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:
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...
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:
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.
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:
...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:
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.
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...
View complete transcriptDescription: 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:
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.
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
Vonnie...
View complete transcriptDescription: 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
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.
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...
View complete transcriptDescription: 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
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.
Description: 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
Description:
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
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.
Hide transcriptDescription: 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.
GuestsVonnie 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...
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.
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.
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...
View complete transcriptDescription:
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.
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.
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...
View complete transcriptDescription:
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.
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.
Description: 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...
View complete transcriptDescription:
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!
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.
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.
GuestsDescription:
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.
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.
Vonnie Estes: Welcome to PMA Takes on Tech, the podcast...
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.
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.
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...
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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:
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 Rublee:
So anyway, it just seemed like a really amazing area to start digging into and of course, I was naïve and still am, but I started looking at the problems that farmers were facing and talking to former colleagues from Willow Garage who were picking apples with robots and talking to sustainable agriculture advocates and it became clear to me how important our food system really is. We all have to eat and ensuring that it's resilient both because of climate change, but also from a social justice and health perspective it just started to really resonate with me.
Ethan Rublee:
So, I basically November 2019 moved from our home in Mountain View to a little 11-acre, ag-parcel here in Watsonville with my wife and two kids and ripped them out of the city life, and so we're starting a market farm and selling produce for the local farmers on an online store and working on testing robots in our backyard.
Vonnie Estes:
Wow, just like everyone would do that.
Ethan Rublee:
Yeah, why not?
Vonnie Estes:
Well, it's so cool, your story because what is really needed in agriculture and food production is people with these different skill sets. So, we still need people that go to school and get degrees in agronomy, that's still really important, but we also need people with different skill sets to bring farming and production into the new age with some new tools. And so, it's great to see that this was attractive to you. We'll have to get that paper and send it around to more people. So, can you tell us a little bit about one of the companies you're working on called farm-ng and what are you wanting to provide for farmers and how are you doing it?
Ethan Rublee:
So, with farm-ng, we're a technology company, still fledgling, but our mission is to scale a sustainable food system through appropriate automation. And so, that's a lot to unpack there, but basically we're interested in enabling the small to mid-scale farmer and specifically looking at market farming, market vegetable farming, looking to make those operations more cost-effective with robotic tools and technology.
Ethan Rublee:
And so, right now we're very much in that early prototyping, searching for the business model phase of the company, but we have four people working on this and because of the pandemic and the time we started this, it's a completely distributed team. So, I've got a partner, Matthew Bitterman who's out in New Hampshire out of Alphabets X, their agriculture project and Michael McGowan who's up in Oregon, he's the founder of Carts and Tools and they built this little electric rototiller.
Ethan Rublee:
We have an intern, Simcha Bradski. She's an ME student out of Waterloo University in Canada. And so, right now what we're all working on is basically developing a low cost, open source, smart electric microtractor that would be basically a general purpose beast of burden, artificial beast of burden for a vegetable farm.
Vonnie Estes:
Would this be something that a smaller producer would purchase or would you have the business model of having a fleet and do the Uber of tractor model or how are you thinking about the business model?
Ethan Rublee:
Well, so that's a good question. It's still too early to understand what a business model is around a small robot essentially that you can use on your farm, but just to give a sense of how we're building this, we're on our second iteration. We have three built of that second iteration and it costs us about $6,000 in off the shelf parts. And so, we're publishing all of the software and hardware designs on GitHub and so the intent is really to find a repeatable, easy to manufacture platform that you can do research on how to effectively use this on a farm or an industrious farmer could take and build or maybe buy one from us and experiment with using it to save labor on the farm, but it's such an early project and so we can't promise too much, but we'll keep you posted on all of our success and failure if you follow us on our GitHub project.
Vonnie Estes:
Great, so what level of adoption do you think we'll have with robotics outside of the broadacre crops in the next five years. So, besides corn and soy as we start looking at some of the crops that are grown around you in Watsonville, how do you think robotics are going to come to those farms?
Ethan Rublee:
I think RTK-guided tractors, that's already being adopted, but it's looking at essentially the low cost of implementing those systems and strapping them onto existing older tractors for your small Kubota or your old used John Deere. I think that that's certainly coming and there's a lot of exciting work going on, so more companies are implementing that and I think that'll become really practical and I think transportation and logistics on the farm, basically carrying items in and out of he field with AGBs, and talking to farmers, that seems like a very practical way to essentially scale your labor force, augment them with something that actually might be able to get to market in the next five years.
Ethan Rublee:
And then, I see smart implements that can leverage computer vision that can bolt onto any tractor and do transplanting or weed cultivation or aid in those types of operations as pretty promising in the next five years. I guess these market farms that we're working with here in Watsonville, they frequently also have 50% of the labor happens in their pack sheds when they are packing these CSAs that they're delivering basically door to door and we might have 400 subscribers.
Ethan Rublee:
So, it's actually a pretty interesting logistics automation problem at each farm. And so, I think pack shed automation is another low cost, affordable pack shed automation work cells is another area where you'll see some adoption. And personally, I feel like automated harvesting will be limited to those high value specialty crops where you have a certain scale like apples that it makes sense, but I think in the near term, helping workers in a generic sense harvest some product into a bin and place it on a robot and have that robot basically take it to the pack shed, that can save an extraordinary amount of time.
Vonnie Estes:
And, I think as we're more and more nervous about not having enough workers and then keeping the workers that we have safe and healthy, these types of developments will really help. What do you think the barriers to development and adoption are for these types of technologies for smaller acre farms and how do you think the best way to address them is?
Ethan Rublee:
I think some of the challenges that we're dealing with really stem around identifying the return on investment for the farmer and what applications to go after and balancing that with what's practical to build with existing technology. Also, in robotics there's this issue of human safety and then system reliability and those intertwined, but also have an effect on return of investment. If you basically need to constantly monitor the system with a person close by, that's not as practical or it just doesn't make the person actually more efficient.
Ethan Rublee:
And safety, there's not a lot of precedent for safety and so a lot of companies are concerned about liability and waiting for legislation to become more concrete in the United States, especially before deploying a robot at any type of scale. And then, I think the third issue for smaller farmers is really access to capital and this has two legs to it I think. So, there's smaller farms and they might lack essentially access to capital and there might not be loans or lending facilities available for newer, more novel robotics systems.
Ethan Rublee:
So then, the onus is on the companies that are developing these systems to figure out how to support that lack of access to capital from the farmer's side and institutional side and then an investment in companies that are focused on smaller farms. If you look at the venture capital model where you're really looking for something that can scale relatively quickly, the smaller farms it's the long tail. There's 95% of the farmers in the US could be considered small to mid-scale farms, but if you focus on the top 5% of producers, that accounts for 40% of the agricultural value in the US.
Ethan Rublee:
So, a lot of the investment is going into the larger commercial operations, and so I think that part of the work that we're doing at Food System 6 was to identify essentially capital and business model access for investing in development that's going after these smaller operations.
Vonnie Estes:
That leads into my final question, which you've started to answer there is, how does the work that you're doing align with Food System 6 in working towards a better food system?
Ethan Rublee:
What resonates with me with Food System 6 is they're really trying to enable these local food sheds and making those as resilient and self-sufficient as possible and one of our theses around the technology and the reason why we wanted to be appropriate for these smaller scale farm businesses is really to develop something that's financially accessible to the small farm budget and is adoptable in a wide variety of farm systems, that it's reparable by the user.
Ethan Rublee:
If you buy $1 million piece of equipment and you're not allowed to fix it, this is something that just isn't going to work for the five-acre farm where you have essentially the polymath farmer that's playing the piano and rebuilding all of their tractors. I think what we're looking to do is really build technology that is in alignment where the business model and the technology and how it is proprietary and the competitive moats are well-aligned with essentially the values and principles behind essentially a sustainable food system.
Ethan Rublee:
And so, it's still a work in progress. The thesis is if we can make those small to mid-scale farmers economically competitive with automation, if they can be as effective at growing produce as a larger operation, all of a sudden you bring them out of the red. The majority of those small to mid-scale farmers are actually at operational risk. And so, if we can make them profitable, I don't know, there could be a $1 trillion yield gap in the US alone. So anyway, that's longterm what we're working on and I think Food System 6 has been incredibly supportive of our effort and we're looking at farming as a prototype for a sustainable ag-tech company.
Vonnie Estes:
That's great, thank you so much and that's one of the things that I've seen in my role is that an awful lot of the risk of developing and adopting technology ends up on the farmer which is not the place it should be. And so, I think working with people like you in the systems that you're developing, it turns that on its head and we're going to see a lot more adoption and a better food system because of that.
Vonnie Estes:
I have with me Lindsey Lusher Shute. As I was reading up on your background, there are so many things that you're involved in. I was having trouble deciding what to talk to you about. You've ran the National Young Farmers Coalition for over 11 years, you hosted the Young Farmers Podcast, which has really great conversations with important voices. I've really enjoyed listening to some of those, but for this discussion, let's talk about your current venture, Farm Generations. So, what does Farm Generations do and why did you start it?
Lindsey Lusher Shute:
Thank you for having me on, Vonnie. So, Farm Generations is an outgrowth of the National Young Farmers Coalition. It's a national agricultural cooperative that was incubated by Young Farmers Coalition and we are delivering fair technology to the farmer community and our first project is an app called GrownBy that will be available this fall more broadly and it makes it very easy for farmers to market and sell their products through subscription and online orders to consumers.
Vonnie Estes:
So, what size of markets and what type of people will be involved in the app?
Lindsey Lusher Shute:
This app is really focused on direct to consumer operations and that's where we found real need for technology. My husband and I have a thoroughly scaled direct to consumer vegetable farm in the Hudson Valley and through my own experience seeing him try to manage that farm and our crew of 17 people and we have over 1,000 CSA members this year, it is very complex and so the idea is GrownBy will help to manage some of that complexity, those relationships with customers and hopefully save our farm and many other farms lots of time in employee hours and trying to get those orders right and really provide a service to customers that they enjoy, so they'll keep coming back, but it's really focused on direct to consumer farms really from the smallest beginning operations to more scale operations like ours.
Vonnie Estes:
And, do you think there's going to be an increase in that demand because of COVID or are you seeing more people trying to do that now?
Lindsey Lusher Shute:
We have seen that on our farm. We had an incredible increase in sales in the spring. Some of that has shifted a little bit as there's been more availability at grocery stores and just some of the normalcy of markets have sort of crept back in. Things are more as they were, but we still have much stronger demand than we ever had in our 17 years of operating this farm.
Vonnie Estes:
Wow.
Lindsey Lusher Shute:
So, there's the trend of people wanting to buy online and there's the trend of people looking to buy food locally from regional producers where they want to support that producer because they're essential to their community and I think consumers really understand how important direct to consumer farms are now in terms of regional food security in new ways, but I think there's also a real relief for consumers in knowing exactly where their produce comes from. They know who grew it, they know how it's being handled all the way to their refrigerator.
Vonnie Estes:
We're definitely just through a lot of the consumer research that we see at PMA, we're seeing those trends and it's interesting to hear you see how they're playing out out there. So, I met you though Food System 6 and how does what you're doing align with their values?
Lindsey Lusher Shute:
Well, Food System 6 has a truly holistic and such a thoughtful approach to looking at the food system and supporting the food system from the producer to the consumer to the ecosystem at large and how an individual farm and farm system impacts that. So, what we're doing at Farm Generations is thinking deeply about how can we serve the world through improved technology, but we're going beyond that because we're also thinking about fairness and how the cooperative model uniquely offers farmers equity in the future of the food system and that's something that not everyone just understands right away, but Food System 6 is a group of people who have been thinking about these problems for a long time and are willing to really engage deeply in the complexity and the challenges faced by the food system.
Lindsey Lusher Shute:
So, I think certainly from a values point of view, we're highly aligned in the outcomes we're looking for. We're looking for good food, regional food, and good environmental and social outcomes, but also the people at Food System 6 I think are very thoughtful and willing to embrace the complexity and what it's going to take to get there.
Vonnie Estes:
I got to talk to Caesare and I am amazed at how they're thinking about it and how they're looking with this huge vision of really changing the food system and how we work, so I'm very excited about all of the companies and the cohorts. So, I love the various issues that you're focusing on through the podcast that you had and the work that you've done with Young Farmers and in this time with a desire to eat for health and immunity and our disrupted supply chain and also financial inequity, what are some of the changes and movements that give you hope going forward?
Lindsey Lusher Shute:
This is such an interesting time. I'm certainly hopeful in what I'm seeing in shifts in consumers' interest and understanding in just around local food and agriculture and regional food systems. As a grower, I've always known that I am essential. What we're doing is critical. We are growing food that most people are not involved in that business. It's like 1% of the population is growing food for everyone else. I'm also very excited to see what's happening around race in the United States happening in parallel with the COVID-19 crisis.
Lindsey Lusher Shute:
This conversation around race and inequity is carrying over into the food system and is encouraging many more young people to take action in communities thinking about nutrition, how we can improve the lives of people who do not have access to food, but also how we can encourage black, indigenous people of color to become farmers in the United States and reclaim some of that history and give people new opportunity in that space. So, there's just been all of these projects that have come up around providing new opportunities for land access for farmers of color in all parts of the US, just this new burst of enthusiasm and there's been financial support for training and many of these more structural initiatives, so I'm hopeful that on the other side of this we're going to have a food system that's much more resilient and a food system that is much more diverse and ready to serve what is ever going to come at us next. I think hopefully after this, the nation will be more well-prepared.
Vonnie Estes:
That's great, I love hearing that. There's a growing awareness that the food system is not merely the sum of its parts, but that all parts of the system relate to and affect one another in a complex and sometimes indirect ways. This was such a great opportunity to talk to people who are thoughtfully involved in moving our food system towards an integrated approach where decisions are made within the context of environmental, physical, and social health. We're in a time of massive upheaval where fundamental shifts are calling for technology, innovation, and entrepreneurship.
Vonnie Estes:
No matter where we sit in the food chain, we can respond to these shifts with ingenuity and creativity to shape the food system in a positive way. What can you do today? 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.
Description: COVID-19 has shocked the foodservice industry on all fronts. Restaurants are having to open and close at a moment’s notice. Foodservice operators and suppliers are responding and modifying their business models for the new post-crisis world. How we plan, how supply chains move, and how we collaborate is all going to change. In times of rapid and drastic shocks, those who are quick to adjust will lead the way for the industry to follow. New technology and increased use and reliance on existing technology will help the industry plan for the future. Join the conversation about current state of food service with Vesta Foods and two different types of technical solutions from Avolast and Agtools.
Guests:
Description:
COVID-19 has shocked the foodservice industry on all fronts. Restaurants are having to open and close at a moment’s notice. Foodservice operators and suppliers are responding and modifying their business models for the new post-crisis world. How we plan, how supply chains move, and how we collaborate is all going to change. In times of rapid and drastic shocks, those who are quick to adjust will lead the way for the industry to follow. New technology and increased use and reliance on existing technology will help the industry plan for the future. Join the conversation about current state of food service with Vesta Foods and two different types of technical solutions from Avolast and Agtools.
