especially now in restaurants are opening and then they're closing and then they're opening again. And so you end up with product that you have to keep much longer than you expected. And so I think there's places like that, where if that avocado normally only lasts a week, but you'd like it to last much longer, then food being able to last longer in the supply chain is just really a benefit. So it's great to see you guys doing that.

Lou Perez:
Yeah. Appreciate it.

Vonnie Estes:
Yeah. Carolyn. So your product works at optimizing operations and logistics. How has the use of your product changed during COVID-19 and maybe explain a little bit about your company as well?

Carolyn Mooney:
Yeah, absolutely. So my background is actually in systems engineering. So all the things that both Boaz and Lou are talking about in terms of data becoming a bigger part of this supply chain ecosystem, especially with food supply chain specifically, I think is kind of bringing to light some technologies that have existed in other sectors for a long time. So when you look at the transportation industry and also things even in the military industry, optimization has been a big part of that for a long time, but that technology really needed some kind of updates and more flexibility to be able to use across industry. And so here at next move, we're really trying to make that technology accessible. So you can think about the issues in supply chain when you're trying to move people around, like every airline ever known is using some optimization to try to decide how to set up those planes and those schedules and everything else. That can easily be translated into how you pack different trucks for the supply chain for food or how you decide on how to truck them to different places or what goes where.

Carolyn Mooney:
And so that's really what we do here at nextmv is we're working on optimization and simulation. So basically how do you build automated decisions? And then how do you test them really efficiently so that you can be prepared for kind of a variety of scenarios? And I think COVID-19 has kind of brought to light the fact that these systems are a little bit fragile right now. And so, as I would say, COVID-19 basically made it so that forecast fundamentally broke, right? Your forecast from May this year did not look anything like May last year. And that means that using those forecast made it very difficult in your standard decision making. Your decisions had to change and you needed to be able to adjust on the fly. And so for us, we're basically creating a method for people to represent decisions as code and so to really make it so that you can minimize costs or maximize value for your consumers kind of directly in how you make your decision. So, whether that be, like I said, packing material in a certain way, or Lou mentioned wanting to make one trip to kind of where your distribution centers are, stores, et cetera. That's all stuff that we kind of handle in our optimization technology.

Vonnie Estes:
Right. Yeah. And I think as you're talking about forecasting, you can't use last year to forecast this year, but you're not going to be able to use this year to forecast next year. So I think really, depending on, thinking about how do I use this data, I think it's really important to use these new tools.

Carolyn Mooney:
Yeah, exactly. And I was working for GrubHub for a long time and that really is a real time delivery problem. And so the kind of the state of the world is constantly changing. And so you want to try to create your decision models or automate your decisions in a way that's robust to change, right? And behaves as you would expect. And so that's kind of the methodology behind nextmv is creating these resilient decision models for things like planning or packing or shipping kind of across the supply chain for food.

Vonnie Estes:
So, this has been an interesting time for companies in all sorts of different ways. And the three of you are all startups at different stages. And there's this whole question like where's the money and are companies going to be able to continue? And so that's been another thing that's been particularly challenging for startups and Lou, you guys closed a huge round during a pandemic, which is pretty amazing. And you had some pretty unusual, amazing investors that stepped into that round as well. So can you talk to us a little bit about, I mean, obviously the whole thing started before the pandemic, but just being able to pull that off is... Congratulations.

Lou Perez:
Yeah. No, thank you. Appreciate it. Yeah. You're right. Things usually start before this point when you're considering fundraising, but yeah. Super appreciative and, just excited about it. So, I mean, when we talk to investors, I mean, we talk about reducing food waste, but really what we discussed with them, the bigger picture is an investment in building a more sustainable food system. So, and I think, especially now, I think that's been amplified a lot, just as far as the importance of that. So really we've been having a lot of demand and I think this is just only increased it. So yeah, it's been great. So we were able to raise, a big amount came from GIC and we had some other local investors, some celebrities, Oprah Winfrey, and Katy Perry, who had a small participation in the round and yeah.

