PMA Takes on Tech Podcast

Description:
In this episode, we speak to two executives from Bolthouse Farms about innovation. The Bolthouse Farms story is a great business case on what innovation and collaboration can bring to a company. Innovation is woven through everything they do and think about. There is also an open invitation to reach out to the company with innovative ideas/products/technology at [email protected]

Speaker:

• Zak Karlen - General Manager Farms - Bolthouse Farms
• Michael Rosenthal - CFO, GM and Chief Innovation Officer - Bolthouse Farms

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

Vonnie Estes, PMA:
This episode of PMA Takes on Tech is sponsored by CropTrak. CropTrak helps food and beverage companies digitize their unique supply chains to easily manage data, to improve their processes today and into the future. To learn how your entire supply chain operations can work more transparently, go to croptrak.com/pma.

Vonnie Estes, PMA:
Today we are having a conversation with Bolthouse Farms about innovation. The company has such an interesting history. It was founded in 1915 in Grant, Michigan. It is now a vertically integrated farm company specializing in food and beverages. It is located in the San Joaquin Valley of California with numerous regional farms. The private equity firm, Madison Dearborn Partners owned Bolthouse from 2005 to 2012. In 2012, it was bought by the Campbell Soup Company for 1.55 billion. Campbell's sold the company in 2019. From a business perspective, this journey is a fascinating story. Modern Acre podcast did a great interview with Jeff Dunn, the CEO about the various business transitions that is worth listening to. In this episode, we speak to two leaders in the company, Zak Karlen, General Manager of Farms, and Mike Rosenthal, Chief Innovation Officer and CFO. I love how innovation is woven through everything they do and think about and what having two different business models, a consumer packaged goods business, and an ag business allows you to do. Let's jump into the episode where Mike is talking about his role and how he brought Silicon Valley thinking to the company.

Michael Rosenthal, Bolthouse Farms:
In that time period, I was doing technology and innovation across a broad range of companies in a wide range of areas, software, data, services, hardware, you name it, and I really got to understand quite a bit about how Silicon Valley approaches innovation and from my perspective, and you live there so you know, Silicon Valley has a unique approach in the world doing innovation and technology. What I learned there, I realized it is not just for Silicon Valley and it is not just about the application of technology, but it's actually, maybe even more so, about the application of innovation process. The innovations I've lived through, some material changes in innovation process and Silicon Valley, and I realized those things could be applied to food and ag. And so I'm here at Bolthouse Farms to do a lot of things, but one of those things is to help blend together the best of what food and ag has and the best of what Silicon Valley does from an innovation process and technology standpoint, to create the food company of the future and we're doing it.

Michael Rosenthal, Bolthouse Farms:
So it's pretty exciting

Zak Karlen, Bolthouse Farms:
As a CFO and CIO, he also never cuts his own budget. It's awesome.

Vonnie Estes, PMA:
I bet.

Zak Karlen, Bolthouse Farms:
Which is strange how it always lands in my lap.

Vonnie Estes, PMA:
It uses two different sides of your brain. That really is interesting. You know, how can we be way out there and do wonderful things and then how do we control? That's a great balance for you. Zak, let's move to you and looking at your background, you've been kind of in and out of both farms, you've been in and off of farms and in food produce, tell us about your journey and what you do at Bolthouse Farms.

Zak Karlen, Bolthouse Farms:
Good question. So I started at Bolthouse Farms in 1997. I was 17 years old. You can do the math. Fresh out of high school, working in maintenance, pulling pumps and motors. Did that for the summer and then went to college in Bakersfield, at Cal State Bakersfield, CSUB Roadrunners. And I went to Grimmway Farms. I worked in Grimmway Farms or aggravate farms in their field program, doing data and analytics and understanding seed. I did that for four years and then ultimately graduated with a degree in economics and went and worked for Kern Ridge Growers, which is the third largest carrot company, it's also in Bakersfield. Really, really good experience, six and a half years there working as an Operations Manager, understanding how a family run business works and pinching pennies and competing against Grimmway and Bolthouse. I got a phone call in 2007 to come back to Bolthouse Farms and start it back from the operations.

Zak Karlen, Bolthouse Farms:
They were going through a transition because they were just acquired by Madison Dearborn. A private equity firm out of Chicago. Had been a family owned company from 1915 to 2005. I came over and started gobbling up part of the operations, worked from 2007 to 2017 as part of the management team that transitioned Bolthouse from Madison Dearborn to Campbell Soup. Worked for Campbell Soup for five years, got an opportunity to work in private equity. So I spent two years in the private equity world for a startup Arable Capital Partners. Then ultimately in 2019 around, Mike, it was March, April in 2019-ish. Jeff Dunn, our CEO, who was my boss in 2016, he called me and said, congratulations, you're quitting your job and you're coming home and you're going to come work for me as the GM of Farms again. And so that's what we did. We acquired the company June 17th of 2019. And we've been turning and burning it ever since.

Vonnie Estes, PMA:
Yeah, it's such a great story just to... I've heard Jeff tell the story several times and just about how the different transitions in and out of Campbells and what have been always very positive about Campbell and how that opportunity was, but the pros and cons of getting the band back together and pulling Bolthouse Farms back together again, and really as one of the most innovative companies, I think, in the produce industry. You all have really done some amazing things. So what we wanted to do in this episode is to get a future view from the C-suite. So clearly, as we've talked about, Bolthouse Farms has experienced a lot of change and transformation in the past five to 10 years. Tell us about what you've learned that has helped the company maintain its leadership position in fresh food.

Michael Rosenthal, Bolthouse Farms:
One of the biggest lessons in Silicon Valley, and many of the listeners may not know this story, but software development 20 years ago is very different than it is now. And the thing that transformed the software development was something called Agile software development. And what Agile software development did, was it said rather than spending a long time building a big thing, and then finding out whether it's going to work, take it in little chunks, move faster, move quickly, spend less money and in the end you will have a much more effective, less expensive, faster results. And that then got translated into business models by book that I recommend everyone read called The Lean Startup written by Eric Ries and he's showed how that process and software development can apply to business. And the very first thing I did when I got the Bolthouse Farms was started talking about lean startup.

Michael Rosenthal, Bolthouse Farms:
In other words, we can do things much faster, much less expensively by just trying them, using something a lot of people call them MVP, and end up with a much better result much more quickly. And so Zak and I spent a lot of time talking through this, I do it on my teams, Zak does it on his teams, and what it does, ultimately, is allow us realize that future of food by applying a process that helps us move faster and more effectively. And we can give you a number of examples of that. Robotics and other things that we can sort of talk through in the future, but I'll turn this over to Zak to chat for a bit and then we can sort of talk through some of these specifics.

Zak Karlen, Bolthouse Farms:
So when we talk about lean startup on the farm side or on the operation side, we use it in a lot of different ways, but one of the things that we're really focused in on is failure is okay, and that's a mentality that Silicon Valley has. There's like a badge of honor. If you have something that fails, you reiterate and fails, fails, and ultimately you get to this incredible solution. And so we've really taken that mentality, that Silicon Valley mentality, and inserted it into our operation. And so Wunderoots is a great example of that. It was almost a year ago today. I asked Bill Levisay, who is our head of sales, I said hey, can I have an innovation person, somebody that works in R and D because I think, the last advent in carrots was the baby carrot at 1988. What else can we do?

Vonnie Estes, PMA:
Was it that long ago?

Zak Karlen, Bolthouse Farms:
It was 1988. Literally I go, Bill, what else could we do? And he kind of looked at me as like, no, I don't think so. I promise, just give me somebody. So I got Kourtney Kobdish, senior scientist, and R and D. And within a week we had carrot bacon, carrot rice, carrot fettuccine, carrot hotdogs. They were taking the tops from the carrots and making pesto out of them. And we were blown away and PMA happened to be, well, I want to say 45 days later, we display these products at PMA, right? And we had no idea what we were doing. We just knew we had a really good product in Wunderoots, and that we were going to try to make it successful. How we were going to do it, no clue. To me, that's that lean startup MVP mentality that Mike's talking about, that we took that and put it to work on the farm side and Wunderoots is an incredible platform that we're just super bullish and excited about.

Michael Rosenthal, Bolthouse Farms:
Yeah. A hundred percent. It was, frankly, it was incredible to watch Zak do that because you can see the results in the marketplace. And if you haven't had a carrot hotdog yet, you should.

Zak Karlen, Bolthouse Farms:
It's crazy. It's crazy how good it is.

Michael Rosenthal, Bolthouse Farms:
But I'll add a little bit on this as well, which is Bolthouse is a unique company in many ways. And you referenced some of our commitment to innovation from the top down, which is wholeheartedly being baked into our ethos. But one of the ways that we're relatively unique in the world is that we have a big CPG company and we have a big ag company in the same place and they're intertwined together. And what that allows us to do is look at the produce and ag equation differently than most ag companies look at it. But you know, many ag companies, I would say look at it, input costs and yields per acre and all the sort of metrics that quality that you have to. But there's another layer that we look at it with respect to particularly innovation.

Michael Rosenthal, Bolthouse Farms:
And what Zak talked about from a Wunderoots standpoint is exactly right and it's incredible what he did there. We get to put a CPG lens on it. We get to say forget about the... yes, we have a bunch of projects, technology, and otherwise. Zak does an incredible job with this to take 5% of our costs out of our bag for a program, just like everyone has to, but we get to do something else, which is so important in how we think about the world and what the future of fresh is. We get to say, well, what does the consumer want? And we know that one of the things that consumer wants is a connection back to the earth. They want to understand their food and where it comes from and what it is. And they don't want to see an ingredient list of 25,000 things you can't pronounce.

Michael Rosenthal, Bolthouse Farms:
But we have a whole bunch of tools that a consumer packaged goods company has to assess those consumer needs and then think about that and bring that back to the farm. So what Zak did on Wunderoots is exactly that. Hey, the consumer is moving away from meat products, hotdogs, say what you will about them. They taste...

Zak Karlen, Bolthouse Farms:
Awful.

Michael Rosenthal, Bolthouse Farms:
They're pretty awful. What can we do, right? The R and D team working with Zak came up with some pretty cool stuff and then we got to launch it like a consumer packaged goods companies. So we grow the carrots for it, you put it through our plans, and then we launched it, and now the consumer has a healthier choice that tastes incredible, that is a carrot, not 35,000 ingredients. So I give Zak kudos, and the rest of the team kudos for doing that, but it is something pretty unique that we have here that will impact the future of produce and food that I'm very proud of.

Vonnie Estes, PMA:
Yeah, I think if you would've tried to go somewhere and sell that carrot hot dog, they wouldn't have done it. They wouldn't have taken it and so that you could take that to market yourself and kind of test some of those ideas out and also that you can be really innovative. I think it's hard for somebody to come up with something that's really unique if they're not an innovative company and take it all the way through the market. So that is really exciting and interesting that you have those two different pieces and you can get feedback loops really quickly instead of having to go try to sell it to someone that doesn't get it.

Michael Rosenthal, Bolthouse Farms:
Part of the reason we're able to do that innovation in the marketplace is brand awareness, right? Bolthouse Farms is known as an innovative company, and we have a lot of chips in the poker game relative to our CPG business. With all the innovation we've done over there. Yes, they're not the same buyers, but they know Bolthouse Farms is innovative and so when we went out to customers and did market research on Wunderoots, back when we used to allow people in our facility and do a taste testing, people were like, wow, this is incredible. Like, give me carrot bacon now. Let me figure out how to make it first. But yes, as soon as I do, I'll give it to you.

Vonnie Estes, PMA:
That's great. So thinking about technology again and all the innovation. So as you think about the pressures on the fresh part of the industry, how has technology and specifically data science and other technologies helping Bolthouse manage an efficient and resilient supply chain?

Michael Rosenthal, Bolthouse Farms:
Yeah. I'm going to make a statement that I make a lot and I'm going to turn it over to Zak to chat a little bit, but there's something I say that I want the world to really get. From my perspective, when you think about ag technology, robotics and data science and the connection of those two things and data sciences isn't just the science, but it's the capture of the data, the organization of data and what you do with it. Are the chemicals of the future.

Vonnie Estes, PMA:
Oh, I love that. That's great.

Michael Rosenthal, Bolthouse Farms:
We as a world and certainly in the United States, went through a revolution in agriculture when we figured out how to use chemicals, improve yields, and other things like that. There was another revolution in genetics, GMOs, that also helped. There's obviously a great debate about whether that's good or bad. There's a bit of a debate about chemicals, good or bad, but forget about looking at the past. The future is powered by data and robotics is one of the ways of capturing it. And they are the new chemicals. That is what's going to drive the next evolution in agricultural efficiency and lots of other things and so we take that very seriously, but anyways, Zak, I know you have a lot to say about this.