Guests:
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. I've spent years in the ad 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:
The foodservice segment of the produce industry has been hit particularly hard during the COVID-19 pandemic. The complete and swift shutdown of restaurants, schools, hotels and pretty much everywhere people met outside their homes to eat, shook the industry. This resulted in over supply and chaos in the supply chain. Planning and forecasting on how to move forward is extremely difficult. Today we are speaking to Jin Ju Wilder at Vesta Foodservice, about the effect on her business. Later we will speak to Agtools and Hazel Technologies about technologies aiding the foodservice industry. Let's hear from Jin Ju at Vesta Foodservices.
Jin Ju:
Vesta Foodservice is a distribution company and we're dedicated to providing solutions to the foodservice industry, in particular. We have facilities and distribution throughout California and large portions of Arizona and Nevada. We supply a full line of fresh produce items, as well as specialty grocery items. We typically carry about 7,500 unique SKU's in our facilities.
Jin Ju:
As to my role, I cover a lot within the company; branding, marketing, communications is all in my purview as well as community engagement. I have a category development team, whose job is to really take a look at adding new products, new lines, new vendors that provide value to the customers. They also provide education and product training to our sales team and to our customers. Then, I also have a key count management team. What they do is they really take care of some of our regional chains, and they create the systems and processes that are unique to each one of those chains, again providing the unique solutions for the company, whether that's logistics, product solutions, labor solutions, et cetera. That's pretty much where you'll find me working within the company.
Vonnie Estes:
Busy times. And you've had a little bit of a background with the Produce Marketing Association, as well, right?
Jin Ju:
I have. I've spent, started very early in my career, great opportunity to network and learn more about the industry, not having grown up in the produce industry, so wanted to just learn more about it when I started, PMA was a great was a great way to do that. I volunteered for committees. I served many years on the Board of Directors for PMA, three different terms. Then served as the PMA Chairperson, amazing opportunity, 2017 to 2018. It was just such a wonderful opportunity to work with my industry peers, some amazing people. To come up with the new strategic vision for PMA, at the time, which was bringing together the global produce and floral communities to grow a healthier world, which we talk about a lot right now, especially. Really bringing that vision alive through the different focus areas, whether it was demand creation, technology, which you know Vonnie; sustainability talent, global connections is definitely a focus, and then as always, the science and safety. To be able to help articulate that, and to be able to help PMA bring some of that alive during my Chairmanship was just a fantastic time. I learned, I grew so much through that time period. And I'm so grateful to the other board members that certainly helped make that happen and were so generous with their experience and their expertise with me at the time.
Vonnie Estes:
Great. Yeah, you've had a great impact on the organization. And your support was part of the reason I was hired. So, thank you for that. I think, not just particular to me, but just your realization that technology was a really important part of our industry going forward. I appreciate that and recognize that impact. So, COVID-19 has hit the foodservice industry super hard. The last time we talked, I think about a week and a half ago, things were starting to open up a little bit and you were a little more hopeful and things were moving again. And now, things are starting to contract a little bit. Can you tell us what's happening in your business right now?
Jin Ju:
Sure. You are absolutely right. We're such an optimistic, hopeful industry, aren't we? Even a slight uptick we get very excited and that's certainly how I felt the last time we talked. Things continue to open up a bit more, albeit very slowly. We still obviously have a lot of challenges. You're right. The recent rollbacks to in room dining, they are damaging. I think, the restaurants that had mechanisms in place early on, to be successful with takeout and delivery did well. They now find themselves building upon that success. We certainly have some chain customers that, gosh are at 85-90 percent now, which we're very happy about.
Vonnie Estes:
Oh. That's great.
Jin Ju:
Yeah. Absolutely, but I wouldn't say that's the majority. We have plenty of customers who haven't reopened, have shuttered for good, or were planning on reopening for 4th of July weekend and due to the rollbacks had to shut back down again. For those familiar with the supply chain and how it works, they won't be surprised. But for those, who maybe don't live it every day. In order to open up for 4th of July weekend, they ramped up their inventories and so did we. They brought back employees in anticipation of the increase in business and so did we. So to have to take another hit on inventory is devastating, to have to tell employees that you have to lay them off again because that anticipated bump in business isn't coming yet, that there's at least a 3 week delay, and we don't know it maybe even more. It's not looking good. It's just heartbreaking. So, you're right from the last time we spoke there's been a change, but overall we're still optimistic that things will continue to open up and customers will continue to be very creative in the ways they find to get food to the customers, get food out into the communities
Jin Ju:
Then, we talked about as well, we're one of the contract awardees on the USDA Farmers to Families box program. Our contract got extended through August. That has had such a positive impact on our business, as well as our growers and our immediate communities, in that we're able to help get food out to families in need. That has been helpful and that was a bit of good news.
Vonnie Estes:
Oh. That is good news. You had mentioned to me, your job when everything is going normally, is to solve the problems of the chef. Can you explain what that looks like normally and how you're trying to handle that now in whatever way you can?
Jin Ju:
Absolutely. So we have a very diverse customer base. Our customer base covers everything from the independent high end restaurants to regional chains, business and institution, colleges, hotels, sports venues. It runs the gamut and each one of those segments, and each individual customer is going to have their own unique challenges in reaching whatever their goals are for their organization. Those solutions can be just in sourcing, whether it's sourcing the particular items that they need for their menus, or even organizational goals. Some of the businesses may want to purchase only organic, or they may only want to purchase most of their product from locally grown sustainable food systems. So there are some things on the sourcing side that we do to provide solutions and then depending on their facilities and how much product they can hold, and how quickly they need to get product; some of those solutions are logistics. Some of the chains have commissaries where they're producing some of the items needs to be combined with the product we're sourcing for them, so we're setting up some unique logistical solutions for them, so they're getting just-in-time delivery and the freshest product available.
Jin Ju:
Then some of it is labor, whether it's packing in smaller sizes or sorting the product. We have customers who need bean sprouts, for example, to be exactly five inches long and that's it. We've got our rulers out and our team is out there measuring. It could be green beans. It could be cherry tomatoes. I don't think that is necessarily unique to us. We certainly pride ourselves on the level of service we provide. I believe that is something that foodservice distributors across the country do in terms of service.
Vonnie Estes:
So how do you think your business will change? Your business specifically, and then also just the industry in foodservice coming out of COVID-19. What will look different? And how will things change?
Jin Ju:
I think this particular crisis was so devastating across the board that there's been much more understanding throughout the supply chain.
Vonnie Estes:
Even from consumers, right?
Jin Ju:
Yes.
Vonnie Estes:
I think consumers have never thought about the food supply chain and they are now.
Jin Ju:
Correct, because it was such a big shutdown. There have been more stories written about the supply chain than ever before. Some of it is eye catching because they are accompanied by photos of crops being left in the field or milk being dumped. So, people are paying more attention. In particular to the foodservice industry segment, I believe that there's more open communication from the grower all the way to the customer. An understanding of how each one of us has been impacted, and as things start to open up the understanding of the open communication that needs to take place in order for us all to succeed. Very early on, for example, we were very clear to our customers in constant communication what was happening with the growers and the processors, and the decisions the growers and processors were having to make; not only to deal with COVID-19 and employee safety, but also planning for business sustainability.
Jin Ju:
There are going to be fewer plantings of the foodservice SKU's and once foodservice comes back; you're going to have more demand for less supply of those items. So, you need to be more communicative about when you're opening up and your menu changes, but also more flexible about the specs you are willing to accept and be able to use in your menus.
Jin Ju:
There's a lot of that kind of dialogue happening. And then we're trying to do our best to communicate back to our growers when our customers are coming back, and at what percentage they're coming back. That has been a great challenge. I wouldn't say we found the magic algorithm that allowed us to be accurate in doing that. Frankly, that's something that continues to be a daily challenge right now, but we have a focus on it and we're doing our best to communicate back to the grower so they can have some data to make better decisions.
Jin Ju:
A big joke around here is there's just not enough data to do good maths and make good decisions. We're doing our best to collect that data and share it as much as possible. I just find there's more openness on either side of the supply chain to do that.
Vonnie Estes:
That's great. That leads me to my last question, which you kind of touched on. What are some of the specific issues that you're facing where technology might help going forward? Certainly forecasting is like you just mentioned.
Jin Ju:
Yes. Forecasting is one of them. That is something that is not new to the foodservice distributor. We regularly use forecasting to create pars levels within the company, but I think it has never been more critical that we get it right because none of us can take another big hit. We can't take the kind of inventory losses we took at the beginning of March and survive. Forecasting from the customer side is one part of it. Inventory management is certainly another one. Everyone's keeping much tighter inventories because we just can't afford it. We don't know. In our case, our inventory management planning, we are considering another shutdown. Some people may say, it's not going to happen; states can't afford it. Yet, the rollback, I think is evidence that it's very much a possibility and that it does have to be considered in your inventory management plans.
Jin Ju:
So, forecasting, inventory management, another thing the rollback brings to light is that anything we can do in terms of shelf life and helping us kind of keep inventory in good condition for longer than maybe we have up to this point would be extremely helpful. As customers open up, they're not able to take full cases. If your dining room is only able to seat 25 percent of what you normally did, you're just not going to use full cases. In the past, at the grower-processor level, when we asked for smaller pack sizes, because we don't have the labor in house right now to provide those services that we used to provide to the customer, if we could purchase them in smaller pack sizes. But, affordably, I know that's the key, it's not that, the capacity is not there to do that. It's that typically when we ask for the smaller pack sizes, it pushes the price up so high that it's no longer a viable option. The customer will say, I'll take the case and throw half away, which is not what we want happening in the supply chain.
Jin Ju:
I think there's a lot of opportunity there. The learnings, the pain that we went through in losing so much inventory; I think there's opportunity there from a technology standpoint to provide some solutions. So again, the forecasting, inventory management, packaging and shelf life are the top issues that come to mind. Then, labor would be another one.
Vonnie Estes:
Great. Well, thank you so much for giving us a view of your world. I think you kind of sit in a spot that most people don't get to see what's really happening with foodservice and the impact.
Vonnie Estes:
We will now turn to two technology solutions that can help solve some of the problems that Jun Ju talked about. First, Agtools, a data subscription service that allows for better forecasting and decision making. Then, second, we will jump into a conversation with Hazel Technologies and Mission Produce about increasing product longevity.
Vonnie Estes:
Let's hear from Martha Montoya, CEO of Agtools.
Martha Montoya:
What we do is we literally gather data from all types of government entities; first, second and third floor layer of data to be able to bring it into a dashboard that gives us the insight of what really is happening across the market, not only in the United States, but Mexico and the Americas, on sourcing; where the products are coming from.
Martha Montoya:
After many years, I decided we needed to find a way to see things faster and forecast. The fun thing about this whole world is that all of us in the industry kind of know what's going to happen, we just don't have the tool to confirm what we know. We just need that little extra element. What we do is we make sure the Agtools brings you historical data in seconds because we have a platform that operates one billion transactions per second. You have 25 years of historical data so you are able to, as a buyer, or in the foodservice industry, you can see where things are coming from and how much volume is coming, when is the beginning of the season or the downturn of the season for freshness and be able to turn around and either tell your supplier, the large suppliers to myself as a restaurant or as a buyer myself of the commodity, be able to say, can we start sourcing strawberries from this region now, because they're best, they're fresh and they're less expensive.
Martha Montoya:
I think this Covid-19 has created that need of transparency of understanding where anything comes from; even for this whole program of the farm to four or the family program, where sourcing is where do we find the products. It's kind of people calling people, no longer, it's all in one little dashboard that tells you exactly where they are coming from and when, because it's all government data.
Vonnie Estes:
So that's where you get your data? It's mostly government data.
Martha Montoya:
It's all government data, adjusted a couple things and there's always a misunderstanding in the world of data. The whole government, not just here but all over the world, they're continuously updating data in our industry, what we call the fresh market every second. By the time we get these "reports" we used to get, the general scope of what happened, there might be upgrades that we don't see crossing the borders. Or our processing plants or packaging houses that put out three truckloads, but it was really two because one didn't leave. The following morning at 6 a.m. it's revamped. We can continuously, as a buyer, me as a foodservice company; I can see literally, is it moving more from the Rossi side? Is it moving more from the Fresno area? Because now I can see where the volumes are coming from and plan better
Martha Montoya:
I think the second, and most important part of forecasting which our tool does is the market movements. We have 67 variables that impact at any time our buying decisions. The tool does the thinking process for you, whether it's a storm on the way to the distribution center or to my door, or through in the process. Or whether there's an exchange rate on all of us in Argentina went down and the blueberries are $5 versus $14 in Michigan. You see what I mean. All these variables are anytime working in this tool to tell you the best place to source in the next month, three months, six months, is from this area or at this price or these volumes. It helps us make better decisions to avoid losses which is what we are trying to do right now, avoid the losses, the financial losses.
Martha Montoya:
I understand food, but at the end of the day in our industry the P&L is important.
Vonnie Estes:
Right. One of things you were talking about, the different variables that we talked about last time I spoke to you was there are all of these questions that everyone who is buying should be asking. There's all these variables that people should be looking at and whether they're using your tools or not, a lot of people, you had mentioned you talked to someone and they got up every morning and they looked at like 10 different sources to try to get a sense of what's the weather and what's the exchange rate and what are all these things that are happening? The advantage of a tool like yours is there's so many variables, no one can be watching that many and they should be. So, your tool actually allows them, in one place to look at all these variables at once, instead of trying to hold it all in your head, which no one person could do.
Martha Montoya:
There's no way. Not only that, Vonnie, the more important part also is we need to bring the new generations in. It's a tough industry. It's a little bit of a chaotic industry, sometimes because it's almost like a panic reactive mode. When young people come, either they love it or they are like, I don't think I want to do this kind of thing. The tool we have young users loving it and performing the season ones, buyers because they are able to see it in seconds. They can see where the tomatoes are coming from, where the cantaloupes are going, where did they sell more. And in seconds understand. We are able to train other people underneath us. We love our industry and we want to bring more people, but we need to give them to tools to love our industry enough, not be scared of it and screaming, "Hey what happen with the truck?" “Why did we buy it at this price,” and so on and so forth. Right?
Vonnie Estes:
Yeah. No, that's a great perspective.
Martha Montoya:
It's almost like a retention tool or an enhancing tool for the younger generations. We always have had the gurus of our commodities across the world, and the United States, the one who knew everything about asparagus, the one who knew everything about cantaloupe, right?
Vonnie Estes:
Yeah.
Martha Montoya:
We're grabbing all those brains and we're putting it in this tool.
Vonnie Estes:
Yeah. No, that's great.
Martha Montoya:
Before they go to play golf.
Vonnie Estes:
So, is it a subscription service? Is that how it works?
Martha Montoya:
Yeah. It's a license we went through UC Davis research to make so accessible, knowing the pain, the common pain that corrodes our industry is thin margins. We made it very simple, $199 per month, per commodity. I always say, you save one truckload, you pay the membership.
Vonnie Estes:
Yeah.
Martha Montoya:
That's our thinking process.
Vonnie Estes:
Yeah.
Martha Montoya:
Nothing fancy. It’s very simple. Not that we're not smart people. We need simple 67 things to tell us in seconds, what should I do with that truck? To cross it or to send it or to pick it up again.