Lou Perez:
They're both extremely passionate about reducing food waste and making food more sustainable. So that's always been really fun to be a part of. The great thing I think about having the capital now, it puts us in a position to really grow and expand where we have operations in the US. We're in four continents, basically now the US, Europe, Africa and South America. So yeah, the idea is that continuing to build out a global coalition of producers and suppliers and bring longer-lasting produce ultimately to the end consumer. So, working with Kroger in the United States, so the biggest retailer in United States, Edeka in Germany, and Salling Ground in Denmark and some really major suppliers like Nature's Pride, Horton Fruit, Sacara. So, the idea is we're basically just going to put this capital of the idea is just to keep growing and expanding.

Vonnie Estes:
Yeah. And you guys, I mean, I keep seeing constantly that you're hiring, which is great to see as well. So it's good to see at this time when many people are losing their jobs, it's great to see you guys hiring and some really interesting positions that you're hiring for. So did you get to meet Oprah yourself?

Lou Perez:
No, not yet. No. I haven't got to meet Oprah yet, but James, our CEO has.

Vonnie Estes:
Yeah. I assume she sat on your board either, right?

Lou Perez:
Not yet.

Vonnie Estes:
Not yet.

Lou Perez:
Not yet. Yeah. So I know we're super fortunate, appreciative, yeah, of just the overall I think, yeah. Investors are investors. And so they obviously do a lot of research into this and the fact that startups and companies that are focused on food system solutions is starting to get more attention, I think is a testament to all the work that's already been done in this field. I think, I mean, when I first started doing this, it was, when you look at it, the idea of going, I can go to ant retail store anytime of the year and get any type of produce or whatever, is I think sometimes we lose sight of how amazing that is in the first place, the access we have. And I just really look at a lot of the new things that are coming out. It's being discussed today, as, how do we not only have that, but how do we build it more sustainably and give retailers and people more opportunity, more solutions to make decisions.

Vonnie Estes:
Great. So Carolyn, what does funding look like for you? I mean, you're in an earlier stage and we don't want to compare you to Oprah knocking at your door, but...

Carolyn Mooney:
I wish. I wish. Oprah can come anytime. I'm cool with that. But yeah, no, we raised a seed round actually in April. So we were part of the recent Y Combinator batch over the winter and we raised our seed in April and actually closed that right around the time the pandemic was really, I feel like taking hold here in the States. So similar to Lou, probably getting a lot of questions about what does your business look like in the face of COVID-19. And I'm sure we had to answer some of those questions as well. Fortunately, kind of for all three of us here on the call, we're in, I would say, necessary industries, right? And so they aren't going anywhere. Supply chain problems are always going to be supply chain problems and necessary to solve. And things in the food system obviously are necessities for us all to live. So I think that that kind of begets a little bit more attention in this time for investors that are looking really hard at what they're investing in. And so that played well for us, I think.

Vonnie Estes:
And you're working across different industries, too. What other industries do you think you'll end up being involved in or do you think food is one of the ones that you'll spend a lot of time in, or are there other kind of equally important industries, right?

Carolyn Mooney:
Yeah. Food is actually the one I would say we're spending the most time in today. We're a little bit more on the prepared food side as of right now, or at least our initial clients are kind of in that sector. But I have a lot of interest actually going further up the food supply chain. I used to work for the EPA a long time ago. I have a lot of interest in just sustainability in general and figuring out, how do you make food both accessible to people in a variety of ways, but then also from an environmental aspect, how do you make it a more sustainable long term? I know that's actually something you touched on in one of your prior podcasts was just like the food system in general and like, how do you drive those changes?

Carolyn Mooney:
Maybe it'd be more local stuff like that. So I think there's a lot that goes into that. And for us, I look at optimization as an opportunity break that system down into kind of its component parts and make sure that you're making solid decisions at each of those stages. And so that's kind of how I see us kind of playing in this larger ecosystem, but longer term, our optimization technology is very general. It's basically mass technology, right? So it can apply to across many industries. And we're looking at both applicability I would say, across the logistics space, across the food space and even in things like financing and e-commerce so they're very generic. Yeah.

Vonnie Estes:
Great. So Boaz, what is funding looking like for you guys?

Boaz Bachar:
So, thank God we were able to close a significant round just before the pandemic started. And it was coupled with Q1 which was our best course ever. But having said that, once there we saw the company is coming to California, to the US, I got a phone call from my board members that they told me you should get ready. We don't know what we live in. We don't know, there's a lot of uncertainty. I'm talking about the end of March, there was a lot of uncertainty out there, and we don't know what will happen and get ready. So, we basically redid our budget. And so we lost our calling budget, we lost for at least 24 months. And because we, again, I'm talking about the end of March, we didn't know what we left them.