Zak Karlen, Bolthouse Farms:
Excuse me, it's interesting to me, for the first third or half of my career, I always thought about technology as automation, right? So how do I find a machine to replace a human inside the facility to keep that five to 10% cost reduction every year? So optics order, robotic pick and place, things of that nature. And we have a long ways to go to continue down that path, but in the last 24 months, Mike and I have really started thinking about technology and from the soil to the plant, right? And so, as he said, we've got a hundred plus years of agricultural information and knowledge, data that's kind of floating around and Excel and in some papers and in some people's heads, and we're working with CropTrak to get all of that information into a single source so that we can utilize that data to be good stewards of the land.

Zak Karlen, Bolthouse Farms:
And that's really important to us at Bolthouse Farms. I think the statistic is the population is going to be 10 billion over the next decade. Well, one of the things that keeps me up at night is how the hell are we going to feed all these people, right? How are we going to feed an extra three or two and a half billion people with the same amount of land and keep everybody healthy and nutritious conscious. And one of the ways is to be really good stewards of the land and really to start transforming our thought process from the traditional cost per acre, yield per acre, input per acre, and start to think about it from a nutrition per acre standpoint, right? So how do I get the most nutrition out of that acre of ground? And I've been reminding people a lot through COVID of, we are an agricultural company first that happens to grow carrots second. And so we have to rethink how we do farming and start to think about that nutrition per acre angle and going more towards a regenerative ag process and less towards the chemical process.

Vonnie Estes, PMA:
So can you give some examples of how you're doing that and what technologies you're using and how technologies are playing with each other?

Zak Karlen, Bolthouse Farms:
I'll start and then Mike can take over. We have started a process in Cuyama, which is a valley, probably 60 to 70 miles west of here, a regenerative ag program. And so we took 160 acres of organic and 160 acres of conventional and have literally told our farming organization, if you had this land for the next 10, 15 years, what would you do with it? What would you do with it as a true farmer? And the outcome of that has been fascinating, in terms of cover crops, in terms of rotational crops. And if it's done correctly, if you do all of that correctly, and you're good stewards of the land, and you keep soil health in mind at all times, your input costs actually go down. You're weeding costs go down. Your quality goes up, your yields go up, right?

Vonnie Estes, PMA:
How long does that take? Is that one season? Or two seasons?

Zak Karlen, Bolthouse Farms:
Oh no. It could take a decade, right? I'd say it's a decade long commitment. Now you will see results and soil health within six to eight to nine months. But in terms of once you get proper rotations and once you get everything down, it could be a decade before you get to bright, right? So this is a long commitment. And then bring in Mike and the technology side with robotics and everything that they're doing. It's a fascinating program.

Vonnie Estes, PMA:
Are you running that yourselves or you have other contract growers that are running that or how's that?

Zak Karlen, Bolthouse Farms:
One of the beauties of working at Bolthouse Farms is we tend to do everything ourselves. Whether that's good or bad, it's chuckling because sometimes we should outsource, but that program, there's probably a core 10 of us, Mike, myself, and some other key members are running it ourselves.

Vonnie Estes, PMA:
Yeah. That's great. Mike, what were you going to add on that?

Michael Rosenthal, Bolthouse Farms:
No, I'll never forget when Zak came back from a trip to London or he went to a conference and said to me, Mike, it's no longer yield per acre. And I was like, what are you talking about, Zak? I have my CFO hat on.

Vonnie Estes, PMA:
That yield better not go down.

Zak Karlen, Bolthouse Farms:
I'm not cutting LTI budget.

Michael Rosenthal, Bolthouse Farms:
And then he laid the nutrition per acre concept on me and my head exploded because I was like it's so right. So right. It's an exciting thing to think about and build into how we think about the world, but on the technology side, back to your question, there's a lot of technologies we use and I'll probably split this up a little bit, but obviously, as Zak said, the amount of data that is available from the start of the ag process, prepping the land, all the way through growing, harvesting, tracking into the plant, going through the different flows of where it might end up in the plant, into a package, onto a truck, into a warehouse, over to that grocery store, into a consumer's mouth.

Michael Rosenthal, Bolthouse Farms:
I come from Silicon Valley, so what I see, like the matrix, is just a giant streams and streams and streams of data, potential and capability. A tiny, tiny sliver of which we are capturing now, but that tiny sliver is a lot bigger than it was two years ago and it's growing exponentially with a lot of great work that Zak and his team is doing. So there's one piece of this, which is how you capture and organize the data. And then there's another piece of it, which is how do you analyze the data? So I'm going to have Zak chat a little bit about capturing it and organizing it. Cause he's been doing some great things with a great partner there. This is a place where we do some outsourcing. That's good. And then maybe come back to me and I'll talk about some of the analytics around it and some of the things that I think about when we think about the future of that.

Zak Karlen, Bolthouse Farms:
And we talked a little bit about the hundred plus years of farming data. We're collecting it every day, all day, from all different sources and some of it is very cumbersome. Some of it is literally individuals counting rows on how many rows of carrots we harvested and that attribute equates to, we did 10.7 acres of this field, it's difficult, right? And not only do we have a small sliver of data that we need to drive the business, that small sliver is in 15, 17 different places and it's inputted by human beings at times and it's very, very difficult to get accurate data in a very timely manner, because one of the things that I think was lost on prior ownership is carrots are living, breathing organism. They don't take Saturdays and Sundays off, they don't get Memorial day off, right?

Zak Karlen, Bolthouse Farms:
And so we plant, grow, and harvest carrots 365 days a year. It's what we do. We do it every single day. And so for us to have accurate data, timely data, so that we can make very, very good decisions based on that data is really important, right? Because if you don't pay attention to the carrot crop every single day, it's the most expensive thing we have as a company, hands down, more expensive than labor, water, land, utilities, combined. Carrots are the most expensive thing we have in a company. If you don't treat that with the respect that it deserves and you don't have the right data, you can make a really poor decision and you may not feel the ramifications of said decision that moment, because it's 150, 160 day crop, but at 150 or 60 days later, you may have planted the wrong seed based on the wrong soil type, because you had poor data and now what, right? Now you've got 150 days of input costs with potentially a very poor crop. That's not going to work.

Vonnie Estes, PMA:
And you need to be able to implement those decisions right away. I think a lot of times in the past we would collect all this data and then it would end up on a USB or someplace, and then someone would evaluate it and then they'd send it back and then the season's gone by and you're looking in the rear view mirror and you can't do anything with it. And so I think with these new programs where you can really get the data, have the data, make an instant decision, that's going to affect your season makes a big difference.

Zak Karlen, Bolthouse Farms:
It's one of the things that I love the most about Mike is he's so analytical. Because to your point, we have all of this out there, but sometimes we don't do anything with it, right? And so with the programs that he's working on, right? It's like, okay, these are the facts, right? And you can't deny the math on this, this, and this. Let's make the best decision based on that.

Vonnie Estes, PMA:
Yeah. So outside of the data management piece, what other technologies are you working on? And Mike you'd mentioned robotics. What are you guys looking at on that? And what do you think the future of robotics is going to be? It's an exciting area that we've been waiting. We've thought that's been a year away for 10 years.

Michael Rosenthal, Bolthouse Farms:
I love that.

Zak Karlen, Bolthouse Farms:
We're going to steal that line from us. You can steal some of ours.

Michael Rosenthal, Bolthouse Farms:
I can tell you with great certainty that robotics is less than a year away. So look, robotics is not a new thing in the world. If you study the Toyota and the Toyota production system and other manufacturing areas and other places, robotics are not only a primary way that the manufacturing happens, but it's been going on for a long time. Robotics in the field, and in agriculture, is a different set of problems. Hasn't had the same kind of attention and focus and partnership that manufacturing, as an example, has had. And so it is land. It also hasn't necessarily had the willingness to invest, the capital to invest a clear way to drive a trade off and the rest of that, which I think is a little bit true.

Michael Rosenthal, Bolthouse Farms:
And a lot maybe the way the ag industry and the world has, I don't think has been thinking about it well. And so robotics is the thing that we started looking at as soon as we came back in here. First of all, I've hired a number of folks from Silicon Valley, they've moved Bakersfield, California to join the innovation team because we need that thing that I talked about before, which is the blend of both of them. Neither side knows more than the other. They both have, the ag side is incredible and knows an incredible amount of them. And so does the Silicon Valley side and together is where the magic happens in collaboration. And so we pulled our network together across Silicon Valley, and I knew that the payback on robotics in agriculture would be clear.

Michael Rosenthal, Bolthouse Farms:
And we went out and we looked at all the different robotic companies and ended up finding a partner that we thought we could work with and that had the kind of technology and partnership that could really help us. So we have been working on this project for, Zak, probably a year and a half, something like that. And they had actually already been working on robotic technology, just in a different industry and so me and a couple of folks flew to Silicon Valley and sat down with them and explained why carrots are actually something they should really be focusing on and convince them. And their technology, and their approach, and their team is right. And we, our attitude, our perspective, our knowledge of the ground and of the crop and of the things that we need to bring to the table and that partnership to make sure that we ended up with a robotic strategy that works is right.

Michael Rosenthal, Bolthouse Farms:
And it's working. I'm not going to quote any numbers that I have, but I can tell you that we are, it is not a year away. With my CFO hat on, it's a really good cost opportunity. With our ESG oriented, good stewards of the land data and robotics are the chemicals of the future perspective and Zak's nutrition breakers perspective, and all incredible things he's doing on soil health. It is all about that because not only are we saving money at the same time, we are doing things much more effectively, efficiently, with less inputs that can take care of the land better. And so it's happening and it isn't going to stop. And we are well into that technology. Zak, I don't know if you want to add anything to that.

Zak Karlen, Bolthouse Farms:
Yeah. One of the things, one of the many things, that has come out of COVID for us is the acceleration of this technology of robotics. We had to completely revamp our business in March of 2020 when this thing kind of started to happen. And we broke our employee base down into groups of 10 to keep them safe, to keep the businesses going, but simultaneously behind the scenes, Mike and I were thinking, holy crap, we got to start replacing humans with machines because there's a lot of variability in there. And in a weird way, it actually is going to create more jobs, not less jobs, right? It's going to create more technology jobs, better paying jobs, et cetera. Cause we're going to have less input costs, ergo we can invest more into employees and more into technology, but what Mike's talking about is revolutionary for us, right? For us at Bolthouse farms, in terms of being able to collect all that data, do it seamlessly, implement it, and have all the robotics. It's really, really exciting right now.

Vonnie Estes, PMA:
Yeah. I think it's a really exciting time and just see. I think a lot of people will, just from my vision, I know it's been around for a long time, but it seemed like there was all these gigantic harvesters in corn and soy. And so people start thinking, well, we need gigantic harvesters. Like let's start there. And now I'm seeing different types of things, harvest aids, small like borough, small carts going up and helping with harvesting and people like robotics that are having a different approach to how do we thin and weed. And so it really is exciting. And all of that, like you said, it's all... You have to have the data to make the decisions. It's all tied in together.

Vonnie Estes, PMA:
And if you don't have the data to know where to squirt that weed or how things are growing and what they need to look like, then, you can't use the robotics so that makes a ton of sense. So as you peek around the corner, a decade from now, what trends do you see converging that the fresh industry needs to be building towards now? Like new innovations or adoption or application of existing technologies?

Zak Karlen, Bolthouse Farms:
Yeah. I think Wunderoots is one of them for us, right? Right now we're living in it. It is a product that is potentially going to replace hotdogs, at least a portion of hotdogs. And one of the things that Mike has taught me over the last year is one of the reasons that Oatly is so successful is it's going after milk, right? One of the reasons that Impossible or Beyond are so successful is they're going after beef, which is a multi-trillion dollar industry. If you think about it, I think the numbers close, like there are 20 billion hotdogs consumed annually in America.

Vonnie Estes, PMA:
Oh my gosh.

Zak Karlen, Bolthouse Farms:
Yeah. [crosstalk 00:33:12] You know, I'm going to quote Jeff Dunn, according to Jeff Dunn, our CEO or 20, I mean, that's a lot, right? You get 1% of that. You know, we have a really, really good product that could potentially take a half percent, 1%. And for us it's like, okay, what else can you do with carrots? Or with vegetables? What else is out there that we're looking at it as part of this regenerative ag. Okay, we're going to create 10 or 15 other vegetables that we're going to be growing, cover crops, soy, et cetera, what else can we do, so that we're equal good stewards of the land, but also continuing to be an innovative company? And that's where Mike really steps in with his Silicon Valley experience and his vision around technology and stuff.

Vonnie Estes, PMA:
I think we, at PMA, we talk about... we really are, and produce really is the plant-based diet. We really should be taking on more of the plate and we are the plant-based diet. And so I love that you guys are looking at that and there's lots of room for all the other companies that you mentioned, but I think really going back and looking at let's really get people nutrition, not just pretending that it's meat, but let's get people having high, nutritious food that they want to eat.