Vonnie Estes:
Well, it takes very smart people to make complicated things look simple.
Martha Montoya:
That's for sure.
Vonnie Estes:
Yeah. What do you think post COVID-19 supply chain is going to look like? And do you think people are finally going to rely more on data to make decisions, whereas before it was more phone calls and spreadsheets and doing their own work. Do you think going through this process is going to help people rely more on this type of data and these types of tools?
Martha Montoya:
There are two things I'm seeing a trend. One, the grownups are starting to understand that they have to get in, or some of them are saying, you know what, I'm done, I did my job, I move on. I heard 50 plus people actually retiring, taking advantage of the "situation" to move on because observing data is not easy and we are all living this. I mean we're doing a crash course on every new thing, technology, but definitely digitalization is crucial; worldwide digitalization of our industry is crucial. People just don't understand, and having done this globally, how any farmer in Philippines can impact our supply, at any time. Or how a supplier in down in Sinaloa will impact us. We knew it. We kind of saw it but it was slow waves. Now the waves are faster so we need these tools to understand faster what's going on.
Martha Montoya:
I think the biggest one, Vonnie is that we used to just plant based on the request of the buyers and we in the foodservice industry, we need to start looking a little more on matching supply and financials. That is one tricky one that is finally starting to, after a couple years growing it this process, finally the industry is starting to understand what we produce in the farm or the production packing houses, has to match when we get out to the market based on the market itself to avoid the losses that we've been encountering for decades.
Vonnie Estes:
Nice.
Martha Montoya:
That is where the forecasting is so crucial, matching the market against the production and/or even the planting. We have customers already planting based on historical data of markets. They are growing one of our biggest customers has grown this by up to 280 percent because he's matching broccoli growth against market demands.
Vonnie Estes:
We just talked to Jun Ju Wilder about the many issues she has faced in the foodservice industry. One of the issues is around product longevity with all the changes and hiccups in the supply chain given in the opening and the closing of foodservice establishments in all the up and downs there.
Vonnie Estes:
We're now going to talk to Hazel Technologies and Mission Produce about a collaboration that should help with product longevity in the supply chain. Welcome to Aiden Mouat, CEO and Co-Founder from Hazel Technologies and Patrick Cortez, Senior Director of Business Development from Mission Produce.
Vonnie Estes:
Great to have you guys.
Patrick Cortez:
Great to be here.
Aiden Mouat:
Thank you.
Vonnie Estes:
All right. So first, Aidan, why don't you tell us about Hazel Technologies and what you do?
Aiden Mouat:
Absolutely, I'm one of the co-founders and CEO of Hazel. We formed the company in 2015 with a pretty direct mission of using new sustainable biochemistry and biotechnology to stop food waste by reducing spoilage in the storage and transit process. We've developed a number of products over the years, but our core focus has been to use very eco-friendly, highly sustainable, very cheap technologies, put them in the hands of the world's food suppliers, growers, packers, et cetera. By providing them control over critical processes in perishable food, help them keep their stuff fresh for the longest possible duration and move from point A to point B with minimum spoilage. The ultimate goal of trying to tackle to massive food waste problem that's emerged in the market.
Aiden Mouat:
That's who we are and what we do.
Vonnie Estes:
Where are you in the commercialization process? I know you have a number of partnerships and clients but are you out in the market completely, are you still doing development, kind of where are you?
Aiden Mouat:
No. We're fully in the market. We're fully commercialized. I think it's a great question because the scale of agriculture is just so huge that even though I can say unabashedly we're deploying millions of units a year in 12 different countries, even that's not big enough and we're going to keep growing. But no, we're fully commercial. I think this year we're planning on treating a total of about three billion pounds of produce, that's we're on track for it. Based off the analytical work that we do and the studies we conduct with our customers. We see that translating to about 500 million pounds, give or take, of produce saved from going to waste.
Vonnie Estes:
Wow.
Aiden Mouat:
We've got a lot more to go. It's a much, much bigger world than that but so far, we've been growing to meet that challenge. We're out there. We got a couple of flagship products already taking heavy traction in the market. We've got new product pipeline coming up over the next couple years. You're going to be seeing a lot of new innovations from us, as well as the stable of stuff we've already put out there.
Vonnie Estes:
Wow. That's amazing. Are you mostly in the U S right now? Have you started expanding into other geographies?
Aiden Mouat:
I would say our principal territories are really the Americas, as a general. We've got, certainly North American presence, mostly in the U.S.; a fair amount in Mexico now. We do a lot of business out of a number of South American countries, but yeah the next big phase for us is really the global development piece. So, we're active in New Zealand and Australia. We're getting active in Japan. We're getting active in India, the EU, South Africa, quite a number of other countries. Within the next three to five years, you'll really see us in more like 30 or 40 countries. We're trying to really tackle some of those global supply chain problems, not just the ones here.
Vonnie Estes:,br/> Yeah. It's really amazing, the need for that right now. I've been talking to a couple of companies in Australia right now. One of their biggest issues is because there's no flights coming in and out, I didn't realize how much food was carried in the bottom of commercial airlines and so, there's just a real problem with not getting product in and out on a regular basis as much. Really, the need of having things that extend that shelf life and keep things fresh is super important during these times as well.
Aiden Mouat:
Yeah. Honestly, Patrick could speak to this pretty heavily because of Mission's very international presence. I think that's part of the importance of having these types of partnerships between tech providers and supply chain folks; people that are actually out there moving crop from place to place because there's so many challenges to be solved that we really have to get in under the hood and think about these individual international opportunities and all of these different supply chains. It's been a real benefit to us to be able to work with somebody like Mission that has a lot of experience in those kinds of supply chains. That's good for us and good for the world.
Vonnie Estes:
Great transition. So, as I've talked about on this podcast a number of times is that technology adoption really does come through collaboration like you said, and working with the industry. That's the way we're going to get technology adopted and that's how we're going to make an impact.
Vonnie Estes:
We also have with us as I mentioned, Patrick Cortez from Mission Produce. Before we launch into the collaboration Patrick, why don't you tell me a little bit about Mission Produce and who you are.
Patrick Cortez:
Sure. Vonnie, thank you for having us and this conversation, which I think is very, very important, but Mission Produce, we are the largest grower, packer, shipper of fresh Hass Avocados in the world. We're the largest grower in Peru. We pride ourselves on innovation supply chain service all of the benchmarks that our customer base is expecting for us. We have the world's most advanced avocado network with nine ripening centers in North America. We've got a sales office and ripening center in Holland, operations in China. Our reach is to be global and expansive. We're a very competitive company. We like to position ourselves as a top produce brand. You can't do that without innovation. You can't do that without service. You can't do it without source. You can't do it without collaborations like the one we have with Hazel.
Patrick Cortez:
We continually know that if we don't innovate, we're going to get caught by the competition. That's not in our DNA. That's not in our culture. As you can tell, we're very competitive and very much want to continue to win. At what we're doing in addition to doing what's right for the world. We're very serious about making sure we work to leave the world a better place than how we found it. What we're doing with Hazel, it goes a long way in trying to help achieve that.
Vonnie Estes:
So, Patrick, why don't you tell us a little bit about the relationship? How it came about? What's going on with the two companies right now?
Patrick Cortez:
Yeah. I think we got together three or four years ago. What really intrigued us by what Aidan and Hazel are doing was not only the technology, the ability to extend the shelf life, but also the ability to incorporate it virtually anywhere in our supply chain. That was as critical. At the end of the day, the avocado supply chain is extremely complex when you look at California, Mexico, Peru, South Africa. You name it, it's very challenging, the logistics of getting avocados from place to place, as it is with a lot of produce commodities. We're not alone in that space, but we also found that there's value in trying to extend the shelf life at the retail level, reducing waste, which reduces the carbon footprint, but also affects the bottom line on financials. And the foodservice space, where food cost is so critical to every operator out there, now more than ever.
Patrick Cortez:
The ability to buy avocados and have confidence they're going to last until you need them, until those sales come through is valuable to the bottom line of the business. When we combine all of that and we look at how Hazel integrates in our supply chain and delivers results, it was a virtual no-brainer.
Vonnie Estes:
That's great. Can you talk about what the relationship is and how you're working together? What's happening going forward?
Patrick Cortez:
We have launched a product for fresh Hass avocados called Avolast. We are in partnership with Hazel doing this in a joint manner. Obviously they're working closely with our R&D team to provide the right quality and spec. Aidan can obviously touch a little bit more on that.
Patrick Cortez:
With Avolast, what we're able to do is extend the shelf life of both hard avocados and then also, for the foodservice base, ripe avocados. We've been able to achieve, anywhere depending on the seasonality two to four days of added ripe shelf life, which is massive in all sectors. It's huge in the retail sense. It's huge in the foodservice sense. The other thing we've been able to do is we've also been able to extend the internal quality of the avocado.
Patrick Cortez:
Take it for a practical application at home, if you've left something on the window too long and it feels really mushy, you think, oh man, there's no way it's going to be any good, we've time and time again shown that we can still cut that avocado and it still cuts clean and it still tastes great. You still get the benefit of it.
Patrick Cortez:
Regardless of what sector you're in, there's value add to what we're doing along the way. In addition to, potentially opening up new supply chains. Getting from Peru to India, isn't easy. Something like Hazel helps us open up new markets which in turn grows the category as a whole.
Aiden Mouat:
Vonnie, you can think of Hazel and Mission as kind of the horse and the cart, Right? You've got a company that's already got a long and prestigious history of very high quality fruit and then we come along and we provide a little bit of extra tech on top of that in order to ensure, it's just at all times the best eating experience possible from an avocado that you get.
Aiden Mouat:
I think that's the best way of describing the partnership.
Vonnie Estes:
That's great. Just out of curiosity, can you get a little technical with us here, on like how does it work?
Aiden Mouat:
Yeah. Oh, absolutely. The way that all of Hazel's products work and Avolast is a fine example of this is we provide an atmospheric control that allows us to regulate the metabolism of the crop and extend its shelf life during the storage and transit process, but also after that storage and transit process as well. In this case, we're using a technology that's been referred to generally as ethylene inhibition, which is a bit different from the approach of the industry in ethylene management with the fan type systems, or the absorber type systems. In this case we're actually using our sachet based technology to introduce a small amount of ethylene inhibitor into the atmosphere around the avocados. What that does, it alters the metabolism and the breathing rate of the avocado. We're able to take control of it. We're able to slow it down so the avocado respires more slowly, loses less water, is less susceptible to disease and ultimately then take it through the storage and transit process. Once that avocado gets into a ripening environment, or once that ripening process starts to take place, that regulated metabolism actually results in a higher quality fruit after the fact as well.
Aiden Mouat:
This is where that two to four days of ripe shelf life enhancement that Patrick was talking about comes from. We have a fairly cool, non-invasive biotechnology here that allows us to mimic the natural biochemistry of the avocado, but in a way we're able to control very selectively, to target very specific ripening parameters, very specific dates, very specific times and temperatures, and be able to deliver ripe window to the retailer and ultimately the consumer.
Vonnie Estes:
That's great. Thank you for that explanation. I'll have to read more about it, but I appreciate hearing that use of the technology.
Aiden Mouat:
Well, admittedly I tried to leave off the PhD level organic chemistry.
Vonnie Estes:
I might call you up on that later.
Aiden Mouat:
Yes.
Vonnie Estes:
That's a different conversation. All right you guys. That is about it. I really applaud you both on finding each other and working together to make sure that we get to use these new technologies in the industry. Thank you very much. I wish you the best.
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 as PMA.com and wherever you get your podcast. 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.
Description: Vonnie Estes explores the labor shortage in produce production with guests Dr. Phil Martin, John Purcell and James Terry. Dr. Martin discusses labor issues in produce production while John Purcell explores breeding solutions and James Terry talks about integrated hardware and software in-field solutions.
Vonnie Estes: Welcome to PMA 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. 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 allowing us to serve as your guide to the new world of produce and technology.
Vonnie...
Description:
Vonnie Estes explores the labor shortage in produce production with guests Dr. Phil Martin, John Purcell and James Terry. Dr. Martin discusses labor issues in produce production while John Purcell explores breeding solutions and James Terry talks about integrated hardware and software in-field solutions.
Vonnie Estes:
Welcome to PMA 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. 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 allowing us to serve as your guide to the new world of produce and technology.
Vonnie Estes:
This episode we take on labor, the understanding of labor issues in the produce industry and a couple of solutions. I have three guests:
Vonnie Estes:
Labor's a big issue in the produce industry and there's been many trends around labor that are becoming bigger and bigger problems over the last couple of years, and COVID-19 has even made some of these trends worse. So here to talk to us today about this is Phil Martin. Dr. Phil Martin is Professor Emeritus at the Department of Ag and Resource Economics at my favorite school, my alma mater, UC Davis. Welcome, it’s very nice to have you.
Phil Martin:
It’s nice to join you.
Vonnie Estes:
So let's just jump right in here to get some idea on kind of the overview of the produce labor market, which, as we were discussing before, is really complicated on how you describe it. Just give us kind of a field of, in the U.S., what the market looks like.
Phil Martin:
So the farm labor market in U.S. agriculture includes about 100,000 employers who employ an average of about 1.5 million workers. That's the average employment number. The total number of people who work on farms for wages sometime during the year is higher, probably about 2.5 million. Of all the employment in agriculture, about three fourths of it is on crop farms, and most of the employment on crop farms is in fruits, nuts, vegetables, melons and horticultural specialties. So when we're talking about employment in the produce industry, we're talking about roughly 50 to 60,000 employers who are employing between 700,000 and 800,000 workers a year. That's the average. The total number of workers will be higher. The overview is that we've got a big agricultural labor market that matches many workers who are employed seasonally with jobs that last anywhere from a few weeks to many months.
Vonnie Estes:
So no wonder it's so complicated to try to add all those up. A lot of people have been asking the question for this year and various different issues: do we have enough farm workers to harvest crop?
Phil Martin:
Well, it's always the question of how do you define enough? Employment in crop agriculture has been going up, not down. The reason for that is, as fast as we mechanized the harvest of one crop, so about 30% of the raisin grapes were harvested by some sort of machine last year, we plant more of another crop, say blueberries or sweet cherries, that are primarily picked by hand. So we have offsetting effects. The new plantings are actually slightly offsetting the mechanization to leave us with slightly increasing farm employment. There's always a worry about whether there will be enough workers, and roughly 10% of all the jobs in crop agriculture right now are filled by H-2A guest workers. The guest worker program, the H-2A program, is expanding, it's up about 10% so far in 2020, over 2019, and I expect it to continue expanding.
Phil Martin:
When I look at the farm labor market, I sort of say, there's a race in the fields between machines to save labor, migrant guest workers to replace U.S. workers who are getting older and exiting, and then imports, because remember, we import half of our fresh fruit, and about a third of our fresh vegetables. And those import shares have been rising over the last decade.
Vonnie Estes:
So when we look at some of the trends that you just mentioned, what has changed with COVID-19 and what effect do you think it will have coming out of this?