Boaz Bachar:
Now, a few months after when we have budget until 2022, and we're starting to see the investments, the companies, or the divisions are opening the gates again and they're looking actively to make deals. I think that the main challenge, so there is out there people that are looking to inject money into the markets. I think the challenge would be going forward will be to gain and to action and from startups, for startups to gain traction just because there are no conferences, you can't meet your business. And if you have a young startup in earlier stages to create a momentum before your next round, it might be challenging in the next year, because there is just not a lot of places you can interact with other of people. So, to summarize, we saw that the money didn't disappear and this year still looking to invest in good companies from data. And I'm telling you it's harder to create momentum now those days, just because you can't meet people. So it's going to be challenging I think in 2021 when we will see startups are starting to look for funding.

Vonnie Estes:
Yeah. I think for just getting out in the field and trying to do trials and that sort of thing. So, companies that are at that stage, it is quite challenging.

Carolyn Mooney:
Yeah. I think what we've seen, too, and this is my first time founding a company. So I don't know how this has been in the past, but we've relied I think really heavily on warm introductions at this stage. And I think that's particularly relevant in the virtual environment that we're in right now, getting those introductions to companies and getting in front of the right peoples is very relevant.

Vonnie Estes:
Yeah. So, Carolyn, having been at GrubHub and now the founder of nextmv, how do you see the food delivery and logistics are going to change kind of through COVID-19 and on the other side? And that last mile of any food is such a huge problem. And so how do you see that's going to go?

Carolyn Mooney:
Yeah, I think one thing that we see, and one thing that we're starting to see even at GrubHub is people are trying to change the game on how you get food. And I think that was already starting to happen and then has been accelerated due to COVID-19. And I think some of the considerations there are reducing the number of contacts that you have with different people with the food that eventually goes to the consumer. And I think the other thing is just different business models. You see people kind of working out of the concept of like dark kitchens. We saw a lot here in Philadelphia of people actually having direct to consumer from farms and from meat suppliers and just all sorts of things across the food chain as COVID-19 really kicked up.

Carolyn Mooney:
And that is staying the same, even restaurants are now selling food as grocers sometimes, right? The extra food that they have that they're not using. And so I think with all of those changes, what we're seeing is that business rules are fundamentally changing and they're changing rapidly. And we had one company that added alcohol sales to their business, because the rules changed in PA and they were allowed to do so. And making that change, they were using our software and they were able to make that change really relatively quickly from an operational perspective on handling. And they only had certain people that were qualified to handle it and et cetera. And so I think what you're seeing is that people need to be able to have a very tight coupling between operations and the technology that's driving it and have that quick feedback loop. And I think that's going to be something that's consistent going forward as people kind of challenge the operational environment in new and different ways.

Vonnie Estes:
That's interesting. So, Lou, you've got COVID-19 going on and you've got this infusion of cash. So both of those things. I mean, how are your collaborations and your partnerships, how important are they now and how are they changing, both with the cash that you have and being in the middle of a pandemic?

Lou Perez:
Yeah. I think the current ones we have, I mean, the demand is growing. So, I think to what Boaz was saying, you can't just send a bunch of people everywhere now. You really have to get creative within how you make changes or grow things. So I would say if anything, things have been amplified as far as, yeah, the operations go with our current partners and the new ones we're trying to bring on as well. That's where maybe there's a little bit more where the code that has a little bit more affect, because then you're working with other suppliers and vendors who have their own supply chain issues. And so, but yeah, beyond that, yeah. Obviously we had a lot of plans going into the year and we're been doing pretty good job sticking with them and, and growing and integrating with new suppliers and working with new retailers. So, yeah, just been really fortunate. If anything, I think it's helped accelerate a lot of the other similar to what the group's talking about, data and IOT stuff that we've been building, like how do we communicate with our systems or people without needing to be there? How do we make the units themselves more autonomous?