Michael Rosenthal, Bolthouse Farms:
The produce industry needs to evolve towards nutrition. And what I mean by that is, and I'm not going to talk about carrots for a second. Take an apple or a head of lettuce or whatever else it is. The focus for a very long time has been, how do I get more apples? How do I get bigger heads of lettuce? How do I create as much of a just in time situation as you can, but also since there's seasonality and issues and droughts and whatever else happens, how do I extend the shelf life of my apple or whatever else it is so that the economics of that equation work, and I can still deliver an apple to a consumer in May, et cetera. Whether that apple tastes great, whether that apple's nutritional content in terms of antioxidants and other things, and I'm not going after the apple industry, I'm just using apples, I'm just saying as an example, it could be insert carrots or anything else.

Michael Rosenthal, Bolthouse Farms:
Yes. You might be delivering ahead of lettuce to consumer or an apple or a carrot or whatever, but what is that? Food is nutrition for our bodies so we can stay healthy. And it may look like an apple, it may look like a head of lettuce, smell like one, be bigger than it was last year, et cetera. The real question that this industry needs to ask itself, if it wants to do great things for the world 10 years from now like you just described, is how do I make sure that what gets in the consumer's hands and into their mouth is more nutritionally dense than it was last year or five years ago and 10 years ago. And the consumer... And if they're not thinking about that now, they're making a big mistake because I can tell you based from the consumer side of our business, the consumer sure is thinking about it.

Michael Rosenthal, Bolthouse Farms:
And the next generation of consumers that is graduating from college and demanding all kinds of things that we read about in the news. It is demanding that for themselves and their kids are going to demand it for themselves. I promise you, and I'm not going to go into all the details, cause there is some secret sauce at Bolthouse Farms, but I promise you that we are thinking about that right now. So that five years from now, and 10 years from now, we are delivering more nutrition in the form of a carrot or anything else then we are doing now because in the end, that's going to win in the marketplace.

Michael Rosenthal, Bolthouse Farms:
That's what the consumer is really going to want. I promise, you'll see this in the data shifting in the next 10 years. And so the whole industry needs to understand that a focus on that using technology innovation and soil health, and a lot of other things that you can do right now will actually grow their business 10 years from now because they'll be delivering, they'll be matching what the consumer wants, not just what is optimizing the supply chain for 10 years from now.

Vonnie Estes, PMA:
I know many of my listeners work for startups and companies with new innovations who might be interested in engaging with Bolthouse Farms. You can send an email to [email protected] to get the conversation going with them. Hear Mike and Zak talk about the importance of collaboration and working with outside innovative companies.

Michael Rosenthal, Bolthouse Farms:
Innovation is in our ethos. And we want to hear from startups who have great solutions. And even if we can't take advantage of it ourselves, we want to help them, because it's good for the world. If you want to come work at Bolthouse Farms and you're innovative, please come work with us. If you want a startup and you've got a cool technology, we'd probably want to try it. And if we don't want to try and we probably want to help you anyway. So, yeah.

Zak Karlen, Bolthouse Farms:
Yeah, one of the beauties of being at Bolthouse Farms is we're so big and have so many connections that some of these startups, their application may not be applicable to what we do, but we can definitely get you to the right person to help you be successful.

Vonnie Estes, PMA:
Well, there you have it, an open invitation. Hope you enjoyed the episode and see you next week.

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

Hide transcript

Description:
Hear from Randy Pequignot about his journey as a field supervisor for Del Monte AND data management administrator. He uses software to accumulate Ag data from contract of growers through to the processing of snap beans. Randy gives a great view of what is important to him and how data management has helped his operation and his time management. It is always great to hear the voice of the customer of new technology!

Speaker:

• Randy Pequignot, Field Supervisor Del Monte

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

Vonnie Estes, PMA:
This episode of PMA takes on tech is sponsored by CropTrak. CropTrak helps food and beverage companies improve their supply chain management from contracts, all growing activities, sustainability, and ESG management to grower settlements. To learn how your entire supply chain operations can work more efficiently, go to CropTrak.com\PMA. Welcome to today's episode with Randy Pequignot, a field supervisor of Snap Beans in Illinois with Del Monte. He has been at this job for 26 years and with Del Monte for 30 years. So he knows his stuff.

Vonnie Estes, PMA:
If you want to hear how folks in the field are thinking about data management and adopting technology, Randy is your guy. It's so important for people who are developing technology to hear from people like Randy. He talks about what the needs are in data management from the field perspective, how data is used? What form it needs to be in, and that it needs to play well with other data. He also talks about the journey of adopting technology. This is truly a boots on the ground conversation.

Randy Pequignot, Del Monte:
Hello, my name's Randy Pequignot, and I'm a field supervisor with Del Monte Foods here in North America, and based out of Central Illinois. And being a field supervisor, my main task is contracting and raising Snap Beans for canning purposes. I've been a field supervisor with Del Monte for, this is my 26th year as a field supervisor. It's my 30th year as a Del Monte employee counting some seasonal years before becoming a field supervisor.

Randy Pequignot, Del Monte:
So we grow and raise snap beans, early source and late source here in Illinois for our production facilities in Wisconsin. And an auxiliary part of my job is we accumulate all of our Ag data from starting the crop, contracting, all the way through, till it's being dumped at the plant. So for traceability and sustainability processes through the whole growing season, we use this platform for everything we need to do.

Vonnie Estes, PMA:
And how long have you been using that technology for?

Randy Pequignot, Del Monte:
I've been working for about seven years. The last three years has been our main jump into going full board. We run from like I say, contracting all the way through payment. And so we do electronic contracts. We're able to schedule our [plantings 00:04:05] And keep track of all the scouting's and sprays and everything in a one place live environment. So everybody can keep up with it live basically, real time.

Vonnie Estes, PMA:
Did you jump into using it for all those different things at the very beginning and/or have you incrementally used different parts of the platform as time has gone on?

Randy Pequignot, Del Monte:
Incrementally different parts of the platform as time has went on. We first started in with just as a mapping program and have moved up, stair stepped with them. As they've grew, we have grew with them in parts of the platform that they offer. One of the biggest things that we use and I guess goes along with the climate situation is weather data. And so our older system that we did use, we would collect weather data on basically one or two weather stations in a 60 mile area. We can get it down to a two mile grid and basically we're collecting weather data on a per field basis instead of a per 60 square mile area.

Randy Pequignot, Del Monte:
So that is helping us be able to schedule our plantings to in the end run, have our harvest come off in a streamlined a way where the plant stays full and we're not over-producing or under-producing on a daily basis.

Vonnie Estes, PMA:
So how are you thinking about managing supply chain efficiencies, now in 2021, after all the changes that we've experienced?

Randy Pequignot, Del Monte:
From the field side of it, weather's the biggest player for us and it comes down to a lot of, with the newer technology out there, it's helping us schedule a lot more, scheduled better, more I should say. And that's really, it's really helping us in the long run in that way.

Vonnie Estes, PMA:
Yeah, like you were just saying, as far as getting, having the right amount of product, get in to the plant, to the processing plant, that kind of scheduling, it really helps with efficiencies, right?

Randy Pequignot, Del Monte:
Yes. Naturally we don't want to overproduce and not be able to get it canned and we don't want to under produce and run short on days at the facilities.

Vonnie Estes, PMA:
Yeah. There are many data tools available to help farmers manage their operations. What is the most important to you for a data solution?

Randy Pequignot, Del Monte:
Being in the veg industry, I mean, there's a lot of data platforms out there and in the veg industry, it's kind of, there's a lot of corn and soybean platforms out there but the veg industry-

Vonnie Estes, PMA:
There sure are.

Randy Pequignot, Del Monte:
Yes. But the veg industry you really, I mean, we do things different than the corn and soybean guys and to have a platform that's dedicated to you. There's just not that many out there. To us or another user they're not the same. It's the same base canvas, but it's totally customized in basically the language that we use in our business practice instead of just a generic program.

Vonnie Estes, PMA:
In the using and adopting, there must have been a lot of back and forth of you explaining what you needed and then them iterating and making changes. And then you trying that, was there a lot of that kind of cycling that happened?

Randy Pequignot, Del Monte:
Yes, there was.

Vonnie Estes, PMA:
Yeah. I was talking to a couple of the people at the company and they were saying that everybody's, a lot of their customers, they use different languages for, different words to describe things. And so they kept having to change things because people in one part of the country or would use a different language to explain something. And so that keeps them on their toes, I think.

Randy Pequignot, Del Monte:
It does. Yeah, we have run into many little things like that, even in other Del Monte locations. Weeds are called different things. I mean, it's the same weed, but they have a different name or a bug has that, is the same bug, but it has a different name in different locations of the US. So we've run across that just internally.

Vonnie Estes, PMA:
So you talked about weather information, but what kinds of other information do you need real time to manage your supply chain?

Randy Pequignot, Del Monte:
So we do electronic tickets, field tickets. So we know in real time when the truck is in the field, it's being loaded. It's loaded in, on the road, it's arrived at the plant. It's been weighed in/ it's basically on deck to be dumped. So all those steps are real time, so we can have an idea how many loads we need to be picking. Do we need to slow down a little bit, speed up a little bit, to keep the plant full of product?

Vonnie Estes, PMA:
How many acres do you have? Is it all in the same spot or is it spread out over the Midwest? Or are you mostly in Illinois in a certain locale?

Randy Pequignot, Del Monte:
I'm based out of Central Illinois, but I mean, we have locations in the state of Washington, California, Oregon, Wisconsin, and Illinois.

Vonnie Estes, PMA:
And they all have someone with a role like yours? And is there one plant per each of those locations or are you driving to different facilities?

Randy Pequignot, Del Monte:
All of my product goes to our two facilities in Wisconsin, our two bean facilities. The main bean growing area is in central Wisconsin, corn and peas is in Washington, and fruit is in California and also in Washington. So yes, at all those locations there is people just like me in the, as field supervisors, working with the growers on a day-to-day basis of producing the best quality crop we can with the least amount of inputs to grow that crop.

Vonnie Estes, PMA:
And are these contract growers or are they... How does that framework work? Are they growers that work for Del Monte or are they growers that then sell to Del Monte?

Randy Pequignot, Del Monte:
Contracts growers.

Vonnie Estes, PMA:
Okay. Very cool. So looking at climate related stresses, how is Del Monte responding to the impact of climate related stresses on your farm operations or the supply chain overall?

Randy Pequignot, Del Monte:
Varietal is a big one for us on the field side. Del Monte, 90 plus percent of the beans that we grow are Del Monte's known varieties. And bred for the color, quality and taste that that is a Del Monte bean. And we're always looking, our breeders are always looking for new traits in our bean varieties that will help with basically... Like I said before, weather is a big player is, in our harvest ability and growing the beans is we want an upright bush to keep the airflow down between the rows.

Randy Pequignot, Del Monte:
So if we do get some rains, they will dry out, but you want enough canopy that will shade the weeds. And then the upright bush will keep the beans up off the ground even if you get a heavy storm, it not totally but it'll help keep the beans up off the ground, which helps in quality issues. And then bring in disease packages. So we could spray less and so forth.

Vonnie Estes, PMA:
Where is the breeding done for the beans?

Randy Pequignot, Del Monte:
Wisconsin is where our been grow, our been breeders are located. We grow a lot of the seed out in Washington, state of Washington, lot of push to increase nodulation on our varieties to use less fertilizer and so forth.

Vonnie Estes, PMA:
And are you seeing more extreme weather or any changes in weather? Have you seen a change over the last couple of years?

Randy Pequignot, Del Monte:
Yeah. I would have to say yeah, the weather patterns seem to be a bigger swings in the weather patterns. It just don't seem like we can get a nice all day inch rain anymore. If it's going to rain, we'll get a big storm and it'll rain for 15, 20 minutes and you'll get half inch to an inch. Which, I mean, everybody loves a rain, but sometimes when a rain comes that fast and furious, it doesn't get a chance to soak in and you get run off and you're not getting the value out of that rain. And then naturally with the storms you got, hail, wind and other things that bring in diseases and works only on the quality side of it.

Vonnie Estes, PMA:
Yeah. So are you breeding for more drought tolerance? Do they need to be more drought tolerant because you're getting less rain or is that a problem?

Randy Pequignot, Del Monte:
No, everything we grow is irrigated so.

Vonnie Estes, PMA:
Yeah. So you can get the amount of water that you need?

Randy Pequignot, Del Monte:
Yep.

Vonnie Estes, PMA:
Yeah. So how do you think the company will manage environmental stresses going forward?

Randy Pequignot, Del Monte:
I think with technology that's out there it has really improved what we've done, and like I say, our bean breeding program has really brought a lot to the party to help us, obtain those goals of a steady supply chain in the culture we're in right now with the weather and climate and so forth.

Vonnie Estes, PMA:
Do you grow different types of varieties in your particular area or/and do you get new varieties every year or how does the varieties change?

Randy Pequignot, Del Monte:
Well, we grow a couple of three different varieties. And we're always looking at new varieties that our breeders cross up. And it's awful tough, you'll find a variety that has one great trait, but it's a little lacking on a couple of other traits. And you might find a sister variety to it that's brings something to the party, but is lacking there also.