Phil Martin:
Well, COVID-19 has had the short-term effect of raising costs for employers who have to do physical distancing and provide personal protective equipment, and increased fears among workers that they will get the disease and spread it to their families and their communities. So in the short-term, there is higher cost and more uncertainty in the labor market. I think the one thing we can say so far is that even though the unemployment rate went up enormously, from less than 4% to over 14%, we don't anticipate a lot of jobless non-farm workers returning or taking seasonal farm jobs. Instead, this notion that the H-2A program is expanding at the same time that the unemployment rate is so high, seems to suggest that there are not a lot of expectations of getting the U.S. workers, or new U.S. workers into farm jobs. Instead, it goes back to that one, two, three choice of machines or more guest workers or imports.
Vonnie Estes:
So I've read some of the things that you've written about what is the tipping point of looking at machines versus getting the price of machines down and when the cost of labor is so high and the machine cost goes down, then we'll mechanize more? Can you talk a little bit about that and what you're seeing out in the field?
Phil Martin:
Well, it's supply and demand, like everything else, two blades of the scissors. With the cost of labor going up, and with the price of machine substitutes going down, there will be a tipping point, but the tipping point varies by commodity and a whole lot of other factors. Fruits are more labor intensive than vegetables. If you look at the fresh fruit industry, when one is a planning a new orchard, the planning is typically for dwarf trees and fruiting walls, all things that make harvesting easier, whether it's done by hand or by machine. What has happened, especially in California, is that the minimum wage is scheduled to rise to $15 by 2022, there are new overtime rules coming into play that will increase the cost of hours after eight a day or 40 a week, there's new rules on paying for travel time and other things.
Phil Martin:
So anyone looking at labor costs is going to be looking at rising labor costs. If we're not going to get U.S. workers back into these jobs, then we know that the cost of H-2A workers is typically, right now, in the $20 to $25 an hour range, and that's likely to rise, as well. With the labor costs on an upward trajectory, the question is, how does one think about the future? And I think most people who are making investments in vineyards or orchards are thinking that when these trees or vines come into production, will this commodity be profitable at labor costs that could be 10 or 20 or 30% higher than they are today? For vegetables, it's often an annual planting or several plantings a year, and the real question is always, do you work with plant breeders to make the commodity easier to harvest by hand? Or do you stress getting the commodity to ripen uniformly so that it could be harvested with one pass through the field?
Phil Martin:
So you could have tall-stalk broccoli, so that people wouldn't have to bend as much to cut it. Or you could say, if we now get 70% of the commodity in the first pass through the field, can we raise that to 90% and then use a machine to harvest in one pass through the field, because selective harvesting typically is more expensive and doesn't work well under field conditions. So in thinking about mechanization, it's not the idea of “there's a machine sitting in the shed and we bring it out and decide to put it to work.” Mechanization in agriculture, it's a process; it's not an event. You start with the plant breeders, you then change your planting and management system, you work with the packers and the buyers, and it could be, for example, that if we get a machine that works well in harvesting, say, fresh peaches or nectarines, maybe at the super market, instead of having organic and conventional, we'll have machine harvested and hand harvested, and they may be of two different prices.
Phil Martin:
So there's got to be changes in the entire supply chain, in many cases, before machines sort of become widespread. Machines are taking off, there's been a lot of labor saving change in the pre-harvest for vegetables, with the planting tapes and the thinning and hoeing, or the thinning machines replacing hoers, and there will likely be many more in the next 10 years. But there are different strategies, there's different time horizons, and it's not that there's a coordinated effort, in some way coordinated, let's say, by the government or by any kind of industry association of which I'm aware that is saying we've got to have a machine to harvest iceberg lettuce within five years. That's what happened back at the end of the Procera program in the 1960s. People knew the program was going to end, and so the plant scientists at UC Davis got together with the agricultural engineers, they developed a kind of tomato that would ripen over 90% uniformly, a machine to cut the tomato plant, shake the tomatoes off.
Phil Martin:
Then, of course, the processing facilities had to switch from taking 50 and 60 pound lugs of tomatoes to taking 25 ton truckloads, so it had to be a coordinated effort throughout the supply chain, and that's a role that both the federal and the state governments played back with the processing tomato industry. And we don't yet have that central coordinating agent that is working in the fresh produce industry today. There are a lot of industry associations, individual growers, but not that coordinated overall look, as we had back in the 1960s.
Vonnie Estes:
Yeah, I love that idea that it's a process, not an event, because you just can't take one part of the whole supply chain and change that and not expect it to change everything else. So I think that's a really good point. I've seen a number of the breeding technologies, both in the broccoli, so you don't have to go harvest as many times, but just for soil compaction and less labor, and you can also mechanize it so you don't have as many people out there, as well. And I've also seen it with some of the iceberg lettuce that stand up higher, that they can cut more easily in the field. So there is this coordination event, you're right, it's just not really happening across the whole industry yet, but there certainly are pockets, like you mentioned. There are breeders that are working with growers to try to come up with that.
Phil Martin:
The direction of change is clear. The speed of change, and exactly how it comes about, is something that we almost have to look at commodity-by-commodity, and area-by-area. So we know which way things are moving, but I can't tell you exactly how fast things will move in any particular commodity and area.
Vonnie Estes:
Yeah, that is definitely true. Well, Phil, thank you so much. I really appreciate you taking the time to enlighten us in this area and this is really interesting and will continue to be an area that we all watch. So thanks again and take care.
Phil Martin:
Thank you.
Vonnie Estes:
Joining me now is John Purcell, the Head of Vegetable Seed R&D at Bayer Crop Science. John, the last time we saw each other was at your innovation center in Woodland, and then, I think the time before that, we saw each other on stage in Amsterdam. This is a lot less exciting, but it's really great to have you.
John Purcell:
It's great to hear your voice, Vonnie. And it's been an honor and a pleasure to share some stages with you. And you're a tough act to follow, I know that from Amsterdam.
Vonnie Estes:
Thanks. So our topic today is labor and we just heard from Dr. Martin, from UC Davis, about labor issues in specialty crops. And, unprompted, he mentioned that plant breeding is a possible solution to some of the labor issues. And that's not where most people would go first, when they were thinking about solving the labor problems. Can you give us your thoughts on that?
John Purcell:
First of all, I want to say, your conversation with Dr. Martin was really informative. He really did a great job of talking about the dynamics at play, about the complexities of some of the labor situations when it comes to produce or more broadly the agriculture industry. Now, Vonnie, I'm obviously very biased talking about, whenever you ask me is breeding a possible solution or how does genetics play. I obviously head R&D for a company that sells seeds, and sells other solutions for farmers, as well. As a biologist, I firmly believe genetics, plant breeding have a major role in addressing labor challenges, as it does in addressing other challenges growers face.
John Purcell:
I do think Dr. Martin's example of processing tomatoes, kind of the classic example, which was really it was that interaction between the plant genetics and the mechanization of the development actually required both. You had to look at traits like uniformity, plant architecture, because all of those are critical for enabling mechanical harvest. And what you find is, you have to kind of co-develop the mechanics with the biology, with the genetics, and I think that's a great historical example, but there's other examples at play now, because of the acute challenge we face around labor.
Vonnie Estes:
Yeah, I think, as you said and Dr. Martin said as well, with most of these solutions in our industry, technology has to fit into an existing system, you can't just come up with some great new something and then just plop it in and expect it to work. So a lot of the new technology and the new solutions really require collaborations across the value chain, so that whoever you're selling to, it fits into their system, they know how to use it, and also, having them give you feedback about what it is that they need and what's going to make their life easier. Can you talk a little bit about your collaboration with Church Brothers and how that came about and how long it took to actually have a product that was useful to them, and kind of what the result was?
John Purcell:
Yeah, absolutely. First, just a general comment, I was told, way back when I first came into the industry, a very wise guy, wise person told me, "Don't fall in love with the science and technology, fall in the love with the solutions." And it has to work on a farm, right? I think I know, whether it be our family operation that my brother and I have, or whether it be a person with thousands of acres in Salinas Valley, you have to make sure that whatever solutions, whatever technologies or innovations you're trying to bring, they actually work on the farm. In the end, the solutions don't mean anything if they don’t work on the farm. And so, it's got to have actual value as far as playing out in a real life scenario.
Vonnie Estes:
Yeah, I think that some of us that have backgrounds in science, it is really interesting to fall in love with the science. And so, I think that's a really great piece of advice that you got, and I try to think about it all the time, too. It's “yeah, that science is really cool or that company is really cool, but what problem is it solving?” So those are great points.
John Purcell:
Yeah, and does it actually work on the farm, right? I think the collaboration with Church Brothers and High Rise broccoli is a great example. This was a broccoli that was amenable to mechanical harvest, but it took some iterations, I mean it was a very iterative process over four to five years, when we were working on really honing genetics. And Church Brothers was working with the machine harvesters, the companies, to kind of put together how would it actually work in their operation. Because in the end, that's what it was, it went from that concept to actually, really does it work? And I think it's that combination, where you put together the seed companies with their genetics, the automation mechanization companies and the growers, because they have to be partners in that process of bringing that innovation to the farm, bringing that innovation and demonstrating that it actually does work.
John Purcell:
But those kind of collaborations when they work, let's say you go through several iterations, several years, but in the end, that's how you get those new varieties that address any challenge, including labor challenges. And I will say, Vonnie, you and I get the pleasure going out to a number of different meetings, and I think it's really cool to see how even the ecosystem of innovation, how it's evolving, really thinking about more holistic solutions, bringing in new kinds of technologies, in innovation. And you guys do great events at PMA, and other groups do great Agtech events, where you're seeing a whole different combination across those diverse innovation companies that are out there. And fortunately, we had our own.
John Purcell:
I think everybody has to play a role in this, how do you bring together all these diverse players to really talk about solutions? But as you know, you were a speaker, thank you very much; you graciously agreed to give a talk at our Ag innovation showcase last year. We brought together the scientists, the team at Bayer, we talked about our seeds, our crop protection, and our digital tools. But we had 20 other vendors there, and they were probe companies, drone companies, robotics companies, and all the different players that can bring innovation to the marketplace. And I think, that's modern Ag, and that's modern food production right now. We really do need to foster these kinds of environments where collaboration opportunities can really be fostered and collaboration opportunities can really take off.
John Purcell:
And I think that's what it's going to take to really address the challenges that are out there, labor and other, to really bring focus to the fruits and vegetables that they want and to do it in a sustainable manner.
Vonnie Estes:
Yeah, so it's really about getting quality product, high nutrition and high value product off per acre. And so where it used to be companies would think about, I'm selling a molecule, I'm selling some kind of crop protection product, I'm just selling something into it,” and then the rest of it is separate. As we're starting to look more and more at really what we care about is what is coming off the field and how can we, in a coordinated fashion, do that in a sustainable way, like you said, and have the highest value product. And I think, as opposed to, a lot like corn and soy, where it's so much about yield, yield is the most important thing and how do we get yield up. I think in our products, it really is about quality and safety and what are we getting off the field in a sustainable way that the farmer can stay in business, too?
John Purcell:
No, I hear you.
Vonnie Estes:
That's an important piece.
John Purcell:
No, any definition of sustainability has to have farmer economic sustainability, as well. I know from my brother's operation, believe me, it's a challenge for growers and ranchers all over the world. And so, that economic sustainability has to be a part of the equation. But yeah, I agree, and I think what's happening not just at Bayer, but across the industry really is this movement from a very product oriented, as you've laid out, to a solutions oriented. And that's where these partnerships and collaborations really come together, because you're thinking about what is that challenge that's being faced, and let's think about the solutions that we can provide as a company, but also who else needs to be partnering in this to bring about the solutions.
Vonnie Estes:
You have lots of farms around the world; you're doing lots of research, any new things coming through the pipeline that you can tell us about?
John Purcell:
Yeah, I think what's really quite remarkable actually, historically, as Dr. Martin talked about, we have the crops processing tomatoes that have employed mechanic harvesters and other processing crops are natural peppers, et cetera, broccoli and lettuce turning more and more to that with products that are being offered and the kind of solutions that are being offered. But I can tell you, the grower events, it's amazing. It's hard for me to think of a grower that doesn't ask about amenability of genetics for mechanical harvest right now, because the labor situation is just so acute. I mean, it's really diverse crops: onions, melons, watermelons, it doesn't matter. Virtually everybody is struggling and it's not just in the US. It's in Mexico, it's in Europe and it’s in Asia. I mean, it doesn't matter where you are, it's not just the cost of labor, it's actually getting warm bodies, actually in the field, because it's a real challenge with that's going on there.
John Purcell:
And so, I think what we're looking at is a pretty broad based approach to really explore opportunities for collaboration, look at our genetics, and how do we bring solutions that bring efficiencies. And we talked earlier about uniformity, which is really important for mechanical harvest, obviously, if you're bringing a machine through the field. And plant architecture, which helps drive that. But that's not just important for mechanical harvest; think about hand harvesting, right? I mean, if you can reduce the number of trips through the field, well that helps on your labor situation, that increases the efficiency of the harvest, but I think the labor situation is just in such an acute position, that I think we and other seed companies are all looking at what can we do to help in that situation, and how do we have the genetics, but then what are the partnerships we need to really drive new products across a number of different crops.
Vonnie Estes:
So we're hearing a lot about some of the new breeding technologies, and do you think that there's a place for new breeding technologies in produce and a place for bringing some of the traits that you're interested in and bringing it to the market?
John Purcell:
Oh, absolutely. I think it's been cool seeing the evolution within the breeding world and within the tools of modern biology over the last 30 years. The way I look at it is, any technology that allows us to bring products to market faster, helps. As you well know, it takes six to 10 years to develop new varieties and bring them to the market. So anything we can do to accelerate that innovation rate, accelerate the product development cycles, that's a good thing. So when I think about what modern breeding is now, the shift from having to make all your selections into the field, to really doing much, much more in silico. You're kind of started with molecular markers, which are ways to test in a laboratory for certain traits. But now, as you get into really predictive breeding genomics approaches, which are even much more powerful than markers, that'll definitely help.
John Purcell:
I think even the way we assess new traits, things like remote imaging phenotyping, where instead of the walk in the field you have drones or you have other systems that allow you to assess what your breeding pipeline is delivering, all helps. And then don't forget the existing suite of technologies we have. I mean, things like molecular markers, double applicants, all of these tools that have been in use, their efficiencies are being gained, and they're being applied to more crops, and more markers, and more genetic information is flowing, and so all of that allows us to reduce the time it takes to bring new products and bring innovations to the marketplace, absolutely new breeding technologies. And then you got emerging technologies like gene editing. That could be extremely valuable in accelerating breeding efforts. So with all the great advances that are happening in other fields, biology's marching on.
John Purcell:
And believe me, breeding is a very different world than it was 25, 30 years ago, thanks to the genomics, the genetics, the high throughput sequencing, all the applications that are coming out of the biology revolution over the last 25, 30 years.
Vonnie Estes:
Yeah, those certainly weren't the things I learned in school.
John Purcell:
No, no, don't age me. Don't age me Vonnie. I'm older than you are. Exactly.
Vonnie Estes:
So as the last question here, as you're out and about, and maybe out and about somewhat virtually now, but what other labor solutions are you seeing and what are the things do you think is going to help the industry?