Vonnie Estes:
So experience teaches us that these types of crisis typically trigger new avenues of growth, and startups like yours, you're constantly looking for new avenues of growth in every avenue, but with what's going on, what moves can you make now to serve your customers, your employees and your stakeholders that kind of puts you in a better position for the long term? So Carolyn, why don't we start with you? Carolyn Mooney Yeah. I think the moves that we can make right now, so one, I kind of talked about how optimization is a general technology. And I think one of the dangers of a general technology is that people don't really know how to apply it directly. And so something that we've been doing and will continue to do is to create kind of example models, and also just basically pre-formulate certain models that are just common across an industry. So whether, Boaz mentioned, kind of the crop planning and being able to service, particular fields like that could be a model, like how do you route somebody efficiently around a set of fields, something like that. And so we've been really focused on creating kind of a specific samples of models so that it's more accessible for whatever industry we kind of tackle and go into. And that's been one of I think the critical ways that we are trying to be helpful to both stakeholders to kind of prove our cross industry applicability to our investors as well.

Vonnie Estes:
Great. Lou, how about you?

Lou Perez:
Yeah, a little bit, when I was mentioning before about creating systems that make it easier to communicate back and forth, and you mentioned the hiring as well. We're investing a lot into growing within those regions themselves, and to meet the demand. In addition, we're pretty fortunate that this technology is pretty robust and it can work in a number of different categories. So, by us expanding into different regions, being at source for different produce categories, it's helping to really accelerate some of our product development efforts as well. So, we're working on new categories, such as cucumber and apples and more citrus categories. So I think as far as with our customers, what happens is you usually work with a supplier or you work with the retailer, and they're pretty open with what they struggle with the most and having our systems there, our people there has really, I think helped increase the velocity at which we can meet their demands or inquiries on different categories.

Vonnie Estes:
That's great. Boaz, how about you?

Boaz Bachar:
So we believe that the demand for reliable data and it comes directly from the field, the value of it will continue to increase and the demand will continue to increase both from growers, but also for partners and the rest of the supply chain, because this is the operation. This is where everything is happening, and then you will sending it to the next area, to the packing house. And it's very important to understand what is happening in the field. And so, we believe that we can add more layers of working with the field and basically add more layers of data working with growers.

Vonnie Estes:
Where do you have people right now? Mostly in California, or do you have them at other places as well?

Boaz Bachar:
So, in total, FieldIn is almost 100 employees. In general, 50% of them are in the site in Israel, and the other 50 located in California. They are spread all over the country and sales, marketing and operations are sitting here in Central Valley, California.

Vonnie Estes:
I think I heard, I don't know if it was on a podcast or something, that your partner was stranded in Israel for a while just because of COVID-19 and couldn't get back. Is he back or is he still over there?

Boaz Bachar:
No. No. So he got back a month ago and actually it's funny that you're asking because me and my partner are in this journey for the last seven years. And I was laughing that I started the company a bachelor and now I'm married with two kids in a different country. And suddenly he was stuck in Israel for almost four months. And the distance was very challenging for us after so many years. So my wife was saying, laughing about me, that I'm missing him more than I miss my family. But yes, it was challenging time, but I thank God he's here and he's full power and working with our clients here.

Vonnie Estes:
Great. Thank you. So what can we a forecast about May of next year, based on what happened this May? That's not possible necessarily to be that specific, but what do you hope is going to stick around? What's going to stay with us?

Carolyn Mooney:
Yeah, I do think some of the changes that we're seeing kind of across the food industry are going to stick around. The reality is that like they say it takes four to eight weeks to build a habit. And right now we've been in lockdown for four months. So I think fundamentally we're changing consumer behavior in a really big way to rely more heavily on things like delivery and just local sourcing and stuff like that. So I think that some of those things are going to stay, and I think the really big thing is looking at the data to understand kind of correlation of different signals to the actual forecast itself is something that we'll have to look at, because I think the seasonality things that normally you could rely on are going to be a little bit flawed, looking at May to May, or May to next May. Does that makes sense?

Vonnie Estes:
Yes, yes. Anybody else have thoughts on that one?

Boaz Bachar:
I think that the growers will adapt to the new demand. They will understand what the new demand is, people, to talk about what you just said, because less flights, less hotels, less demand, and they will understand how to fit there. Also the supply chain will fit in self to the new demand. Regarding the startups and other companies, I think that we will develop new ways to communicate with partners and growers and will adopt and hopefully it will stay with us and we will not have to fly and to drive to face to face and meeting, to do only the last meeting or the first meeting, but for sure not the entire process.