Randy Pequignot, Del Monte:
So it's tough to find that one variety that brings everything you need to be a success. So we look at many, many varieties and usually pick two or three a year to push forward to see how they're going to react in different locations also. So what works well in Wisconsin might not work well here in Illinois.

Vonnie Estes, PMA:
Or it might work well this year, but it doesn't work as well next year.

Randy Pequignot, Del Monte:
Definitely. Thus, you definitely want to look at it over a two three-year period.

Vonnie Estes, PMA:
And did the breeders come and interact with you and look and see how things are going in the field for data and feedback as well?

Randy Pequignot, Del Monte:
Yes. Yes. Yep. We interact with them all year long, looking at trials and trying their new varieties and taking harvest measurements and growing qualities all through the growing season. So we talk back and forth with them, what we see on the Ag side that can be improved on or what is working well?

Vonnie Estes, PMA:
And are you thinking about, or managing different factors for different crops like tomatoes versus carrots, versus peaches, for instance.

Randy Pequignot, Del Monte:
Not too much difference. I mean, in the big picture, they're all in the same boat with weather patterns, it's all relevant that via drought, heavy rain storms, it's all going to affect all the crops we do in the same way.

Vonnie Estes, PMA:
So what is the biggest change produce farmers will face in the next two years or beyond?

Randy Pequignot, Del Monte:
I would say weather, probably the number one and help is going to be number two, is another big hurdle.

Vonnie Estes, PMA:
Definitely.

Randy Pequignot, Del Monte:
So you can have all the technology in the world, but sometimes they don't get the manual labor done.

Vonnie Estes, PMA:
Yeah, exactly. How is Del Monte working with your farmers to mitigate those particular challenges?

Randy Pequignot, Del Monte:
We're able to, like I said before, drill that weather data down and we get daily weather reports. I mean, we don't have to go out and see where it did rain. We can get that on a, in a real-time basis. That's going to help us manage when to water, when not to water? Fertilizer when to fertilize and when not to fertilize behind a big rain.

Vonnie Estes, PMA:
If you were to talk to someone who hadn't adopt these types of tools, what kind of things would you tell them to make their journey easier in adopting technology? And should they adopt new technology?

Randy Pequignot, Del Monte:
I would always say, yes. Moving on the technology is a great thing. Like a lot of other things it's not cheap, and there's a lot of things out there. Is your return on investment going to be there? Jury's still out on that.

Vonnie Estes, PMA:
Would you look at that over a season or over a year, two years or over a decade? How do you look at it, evaluate your return on investment on those types of tools?

Randy Pequignot, Del Monte:
Well, some of that's yes, you got to look at the long-term, but some of the short term stuff, there's some water management tools out there that they would be great tools in heavier ground when to water, but in some of our sandier soils it's not when or water, it's when you can shut the water off. And so I guess it doesn't need to tell you when to water and that cost yeah, can be a pretty steep cost comparative to water, but everybody wants to save as much valuable resource of water that you can, so it's kind of a fine line in there. But data collection is great. I mean, you can collect all your data, run your numbers and then do some great comparisons in number crunching to get you where it is a return on investment or not.

Vonnie Estes, PMA:
Yeah, I think one of the things I wonder about it is how deep do you have to get into a system before you figure out whether it has a good return on investment or not. I mean, you have to spend a lot of time to learn water management, any kind of data, farming management system, you have to spend your time to try to figure it out. So when you're looking at something, how do you make the decision of I'm going to go ahead and try that, this and see if it works and see if I get a return on investment.

Randy Pequignot, Del Monte:
Yeah. I would say yeah, you can't do it. You can't look at it at a one year deal and going to see that return, because it is a big investment and a large step forward. But I would say time savings for us has been one of the huge additions and accessibility to all the information. I mean, prior to having this platform, where we all have it at our fingertips basically. The data prior to that is if you needed a piece of data, you try to get ahold of somebody and they had to look it up in their three ring binder.

Randy Pequignot, Del Monte:
And then you get the information and then pass it on to the person that needs it. But like I say, now with real time data, it's there. Anybody can use it from the plant side of it for quality issues that they're seeing or could be seeing to spray records, and scouting records, and planting records, and it's just all right there.

Vonnie Estes, PMA:
And you're all seeing it, all the people in those different roles that are making decisions. You're all seeing the same data at the same time, right?

Randy Pequignot, Del Monte:
Exactly.

Vonnie Estes, PMA:
Yeah, that's fascinating. What was it like to go from the three ring binder to everybody having the same data? I mean, did that take a long time for people to figure out how do we work together on this and trust it, or was that pretty fast?

Randy Pequignot, Del Monte:
It was pretty fast. I mean, like everything else, you're always going to have the naysayers that are going to buck change and there's... We thought it might be some of the older folks, but a fair share of the older folks took onto it more than maybe some of the middle-aged ones.

Vonnie Estes, PMA:
Oh, that's interesting.

Randy Pequignot, Del Monte:
Yeah. It surprised me. But no, it actually went pretty fast and pretty well. And it's making everybody's job easier. So I mean, that's a big hurdle. I mean, if we can make our jobs easier, you can get home maybe a little earlier in the day than 12, 14 hours, it might be 10 hour days. So it does. And maybe a lot of times, a lot less phone calls. "Well, I need this. I need that." Well, all they have to do now is just look it up. It's right there at your finger tips.

Vonnie Estes, PMA:
And it also I assume, allows you to make some real time decisions instead of sometimes when you get data that is already two weeks old or stale, you're looking backwards and you're not able to make real time decisions in the moment of what to do and what to change.

Randy Pequignot, Del Monte:
Most definitely. And like I said, with the harvest side of things, it has really been a great thing on the real-time data. So they can see, we have CropTrak linked up with a system we use in the facilities and we can actually see what they're processing in tons per hour. And we can see as us harvesting, are we harvesting enough, are we not harvesting enough? And we can relay quality issues with all that information. So the plant knows, "Hey, there's some brown spot on these beans, maybe they need to slow down and clean them up a little better." So all that being real time where before is, "Yeah, you had to relay that and they had to make sure it got relayed to the right person." So all that is incorporated in the plant, their screens around, gives them all that data on a real time platform.

Vonnie Estes, PMA:
Yeah, that's great. So you can respond to it happening now. You had mentioned that it was tied in with another system in your plant. And one of the complaints I hear about so many of these systems is people have old legacy systems and then they get some new app or something and nothing talks to each other. And so it sounds like in this situation that you've got two different systems that are able to communicate with each other, have you found that to be the case a lot with technology, or has that been a problem?

Randy Pequignot, Del Monte:
No. So far everything that we use internally has linked very well. We use some different platforms for... Our aerial applicators use some of their own platforms and we can link directly with them. So it's been a lot of time savings of, instead of having to put it into three different programs, you put it into one and we can pick it up or send it to any of the others.

Vonnie Estes, PMA:
Yeah. Great. Well, is there anything else you want to mention about just adopting technology and what that journey has been like, or you think we've kind of got it covered?

Randy Pequignot, Del Monte:
I think we kind of got to covered. Yeah, it's definitely a journey. And like I said, jumping over the last 25 years of handwritten notes and trying to find where you wrote it down and when you wrote it down what you did? To being able to document it right now on the iPad or iPhone or your desktop, if you're at the office and having that live data real time is very valuable.

Vonnie Estes, PMA:
Great. Well, thank you very much for your time, Randy. I really appreciate it.

Randy Pequignot, Del Monte:
You're welcome.

Vonnie Estes, PMA:
Randy touched on so many important things about adopting a data platform. Every operation is different and vegetables are certainly different from corn and soy. So we need to start with a platform that is tailored to our growing systems. Then a close collaboration with the tech provider, especially at this early stage of technology development is crucial. Use of the technology is iterative and both the developer and the customer need to work together. Maybe in the future, a company can just sell a platform, but we aren't there yet.

Vonnie Estes, PMA:
So all platform companies need to have a consultant part of their company. It is an integral part of the product, not an extra pain. And how do we measure return on investment? As we use tools that look at increased efficiencies in the chain, we will be able to see increases in yields and decreases in costs of production from data management systems over time. For Randy, the biggest ROI to him is getting several hours of his day back and not constantly looking for those scraps of paper or binders.

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

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Description:
The race to develop systems for carbon capture and reduction is on!
We dig deeper into the carbon challenge and talk with two innovators who are working with food companies to ensure transparency across the supply chain. The speakers tie together the importance of ESG, effects of climate change, carbon programs and how technology is the “unlock” to solve these issues.

Speaker:

• Anthony Kingsley, Benson Hill
• Dave Stangis, founder of 21C IMPACT

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. 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.

This episode of PMA Takes on Tech is sponsored by CropTrak. CropTrak helps companies digitize their unique supply chains and break down data silos. Whether it's data about crops, contracts, operations, or carbon CropTrak offers an easy way to manage data needed for tracking, tracing or transparency. To learn more, go to CropTrak.com\PMA.

As many of our listeners are keenly aware the race to develop systems for carbon capture and reduction is on. Today we're going to dig deeper into the carbon challenge and talk to two innovators who are working with food companies to ensure transparency across the supply chain. Joining me today is Dave Stangis, who is the former Chief Sustainability Officer at Campbell Soup and founder of 21C Impact and Anthony Kingsley, head of ESG, which is Environmental, Social, and Governance and Impact for Benson Hill. Welcome to each of you.

Dave Stangis:
Thanks so much.

Vonnie Estes:
Dave, tell us more about your background and the work that you're up to now.

Dave Stangis:
Yeah, thanks Vonnie. It's great to be here and great to be with you, Anthony. I think this is the time we've met virtually, but I've been following some of the work, you and your company. My background is I would say, it started in core Environmental Health and Safety. I spent more than a decade at Intel Corporation where I created their sustainability and ESG strategy, clearly different than food. In 2008, Campbell asked me to come and join them to create their first version of this. The food sector was a little bit later in mass than the tech sector. And was there, again for a little over a decade and worked on sustainability as well as responsible sourcing and sustainable agriculture and some of the public affairs and reputation programs. And for the last couple of years, I've been advising companies across sectors. Some big food companies, some very small, startup even, food companies, but also companies that are in different sectors in life sciences or finance or tech as well. So I'm having a lot of fun and I'm cutting across a lot of these topics we're going to talk about.

Vonnie Estes:
So what services are you providing for your clients?

Dave Stangis:
Primarily it's advising on strategy. So most of these companies are at some point along the maturity curve of ESG or sustainability, and they're either starting, they may be getting questions from investors if they're private companies or they may be getting investors or questions from institutional investors and other stakeholders of their great big public companies. Some are well on the path and they're just looking to amplify or actually integrate this into their business functions, whether it's HR or marketing or procurement. So they're across the board. And mainly I sit as a extended member of their leadership team just to help accelerate that progress.

Vonnie Estes:
That makes sense. Anthony, you recently joined Benson Hill as impact and ESG Director. Tell us more about your role and your focus there.

Anthony Kingsle:
Yeah. Thanks. So same, Dave. Great to meet and great to hear about your work as well. So Benson Hill, we are a food technology company that combines food science, data science, and plant science leveraging the natural genetic diversity of plants to produce more nutritious and sustainable foods that really address consumer demand. Especially from those millennials and Gen Zs. We're really focused on developing products that are better optimized from the seed level to really help meet this demand. And so I joined Benson Hill in January and it just really attracted me, I think because they're so focused on innovation and not only for themselves, but enabling innovation throughout the food industry as well. And that was just very, very appealing to me. And then of course they have what we call a closed loop strategy that provides us insights at each of the stages of the value chain.

So working with growers, working with processors, working with retailers and CPGs really provides just a very unique look at the entire supply chain as a whole. And so I thought that was just super interesting and of course their focus and their purpose for existing is to provide nutritious, sustainable, and healthy foods and provide greater access to those foods and ingredients as well. So, I'm just really, really happy to have joined Benson Hills at such a great time.

Vonnie Estes:
People listening, there may be people that don't know Benson Hill, which would be surprising, but there could be, but it's a company that has grown really quickly in the last couple of years that I've watched really prosper and do well. So was this a new role? Are you the first person to have this role? And was it a new role that was created?

Anthony Kingsle:
Yeah, so I am the first person to hold this role, but as I said the purpose of Benson Hill is really to develop sustainable, healthy and nutritious foods. I think bringing myself on board was an opportunity to really formalize and solidify all the great work that had already been put in place and really build a more strategic and intentional approach around it as we continue to grow as an organization.

Vonnie Estes:
Which is how companies grow. That's great.

Anthony Kingsle:
Yeah, part of that sustainability journey curve, I think that Dave mentioned earlier.

Vonnie Estes:
Yeah, exactly. So Dave, in your work, you talk with many food industry executives. I'm curious about your perspective on the recent reports claiming that supply chain disruptions during COVID will be nothing compared to those from climate change. What are you hearing about that?