John Purcell:
Yeah, what I think is cool is there are new technologies flowing and it used to be you came into Ag from a lot of sort of defined disciplines, if you will, but I think what's cool is, those of us who went to Ag schools and I was an insect guy and there were yield people and there were agronomics and there were breeders and there were soil, and you had different disciplines, if you will, that all played into that. But I think now, the diversity of disciplines that are being applied to food production and agriculture is really cool. You and I go to some of the very same events that look at that innovation. We talked about modern biology, where that's driving, but this confluence of technologies now. We continue to make the advances on the biology front, but boy, you think about the digital tools, that automation, the robotics and you combine that with genetics. It's a really cool future.
John Purcell:
I like to think of it is Silicon Valley meets Salinas Valley, and that's really what's happening. I mean, you really do just have this confluence of technology and innovation and just a lot of smart people now really thinking about how do we continue to drive innovation within the food and Ag space. A couple examples I think about is, first of all, are around data. It's a data intensive world out there, and certainly the tools now to manage crops digitally, really thinking about the agronomic tools. Growers have a lot of tools in the toolbox now. I mean, my dad was a carpenter, he always said, "Don't leave for a job unless you got the right tools in your toolbox." And I think farmers think the same way, ranchers think the same way. It's like, "I got all these tools," but how do you help them now utilize those tools most effectively. And I think that's where the digital crop management comes in.
John Purcell:
As I always tell people, it's not your grandparents tractor anymore, we think about all the information that flows into that, soil probing, weather data, yield data, the imaging data that comes in now, all being used to develop models on what to grow, how to grow it, how to manage your crop. How do you manage your resources? How do you manage your inputs? That's a really cool world. And I think that's where the digital crop management is really going to pay off in the future. And then the other one I really think has huge opportunities and we're seeing great progress is the use of technology like UAVs or drones, right? Where you have, rather than walking a field to do your scouting, you have a drone or UAV fly over that gives you back the information. It gives you it in a digital manner, too, versus somebody's eyeball looking at it.
John Purcell:
Rather than driving into a field to apply a crop protection solution, there's systems in place now where UAVs are applying those, so you're able to detect diseases early and apply fungicide early, for example, using a UAV. That's the kind of labor savings that are out there. So I think you combine that digital with some of the automation and mechanization and then the UAVs and drones and other remote kinds of systems. That's a lot of cool innovation happening. I always joke with my team, I say, "Man, I can't wait to see what this is like in the next 30 years. I think it's scarier than thinking of a 90 year old me up there in the field." But, no, I think about the last 30 years have been amazing, the next 30 are just going to be there, too. Just the level of innovation. And it's so cool, too.
John Purcell:
I think another cool thing, Vonnie, is it's drawing a new source of brain power, new source of people entering into the field of agriculture that, because of the digital, because of the remote, the drones and all this stuff, it's cool again, right? So you have a lot of people from a new career. I know PMA does some great events on career and young students and all this, but it's fun to see not just kind of the traditional Ag disciplines, but the modelers, the IT people, the engineer, robotics students coming through who are interested in Ag now, and that's a really cool thing to think about what the next 30 years is going to bring.
Vonnie Estes:
Yeah, I think it's great with those new talent sets coming in, too, because it's people that have been trained in these different talent areas. But they actually want to work in something that just isn't another website. They want to do something that has an impact and food, certainly, like you said, food is cool again.
John Purcell:
We tell people all the time, you want to write an app to help people meet each other, or do want to help the world grow more food? Your choice, right?
Vonnie Estes:
Yeah, exactly.
John Purcell:
Let's think about where you want to apply yourself, right? Because it's the same skills. It's the same skills. You think about the modeling, the programming, the coding and all that do something that really means something. And for a lot of them in this generation, that's really important for them, which is really cool to see.
Vonnie Estes:
Yeah. Well, we need to wrap up here. And I've heard you say many times when we've been together that you have the best job in the world, and I agree, this is so cool to be able to work in this industry and work with these technologies and work with people like you. So thank you so much for being willing to talk with me and hope to see you again in person soon.
John Purcell:
Vonnie, thank you so much for the opportunity. It's always a pleasure.
Vonnie Estes:
It's always great to talk to John about plant breeding and how it can help with labor issues. We will now jump to Australia, to hear about some other labor managing and saving technology. Whereas this company is not the complete jump to robotic harvesting of the future, CloudFarming is developing tools that can be used today to help bridge the gap of labor shortages. We have with us, James Terry of CloudFarming in Australia. Great to have you on today, James.
James Terry:
Great. Thanks. It's nice to be here.
Vonnie Estes:
Before we jump in, why don't you tell us a little bit about yourself? You have a really interesting background.
James Terry:
Yeah, thanks. So I grew up on a mixed family farm in Tasmania, livestock and cropping farm. And after sort of growing up there, I developed a real passion for agriculture and innovation and the intersection of those two has always been the area that I wanted my career to be in. So I studied agriculture science at the University of Sydney, worked for a couple of different companies, but one of them was a large asparagus vertically integrated company growing, packing and export. And three years ago, I wanted to run my own business. So I've always wanted to run my own business so I left and now have my own asparagus farm and have started CloudFarming.
Vonnie Estes:
So this particular episode of the podcast is about labor, and I talked earlier to Dr. Martin at UC Davis and he talked about the real and building problem of labor shortages in the horticulture industry. A lot of his focus, because he's here was on the US, but I was wondering if you could talk a little bit about how things are in Australia around labor shortages.
James Terry:
Yeah, labor's a huge issue in Australia as it is all over the world. But, I have, obviously, a lot of experience in the Australian market and a pretty deep understanding about the issues that exist. And they are very similar, to my knowledge, of what is happening in the US, rising cost of labor annually, cost of goods sold is not increasing at the same rate as the cost of labor is increasing, so margins are getting squeezed for horticultural producers. Also, around finding and accessing good labor, so a lot of people are now having to house people under the seasonal worker program from Pacific Island countries on the farm. So it's been a huge change in the dynamic around the employment of the people and where they're sourced and, I guess, how they're treated.
James Terry:
From years ago, relying on one contract to be able to ring up and say I need 50 people tomorrow and you'd be able to have those 50 people. But the working rights and the legal issues around those 50 people may be questioned, I guess, and that became a real issue in the Australian work force, and now farmers are slightly changing away from the contract based system to direct employment, which is a huge issue for a lot of businesses that are not geared up to do it, with a payroll system, with a human resources system, but slowly that transition is starting to happen in the Australian market.
Vonnie Estes:
Oh interesting. So when people come from out of country to work to do harvesting, do they then stay in Australia? I mean, do they immigrate there and stay there or are people moving back and forth some?
James Terry:
No, they're normally, pre-COVID anyway, they're on short working visas, to come and work for a set period. It started off being a minimum of 14 weeks, I think, and a maximum of six months, and now it's been extended, I think out to 12 months that they can stay in the country without having to go back home. But they're for purely the purposes of farm work in Australia, and most of that farm work is centered around horticulture harvest, which had been where the pain point has been for a lot of growers in finding the labor and finding good labor that's able to harvest and pick in a timely fashion when they need it to be picked.
Vonnie Estes:
So your company, CloudFarming, is looking at this issue, and you're developing some global solutions to assist in labor management. Can you tell us about what you're working on and what you're doing?
James Terry:
Yeah, so this issue really started, well it didn't start, but I sort of saw the brunt of the issue on my farm where we used to pay workers on a piece rate, and legislation changed and we weren't able to pay piece rates anymore, we had to be able to individualize what each person had picked and when they'd picked it or how much they'd picked in a given day. And I didn't have a solution that was able to achieve that, so I set about building a small innovative robotic transporter, to work just in front of a small team of three or four pickers in a paddock. So the robotic platform moves itself just ahead of three or four pickers. The pickers work behind, and then every handful of product they have goes in a crate, and that weight is recorded at exactly the time and the position in the paddock and by who it was picked.
James Terry:
So then we can get accurate information throughout a whole day or a whole life cycle of a crop about who's picked what, where it was picked and the cost involved in doing that. And some really good analytics that are possible from that around yield mapping, yield forecasting and the traceability throughout an entire supply chain from the harvest process, which is a critical step as we identify the horticultural process, the harvest process.
Vonnie Estes:
That's so cool that people can go and look at the field bot on your website. It looks very cool. What size is it? It's hard for me to tell from the website.
James Terry:
Yeah, so its about two meters by two point four meters. So two meters wide by two point four meters long. So it's capable of carrying around 500 kilos of products along the rows. And then it would deliver to the end of rows and then it can be collected.
Vonnie Estes:
So what crops have you worked with on it at this point?
James Terry:
So me being an asparagus farmers myself, that's the immediate crop that we've started to focus on, but we're trying to build it so that it can be used across a range of crops. So: asparagus, field strawberry, or field grown strawberries, broccolini, chilies, snow peas, peas, field grown tomatoes. So anything that's relatively lightweight that's grown on a row. And we're trying to then develop, or we have future plans to develop a smaller machine called the field bot mini, which will be for row crops such as table grapes, blueberries, raspberries, where you need a smaller machine to go between rows of crop, not over rows of crop.
Vonnie Estes:
So where are you in the development as far as are you selling any units yet? Are you testing on your farm, I'm sure, and other farms? Or where are you in development?
James Terry:
So at this stage we've developed our second prototype, which is in the final stages of refinement with plans in our spring, the US fall, to really refine that and incorporate the changes from the second. Build our third prototype, and then look to commercialize at some stage later in 2021. Developing of hardware is a challenge and we're trying to make our field bot, our machine, to be really reliable and robust, so that any farmer is able to incorporate it straight into their system. So there's a huge amount of field testing required to get to that stage, so that will be happening over the next 12 to 18 months before actual commercialization happens.
Vonnie Estes:
I assume you'll start in Australia and then start looking at other geographies, as well.
James Terry:
Yeah, so target is to, definitely start in serviceable area from where I'm based in Melbourne, which is where my farm is and where I have a number of close farmers that I'm working with, and then try and expand from there, globally, once we have a really simple, efficient and robust platform that can be expanded very quickly and very easily.
Vonnie Estes:
And how many people do you have now?
James Terry:
How many staff?
Vonnie Estes:
Yeah.
James Terry:
Yeah, so it's myself and I have two others in my founding team and then we're relying on casual and contract staff to assist with the robotic development. So the other two founders, I have an engineer and I have a data scientist on the team.
Vonnie Estes:
Wow. Yeah, it's cool to look at you're doing both the hardware and the software, and just one of those is hard. So doing both of them are very different skill sets, right?
James Terry:,br/> Yeah, it's a huge challenge and the way we're sort of looking at it is that to get into the market we require the hardware, but the software is our long-term big play for us. The ability to capture the data around the harvest process, and around the work and the efficiencies that can be gained and then using that information and data throughout the next years crop, as well. So incorporating what we've learned from this season and put it into next year, into changes and how we can make the process more efficient of harvest, and also the process of growing, to increase the yields. And then, from a marketing stance, as well, we think we can, over time, once we've collected enough data, do some really cool things around crop yield forecasting.
Vonnie Estes:
All right. I think that's all the questions I have. Is there anything else that we should know about you or the company or what you're thinking about?
James Terry:
No, just the next year, for the next 18 months it's a really critical time for us and we're trying to do a round of fundraising in the next six to nine months, which is going to be a real challenge, given the coronavirus situation. But we're all open to learning the new experiences and the challenges of the world that we're currently living in, but I guess I'd also say that we have identified, yeah, the problem exists in Australia, we see it exists in the U.S., and it's virtually the same wherever you go around the world. We're encountering similar labor based issues, even in developing worlds, actually. There's a huge management issue, that management oversight is key, and the ability to look from a cloud and see exactly, or on a dashboard, where those machines are, what each person has picked, is really cool technology that we can see having a huge impact in the future.
Vonnie Estes:
I think now with all the issues around COVID-19 and travel and export, like we were talking about before, export and import, I think it's becoming even more of an issue. So even though it might be a hard time to raise money, I think the spotlight on this problem is good, and that should be helpful, because the problem's only going to get worse, and a lot, as well, around worker's rights and just people's ability to travel, we're just going to need to have less humans in the field. So I think it's really great technology you're working on.
James Terry:
Great. Thanks. It's nice to be on.
Vonnie Estes:
All right, well I think that's it. So thank you so much, and we will speak again.
James Terry:
Cheers. Bye.
Vonnie Estes:
That's it for this episode of PMA 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.
PMA Takes on Tech: What food and Agtech venture capitalists are thinking now PMA Vice President, Technology, Vonnie Estes is joined by Sanjeez Krishnan with S2G and Rob Leclerc of AgFunder in a conversation about how the Ag and food tech venture capitalist sectors look today. Among topics discussed are what investors are saying and doing, what are the current needs and solutions, and what is going on with startups.
Vonnie Estes: Welcome to PMA Tech, the podcast for fresh produce professionals that explores the people, companies, and technology solutions 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...
PMA Takes on Tech: What food and Agtech venture capitalists are thinking now
PMA Vice President, Technology, Vonnie Estes is joined by Sanjeez Krishnan with S2G and Rob Leclerc of AgFunder in a conversation about how the Ag and food tech venture capitalist sectors look today. Among topics discussed are what investors are saying and doing, what are the current needs and solutions, and what is going on with startups.
Vonnie Estes:
Welcome to PMA Tech, the podcast for fresh produce professionals that explores the people, companies, and technology solutions 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. So thanks for joining us and allowing us to serve as your guide to the new world of produce and technology.
Vonnie Estes:
Today, I'm talking with two highly successful and well-respected venture capitalists in the Ag and food tech sectors, to discuss how their world looks today. What are investors saying and doing? What are the needs and solutions? And what is going on with startups? We will start with Sanjeev Krishnan with S2G and follow with Rob Leclerc of AgFunder. You will get great insights into the world of tech and investment. Let's get started.
Vonnie Estes:
We now have Sanjeev Krishnan, the chief investment officer and managing director of S2G on. So happy to talk to you, Sanjeev, welcome.
Sanjeev Krishnan:
It is great to be with you today, Vonnie. I am excited to talk and share what we're doing, and learn what you're doing as well right now.
Vonnie Estes:
Great. I don't miss all the constant travel that we all were doing, perhaps now with a different lens, maybe we were doing too much. But I do miss talking to people like you and I miss going to your event, to really hear what's happening in innovation and new technology in the companies and a conversation with you is always filled with all sorts of interesting new topics and new innovation. So since we can't get together in person, this is a good second way to do it.
Sanjeev Krishnan:
Yeah. I think my second home is now Zoom. It was United Airlines and now it's Zoom. So I'm getting acclimated. The food is just as bad, or just as good, at the end of the day.
Vonnie Estes:
Between United and Zoom, those are two hard things to choose between. So for our listeners that don't know about S2G, why don't you tell us a little bit about who you are and what you do?