Carolyn Mooney:
Oh, I had one more thing actually to add as well. So in addition to kind of these habits, I think fundamentally shifting, one thing I hope stays is that I think this has made every company, regardless of your industry, look at the state of your operations and make your system more resilient to change. And I hope that that stays because I think making something more resilient to change is ultimately how we make our more sustainable.

Carolyn Mooney:
And you don't have kind of these peaks and valleys of labor support and peaks and valleys of supply and stuff like that. You can kind of just get to a more even playing field on operations. So I'm really hoping that that trend stays. I think it's kind of just shed light on some of the issues across the supply chain in that regard.

Vonnie Estes:
Yeah. I think that's a great point, Carolyn. I think looking at across the whole supply chain and just how fragile things are that we didn't even think about how fragile they were and that we've had to build in resilience and do things differently. So, I think in the food industry, it's really shone a light on some of that fragility. And I think we're starting to figure out ways to fix it. So I totally agree with you.

Vonnie Estes:
All right. I think we're probably done here and I really want to thank our panelists for being willing to be on this and have this discussion. It's an important discussion. And I think as we continue to reflect on where we were before COVID-19 and then what we're doing now and then what the future is going to look like, these are really important learnings on how we build the food industry at a system that is resilient. So thank you very much for the conversation.

Vonnie Estes:
This concludes season one of PMA Takes on Tech. Thank you to my listeners who have hung in with me as I learned how to do podcasts and to share insights of what I see in our food supply during this time. Please stay tuned for season two and send me any ideas of what you would like me to take on. Thank you.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all of our episodes pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions on what you might want me to take on. For now, stay safe and eat your fruits and vegetables, and we'll see you next time.

Hide transcript

Description:
The history of the world’s food systems has had major shifts - from hunting, gathering, fishing and foraging through the current industrial food system. The fifth and current food system has exhausted its growth trajectory and the world is, once again, staged for a major transformation in the way that food is grown, distributed and produced. There is a movement away from an industrialized, monoculture system built to provide calories and yield to one based on healthy people and sustainable, equitable ecosystems. In the produce industry we are all about nutrient-dense fresh food for healthy people and a healthy planet. In this episode, we talk to Caesare Assad, CEO of Food System 6 a nonprofit accelerator whose mission is to support impact driven entrepreneurs as they transform how we grow, produce and distribute food. We also talk to two companies involved with FS6: Ethan Rublee, a brilliant roboticist turning his passion and experience from computer vision startups and google to the farm and Lindsey Lusher Shute on supporting smaller acre producers for a more equitable food system.

Guests:

• Caesaré Assad CEO, Food System 6
• Ethan Rublee, farm-ng
• Lindsey Lusher Shute, Farm Generations

Vonnie Estes:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people and ideas that are shaping the future of the produce industry. I'm your host Vonnie Estes, the vice president of technology at the Produce Marketing Association, and I've spent years in the ag-tech sector. So, I can attest it's hard to navigate this ever changing world. Thanks for joining us and allowing us to serve as your guide to the new world of produce and technology.

Vonnie Estes:
On my podcast, I typically look at a problem for the produce industry and then talk to one or two companies with technology based solutions to that problem. Today with my guest, we're going to look at some problems and solutions of the food system itself moving away from an industrialized, monoculture system built to provide calories in yield towards one based on healthy people and sustainable equitable ecosystems. In the produce industry, we are all about nutrient-dense fresh food for healthy people and a healthy planet.

Vonnie Estes:
I have with me Caesare Assad the CEO of Food System 6. Food System 6 is a nonprofit accelerator with a mission to support impact-driven entrepreneurs as they transform how we grow, produce, and distribute food. That's a really big mission. Many listeners may not be familiar of the concept with the 6 Food System. Welcome, and can you explain that?

Caesaré Assad:
Yes. Well, thank you, Vonnie, for letting me just dig right in. So at Food System 6, we are obviously thinking about systems and as such our name as it indicates, we've really been looking at the systems over the last six systems and we look at that through the context of the first system really was hunters and gatherers. That lead to early domestication. We call that the discovery of beer and then hybridization and trait selection really earmarked the third food system.