Dave Stangis:
Yeah, there's some truth to that. I would say, I think that the challenge with the COVID related supply chain disruptions is they were not seen, they were not anticipated in the way they played out. They came up so quick. Everybody might've had global pandemic on their risk map, but it was way out in the fourth quadrant. So, they're going to be different. I think that the shifts and the impact that we're going to see from climate change across the food supply chain, but a lot of other supply chains as well, both from physical risks that people understand, sea level rise and other things like this or disasters and hurricanes and weather, but also the transition risk and not being prepared to manage technology transitions like Anthony is describing in agriculture, but also other shifts that come with electrification and the analytics at the farm level, these are huge disruptions.

The good thing is that they are visible. Everybody may not be reacting to them in the same way, but they're at least there and people are working on them and they can start to plan now. The bad thing is they're going to be life-changing for some of these people in the value chain. They're going to change careers, they're going to change skill sets needed, and they're definitely going to change the way food is produced, delivered and communicated about.

Vonnie Estes:
Anthony. What do you think? And looking at this and the climate change disruptions.

Anthony Kingsle:
Yeah, Dave, I think what you mentioned is spot on. And I would think of it really in two pieces. One is that resilience, what can we do to continue to prepare for the changes that we'll see when the IPCC report came out a couple of weeks back, it was very clear and evident that climate change is happening, it's happening today. And we'll continue to feel the impacts in many different ways. And then the second piece being, it doesn't have to be as bad as it could. If we continue to mitigate, to see organizations, industries, government policies being sent around the different commitments, we see a lot of private sector companies focused on long range, sustainability and GHG reduction commitments. So, I think both of these, having the resilience, having the mitigation coming together and really being able to avoid some of those worst case scenarios is certainly an opportunity for us. And I think the food industry is poised to contribute in a very significant way.

Vonnie Estes:
Yeah, I think having people with roles like yours or companies like yours, David, this is front and center and that those 10 years ago, people like you, weren't in leadership conversations. And so I think that makes a big difference too. So, kind of pivoting to carbon, there's so much talk about carbon capture and sequestration in Ag and even some programs out there for payment, mostly in broadacre crops. Anthony is Benson Hill developing or participating in carbon capture or credit programs with your partners.

Anthony Kingsle:
Yeah, that's a great question. So in short, yes we are. We're very interested in carbon. So, at Benson Hill we have a proprietary technology platform that we call CropOS, Crop Operating System. And this system combines large scale, data analytics and artificial intelligence with plant biology and food science to produce crops that are optimized for taste and nutrition. Now, big data, essentially, predictive analytics and machine learning are things that are being used and delivered across different industries. Now by harnessing this we're able to simulate breeding outcomes and produce crops that again, are really optimized for certain characteristics, for example, such as protein content. So engaging with our growers in that way, collecting data, leveraging on farm technology is really important. And a key piece of that is how are we measuring carbon?

How are we measuring our greenhouse gas impact and output on those farms? And so just this year, we've become members of the ESMC, the Ecosystem Service Market Consortium. And they're very focused on producing a carbon market and actually water quality market as well. And so as part of that membership, we're very engaged and working through how we can prepare our growers and our farmers for entering into that type of carbon credit market and data and technology and understanding what's happening at the field level is a critical component of making that happen.

Vonnie Estes:
So what types of programs are either of you seeing that might work in the produce industry? I know that this isn't really your focus, but Dave in some of the work that you've done, Campbell type companies, what are you seeing? What are each of you seeing in that area that might work?

Dave Stangis:
Yeah, I think that the parameters that Anthony just described are the consistent themes that have to come through with this. So a lot of what is happening in agriculture around carbon is better agricultural practices that focus on healthier soils and carbon sequestration. All that is great for the farm, it's great for nutrition, it's great for the environment, but it needs to be measured and it needs to be accounted for in order to put it into a trading program. So the data is really key and the same type of systems you put in place around tracking and measurement. The hardest thing is really getting down to the measurement of the sequestration to the change in the carbon, in the soil. How long has it in there? Can I account for it? Then, can I assure it and monetize it? That's been the challenge.

Campbell looked at a couple offset programs in rice in the past and companies are clearly they're doing forestry. You've seen this play out all over the place, but it's the same technology if you're in produce. For the same ranges of topics, got to have the data, you got to be able to measure the change, got to be able to measure the timeline and then account for it. So if I'm in the produce sector, I'm thinking about it the same way that Anthony described in his sector. It's more difficult, I would say because there hasn't been as much piloting going on in produce. And the other thing is, I think it's just the way the customers, a lot of this has pulled up through the value chain and up by brands up by publicly traded companies, making carbon commitments that sometimes the produce line, frankly, where it goes in the food system and where it goes up, the brand chain is a little bit different than some of the row crops. But generally,

Vonnie Estes:
And you see that as a positive? Because a brand would be able to say, it'd be able to say that this is carbon neutral or however they want to phrase it as a branding thing. Does that make it more positive for produce, you think?

Dave Stangis:
Yes, and what I think is sometimes produce may be challenged because there may not be a lot of brands that are stamped on produce. There are a few, and we know the ones that there are, but the way these programs work is you're looking for value across a bunch of channels. There's a value in carbon reporting, there's a value to the brand, perhaps in marketing, there's a value in reputation. Somebody is going to be paying for the pilot and paying for the work. So you're looking to spread that brand value out if you can. And definitely if I'm a company that can take credit for it authentically, transparently in my product, I'm going to take credit for it. And some of the attributes that Anthony has talked about in his products as well. Whether it's nutritious, more sustainable, carbon's a great way to start in a great data piece to go after.

Anthony Kingsle:
Yeah, I might just add onto that as well. I very much agree. And I would think of this as really two ends of the value chain that are working harmoniously. So on the one hand we want to work with our growers and enable them to improve their soil health. It's something that a lot of growers are focused on and we want to help enable that. Now, part of doing that is the potential to sequester carbon. So through implementation of some of these agricultural and conservation practices they're able to achieve improved soil health. And as a byproduct, their carbon sequestration can then potentially be monetized as carbon credits. And what's nice is then when you turn in position to customers and consumers, yes, you can definitely bring that story through and provide the sustainability marketing, the sustainability storytelling around what the growers can do and how we are providing ingredients or providing foods that have such a great nutritious, reduced carbon emission and healthy story around it. So I think these two components really work hand in hand with one another.

Vonnie Estes:
Yeah. I think in talking to a lot of the producers in our industry, I've heard a number of them say that focusing on carbon is really not the right place to focus, that we really should be focusing more on healthy soil. Like you mentioned, because that, if you develop a healthy soil, you're going to get return on investment. And so a lot of the practices that sequester or capture carbon, are the same as going to give you healthy soil.

Right now, we did a think-tank with a bunch of producers talking about this. And they basically, some of them felt like they were missing out. They're like, okay, everyone else is getting money and I'm not getting money. Like how do I get money? But a lot of them just said, look, this is part of the practices that we do for healthy soils. And so we don't expect to get money. So, if you were talking to a group of growers, would you say that the soil is the most important thing or that it's a two component thing?

Dave Stangis:
Yeah, I can give you my 2 cents. Sorry, Anthony. I don't think that we're talking about two different completely things. I have actually been asked by investors looking to set up the investment screen several years ago, about how to manage or how to assess these companies that were taking claims about healthier soil, frankly. One of the ways you do that is measure carbon content. So, healthy soil is the, I would say the north star. That's what we're looking for, but in order to take credit for it, in order to monetize, you have to measure something and maybe you measure organic content, which is carbon, or you measure water or a reduction in certain things. So I think that instead what either or, a lot of advice I would give is, look at carbon as a measurement to drive and to assess soil health.

Anthony Kingsle:
Yeah, I very much agree with that. And I think to your point, Dave, it makes sense at the field level too. Because the end goal is for us to produce foods that have nutritional content. That have good yield. And so soil health is a key component of doing that. I think what helps drive growers or farmers toward that outcome as well is when there are food system, I'll call them enablers that are happening. Such as, okay, I'm doing this practices already and now that I can measure it, there's the potential for additional revenue through carbon credits. We're seeing even this Congress right now, the Growing Climate Solutions Act was passed by the Senate, so the ability, again, an enabler through the government to potentially help farmers and ranchers to set up a carbon market, we're seeing a lot of talk from the SEC and Mr. Gensler right now on ensuring that there's better regulation on the SG. So I think all these enablers are going to help motivate and push the food system in this direction.

Vonnie Estes:
So when you look forward, how do you think this is going to evolve? Like, in two years, Anthony, do you think that there'll be more programs in place and farmers will be getting paid or, right now it's a little, all fools rush in. It's like everybody, use my program, no use my program. And it's really kind of hard to figure out how to go about this. So how do you see it evolving?

Anthony Kingsle:
Yeah. That's a great question. My guess would be that we will start to see a little bit more policy around it that we'll start to see more, these private-public partnership, like the SNC, for example, who will begin, or at least help to frame a little bit more quantification and more standards around where this is going to go. So, I would suspect that we'll start to see that.

Vonnie Estes:
Dave, what do you think?

Dave Stangis:
Yeah, I agree. The other thing I would add, I agree a hundred percent with Anthony. I also think that there's going to be advancement in the platforms and the technology, both in terms of the data overlays, think of like a Google idea or an operating system, like a Microsoft where the platforms, the technologies are able to speak and we're using common language and this is going to accelerate. It's also going to take away some of the burden on some of the smaller suppliers, because they don't need a separate piece of software for every customer that comes to them. But it's also going to accelerate a lot of the learnings that we see and some of the standardization, which is what we need.

The challenge in Ag is that nature is not a standardized environment. So, doing something in a field in one part of the country, doesn't automatically, you can't sell that carbon or that practice somewhere else in the country because it's not identical. You've got temperature, water, fertilizer, implements, everything else. But I think all those things are going to advance. I think it'll still be messy in two years though, I don't think we'll be all the way there, but I do think it will be further along and there'll be more players at the table.

Vonnie Estes:
Yeah, I think when you look more at like five years and you think about if it's standard, if there's policy and if there's standardization, then that's going to make it a lot easier for people to participate, I think.

Anthony Kingsle:
Yeah, I think so too. And I'd also add how important the evolution of technology will be here. Dave, as you pointed out earlier now, testing soil organic carbon, soil organic matter, bulk density of soils in those fields that's not cheap. And it's not easy to do. You have to go into those fields and pull multiple sub samples. And so I'll also be very interested in how technology continues to evolve and, and makes that easier and more cost-effective.

Vonnie Estes:
Yeah, because a lot of that work is being done with models now. And Dave, as you said that it doesn't take into account or it can't take into account all the variability. Also, I was talking to someone that they were talking about a technology where a drone could fly over the top and using a sensor could better predict what was going on under the soil. So I think you're right. I think there's going to be technologies where just going out and taking those core samples it's just too cumbersome and we can't build the industry on that, but I think there's an open door for, and a lot of money to fund companies that have different ideas. So in this series of the podcast, we've been talking about how to rebuild a resilient and secure and transparent supply chain. Can you both speak about how fresh food companies are using technology to realize ESG commitments on farm processing and onto the plate? Dave, let's start with you.

Dave Stangis:
Yeah, thanks Vonnie. It really is a nice transition from the question you just asked. You're talking about drones, perhaps hyperspectral technology or robotics, a lot of imaging going on. I think that technology is really the unlock and where consumers understand technology it's a win-win, bonus all the way through. There's some technology coming to market that consumers need to be educated on a little bit. So they're bought in and they're brought along, but we're seeing this as we've talked about on farm, this conversation's been basically kind of what we're seeing at the farm level, and it hasn't been the hardware piece, which is a ton of that. Also, just in how food is grown. We had relationships and conversations with vertical agriculture, indoor agriculture, agriculture in a box, specifically design agriculture for certain ingredients that we wanted to, and then replicate that anywhere in the world. Inside the processing or conversion, for example, there's plenty going on, especially around traceability and transparency, making sure that we know where everything's coming from.

If there's claims being made about a lack of a certain ingredient or component or free from this is all enabled by technology. And on the plate, I think is really where the payoffs is. Anthony and I'll let him talk about some of the nutrition, we've seen it play out before there's things in their pipeline and things, and other companies' product pipeline that are really interesting and value added both to the planet, but also to the customer, the consumer, but backing that all up and helping the consumer make informed decisions that they trust and that they feel good about for their family or for themselves is where the value is for everybody. And we had a couple of examples where we were able to tie just some of that storytelling from the plate to the farmer and the farmers feel better.

You know, the mills feel better, everybody on the chain feels better because they're part of the story. And I think that's another opportunity that technology is going to enable.

Anthony Kingsle:
Yeah, I very much agree Dave. At Benson Hill we're very focused, engaging those different levels of the supply chain. Those different stages. And connecting our farmers and our growers with consumer trends and really understanding what it is that's driving consumers. And what I think is interesting here, you mentioned around transparency and traceability, those are key words that are really going to help drive this connection, bringing that value chain just a little bit closer together. And technology is going to play a fundamental part. How can we bring that story, that information, that data of that food along with the physical product as it gets to the consumer? I think telling that story really enhances and certainly improves the trust that consumers have within the food industry. So yeah, I very much agree. I think technology is going to be a fundamental component here in order for us to really share that story.