Sanjeev Krishnan:
We are a food Ag fund, really anchored around the changing consumer and then the ripple effects of the changing consumer across the U.S. food system. We try to make investments that nudge the food system in the U.S. towards sustainability and health. So we invest across the value chain, so we do Ag tech, food tech, supply chain tech, but also investments are processors, brands, restaurant and retail concepts. We have over 45 companies in our portfolio. We also invest multi-stage. So do C-stage investing, venture investing, growth investing, or even open to doing buyouts as well.
Sanjeev Krishnan:
We have about 15 colleagues in Chicago and an outpost in San Francisco. And divide the world into an investment team and a platform team. The platform team just really helps post investment with things like talent, corporate development connections, marketing, a number of other value added services that really help manage the three risks that we see when investing in food and Ag innovation, which is really adoption risk, financing risk and syndicate risk. We've been around since 2014, and continue to be very active in the market, even during this pandemic crisis.
Vonnie Estes:
I think S2G, as opposed to some of the other investors, really looks across the whole supply chain and hits all the areas that the Produce Marketing Association is really active in as well. We really work all the way from seed to fork, and so it's always interesting to see how you look at things because you're looking at the whole food system, instead of just what's happening on the farm.
Sanjeev Krishnan:
That's right. I mean, I think it's always been an area of uniqueness for us, that we've tried to take advantage of, in terms of linking downstream companies with upstream companies and vice versa. Or seeing trends in an upstream company that we can invest downstream in, and vice versa. But this crisis has highlighted even the greater importance of supply chain linkages and we see very interesting bird's eye view, just given the fact that we have over 45 companies across that value chain and could go into that if it's of interest.
Vonnie Estes:
Well, we're not only seeing supply chain linkages, we're seeing supply chain breakages. So that's been one of the really interesting things in this whole COVID-19 world of how things are really connected together. So one thing I wanted to ask you about, which was a funny thing for me, last week I had two firms who called me, one very large multinational investment firm, and another one very small from across the other side of the world. It was on the same day and they asked me the same question, which is, what are we at PMA seeing around perishability in the supply chain? What's happening with being able to keep fresh food fresh longer? What are some of the technologies to reduce waste, is how I think a lot of us were looking at it before, but I think now with COVID-19 and where the supply chain is needing to stretch, and people are looking at differently how they buy their fresh produce, what's happening in that space?
Vonnie Estes:
I know that you have a number of investments in that area, and it's an area that you've looked at. So I wonder if you could share with us your thoughts about your companies, and then what else you see might be coming to fix some of these supply chain issues.
Sanjeev Krishnan:
It’s a great point and we've been very actually bullish on the perishable sector. I know center store has had a little bit of a revival, but we still think perishables is a great place to invest and see growth. But obviously in the produce sector specifically, you're effectively, or anytime that you're doing in a perishable space, you're effectively inventory manager business, is the view we have. And so keyed in inventory management, I think is, data and digitizing some of that supply chain. So you know beyond either the picker, shipper, packer or the DC, how do you digitize your supply chains so you have a more holistic view of where issues occur, particularly even post COVID-19, if climate change impacts or other impacts that will come to impact the produce supply chain, the sooner you know, the more you can plan, I think.
Sanjeev Krishnan:
I think what we're seeing is, both midstream, grocery and food service, when they come back, we're much more interested in digitizing the supply chain to manage shrink and to manage food waste. The secondary that we looked a lot at it and made a few bats in as well, is post-harvest shelf life extension. So we've got Appeal and Hazel as investments in that area. Those are materials science platforms that I think are really compelling, and both companies are getting great traction from a distribution perspective and a business model perspective are around extending shelf life of fruit and veg. The third tool kit, if you will, that we invested in that's a little bit different perhaps, is we also see the role of indoor and vertical as a potential way to manage inventory and shelf life extension, we think that sector will probably have some tailwinds.
Sanjeev Krishnan:
They still have some work to do in terms of cost per pound, capital cost per square foot, and then ensuring the cap x cycle, such that they can serve as grocery and food service alike. But we have a holistic approach to how we think about shelf life extension manager, I think there's another dynamic that we're very excited about and I want to make more investments, is really around packaging solutions, that could be compliment material science, but we think there's going to be a lot more smart packaging that is both sustainable and can help with some of the shrink issues as well. So we're excited about exploring those foreign innovation areas.
Vonnie Estes:
That's great. I think there's so much going on in those areas, a lot of trends were happening before COVID-19 and now they've just been sped up. But I think around indoor, there are so many people that want to buy local now, that's become really important to them. So places where they can buy local, if there's an indoor vertical farm close to them. I'm doing that myself, I feel very fortunate that I can get really fresh local indoor greens, so I think that's a great area. Around packaging, another area that we've been thinking about, is that right now there's this increase of use in single use plastics because everybody wants to have a plastic barrier. So we're going back to using different plastic bags and we're putting apples in bags and everything in bags. I think as you guys start looking at, there's going to be some increase in packaging, I think, coming out of COVID-19, but I'm sure you're looking at technologies that aren't plastic, that are other kinds of ways to put some physical barrier in different kinds of packaging, that doesn't come from fossil fuels.
Sanjeev Krishnan:
Exactly. I think packaging probably has a new dimension to it, which is beyond the sustainability argument, is a health argument or at least a contact, minimizing contact or transferability, clean, if you will, clean packaging that helps mitigate some concerns that the consumer may have. So absolutely, it's how do you plan both? So we're just starting our journey in that area, but hopefully are going to make more investments in packaging this year and next year.
Vonnie Estes:
Great. So in the report that you recently came out with, which was an amazing report, Everybody Eats, which I suggest anyone get their hands on it that can because it's just a great view of what's happening during COVID-19. Then you look at the other areas, that technology and innovation, coming out of this. And one of the things that you say in the report is that pandemics cause innovation. So what kinds of new technologies are you seeing and do you think these things will be adopted quickly?
Sanjeev Krishnan:
So the reason for the report is twofold. One, we were trying to figure out what mentality was best to approach it with. So a lot of it was ‘08, ‘09 or 9/11 or World War II. But we decided that doesn't really fit what's happening as much as pandemic economic history. So it's a niche genre, it was just probably popular right now. But one of the things you see consistently from the Justinian Plague, to the Bubonic Plague, to the Spanish Flu, to the major pandemics that have happened in human history, is that it's an interesting pattern because it's all of them happening in different historical time periods in human history, is innovation comes out of those.
Sanjeev Krishnan:
After the Bubonic Plague, people think that it's one of the things that led to enlightenment, the advancement of medicine as we know it today, really came out of the Spanish Flu, in terms of just a greater respect for science and technology and medicine in particular. This pandemic, I think, will be similar in a sense that innovators and entrepreneurs have a tremendous opportunity to invent and invention is necessity, things that will help with some of the core issues in our food system. I think one of the things that we see is the fragility of labor and logistics, and you've seen it obviously in the meatpacking sector, but I think you've also seen it even pre-COVID-19 in the produce sector. I think there's going to be, whether it's automation, robotics, digital tools, etc., I think there's scope here for folks across the produce value chain to benefit from.
Sanjeev Krishnan:
I think the other thing that is going to be interesting is, challenging the nature of globalization and the notion of food security. We have some investments outside the U.S. and that is a key area of concern for a lot of governments and nation states across the globe, in terms of if you're importing a good amount of your produce or calories in general, how do you make investments to at least have increased domestic self-sufficiency? We think that's going to be a key thing, I mean, innovation has a role now, and it's not just indoor Ag or others, but I think there's going to be a wide variety of ways to enhance food security and insure domestic self-sufficiency. So that's another implication that comes out of this.
Sanjeev Krishnan:
The other one I think is really around channel digitalization, which I actually think has some really interesting potential for produce. But two or three years ago we looked at a very clichéd word that venture capitalist's like me uses, disruption. We define disruption as changes in market share. And we looked at, the last 25 years, what industries have had the greatest changes in market share and why. And the biggest the biggest correlation that we found is when the channel gets digitized. So you see that in very quoted statistics on Netflix and video, or music and Spotify, and consumer batteries and Amazon. Amazon went from zero to number three in batteries, once people started buying batteries online.
Sanjeev Krishnan:
This grocery movement is going to be super interesting in terms of the second order consequences and the order consequences it has, because we've gone from five to seven percent, online grocery to, I think it's going to be, well, four to five times, if not higher than that. A lot of folks who we spoke to in grocery, who always thought there was a little bit of a behavior change element to online grocery, and therefore we wouldn't really get it launched, and changed their minds, in this crisis. I think for produce companies, how you build maybe direct to consumer channels, like you couldn't before, and what does that whole world look like? So I think that challenge is going to have impacts, not just in how producers and shipper, packers get things to market and the optionality they have, but also even in genetics, like if you wanted to grow unique varietals, differentiation's a lot, potentially quite compelling in an online digital world. So I'll pause there, three impacts I could see for the produce sector.
Vonnie Estes:
Those are really interesting. Thanks for sharing that. I think around digitization, one of the things that I've been thinking about and looking at in the industry is that a lot of the information just isn't shared all the way through the chain. We're starting to see through things like the IBM Food Trust and companies, the retail companies, reaching back and getting good traceability information coming towards them. But that retail information isn't going back to the grower, for the grower to really have the same amount of information and for that chain to really be connected with each other. One of the things I'm really hoping for coming out of COVID-19 is that we start doing better forecasting and not just using the telephone and Excel spreadsheets, but actually have some good chains that are set up and some good demand and supply forecasting, that in itself is going to help a lot around reduction of food waste and shrinkage.
Sanjeev Krishnan:
There was some good data that I saw yesterday around the volatility of the S&P 500 versus produce. Produce was significantly more volatile than the S&P 500. And the S&P 500 is at the most volatile as it has been the last 10 years. And so it's just interesting to your point, obviously there's a moment in time that's unprecedented, but going forward, I think I always thought about the produce to be one of the first that have traceability, because there's always an issue of who pays in traceability. I always thought food safety and food recalls, that was a great ROI for whoever pays in that, the grower is made to pay or whoever pays. And now even things like surety of supply and surety of supply at a certain price point, digitizing the whole chain is going to be, I think, valuable for whichever stakeholder you are, just so you don't have a net short or you understand your selling price or your buying price.
Vonnie Estes:
I think information is power and I think as we get more data and the balance of power throughout whole chain, it's just going to make things go a lot more smoothly. Well, I really want to thank you for spending time with me, and it's so great to hear your voice. I look forward to sometime when we can actually stand somewhere and have a conversation, whenever that will be. It's great to keep in touch and I love the work that you guys are doing, so keep it up. Thank you very much.
Sanjeev Krishnan:
Thank you for having me. Thanks for your partnership in general, and would love to work more with PMA and you, in terms of how we invest innovation and how that gets deployed. So thank you again.
Vonnie Estes:
Today I'm sitting with Rob Leclerc, he's the founding partner of AgFunder and it's so great to actually see you and talk to you. This is one of the things I miss the most about our new world, is not getting to catch up with people who I love talking to. So thanks for being here.
Rob Leclerc:
Thank you very much Vonnie.
Vonnie Estes:
So there will be some people, shocking, as it seems, that don't know who AgFunder is, that are listening to this podcast from possibly in the produce industry. So why don't you talk a little bit about AgFunder and when you got started and what you guys do.
Rob Leclerc:
Sure. So AgFunder, we consider ourselves a digitally native venture capital platform. We started back in 2013 and at the time there wasn't a lot of interest in technologies that related to food and agriculture. I remember going to a cocktail party and you chat with somebody and their eyes would roll back in their head and they would grab the nearest accountant that would walk by and say, "Get me out of here." And so what we realized is that this was such an important industry and that maybe it was framed the wrong way, that there was an opportunity to get a lot bigger engagement and that there were so many technologies and some of the most cutting edge technologies in the planet, could be brought to this industry. So if you love technology and were a futurist, this was a place to spend some time.
Rob Leclerc:
Our theory on how we would get people engaged was through a lot of media and research. And so in 2013, we started AgFunder News, today we've published over about 2,500 articles on the space and try to just generate a bit of a narrative around the most cutting edge tech, the leading investors in this space, the most talented entrepreneurs and try to tell that story. And then in 2015, as we were struggling to come up with a real coherent thesis on investing in the space, we said, "Well, look, we really need to map out this market." So this started a long journey of putting together research reports, investor reports, that would really frame the sector. And so we started in 2015, I think there was $2.3 billion that was raised in 2014. And then the previous year, that was three times over that year. And so it was a huge jump and people really paid attention. And then now fast forward to our last report, we just published, where we calculated almost $20 billion in funding.
Rob Leclerc:
So it has been an incredible journey to see this industry really mature and see capital coming and solving problems for technologies that affect the bottom of Maslow's hierarchy of needs. And if we can do that, I think that can have incredible impact. In 2017, we launched our first venture capital fund. So we've launched a series of, we'll call it micro VC funds, to invest in this space. Today we're one of the most active investors, we invest in North America, clearly we're based in Silicon Valley, but we also invest in India, Australia, Brazil, Europe and Asia. So we really are looking to find the companies that are going to transform the future of agriculture and really look at and meet those founders who are living in the future.
Vonnie Estes:
That's so great, the way you talked about really creating and starting the narrative. I've been working in Ag biotech and Ag tech before it was called Ag tech. And when you first started AgFunder News, you guys were the only ones that were writing about technology that was affecting agriculture. And I loved it. I started throwing articles your way as well, because there was no place else to even send articles.
Rob Leclerc:
And thank you for all your contributions, as well.
Vonnie Estes:
Thank you. You guys did really start creating that narrative and have people start thinking about Ag tech and what the different innovations coming from all over the world. So thank you for doing that.
Rob Leclerc:
Thank you.
Vonnie Estes:
So how are things looking in your world right now? Just what are you talking about, what are you seeing, what are things like?
Rob Leclerc:
Certainly things are pretty crazy right now. We sent out a note to our portfolio companies, I think it was March 3, trying to frame what we were seeing in the world and some of the risks. I think we're seeing what many people are seeing and some of the challenges around operating in this environment. But I think when we speak to our portfolio companies, because almost all of our portfolios are supporting the food and agriculture industry, they are operating as essential services. And then the next question is, what does their activity look like and do customers even care about what they're doing? And what we're finding is that when technology was coming in, it had the potential to make our food and agriculture system much more resilient.
Rob Leclerc:
There was some slow adoption, sometimes it was hard to tell that story and why there's value there. That is becoming much more evident now. So we're investors in a couple of alternative protein companies, we're investors in a couple of automation companies, we're investors in some, we'll call it digital marketplaces. And in all of those cases, their customers are seeing, we're seeing far more demand for those products because they're really helping fill in problems that were always there, but could be papered over. For instance, if a greenhouse goes down or people get sick on a farm, that could be hundreds of thousands of dollars in lost value. And so automation is very important in an environment like that, where a tractor that's autonomous is not going to get sick. And the more people there are in a farm, for instance, the higher the risk there is. So what we're seeing is these clients are starting to really speed up their adoption and their seriousness around innovation because of this.
Vonnie Estes:
Oh, that's fascinating. I think a lot of the trends that were happening, were already happening before COVID-19 and then it did definitely speed up a lot of things that people were looking at. I talked to one startup that does a lot of forecasting and data analysis, and she was saying that she feels like Cinderella now, that everybody wants her at the ball, it's before people were thinking about it.