Caesaré Assad:
The fourth was what we look at as the Green Revolution, that's where we started seeing a lot of synthetic chemicals, high yield varietals and then the emergence of the fifth food systems started happening around the 70s, response to globalization. This is where we saw a lot of the lengthier supply chains being built, standardization, larger scale production and distribution, a system, as you said at the beginning, optimized for yield, calories, not necessarily for sustainability, which leads us to the sixth food system, the one that Food System 6 is focused on building, one that shifts us towards a system that can sustain itself, one that looks at the planet, the people that depend on it and thinks about and enables solutions that prioritize resilience, regeneration, and health.

Caesaré Assad:
So, our work is really about holding the complexity around this vision and supporting innovators, entrepreneurs who are building businesses that are achieving outcomes focused on resilience, sustainability, and health.

Vonnie Estes:
And, how do you define impact and how do you use that to pick the companies that you work with and invest in?

Caesaré Assad:
We're focused on innovations that are building vibrant farms, so resilience, richness, life-filled land. We're looking for solutions that support healthy people. You've talked a lot about labor already, so I think we can all appreciate the importance of taking good care of the people who are really stewarding and backboning the work that's happening out in the fields and also looking for companies that are creating healthy foods, healthy lands for our communities.

Caesaré Assad:
Sustainable ecosystems is our third pillar. This is working within the bounds of our ecological living systems, ensuring production and consumptions cycles of our land are loops rather than lines. We also look at justice and fairness. I would say really this is the heart of what's most important and especially now and I know that your audience is global and can really appreciate the need to look at the systemic inequalities of our food system to address dismantling the injustices, looking for ways to uphold dignity and quality of life for food workers, healing social, historical, cultural connections with the food people in the land.

Caesaré Assad:
There are so many innovators that are building solutions that are addressing all of these areas and then we've added a fifth element to what we look for, which is circularity and we've been able to do this in partnership with Huhtamaki, which is a global packaging company. They're sponsoring us to select a cohort focused on these closed loop models of circular production, enabling us to really go further into seeking regeneration, production models, and connecting that to all of the different parts of both small to mid-scale resilient system and the much larger corporate companies and looking at ways that they can really be involved.

Caesaré Assad:
So, those five pillars, circularity, justice and fairness, sustainable ecosystems, vibrant farms, and healthy people provide us with a holistic lens to look at how companies are making a difference.

Vonnie Estes:
That's really fascinating. I've worked with a lot of venture capitalists and been on a lot of selection committees of companies and nobody looks at it that way, and it certainly adds a challenge to both the people that are coming to talk to you and also as people who are trying to depict what companies do I invest in because on top of that as well, you have to think they have a good business model and they have to be able to make money for their investors at some point. So, those are a lot of hoops to jump through and I love that you're doing that and it's really forcing people to look at how what their doing has an impact on the whole system and not just one piece and maybe making money and then going, so it's really exciting to see the work that you're doing.

Vonnie Estes:
So, what are the ways that you are engaging with the companies? You mentioned the circular economy, the cohort, what other cohorts do you have and how does that whole process work?

Caesaré Assad:
Yes, and thank you very much for just pointing out the bit of the elephant in the room and a lot of our work is about blended capital, a lot of our work is about building this pre-competitive environment to help educate investors about what's happening in the food systems, so that we can look at where the other instruments ... That's a big part of what our program does, so our formal work is that we run a two-year cohort based accelerator program. We're currently in the midst of Cohort 5, so folks can go to our website, see who those six companies are.

Caesaré Assad:
The work itself for this cohort is founder-focused. It's largely bespoke and we're designing what we do to meet CEOs at their individual milestones. Our work is done in a way that we don't charge any companies who participate with us. We've just with this fifth cohort started to charge 1.5% equity for four profit companies. So, it's a much more just an advisory stake and we tend to work with these companies for much longer than the two years. That's actually been one of the things we've iterated over the years.