Vonnie Estes:
So sticking with you, Anthony, on Benson Hill's website, there is a strong statement from well-meaning to well measured. Tell us more about this work and how you are going about ESG from a measurement perspective.

Anthony Kingsle:
As we touched on earlier, there are a lot of companies that are doubling down on their sustainability commitments during COVID and we really saw this in 2020 during the pandemic, we really saw this enhance. We saw a lot of organizations were really focused on this. And at Benson Hill we're not any different, we're really focused on a commitment to the environment, the social responsibility, it's the core of our ethos. And we recognize that these strategies and objectives are really just the first step. So when we talk about this well measured component, we know that there is a thirst for more quantitative information and data from investors, from consumers, from all sorts of different stakeholders. And so at Benson Hill, we're very actively working to identify and measure these quantifiable goals for our behavior as a company and the performance of our products and the impact that we might contribute, whether it's on the farm, through manufacturing or processing or even at the consumer level.

Now we've partnered with an organization called CropTrak where we are aggregating information and data so that we have deep insights into each of those stages of the value chain. And for example, because we're connected with each of those stages, we're able to influence and pull that information instead of going through multiple tiers of suppliers and vendors, we're directly connected. So we have a higher confidence in the information that we're receiving, and we can then feed those insights back into our CropOS system and using tools like a lifecycle assessment, for example, we've identified that during the processing stage for our ultra high protein soybeans, we can actually skip certain concentration steps to reach a high level of protein. And in skipping those steps to create soy protein concentrate, we're able to then remove carbon. And through that lifecycle assessment, we're able to reduce carbon and reduce water use at those stages as well.

Vonnie Estes:
Dave, do you have anything to add about measurement and importance?

Dave Stangis:
I think just to add a layer above what Anthony said, but I think that ESG space is noisy right now in a good way for some companies. Companies like Anthony's that are focused on this and are building their story early days, there's opportunity to frankly, create a differentiated story with the frankly differentiated results that support your brands and support your mission that supports your marketplace, your financial bottom line. There's noise to manage, especially if you're a publicly traded company. But I do think there's great opportunity in this space. And technology is an enabler.

ESG is very broad, which sometimes it can cover everything and feel like companies have to boil the ocean, but it's a great opportunity for companies to pick the most material things for them, and then build the data systems to back it up because that's really where you get the credibility and the eventual authority on the topic.

Anthony Kingsle:
And I think it's combined with what we mentioned earlier on carbon markets, the more information, the more validation or verification you can provide, the higher level of confidence, the industry and potential customers will have when looking at the carbon market and purchasing carbon offsets.

Vonnie Estes:
So my last question, both of you have been focused on sustainability and ESG throughout your careers. What are you most excited about for the industry, the food industry, Dave, let's start with you.

Dave Stangis:
I'm really, and I don't want to take the story away from Anthony, but I really am excited about technology. I think that technology is something that needs to be embraced. It needs to be put to work. It needs to be communicated in a way where consumers are brought along on the topic and not sold on the topic. And some technology is super easy to understand, and they're 100% onboard and they're frankly taking part. And some of the technology that's coming to play in the food sector is super interesting, but it's also different for consumers. And we need to be able to have a conversation with them, help them understand the value to the environment, the value to the food and to kind of welcome their conversation in the topic.

But I know when I joined Campbell, I came from Intel and I said, we're going to be a technology company. And they're like, no, we're a food company. I'm like, no, every company is a technology company, trust me. No, we're just going to focus on the food. It didn't take long before everything happened. And it wasn't just hardware and software. It was chemistry and biology and transparency and packaging. So I think that the food sector is in a complete positive disruption from technology. And that's what excites me the most. I think it's also what excites the new talent coming into the sector.

Anthony Kingsle:
Yeah, completely. And, I've always been in love with the food industry. From when I was much younger and it's because it impacts our lives in such a positive way. It influences our health, our personal health, it brings our community together. Families come together around the dinner table. So I think what really excites me is our capacity to continue to leverage technology and really touch the lives of everyone around the world and help improve the health, nutrition and the sustainability of the food system. And what I think is really interesting, and we have the stat, I think, on our website that talks about how the US spends $1.7 trillion on food annually and spends equally even a little bit more on diet related illnesses. And so our ability to invest in this and invest enough in nutrition, to invest in nutrition and health and the sustainability of our foods, it really has the ability to have such a significant impact. And to Dave's point, technology is going to play a critical role in helping us achieve that.

Vonnie Estes:
This episode was fascinating to talk to experts about carbon through the lens of ESG and how technology is, as Dave said, the unlock. As Anthony stated, we can leverage technology and touch the lives of everyone to help improve the health, nutrition, and sustainability for the food system. Well, that about nails it, thank you for listening.

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

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Description:
How safe is your information? How do threat actors get into your company and what do you do if it happens? Hear from the experts about the current state of affairs and how you should protect yourself and mitigate risk.

Speaker:

• Andrew Rose, Senior Advisor at F3Tech
• Brian Dysktra, CEO - Atlantic Data Forensics, Inc.
•  Bill Danker, Principal Industry Consultant - AgTech SAS

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

Vonnie Estes, PMA:
This episode of PMA Takes on Tech is sponsored by CropTrak. CropTrak enables food and beverage companies to improve their supply chain management from contracts to settlements, one trusted source of secure data at your fingertips. To track what matters go to croptrack.com/PMA. Hello, today, we're going to talk about cybersecurity and agriculture. Cybersecurity is a very important topic to our industry and to the food supply system. I have three speakers with slightly different takes on the problem and solutions. First we will hear from Andrew Rose. Who's an expert in the topic and is starting a Cyberag organization. Andrew gives us some broad information on what is happening now around cybersecurity. Then we will hear a deeper dive for action from Brian Dykstra, CEO of Atlantic Data Forensics. Followed by Bill Danker, a principal industry consultant from SAS with a view on Ag. This is one of those new to me topics that seems to be what everyone is talking about now.

Vonnie Estes, PMA:
But of course it has been around for a long time and we have been warned to take precautions. What is bringing it to the forefront in the food supply chain right now is that the Ag industry is particularly vulnerable because we haven't been paying as much attention. The Ag industry has recently adopted a lot of new technology into our operations without the necessary security protocols. Every company is now a technology company, and we need to protect ourselves as such. Let's jump into the conversation with Andrew, where he's talking about the advantages of starting the Cyberag organization in the Maryland area.

Andrew Rose, Cyberag:
If you think about cybersecurity nationally, we've got all of the big agencies in D.C., the NSA, the CIA, and a bunch of others who you probably have never heard about. And as employees work in those agencies, oftentimes will spin out and start government contracting organizations and then organizations that serve the private industry. So we've got a real good, critical mass of these types of companies, individuals, thought leaders, and what have you. So it was almost a blessing to be able to stand this organization up in that area. And I've always stayed involved the cybersecurity. I've spent the last six years in agricultural finance, and it was funny. One of the first things I did when I came to the bank was I put on a tabletop exercise, simulating an insider attack on our systems from a cybersecurity angle.

Andrew Rose, Cyberag:
I just recognize that there wasn't a whole lot of awareness in the bank. We felt that our defenses were good that we weren't necessarily a target. And what have you. And it was a very instructive event. I won't go into too many of the findings of it, but one of the outcomes was it helps us develop muscle memory. So if something like this does happen in the future, at least we're not relying upon documents that may have been created by somebody else that we pull off the shelf and flip the page three and say, "How do we contact folks?" We actually put these things into play into motion. Fast forward to late 2019. And I was invited to attend a private briefing from one of the head intelligence people on some of the threats that China posed for intellectual property theft to a multitude of industries.

Andrew Rose, Cyberag:
And after that briefing, I spoke to the authority there. And I said, "I'm in the agricultural sector, is this something we should be paying attention to?" And his face went ashen and he said, "Oh my gosh." He goes, "The agricultural sector itself is so at risk right now, we need to get the message out there." And almost simultaneously, I was recognizing at least in the State of Maryland, that agriculture wasn't getting the attention from the economic development people. That cybersecurity was.

Andrew Rose, Cyberag:
In a nutshell, if you put the word cyber in the title of your company, people throw money at you, and they don't really understand what you do. You have agriculture farming in your title, and they tend to relegate you to the children's table. And so I approached a good friend of mine, Mike Thielke, who runs an Ag incubator called F3 Tech and said, "Mike, we're going to put on a symposium about cybersecurity in agriculture." He said, "Andrew, what does that mean?" And I said, "Mike, I don't know what it means, but we're going to do it anyway. And we're going to find out what comes of this."

Andrew Rose, Cyberag:
So I invited the intelligence community to come in and speak. And I reached out to the USDA and the USDA brought their chief information security officer out, and we did a full symposium, and it opened a lot of eyes. It really got the ball rolling and dumb luck-

Vonnie Estes, PMA:
And this is before there had been attacks in Ag, right?

Andrew Rose, Cyberag:
Vonnie, you're reading my mind. I'm so dumb luck. We put the symposium on one week before the SolarWinds breach hit the news.

Vonnie Estes, PMA:
Oh, gosh.

Andrew Rose, Cyberag:
We are very smart. We probably looked a lot smarter than we actually are, but timing being everything was fortuitous. There was a lot of attention given to us. We recognized immediately. We had to do a follow-up symposium. Some of our friends, I'm in the Delmarva area and we've got billions of dollars in poultry and broilers. And one of the large integrators is Perdue Farms. And they were seeings many or some of their contract growers being hit by threat actors in the cyber sector. And it was having a significant impact on those producers' businesses. So we approached the FBI and we did... And it says, this is widely available and I'm sure we can share links later, a video that describes some of the top attacks that are hitting growers right now, and the FBI then saying, "Here's the mitigation, after the airbags had gone off, here's what you do. And here's why this matters. And here's how we will then perform."

Andrew Rose, Cyberag:
And Vonnie, again, you hit the nail on the head. It seems that this is really an escalating area of concern in the agricultural community. So as of August 1st, I've decided to leave Farm Credit and full-time run the Cybersecurity Agriculture National Center, and we're standing this up right now. It was an initiative. And now it's a thing, and I'm very excited about this. And so the timeliness of this conversation is just fantastic. And I'm sure your listeners are going to be eager to hear what we have to share today.

Vonnie Estes, PMA:
Yeah, I think when I contacted you through Seana Day, a mutual friend of ours and things were just going crazy for you that suddenly you're the expert, and everyone wants to know about this, and you're just starting to stand up this new organization. So it is a topic that's suddenly everybody wants to know about. So if you can walk us through why is agriculture a target for threat actors? Like why is Ag important?

Andrew Rose, Cyberag:
As important as we know agriculture is when you look at the entire landscape across the country, agriculture typically falls to the bottom of a lot of lists. It is considered part of the critical infrastructure, one of 16 critical infrastructure categories, but we tend not to get any attention both from the cybersecurity experts, as well as the threat actors and those days have ended. I think that there is a sense of complacency sometime the cultural sector, because we haven't been hit as hard or as frequently, but now with the sophistication of the threat actors, they're looking for any target out there. And there's a dawning realization amongst our adversaries or those that have a financial interest in attacking us that there's a lot of leverage in food.

Andrew Rose, Cyberag:
You take food out of the equation and people get very hungry, very fast, and it tends to healthcare is another one. I mean, you're seeing it in the hospitals. If you take a hospital offline, they're more apt to pay whatever ransom to is to get back online quickly. Very similar concept with food and take that off the table, so to speak. But going back to your question, agriculture presents a lot of soft targets for the threat actors. Defenses are fairly porous at times. And if you look at the backend technology that a lot of the producers through agribusinesses are using, they're not always state-of-the-art, they'd never had to be. But this is a new day has dawned upon us in this aspect.

Vonnie Estes, PMA:
So what are the current threats and what do you think the future threats are?

Andrew Rose, Cyberag:
That's another good question. This is an important one as well. The current threat as of the latest data breach research that I've seen are financial in nature. There is so much money to be made by these criminal gangs out there holding people's information ransom, holding their supply chains ransom. People are paying that money. And I think we need to back up a little bit, talk about ransomware itself. Everyone's probably heard of ransomware, but if you think about it philosophically, if you put yourself in the shoes of a bad guy, and let's say, you're just starting out, let's say you get into a company and steal that information. The amount of money you will get for that information on the black market degrades from the amount of time that you have it.