Rob Leclerc:
Yeah. No kidding.
Vonnie Estes:
Yeah. It is really interesting to see, and that's one of the things that I wonder how things will look on the other side, as we move through this unusual time. So what are you telling your startup companies, the ones you've invested in and other people, how to get through this time and depending on where they are and raising money and ones that are going to come back to you and need more money, how are you dealing with that part of it?
Rob Leclerc:
Financing risk is probably the biggest challenge, right? So you have operational challenges, but most of the companies are working through those. Then you have the commercial challenges and if anything, as I mentioned, the companies are seeing more demand for their products and services, they may have more trouble getting them to the customer or working with the customer, but there is far more demand. The biggest risk though, is in the venture capital market and evacuation of capital from that market and this creates a lot of additional financing risk. What we're telling our companies is basically, be prepared for a long winter, because even if you have significant commercial success and you are maybe modeling a two times or three times growth over the next year, and you're at four or five times growth, that may not be sufficient to raise funding next year.
Rob Leclerc:
This is what we saw in 2001 and 2008, capital really evacuated the market, it was very difficult for founders. And so what we're saying is, and even what we said back in March 3 was, "Look, if you're going to make cuts, you want to cut early and you want to cut deep, at least you give an opportunity for the employees of those companies to find new jobs while there is still a market for jobs." So maybe that time has now passed. We said, "Look, you really want to manage your burn rate, try to extend yourself out 18, 24 months. If you can have 36 months of runway, great, close bridge rounds, don't feel that you're not in fundraising mode.” I think if there's capital available it's time to take it and ultimately think about survival rather than growth, right?
Rob Leclerc:
So normally in a more frothy market, when the capital is available, we say, "Look, put on the gas, grow as fast as you can, and capital will be there." Now we're saying, "Look, we don't know if the capital will be there. So what you want to do is build yourself to survive in the worst case scenario, really focus on revenue right now, to minimize your burn rate, don't spend as much money and time on R&D for instance.”
Vonnie Estes:
Do you think this is going to result in more MNA and exits that are different than what people wanted? Do you think there's going to be companies that just aren't going to make it, but had great technology and someone will pick them up? Do you see that happening?
Rob Leclerc:
Yeah. I mean, you have these market instabilities and this creates opportunities for some buyers and some of those buyers, may be some of the better funded startups as well, but I guess it comes down to who might be the buyers in those markets. And if Bayer and Corteva or others are also hurting, they may be focusing more on their core as well.
Vonnie Estes:
They're taking your advice as well.
Rob Leclerc:
Yes, exactly. We've been speaking to some corporates and they were told to put a chill on all hiring, all investment, all MNA, and they're going to revisit this on a quarterly basis. So those types of things may inhibit those opportunities and so, we are actually doing a second close of our third fund because we wanted to be investing in this period. We know that valuations have come down. We know that there's tremendous opportunities emerging in this market. We are more bullish on this sector than ever, we see what the future looks like. And we're investors in venture capital, not the next quarter or next six months, but for the next 10 years. And so we see that opportunity to be investing today and, others who have that long-term view may also be able to weather that as well. But sometimes when you're a publicly traded company, you really need to watch your bottom line, you may need to be more careful.
Vonnie Estes:
Yeah. Are you seeing many companies pivoting and trying to figure out how to change their business model so it may make more sense now or is that happening?
Rob Leclerc:
We’re seeing very little of that. I mean, just because alternative proteins was a theme for us in plant based proteins and the companies in our portfolio that are in market, are seeing three to four times growth. So their challenge is how do we produce more when we're operationally constrained? So that would be one. Some go to market strategies are challenging, so we're investors in one company and their plan was to launch in food service with some of the largest food service providers. They were just basically ready to sign those contracts and now that's gone, restaurants are gone and that was an avenue for them to launch. So now we're trying to get creative about how do you connect with consumers when you can't really get time with them and in front of them and get that really intimate, personal experience.
Rob Leclerc:
So some of the go to market strategies have certainly changed. As far as automation companies, their clients are beating down their doors. And some of that is because, their clients have investors as well, people who have lent them money, who are worried that this operation is going to go out of business. So for them to tell a story about how they're now speeding up automation to ensure continuity of their business and therefore continuity of those investor payments is really important. Digital marketplaces, similarly, as you saw this shift in the supply chain away from restaurant and more to grocery, digital marketplaces were really able to adapt quickly because they bring both buyers and sellers to the market. Those buyers and sellers don't need to have a preexisting relationship; it can coordinate a market very quickly. So from that perspective, we're just seeing a lot of opportunity there.
Vonnie Estes:
That's fascinating. Yeah. I think the way that we get our food will be changed for a long time. And certainly we're seeing a lot of people moving to buying online, that had never done that before and that's likely to not go away. So it'll be interesting to see what innovations come up around buying online differently. Then a number of the meal kit companies, some of those, I thought they were not going to make the quarter, but now I think with what's happening now, they've got a new vision on life and it'll be interesting to see how people respond with that as well.
Rob Leclerc:
Yeah. A lot of these companies, they needed to hit a critical mass to become profitable. And they hit that in the last month and a half, and now they can really explore, the cost of customer acquisition really dropped and we'll see if people remain using these products and services because that initial adoption can be really slow. With Instacart, my wife and I would stubbornly just go to Costco every weekend and now we're looking at it and say, "Geez, we're saving a lot of time. This is pretty nice not to have to go and spend three hours every Saturday going to Costco, buying stuff and we can just get it dropped off." And so that's quite convenient.
Vonnie Estes:
That's interesting. We haven't made that leap yet. I mean, I make the list for nine days of meals and my husband dutifully goes and implements the list at the grocery store. So we're still doing that. He went this morning, and it took several hours and if you're worried about infection, that's your highest risk place. You go in an indoor place with a bunch of people for two hours, you know?
Rob Leclerc:
My heart rate is elevated; I've got my N95 mask on. So we've made a couple trips to the grocery store, but it's not a pleasant experience, that's for sure.
Vonnie Estes:
No. It's not at all. So one of the things you mentioned in the opening, is that you do have investments all around the world. You guys have done a really good job of sourcing deal flow in companies throughout the world. So are you seeing big differences in different parts of the world and how people are responding and what's happening?
Rob Leclerc:
I think the challenges are mostly the same, I think the differences become when you're in either emerging markets or you're in developed markets, right? So in developed markets, there's operational challenges everywhere, but, I think the biggest demand drivers, as I mentioned, were really an automation. In developing markets it's been digital marketplaces because their supply chain is not very strong, it's not centralized, it's not efficient. They were doing things in a very ad hoc way, lots of farmer's markets before. So that has been a massive accelerant in those markets.
Vonnie Estes:
Well, I could talk to you for a lot more time, but this is about the time that we have allotted. So it's great to see you and talk to you and hope to be able to have a cup of coffee at some point soon.
Rob Leclerc:
Let's do a happy hour one Friday night over Zoom.
Vonnie Estes:
Definitely. That's it for this episode of PMA Talks 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, along with other important content at pma.com, untill then stay safe and we'll see you next time.
PMA Takes on Tech: What do we do with all these onions? PMA Vice President of Technology, Vonnie Estes introduces PMA Tech, the podcast for fresh produce professionals that explores the people, companies and technology solutions that are shaping the future of the produce industry. Later, Estes sits down with Shay Myers and Michael Helmstetter to discuss the impact that COVID-19 has had on the industry and what solutions have been created and utilized.
Vonnie Estes: Welcome to PMA Tech, the podcast for fresh produce professionals that explores the people, companies and technology solutions that are shaping 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...
PMA Takes on Tech: What do we do with all these onions?
PMA Vice President of Technology, Vonnie Estes introduces PMA Tech, the podcast for fresh produce professionals that explores the people, companies and technology solutions that are shaping the future of the produce industry. Later, Estes sits down with Shay Myers and Michael Helmstetter to discuss the impact that COVID-19 has had on the industry and what solutions have been created and utilized.
Vonnie Estes:
Welcome to PMA Tech, the podcast for fresh produce professionals that explores the people, companies and technology solutions that are shaping 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 that it's hard to navigate this ever changing world. So thanks for joining us and allowing us to serve as your guide to the new world of produce and technology.
We have two guests today: Shay Myers is a third generation producer in Oregon and Idaho and Michael Helmstetter is from TechAccel LLC. Shay is going to talk to us about the current issues he's facing with supply chain disruption on the ground. Michael will discuss, from an investor point of view, what problems and solutions he's seen now. So let's get started.
We've got Shay Myers on the air and he's a third generation farmer in Oregon and Idaho, who's had a big impact from the COVID-19 pandemic and has mostly sold into food service. So why don't you tell us a little bit about yourself and your operation?
Shay Myers:
I'm third generation farm kid, been around the operations my entire life. Left for a few years and somehow ended up back here. I'm not sure exactly how that all happened other than I had a really huge appreciation for my grandfather and what he had started. And at that point in time, it didn't look like anyone was going to come back and that seemed like a bad thing to me. I've also got a lot of farmers in my family, but not a lot of marketers, not a lot of people that look at the business through a marketer's eyes, and I've always enjoyed that side of the business. There was an opening for me to come back and to help sell and market our asparagus and onions and now we've got sweet potatoes and a few other things in the works. The family saw that I kind of had the skill set and they took the risk on me and let me make a bunch of mistakes and almost a decade and a half later, here I am.
Vonnie Estes:
Well, I didn't know that about your background in marketing, but that's really shown through in the great coverage that you've gotten in the last month or so, and really became the face, in some places, of some of the problems that growers are having right now, due to the supply chain disruption from COVID-19. Can you explain a little bit about what's happening on your farm and why that's happening?
Shay Myers:
Sure. I'm going to speak specifically to onions right now because that's where the impact is the most significant, and because it's a low margin, high volume commodity as well. With the closure of the restaurants. So we, we typically are a 70-30 to 60-40 producer, and that's really food service to retail. And so that supply chain is established. It's something that we built and that's what our plantings are based on. That's what our sales are based on. That's what our packing line and equipment is based on. That's what our refrigeration and storage is based on and is what that historical data and that historically has taught us over all of these years. And it's all out the window, right? The restaurants with the closure. And I mean, some will argue that the restaurants aren't closed. I think if you talk to most restaurant owners, they will say that they're closed.
We certainly feel in our industry as if the restaurants are closed, and with those closures, we have lost that 60 or 70% of our business almost completely. It's gone to virtually zero. There's a small amount of product shipping, but I mean, what we would normally ship in one week has taken us six weeks to sell of the restaurant type of onion, which is a larger size profile, larger pack onion than what would go to retail. The ramifications of that are it's the end of our storage season. We have the capacity for refrigeration, but it doesn't really matter. Where we've got a crop that you can store for seven or eight months, we're at the end of those seven or eight months. And so that it's kind of like milk. You can put it in the refrigerator, but once it's expired, it's still expired. And you might get an extra 10 days. You might get an extra seven days on that milk, but essentially you're past that expiration date. That's where the onions are today in the Northwest. So a lot of those are getting thrown away by the millions and millions of pounds. That cycle, frankly, will continue. I'm in California with one of our grower partners here now. And that cycle will continue here in California as well.
Vonnie Estes:
Because they’ll just be old enough that it's just time for them to go, and there's no place for them to go right now.
Shay Myers:
Right, and here they don't store, but it's 105 degrees today. And once the canopy is down, there's a certain amount of time until you can harvest and sell that crop. So if you're only selling 40 to 50% of the norm, the other 40 to 50% is going to get plowed back into the ground.
Vonnie Estes:
There's been some talk that I've heard about people saying to you, "Well, why don't you just give this away? Why don't you just give it to the food banks?" And I've heard you give a very good answer to that. So why don't you let our listeners know some of the complexities around that?
Shay Myers:
Sure. There's a multitude of reasons, but the most significant one is simply the fact that these onions right now, whether it's here in California or they're in the Northwest are not packaged yet. And there's an additional cost of roughly three to four dollars per unit of sale to convert those into something that you can sell. And that's one additional cost that you have to incur, and then you also have to freight the product to the destination. So it's essentially, instead of losing three to four dollars per 50-pound bag, instead of losing four or five thousand dollars an acre, if you were to donate that with zero financial support, you would triple that number. And so you hemorrhage that much faster and we're already losing. So it's a really, really easy decision to make on many levels.
Vonnie Estes:
Yeah, that's tough. I've also heard now that a lot of the food banks are full. So you wouldn't, even if they were willing to take that hit, there's no place for it to go right now.
Shay Myers:
That has been the case. The food banks, as of about the last 10 days to two weeks have started to open up. They really do need product and they are willing to, in some cases, we shipped the load out yesterday that went to a food bank. They covered the freight and they also paid our packing costs. They didn't pay anything for the onions towards the growing costs whatsoever, but they paid our packing costs and our freight. We loaded the truck and sent it to Portland yesterday.
Vonnie Estes:
That's great. So what do you do now? How do you move forward as a producer? What do you think about next year? Or can you even think about next year yet, but kind of what happens now?
Shay Myers:
So, we've already made our bed for the 2020 season because the onions are planted in March and April. So when this was barely beginning, we were already in our planting process. We essentially have made zero changes from a planting, from an acreage standpoint or from a volume standpoint. That wasn't really by choice or by strategy. It was by circumstance. And so unlike the wet veg guys or the leafy greens, they're on a 60-day to 90-day cycle. They can make some corrections, we are going to deal with the ramifications of over supply on an unprecedented level this fall, what we have wasted in the 2019 crop is nothing compared to what will likely be wasted in the 2020 crop.
It's a lot like what we're seeing in the protein industry right now, in the meat industry. Their losses are just beginning and they're going to be massive. Right? They weren't felt before now, but now that that ball's rolling, it's just going to be worse and worse and worse. That's what we're going to see. I mean, if we lost probably 10 to 15% of our entire onion crop in the Northwest, that number will probably be double or triple what I would guess for the 2020 season, for what we harvest this fall.
Vonnie Estes:
Well, I know you're really busy and you have to get back to many fires to put out. So I have one more question for you that fits in with what you're talking about. So what systemic things should happen external to your farm, like outside of what you can do, that can help your business and get the supply chain working again? Is there any call to action or anything that you would suggest that an external force could help you?
Shay Myers:
Yeah, I've alluded to this in some of the videos and some of the conversations that I've tried to have online and through the media, and that is there's really two things that we can do. Number one, we really do need to figure out how we're going to turn the economy back on, and quickly. Obviously safety is a priority for all of us, but we also have to think of the long-term ramifications. Some of these ramifications are just, especially for in agriculture, are just, dauntingly massive. So I think that's number one. We do need to say, "Okay, what's the risk from a health standpoint, but what's the risk economically? And to a supply chain as a food producing nation, how long can we hold off? And what will the ramifications be? So let's turn the economy back on as soon as we feasibly can."