Caesaré Assad:
We used to be a 16-week model, much more of a traditional accelerator. What we learned with food and ag-companies we were building with a focus on impact is that they need a lot more time, they need a lot more resources, they need a lot more support removing barriers, and so that's really what the program focuses on, looking at ways in which we can build unique relationships, we can build partnerships, we can create an environment that's community-minded that creates a space for a lot of different types of people to engage without this expectation of necessarily an investment or something happening except for the opportunity to build relationship, lend expertise, and that's really the ultimate way in which we continue building out our work.

Caesaré Assad:
How do we create relationships that remove barriers? How do we create access to capital, intellectual capital, social capital? Financial being what we see as actually one of the things our entrepreneurs need ... I wouldn't say they need the least of, but it's not just the money. They need people who have real experience and wisdom and a real willingness to create a more resilient business that can help to bolster this beautiful food system that we have.

Vonnie Estes:
And, did the cohorts work together within the cohorts? Did they spend time together? It has to be virtual now, but normally do people get together and learn from each other? Is that part of the value?

Caesaré Assad:
Yes, and thank you for asking. Part of our selection criteria is that we're really looking at the impact pillars, how are companies working across these areas of impact we talked about, we're looking at the business viability. Most of the entrepreneurs we work with have already been in business, some of them have been in business for 10 years and it's because they're building these longterm, barrier resilient supply chains, which we've seen stand up.

Caesaré Assad:
We're looking for folks who actually want support and help, so they have a certain coachability and that are really committed to being part of a community. So, that is really an essential ingredient I would say is that yes, we very much build a system's thinking cohort of entrepreneurs who want to help one another and who want to help other entrepreneurs. It's really a core ethos of our work and we find that ... And, I think as folks talk to other entrepreneurs, this is really lonely.

Caesaré Assad:
So, we're looking for people who are committed to building businesses that can really withstand the pressures of this environment. You have to be willing to collaborate and work with other people in order to make that happen.

Vonnie Estes:
And, I think doing something as laudable and huge as changing the food system, there are so many moving parts and different parts of the supply chain and what you step in and do affects what happens in the rest of the chain, especially when you're trying to make a change. So, it's really exciting that people are able to have a resource and depend on each other, that's really amazing. So, through this, you've introduced me to two companies that you are working with that I'm going to interview next, farm-ng and Farm Generation Cooperative. Can you tell me briefly what interested you about these two companies and why you're involved with them?

Caesaré Assad:
Yes, I will try to keep it brief because there's so much within each of these, which is the case of every entrepreneur we work with, they're just fascinating humans. So at FS6, we have an initiative focused on scaling open source technology solutions for farmers to decrease their reliance on commodity production models and increase productivity and efficacy of small to mid-sized regional food systems. So, in partnership with ... We'll talk about one, but expert scientists, roboticists, engineers, farmers, this program is really working to decentralize and broaden access to technology to build tools that can support small to mid-scale production needs and bolster the resiliency of regional food production communities.

Caesaré Assad:
So, you're going to talk with Lindsey at GrownBy and Ethan with farm-ng. Both these entrepreneurs are farmers that are building technology solutions that are farmer-focused and are designed to meet farmers where they are. They are both experienced entrepreneurs and you touched on it earlier, but they recognize that traditionally funded BC Tech is often just extractive for small to mid-scale farmers.

Caesaré Assad:
There's just a business model incompatibility, so they're really trying to leverage new entity types within this pre-competitive environment that we have at FS6 to seek blended capital that's non-dilutive and to seek other support. That's a long rambling background to introduce Farm Generations Coop. It's a farmer-owned cooperative and it's a software solution, so I'm very interested in just generally alternative ownership models. Cooperatives are uniquely stable entities. In the last few years, there are around 134 agricultural cooperatives that have been in business for over 100 years.

Caesaré Assad:
So, the idea of taking an applying this model to a software solution that's farmer-built and farmer-owned means that profits made on the software will go back to farmers. That's a very uniquely differentiated model. And similarly, Ethan Rublee who's running farm-ng, this is a farm robotics company, Ethan is also the entrepreneur and resident for Food System 6 leading this open tech initiative that I described in my earlier ramble and he initially approached us just seeking connections to buyers for his small farm, but we quickly aligned on values and vision and really together talked about the need for a food tech revolution that's inclusive of farmers that's open sourced, that's supported in this pre-competitive environment, so that we can learn together, we can share insights and help other farmer producer innovators with their solution.