Andrew Rose, Cyberag:
So somebody recognize that their credit card has been stolen. They'll stop that credit card. Their personal identification information just stolen they'll put credit watches and things like that. So you need to sell it quickly. Now, if you're a buyer of this black market information, you want it to be fresh, but you also want to buy it from someone you trust, which sounds bizarre. So the large ransomware gangs are the ones that people trust to buy this information from. So the smaller ones typically will sell that information upstream to the larger resellers, and they take a cut of that. They also will sometimes get into a system. And typically they're in your system for four months, is the average amount of times they move around laterally. They find out when the most vulnerable time to execute the lockdown to encryption of your data is, and they sell all those keys upstream to large gangs.

Andrew Rose, Cyberag:
And another thing to keep in mind for your listeners is when a ransomware team gets into your system, one of the first things they do is they try to disable your backups because they don't want you to have any kind of mechanism to recover that data or take them out of that financial equation. Another one that we're seeing, it's not quite as prevalent as their ransomware on the financial side are competitors, and a competitor could be another business. There could be some sort of trade secret that another business would benefit from knowing about from what you have. It could be another nation state, China doesn't play by the same rules we do. They're a country, they have their own ethos and how they operate. And if we're willing to have all of our information out there for the taking, they're just going to take it, why would they spend all that money doing research if they can just get that right now, out there from one of our competitors. And we can go in some case studies and a few minutes about that?

Andrew Rose, Cyberag:
And the other one that that gets headlines. And I haven't really done the percentage of these are the hacktivists. Those are the people that might not appreciate animal, livestock raising or processing and insider threats. There could be some folks out there that for whatever reason are dissatisfied with their employer, and they're willing to either through malice or for financial gain turn some of that information over, but far and away the greatest one is ransomware. That's the easy one, the easy target right now. Now you mentioned the future. We talk about the financial gain of some of these threat actors.

Andrew Rose, Cyberag:
In my humble opinion, the future are going to be adversarial nation states. It's going to be very apparent that if they want to slow us down or cripple us in some way, going after our food supply is target that I would imagine would be fairly high on their list. And it doesn't always have to be an adversarial nation state, either. It could be a friendly nation state. There were other countries that could benefit from a dip in our agriculture production in a given year that would then increase the amount of money they would make off of their exports or agriculture production. And one area that the FBI is really concerned about is something called deepfakes. And you may have heard about people whose images and voices are now being manipulated through computers, and it's becoming more and more difficult to distinguish those voices or images from a real person.

Andrew Rose, Cyberag:
This is an emerging threat and will only become more and more sophisticated as we go on. So it could be that you get a phone call from the CEO saying, "Hey, we've decided to change our relationships. Please change the wire information to here and send all reminders to this bank account instead." And you will converse with this person. They will sound and use the same idioms that your CEO may use. And you don't think twice about that. Or it could be you and we can get into this later, you have an internal mechanism where no bank information can be changed or shared without the CEO's verbal approval. And you call the CEO up. And that CEO says, "Yes, thank you for calling me. And yes, execute that bank transfer the way I've told you to do." And it was a deepfake all along.

Vonnie Estes, PMA:
Oh, my gosh.

Andrew Rose, Cyberag:
So this it's future, but it's near shore future.

Vonnie Estes, PMA:
Yeah. So how are these threat actors getting into agriculture businesses? You mentioned they can go in and sit for four months. How do they even get in?

Andrew Rose, Cyberag:
Right now, as of the 2021 reports that I've read, the number one way is social engineering. So they identify people who might be in charge of finance or your CFO, and they have a long-term campaigns to build a dialogue with these people. And the stuff I'm seeing now is mostly the threat actors are mostly human, but when we start talking about the use of artificial intelligence, they can do a lot more data mining. So I would imagine that if we're not seeing it today, we'll probably see it tomorrow that are human beings utilizing artificial intelligence to gather more data. So they know what kind of sports you like and what kind of food you like. They can build that dialogue and create a friendship with you and rapport. And then I imagine in the not too distant future, those will be completely AI.

Andrew Rose, Cyberag:
You might think you're having a conversation with a human or interacts with the human, and it's really a bot out there that's been trained to emulate another human being and all that to get inside of your system. And again, I don't want to disparage the Ag system, but we have a lot of unlocked doors. There are a lot of methods for folks to come in. We talk a lot about the information, or I'm sorry, the internet of things. So all your sensors, all your cameras, all those other little nodes that someone can creep in, get into your system and then start moving around laterally.

Vonnie Estes, PMA:
So all these sensors that we're so excited about that are everywhere in the fields and giving all this information back and forth, those can be kind of portals of entry?

Andrew Rose, Cyberag:
They really can be portals of entry, but also portals to exfiltrate certain amounts of data. So right now, data is one of the new currencies in agriculture. And if so, if you're leaking that data to somebody and they're listing or gathering that data, now the value to you for that data decreases, and they have access to that. And going back to financial incentives, if you're a threat actor and you want to get somewhere, the easiest thing to do is open the checkbook. I mean, ask 100 people and one will say, yes, maybe they have financial issues, they're medical related or gambling related, or they're just greedy. It's very easy to buy somebody off. And our adversaries recognize that. One of the associations that I follow quite closely is the Animal Ag Alliance. And they've done a really good job of understanding or identifying the hacktivists and the insider threats and how to mitigate those types of things. So I don't know if your listeners are familiar with that association, but I believe some of their videos or documents are available online for general viewing as well.

Vonnie Estes, PMA:
That's sounds good. We'll have to put that in the notes. What are some other ways that producers and Agribusinesses, how can they protect themselves from this?

Andrew Rose, Cyberag:
Well, I think it all starts with identifying what are your crown jewels? What does that thing that is most essential to your business that would cripple you if that thing was lost or locked away or given to a competitor? Once you've identified that then make concentric rings of security around that. A lot of the stuff is pretty basic blocking and tackling. When that little window pops up to upgrade your Microsoft, click it say yes, always upgrade and patch.

Vonnie Estes, PMA:
Oh, all those updates putting off those?

Andrew Rose, Cyberag:
Oh, men. And they're annoying. I know they're annoying because sometimes they come unexpectedly and your computer goes blue for 20 minutes. When in the middle of an email, they're crucial. And the reason they come in that way is Microsoft, or whoever it is, is identified a threat that somebody is utilizing right now. And they want to protect all the users. Please don't put those off. An example is the Baltimore City school system, I'm from the Baltimore region, put those off because they didn't want to be inconvenienced because they had to send emails out and the entire system got hacked and then locked out by ransomware. It's these things. It sounds very basic, but it's true. Another one is when you do your backups, when you take all that data and whether you do it weekly or biweekly or daily, take it and remove it from the computer and they call that an air gap.

Andrew Rose, Cyberag:
So that makes it a little bit harder for those threat actors to come in there and to travel to that backup in that way. It's a little bit easier to put that in there. We talked about the information of, or I'm sorry, the internet of things. Put some passwords on these devices. A lot of times they come with a factory basic password and people don't think to change that or updated at times, that's always a good idea. There's a term called multi-factor authentication, and you may have seen this where you log into a website and they text you a code. So is two steps in order for you to access that. If you have an opportunity to turn that on, that's an important one and...

Vonnie Estes, PMA:
Those are so annoying though, but you're telling me those are important that we should-

Andrew Rose, Cyberag:
And going forward, they're going to be ubiquitous. We have to, gone are the days when you have a four digit password and think your Hotmail countless was protected.

Vonnie Estes, PMA:
The same password you've used everywhere.

Andrew Rose, Cyberag:
Yeah. It is. I know. And well-

Vonnie Estes, PMA:
Your birthday.

Andrew Rose, Cyberag:
Correct. And that kind of goes to the next one. Is employee training on cyber awareness. There are a lot of organizations out there that provide basic training. Here's what a suspicious spoofing email will look like. Here's when you want to pause before you click on that link and do that thing, and then maybe send out some rudimentary testing. You put the employees through this, well, let's just send out a fake phishing email and see who clicks on it because that's the person that you probably want to have to go through additional exercises. I love tabletop exercises. I know it takes a lot of staff time to do these. It's a four to six to eight hour session, but you have everyone sit around the table and go through the what if scenarios. Let's just say that everyone comes to work in the morning and all of our computers go black, or what do we do now?

Andrew Rose, Cyberag:
And then kind of walk through these exercises and you start identifying different gaps that you might have there in your crisis plans. I won't go too deep in that because you always discover things and you probably don't want to share those publicly where the holes are. And then last there is cybersecurity insurance and a lot of people think, "Well, I pay the premium so I don't to worry about that." What they don't recognize is cybersecurity insurance. They're becoming more and more reluctant to pay out if you don't have good internal controls, if you're not following these things that you should conversantly, if you do follow these things and you have best practices, and you can demonstrate that sometimes there's a reduction on premium or you get more coverage for your dollars. Hygiene matters a whole lot.

Vonnie Estes, PMA:
Yeah. And I think on the insurance piece, from what I've heard too, is that they may help you financially, but you may have had a huge reputation hit that you can't recover from. If they've gone into your customers and attacked your customers, you've lost in trust there. So insurance doing hygiene upfront is better than insurance, but insurance can help. So what can a producer or a business do if they are attacked? We've heard even in our industry and the produce industry, there've been a couple of ransom attacks where the companies paid the ransom because for all the reasons we know it's just cheaper to go ahead and pay it and move on. But is that the best thing to do? What should people do if they're attached?

Andrew Rose, Cyberag:
That's a great question. I know that we have somewhat of an international audience for this podcast from the United States, there's a website called ic3.gov. They should go there immediately log what has happened. And that website is a portal for all of the law enforcement intelligence community. So that triggers a response number one, but it also logs trend analysis. The law enforcement would love to be able to get ahead of these so that they start seeing a certain sector or a certain methodology being used to go after these companies. They can start getting ahead of that and either pretty warnings out there or starting to anticipate what the next move is.

Andrew Rose, Cyberag:
I'm a huge proponent of bringing the FBI in as soon as possible. And I know something that makes some people nervous when you call the FBI, the FBI is very clear. They are there to impose risk and consequence on the bad guys. They want to make it, they're not there to blame you for doing something that you shouldn't have done clicking on a link or letting somebody in, they're there to find the bad guys and impose consequence upon them. The FBI will also tell you "Don't pay the ransom." And this is one of those push and pull things. Some companies, this is a cost of doing business. If you're colonial pipeline and now there is no more gasoline in the Northeast United States. Yeah. You're probably going to pay that bitcoin ransom and see what happens.

Andrew Rose, Cyberag:
Now, here's where the supposition comes in. I don't know necessarily who took dark side, that ransomware gang offline, I don't know who sees their servers are clawed back some of that bitcoin payment nor do I think the FBI would ever admit to being part of that, but that's the consequence and the risk is now the next threat actors and say, "Ooh, maybe I shouldn't go after the gas pipelines," which their new inception has put that as a public statement. The bad guys said, "We won't go after the critical infrastructure, we won't do this." It's a cat and mouse game.

Andrew Rose, Cyberag:
And then you talked about the ransom payments. That's ultimately it's a business decision to be made. Again, the law enforcement community would rather you not do that. It makes their job more difficult. And also they'll let you know that if you pay that ransom now, you're out there on the dark web bulletin boards as somebody who's stroked a check to get your data back. So now you're more likely to be attacked. But I can see it from a business standpoint too, I'll pay the million dollars, just so my $20 million or a hundred million dollar business can get back online as quickly as possible.

Vonnie Estes, PMA:
Next we will hear from Brian Dykstra, from Atlantic Data Forensics. Brian has been at this for a while. He talks about the easy things we can do to protect ourselves. Here's Brian,

Andrew Rose, Cyberag:
Sure, so I'm Brian Dykstra, I'm CEO of Atlantic Data Forensics, where they call it DFIR providers. So we're a Digital Forensics & Incident Response company, which means that we're the folks that you call when you got ransomware or you had some fraud or business email compromise, or we just handle people's worst days really. And we do it over and over. We do hundreds of incidents every year, thousands over the past 15 years. Got started doing this... Well, I grew up as a farm kid in Oregon joining the military got a FFA chapter president.

Vonnie Estes, PMA:
That's impressive.

Brian Dykstra, Atlantic Data Forensics, Inc.:
Got into military intelligence with the army worked humid and technical intelligence. And of course, when you leave the military, what you do is you go to a defense contractor. It's an easy transition back into the world. Ended up teaching cyber crime at the FBI Academy at Quantico for a few years to the super cops. And that just continued on that career from there. 2003, Kevin Mandy, and I started a little company called Mandy and it turned out okay, it's a multi-billion behemoth now. So this is what I do, now all day every day.

Vonnie Estes, PMA:
So do you work in the food supply chain? Is this an area that you've had some involvement in?

Brian Dykstra, Atlantic Data Forensics, Inc.:
We do, we work both in the food supply side as well as in the grower side, the equipment providers side, because nobody right now is invulnerable from ransomware or these business email compromise attacks that lead to further ACH fraud as is, I mean the threat actors are doing this. They don't really care what your business is. They care less about what you do for a living they're about your bank account. And then since so every business has one, the threats now spread across every industry. So where in the past, we might've been sectored around regulated data industries, healthcare, or finance, or things like this. Now we're dealing with everybody because it they don't discriminate anymore.