Two, and I keep mentioning this, I feel like if I could make any requests and I've said this before this event happened, but hopefully the consumer, when they're at the grocery store, is thinking a little bit more consciously about where their food is coming from and how it's grown and the efforts that are made, the risk that is part of that supply chain and that food. And can we take a step to prioritize American grown produce? I'm not saying eliminate imports. I'm not saying anything like that, but we do need to protect, this is a good time for everyone to kind of pay attention to that. We really need to protect the infrastructure that allows us to grow and provide our own food. And that call to action is as simple as requesting America first. There's some programs already established through the USDA for supplying schools where produce is required to first be sourced from the United States. Canada does a really good job with this, and they actually, at retail, require Canadian product first. They prioritize Canadian product before they can outsource. That could make a massive impact both financially and from a supply chain standpoint in the long-term, if we could request, require, solicit that change from a political standpoint.
Vonnie Estes:
Those are really great points. And I certainly see consumers paying a lot more attention now and for the first time really thinking about, "Now that I may not be getting my food, where is it coming from?" I think people are paying a lot more attention. So I really appreciate that point of view of supporting our growers. So with that, I am going to let you get back to work, and I really appreciate your time and your thoughts and your production. And my daughter has asked me once she's grown, but she moved away from home, and she said, "I just realized that not everybody starts every meal with an onion." So I support you.
Shay Myers:
I'm glad you do, and I'm glad that's a tradition in your family. I appreciate you giving me the opportunity to share and to talk about what the industry is facing and what we as Americans are facing. I hope that all of us are mindful of that and that we can make a small change if not a more significant one.
Vonnie Estes:
Great. Thank you so much, Shay.
Shay Myers:
Thank you. I really appreciate it.
Vonnie Estes:
We just talked to Shay Myers, he's a West Coast producer, about the issues that he's facing in the supply chain and how he's solving them. We're so grateful for people like Shay that are still producing our food and getting our food transported at this time. But now we want to hear from a different lens, from someone that doesn't have to be out in the field every day harvesting food, and has the luxury of looking through a longer lens of this situation of what's happening around the supply chain and also looking into the future and what this is going to bring. I have with me Michael Helmstetter, and he's the CEO of TechAccel. And I'm really happy to have you with us today, Michael.
Michael Helmstetter:
It's great to be here, Vonnie. Thanks for having me.
Vonnie Estes:
Great. So if you could talk a little bit, we've got Shay's view of what's happening, literally boots on the ground. If you could talk a little bit about just what you're seeing happening now around supply chain and food supply, that'd be helpful.
Michael Helmstetter:
Sure. I'll maybe make a comment about what Shay's going through and I think everybody can kind of put it in perspective. He's a farmer of a lot of different crops, but one of his major crops is his onions, and restaurants and food service are obviously the major consumer of his onions. Those are, the majority of them are shut down or slowly coming back to life as things open up. But you think about it, we don't do a lot at home with onions. We do cook them with them, but it's not really that sort of staple vegetable that's kind of sitting in our fridge. So that's a perfect example of how a farmer can get hurt because it's really focused on the direct consumer, but they're focused on us getting somewhere and eating those onions in those restaurants and such. So, I feel for him and the impact that he's going through. So I'm seeing kind of two pieces to what's going on today.
There's sort of the social side of things, the food safety side of things and concerns. Then that second piece is the sustainability of the food systems. We were watching the tussle right now as to whether the Tyson plants are going to be closed or open from the poultry side of things. I mean, prior to sort of this push from the administration in Washington, something like 20 plants were being shut down between Tyson and Cargill and Smithfield. I mean, a major number of plants being shut down. The president's pulling the Defense Production Act and trying to get them up and running to continue to kind of maintain that food system side of things. But I don't think the general consumer realizes that when you produce a hog for food or you produce a broiler chicken for food, you cannot maintain them for very long after they're at a stage where you would normally put them into the production pipeline.
Dairy farmers are saying something like four million gallons of milk are being dumped down the drain a day because they're not being consumed. So that's really that sustainability sort of the food system and that balance of wasting food versus getting it into the supply chain and making sure the consumer side of things are there I think is really important. I think it's not just that processor side of things. I mean, you think about the folks that are supplying the grain, the feed to feed those hogs and feed those chickens. And now the orders of those things aren't being placed, it really has that kind of effect downstream. Then I think ultimately, consumers start getting hit with higher prices and empty shelves and those kinds of things that really stress sort of our societal system.
So that's, for me, that's kind of what you're saying is this really push and pull on, say, food. People worried about contaminated food, but also having enough food, the sustainability of the food system to satisfy our expectations because US consumers are not going to not have food. Our country will not be in that situation, but we're very used to having a glut of food and we're not seeing that. I don't think people realize that sort of chain back to Shay and back to farmers and ranchers who are getting grain, etc., and people that are normally storing it and now it's going to waste, realize a lot of that stuff happening behind the scenes.
I do think a lot of really good stories are coming out of this, Vonnie. You see things like Publix down in Southeast, the grocery store chain. They're buying up tons of meat and dairy and donating it to those in need and various charities. Seaboard, our local, one of their major products is pork. They've donated hundreds of thousands of servings of pork that normally would just, in the stage of the environment today, be food waste. And so I think there is that positive of what this country is all about kind of occurring at the same time. But yeah, it's a tough time and it's a shock to our system and it's having an effect on a lot of people. And I don't think we've really seen the true impact of it yet. I think that's still to come.
Michael Helmstetter:
The farmers are constantly working to maintain a resilient food supply chain. I mean, they're doing things all the time to get us clean, good, healthy food, and not so much always in the easiest environment. So yeah, there are a lot of things well before the COVID-19 issue and what we're seeing in food, there are things that were just sort of systemic and have existed for some time and are going to continue to exist in the future. Beyond things like declining wild fisheries and biofuels competing for crops, there are maybe three or four that I think of all the time in our business and the impacts they have. But to me, the most dramatic is climate disasters and associated stress on crops. Agriculture requires weather, climate, water, all those kinds of good things, but we're seeing more extreme weather events, more powerful storms and greater droughts sometimes back to back to back to back.
We saw that in the Midwest last year, where you just had massive rainfall that dumped water on these crops, just destroying acres and acres of crops or delaying plantings. Then months later, that's followed by a massive heat wave and drought. So trying to tackle those kinds of stresses at sort of the farm level is not particularly easy. And again, in the Midwest last year, we really saw the impact of that. And it doesn't just destroy crops. It lowers production volume. You end up with food shortages, prices go up, as you and I have talked before, disrupt supply chains in a significant way. And then you end up with spoilage because of the fact that you've got this chain of events that you often have spoilage in large storage facilities. So I think that natural disaster and that enhancement in it and the frequency increasing in those disasters and that climate is, to me, kind of top of mind of one of those things is behind the scenes.
Another one is biosecurity. Your listeners may not be totally familiar with that, but that's really about, keeping diseases, keeping pathogens, bacteria, funguses, viruses, parasites away from crops, food, people, and all those kinds of things. So again, behind the scenes, biosecurity is a major aspect of a farmer's life. They've got to take measures to vaccinate animals. They've got to produce fresh feed for their animals, dispose of waste properly. We've been pretty lucky as a society that we go to the grocery store and kind of take it for granted that our fruit looks good. It's usually not contaminated. And occasionally we have a contamination event in this country, but we tend to have things that are well grown and protected. Modern tools are used to fight pests, but a slip up, a change in climate; a movement in a certain direction can cause massive disruption. Last year, African swine fever hit China and they lost 50% of their pork herd, of their hogs. And that's 30% of the world's supply and that's a single disease that occurred.
I think right now, one of the reasons to talk about biosecurity is it's exactly what all of us are dealing with at home. The fact that we're doing social isolation, we're washing our hands, we're keeping our six feet, that's biosecurity for us as people. And that's a major challenge down at the farm and the rancher level to make sure that your crops are virus free, to make sure that your animals are disease free. It's just a really sophisticated, ongoing battle that requires innovation and requires costs. And it requires the farmers to really kind of implement that kind of change. So that's a second one that's big.
Two more that are just kind of behind the scenes is vector born diseases. So just like with biosecurity, you've got diseases that are brought in by vectors, like mosquitoes and ticks and fleas and lice and those kinds of things. Again, they have to be protected against. If there is an impact at that ranch or at that farm level, it can be absolutely devastating. And so again, farmers have to be in a situation where they're protecting and that they don't have the budgets to do it. If the innovation isn't there to have the vaccine or have the treatment yet, all those things can add up to real significant issues in the production and supply chain of kind of what we take for granted and the stores.
The last one is sort of the social pressure, the consumer preference side of things, the anti-GMOs, the traceability, I want longer shelf life, I don't want to eat a brown piece of fruit. Keeping pricing logical. So you're trying to do all of those other things I listed earlier and provide this perfect product at the right price point for society because society is growing increasingly worried about this whole food security.
There's almost a food insecurity these days that people want to know the traceability of "Where did this come from? I want to see how it made its way through the system so I know pesticides weren't on it, or I know it wasn't touched a certain way, or I know it's not a genetically modified crop." So they have that side of things and then they have that sort of expectation of a perfect product on the shelf when they go to the grocery store and that nutritious food and all the things they're looking for. So that would be four that really they were there before COVID-19, they're going to be there after COVID-19 and the financial challenges of COVID-19 on farmers are just going to put more stress on their ability to be able to mitigate these kinds of things and be able to satisfy consumers at the same time.
Vonnie Estes:
I think all those things are really true. I think COVID-19 has really exacerbated a lot of these issues and, like you said, really put the pressure on. What I'm trying to do with this podcast and there's always plenty of problems to talk about, but is to really shine a light on what are the issues that producers are facing, which we've done. Then look at what are some of the solutions that are coming that we can kind of have either a silver lining, maybe we found some solutions that we wouldn't have looked for because of COVID-19, but that there are a lot of really smart people out there continuing to look for solutions to some of these issues. And I think you're, with TechAccel, in a great position to see a lot of the solutions that are starting to come along. And so I'd love to hear your thoughts on that.
Michael Helmstetter:
Sure. Yes. As you said, that's what TechAccel is all about is really kind of identifying that next generation of innovation that can really have a positive impact on all of these food, crop, animal, and even companion animal challenges and find those early. So we're willing to take really high risk on very early, discovery-based technology and work at getting those to the marketplace to consumers as fast as we can. So we do, Vonnie, as you said, we see thousands of technologies every year. We have what we refer to as a very significant deal flow pipeline and really see some innovative and creative things that we feel and we invest in are going to be able to address some of these kinds of challenges and such.
So here are some of the areas to discuss. So I talked about this sort of perfect product in the grocery store, and I think one of the most significant emerging areas right now is sort of that food waste reduction side of things and trying to ensure that we have a longer shelf life associated with fruit. We have much less waste that occurs. And so there's a lot of companies that are sort of emerging with technologies that are coatings or an additive to a shipping box to be able to really drastically slow ripening and spoilage in foods and kind of have that increased lifespan on the shelf. You know, one example company is Apeel. They've actually come up with an edible coating that's a bunch of natural materials that they've figured out how to kind of put this powder over a vegetable or crop and be able to provide that barrier that really, their numbers are, it doubles the lifespan without refrigeration, which is obviously really significant.
There's another company similar to Apeel called Mori, where they actually are using silk-based coatings, so natural silk. And again, they look at water evaporation, they look at cell respiration, all these things that occur within the crops that they're dealing with. Their focus is on really slowing ripening and, the spoilage of those products. So there's a number of companies that are really trying to figure out that post-harvest side of things, that when we get these apples, when we get these pears, how do we maintain them in an environment when they end up on the shelf, they look like what the consumer expects, but to be able to do that at a longer period of time, to have more shelf life where they're not becoming waste in the grocery store. So that's a big area we're focused on.
I think a lot of great companies are out there and there's, dozens that I could talk about. Another one that is probably our greatest focus of sort of effort is in crop breeding and genetics. So developing crops that will be resistant or resilient to the kind of things that I talked about earlier, and our focus is on not genetically modified organisms, not that we're opposed to investing in those because I think they're important, but we really focus on what's called gene editing. I know that's something you're extremely familiar with in your background and some of the discoveries you've had in that area, where you're not dealing with a genetically modified crop, but you're starting to do just sort of fundamental gene editing within that crop species itself. And so we've invested in a number of companies.
One of them is called Epicrop. They have what's called an epigenetics platform. It's instead of sort of going in and dealing with genes inside the crop, you're actually changing the way they express themselves, how the genes sort of talk to what they want to do. And so we're working with them on canola, on berries. They're very focused on soy and tomatoes, and it's just another way to produce a more resilient crop, higher crop amounts. So per sort of unit seed, you get more biomass on the backend. So there are more crops that are there and more value that's there and doing it in a non-GMO short of way.
Another company in California, that's Sound Agriculture, that's relatively new, that we recently invested in, and they're focused in that epigenetics area as well. And so we're working with them on that, but they've also got some other sort of sprayable in the field crops on seeds and others that give real protection to those seeds and also enhance sort of that germination life of the plant.
So there are a number of companies, Benson Hills, another one we're invested in that's very focused on corn and moving in some other areas. So lots of companies that are trying to figure out, these farmers are dealing with drought, these farmers are dealing with viruses, they're dealing with all these other things. How can we give them seeds for their crops that when those plants mature, they're resistant to that drought, they're resistant to the excess water, they're resistant to the viruses? All of those pieces that can be there just by creating a better and stronger seed.
A third area I think is really important is this sort of indoor farming. Because again, I'm not trying to say that's great in terms of directly competing with the natural traditional farmer out on the field, but you've just got a lot that's going on indoor that just really allows you to use less water, not use pesticides. It's not genetically modified. You have really superior food safety because you're in this controlled environment. Less environmental impact because again, you have this internal indoor controlled environment. So lot of people probably that are listening to this podcast are familiar with Plenty, which is one of the largest, if not the largest indoor vertical farm, or there's AeroFarms is another big one that's out there that they have gone to not only these controlled indoor environments, but they have gone to robotics where they can have robots that go around and get evaluations of good plants, bad plants, make sure everything's going the way it's supposed to be going. So it's very automated as well. And that can tend to kind of drive the backend price of sort of this perfect indoor crop down to something that can be accepted by the consumers. So those are probably three areas where we're thinking about things.
Our biggest focus really is on that plant trade improvement, that ability to produce more resilient and robust plants that can deal with some of these things that just aren't going to go away. The diseases will not go away. The climate change challenges and the disasters are not going to go away. So the only real outcome of that is that you've got to develop some crops that can be more tolerant and some animals that can be more tolerant to some of these diseases as well.
Vonnie Estes:
Great. Thanks, Michael. That's a great overview of many of the topic areas that I love and I'm interested in, and I think are going to really bring some great solutions to producers. If we can just get out of this COVID-19 situation and talk about other technologies, I'll be really excited, but I want to thank you for your time today and your insights. I'm excited to continue to look forward in the breeding area and the indoor ag and a lot of the post-harvest work that you talked about. Those are all areas that we at PMA continued to look at and that are really going to be important to our growers pulling out of this. So again, thank you very much for your time. And I look forward to speaking with you again.
Michael Helmstetter:
Great Vonnie, thanks for having me and for everybody out there listening to this, please stay safe and well and healthy and be smart about this disease as we march our way through. Good talking with you.
Vonnie Estes:
That's it for this episode of PMA 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 along with other important content pma.com. Untill then, stay safe and we'll see you next time.