Caesaré Assad:
So, really what we're looking at is trying to build a multi-size farm tech revolution that is fragmented, so that it can meet localized solutions and help bring more value back to farmers who are looking to be more participatory in the small to mid-scale production landscape.

Vonnie Estes:
That's so exciting because I see a lot in the produce industry where they are smaller farms for the most part and a lot less attention and a lot less technology gets turned towards specialty crops then towards the big broadacre crops and I worked for a while in the big broadacre crops as well and I know almost every startup, the investors will say, "No, you have to make something for corn. Stop looking at strawberries or fruits or anything like that. If your product doesn't work in corn, we don't want to talk to you."

Vonnie Estes:
And so, a lot of innovation gets turned a different direction because of just the size and scale of the broadacre crops. And so, I really love what you're doing that really looks at smaller farms, which will be more specialty type of farms, and also within those farms in around the area of robotics, a lot of people won't try to come up with solutions because it costs a huge amount of money to develop a strawberry harvester and strawberry growers are going to be able to buy it.

Vonnie Estes:
And so, what are the particular models that you can use where people can work on these things together and develop something that everyone can use that really benefits across the industry? And, I think the models that we've been using before that may apply to corn and that's a whole nother conversation whether we should be putting our money there or not, but I think it's really exciting to see with the lenses that you're using to look at smaller farmers and farmers of crops that are more nutrient-dense and can be grown more sustainably. It's just great to see your work there. So, anything else you want us to know? I think you have a slightly different audience here than you might be used to talking to, so I'd love if you have parting thoughts or any last words or call to action.

Caesaré Assad:
Sure, thank you and that was such a great summary, and I think just other folks have echoed this, but opportunities to continue seeking collaborations, removing barriers, we're really seeing the need to decentralize and broaden access to technology and tools that can support small to mid-scale production needs and to bolster the resilience of regional food communities and economies and this is the time to embrace sustainability and justice as a core value proposition for any business, especially in food and farming.

Caesaré Assad:
We need to collaborate to increase market competitiveness, and we need to create access for small to mid-sized farmers that have been left out of the ag-tech revolution, and we need to continue innovating, so that we can expedite this transition to a food system that prioritizes sustainability, health, and justice and that is really, truly a win-win proposition for everyone and anybody that needs help orienting around that, we say it all the time. We're slammed and we're happy to keep going, so reach out if you want to talk and think about ways to really just think differently about what's next for you, for your business, how you can innovate. Technology doesn't have to be extractive and innovation doesn't have to be expensive and the time to really just start thinking about doing better together is right now.

Vonnie Estes:
Now, we'll move into two conversations with companies that are involved with Food System 6. The first is Ethan Rublee of farm-ng or if you're cool enough to get the joke, farm-ng and then we'll move into a conversation with Lindsey Lusher Shute from Farm Generations Cooperative.

Vonnie Estes:
Your background is not one I usually run across in the ag-industry. Among other things, you've started a company that you sold to Google and then started another company that was based on computer vision and machine learning and now you're doing a company called farm-ng. I'm so excited to dig into what you are up to and what you're thinking about. So, how did you decide to move into applying your skills to agriculture?

Ethan Rublee:
Well, I've been working as an engineer and entrepreneur in Silicon Valley for the past decade and last year I started looking for an application area where I could apply myself basically to what I feel is the existential threat that we all have to work towards solving which is the climate change and the crises, the impact of that.

Ethan Rublee:
And so, I came across this amazing paper on my archive feed, which was titled Tackling Climate Change with Machine Learning, it's by David Rolnick and it's basically this call to action to join a global effort against climate change as a machine learning practitioner. And so, it got me thinking, it's a long paper, but there's a section in there in terms of application areas and it's really geared towards engineers or scientists or investors or entrepreneurs looking for opportunities to help and there was one on farms and forestry and then subsection called precision agriculture.

Ethan Rublee:
And, it was robots, and computer vision, and machine learning and I was like, "Oh, this is so cool." But prior to getting into engineering, I grew up in rural Bucks County, Pennsylvania on my grandmother's 20-acre horse farm, mucking horse stalls, and after high school I thought I wanted to be a starving artist and poor farmer, so I worked a few seasons on some small, organic, CSA family farms.

Ethan Ru