Brian Dykstra, Atlantic Data Forensics, Inc.:
It just doesn't matter. And we've seen that in the press recently. It's all different companies and all different industries getting hit. So is that, but for AgTech, and Ag is the larger Ag communities and stuff like this, extra vulnerable just because there hasn't been a lot of attention really paid to this over the last 10 to 15 years. I mean, there's been some discussions here and there and the USDA has got a nice little website in a report of that maybe, but they're not really, there's not a lot of emphasis in the larger agriculture and food community into that sort of thing. And so unfortunately, we're sitting on a lot of tech debt, we've started to bring these technologies into everything we and into the manufacturing process, and packaging and shipping and transportation, you name it without a lot of security oversight into what's been added on there and what happens if something goes wrong.

Vonnie Estes, PMA:
So are there specific things that the food supply chain should be concerned about that are specific to food and Ag?

Brian Dykstra, Atlantic Data Forensics, Inc.:
Yeah, so, I mean, everybody's kind of problem number one is ransomware. Because while it's highly preventable, it doesn't take much to keep ransomware threat actors from getting to your company. Most companies just aren't even aware of what they need to do to prevent that. And it's really simple little things. Securing the perimeter of your network properly. Unfortunately most of the ransomware that we handle, they walk right into the door through unsecured services and things like this that the company's had there for years. We just always did it like that. The hackers will find that and they will make you pay for that. There's still this idea that you can use a user ID and password on the internet and that's good enough.

Brian Dykstra, Atlantic Data Forensics, Inc.:
That's not good enough anymore. That hasn't been good enough for the last few years. You have to use what they call multi-factor or two-factor authentication which we've all seen. I mean, your bank probably makes you do it now, or PayPal makes you do it, and all these other companies make you do it.

Vonnie Estes, PMA:
Its really annoying.

Brian Dykstra, Atlantic Data Forensics, Inc.:
It is maybe, but is it really, I mean, how many times a day do you push a button on your phone anyway? I mean, you've got to put four or five, six characters in just a logging into the darn thing. It's not really that big a deal to go. Yeah, that was me logging into the VPN click.

Vonnie Estes, PMA:
Yeah, I think that's really true.

Brian Dykstra, Atlantic Data Forensics, Inc.:
Is it really annoying or do we just dislike the idea of there's change necessary and the reality is we just don't like change. But that's what gets people into trouble. Because most, again, the ransomware we deal with, the threat actor logs in right through their VPN, because they've stolen a user ID and password there, and then they're inside their network and they go about deploying their ransomware and so on. There's also that prevailing idea out there that's just really old and internet time, which makes it three or four years old. Somehow, John in marketing clicked on a link and that's how we all got ransomware. That hasn't been how we got ransomware in the last three to five years. That's just not real anymore, but unfortunately that's companies tend to put all their emphasis on that sort of idea. So...

Vonnie Estes, PMA:
So how do we get it, how does it get in?

Brian Dykstra, Atlantic Data Forensics, Inc.:
We get it through stolen user IDs and passwords. And they actually log right into our network through our own remote access, through our Citrix, through VPN. I think it's like that that aren't secured app. And then they just go to town and they deploy it from the inside of the network. And then same thing we don't have, most companies have little to no visibility inside their network as to what's going on from server to server to continue. I'm constantly amazed by how many multi-million dollar companies I work with the don't even have antivirus on their computers in there. It might be on their desktops, but somehow their cloud and server environment, they don't have anything running on them and they can't see what's going on. And so they're just easy picking for a ransomware threat actor.

Brian Dykstra, Atlantic Data Forensics, Inc.:
And then unfortunately there's lots of them out there taking advantage of that situation. And realistically, we look at those two factor authentication, control the bad stuff on the edge of your network and put two-factor on things or AV on things. That's not a hard thing to do. I mean, those are all pretty low bar things. And maybe the last thing is just when that pop-up pops up and it says, "Would you like to patch?" Say, yes.

Vonnie Estes, PMA:
Yeah.

Brian Dykstra, Atlantic Data Forensics, Inc.:
Say, yes, Google puts a little thing in the corner and says, restart the update, say, yes. It's free. But we find all the time folks running just the pool, horribly outdated software. And that's the other way that they easily take advantage of us. And the threat actors that are out there right now, it's not super severe, I don't know. Not to say that there aren't nation, state, threat actors out there that are pretty sophisticated. Yeah. They are. They definitely are seen as some exploits by those that are unbelievably complicated, but your average ransomware threat actor, that's going to cause most of us problems they're not sophisticated. They're taking advantage of the really, really simple stuff, which is like you just said, the things I just listed, just the really easy stuff. They're not doing anything complex. They're not particularly skilled. They don't have to be.

Vonnie Estes, PMA:
Yeah, exactly.

Brian Dykstra, Atlantic Data Forensics, Inc.:
To get into most places.

Vonnie Estes, PMA:
So do you work with companies to help prevent attacks or are you mostly response attacks?

Brian Dykstra, Atlantic Data Forensics, Inc.:
I would love to, I really would. And we do get an opportunity to, if I'd have gone out to a big airlines company next week that really focusing on getting ahead of the threat to their operations. But in general people don't because you've got other business priorities and I get it. I only got what I need. You've got other business priorities that are the things you're worried about. The next two customers, you're onboarding things like this. We'll, get to that IT whatever, somewhere down the road. And that's this mistaken idea that whatever your business is that isn't also a technology company.

Vonnie Estes, PMA:
Yeah, that's the point.

Brian Dykstra, Atlantic Data Forensics, Inc.:
We don't have any non technology companies anymore. I mean, I'm sure we do, but they're few and far between most of us, we really rely on that technology nowadays just to make anything happen. And so it deserves that level and importance within the company. So some companies are starting to catch onto that idea, but for the most part, that is just not the case. And unfortunately I end up just getting the call at 3:00 in the morning on a Saturday morning, text I mean and...

Vonnie Estes, PMA:
So what should people do when they are attacked, they should call you at 3:00 in the morning or what should they be doing?

Brian Dykstra, Atlantic Data Forensics, Inc.:
Yeah, that's why we have the 1-800 number for this call us 24/7 real personal answer, the phone and help you out.

Vonnie Estes, PMA:
And they should do that quickly, right?

Brian Dykstra, Atlantic Data Forensics, Inc.:
Yeah, you want to get ahead of it. As much as possible, what should really be doing, you should be planning ahead of it, knowing that you aren't going to do that. You should have some plan for if we do get in trouble, where do I call? And unfortunately, a lot of times folks just don't know, they've never ever thought about what might happen. And so we see some of the... and clients that called their CPA firm. I don't know why, that was your first call. You're like, "Why, why, mm-hmm (affirmative) I'm not sure what that was about, but okay." Or they call their IT company it was probably the ones that got them involved in some of that to begin with. So that's not necessarily a help. And there was just a lot of things going on out there. Other folks call their local police department or try and call the FBI or stuff like this.

Brian Dykstra, Atlantic Data Forensics, Inc.:
They're not going to help you. They're more than happy to take the report, but because it feeds the stats engine, but they they don't send teams of people out to help you get it corrected or tell you what to do or anything like that. So, yeah. So in a lot of cases, you're on your own and it takes just a little bit of prep work. I mean, get with your insurance provider talk to them about cybersecurity insurance and maybe I need to add something on, that's getting much more expensive and harder to get nowadays.

Vonnie Estes, PMA:
I bet.

Brian Dykstra, Atlantic Data Forensics, Inc.:
But again, because of ransomware. But reach out to, or even your existing IT provider, honestly they've probably been coming to you for a while and saying, "Hey"-

Vonnie Estes, PMA:
Now, I want to pay attention to this.

Brian Dykstra, Atlantic Data Forensics, Inc.:
"Talk to you about security ideas you probably need one." No, no, no. Enough of that. They don't need to hear any more of that. But maybe take a listen, go, "Hey, what do you guys got? What are we missing?" Things like that to try and get a little bit ahead of it.

Vonnie Estes, PMA:
And what about the people that just say, "Okay, I'm just going to pay because that's cheaper." Than try to go through all this?

Brian Dykstra, Atlantic Data Forensics, Inc.:
Right. I mean, we look at all of this so we negotiate with ransomware threat actors on a regular basis. And we do pay ransoms on behalf of our clients. But it's only at about 15% or less of the cases that we actually do that. So we take a real close business look at what is our business case for paying this? Why do we pay? Now, if you have a company where look, we have no backups and 100% of our systems are encrypted up and we're just stuck. All right, you're going to need to pay. There's not a lot we can do for you, but if we've got partial backups or some backups, or we can get this system, this necessary for business operations back up and running by reinstalling or reestablishing it or things like that.

Brian Dykstra, Atlantic Data Forensics, Inc.:
Maybe there's not a great business reason for us to pay for a decryptor and things like this. It varies because if you have data stolen, which is a common part of these ransomware events now, you're still going to have to do all that reporting. So if you had even lost HR data, you got to report to state's attorneys generals. And if you have a regulated data, you're going to have to port the government agencies, you're going to get penalized and all these things. So you're going to do all of that anyway, whether you pay or didn't pay. So that's not really a factor, you're going to do all those things. And if you have customers, you're going to have to do credit monitoring for them. So you're already going to pay all those things.

Brian Dykstra, Atlantic Data Forensics, Inc.:
You're going to deal with all those legal fees and that. So if there's probably not a reason to pay to try and get your data back. And that's the other thing is this idea that you're going to get your data back. You're going to get your data back, but they're also going to keep a copy of it and they're going to sell immediately on the dark net. And then that's just what they do. All your big hacking groups do that. So that idea that you're somehow going to magically give you data back or things like this, and not without a copy going out for sale, because they're very much like organized crime, they're there to make a buck. And there's value in your data. It might not be a lot of value, but some value to somebody and somebody will be willing to buy it. That's just more cash in their pocket for no of a little work.

Vonnie Estes, PMA:
Okay. Well, I think-

Brian Dykstra, Atlantic Data Forensics, Inc.:
I know I have no good news for you.

Vonnie Estes, PMA:
Still so helpful. I know. Well, I'll make sure and put a link to your company in the show notes.

Brian Dykstra, Atlantic Data Forensics, Inc.:
Appreciate that.

Vonnie Estes, PMA:
I think it's just good. Just these conversations just really important for people to hear them and how important and easy some of the mitigation is. So thank you very much. I appreciate your time.

Brian Dykstra, Atlantic Data Forensics, Inc.:
Goodbye. Pleasure. Thank you.

Vonnie Estes, PMA:
Now we will hear from Bill Danker of SAS, Bill's role is to deliver technology solutions to the Ag industry and include cybersecurity in those solutions to keep us safe. Bill Danker, AgTech, SAS: Hi, everybody. This is Bill Danker. I am a principal industry consultant with SAS statistical and analytics company here based in Cary, North Carolina. And my responsibilities here are really to provide support and help in the delivery of analytical solutions for agricultural companies. And that includes the delivery of agricultural systems to help and make decision support and analyzing yield and improving nutrient content, and also looking at cybersecurity of those solutions and how they could potentially whether they need to do to keep themselves safe. In the application, a lot of these applications.

Vonnie Estes, PMA:
So are there specific things that agricultural companies should be concerned about and what are the potential kinds of attacks that you've seen in looking in this area? Bill Danker, AgTech, SAS: Well, there's always the normal they're after your personal information. I call that the baseline. We're all aware of it. Folks use phishing attacks and other types of attacks to try to get your personal information so that they can steal your identity and go with it. From an agricultural perspective. That's always going to be a concern typically for farmers, large farming operations you don't want to get hacked and then have your personal information stolen at the deal with it. I do think in today's world, it's more of the ransomware level. So we've got the recent example of JBS, the beef packing company. The pipeline that got shut down, those are all examples of ransomware attacks. And for those that maybe don't understand what that is, is nefarious groups. They get bots implanted in your systems. Bill Danker, AgTech, SAS: They're able to then put in an encryption layer across all of your data. This goes on for awhile. It doesn't happen overnight. They're in, this thing gets, and then they wait for the opportune time when they can shut down your systems basically everything gets encrypted and you can't read it. And then suddenly you can't operate and they'll wait for the right time, like the end of the month or when the dollars are going to come in. That you're most exposed because what they're after is money. All that matters. They're not after stealing ID, they're just after the money. But the exposure it is for us, at least from an agricultural perspective as they can shut down aspects of our agricultural pipeline. And that's a major concern for us as an industry. In terms of what folks should do about it. You can go to all of the standard, make sure that everybody is password protected and you're doing all of the baseline security protocols in place. Bill Danker, AgTech, SAS: But what I would recommend to a lot of folks is you do a tabletop test of your systems. So if you've got it's typically for a ransomware perspective, plan it out, pretend like you got an attack, take a look at your backups. How often are your backups being run? Can I restore from those backups and be running within a day or two? The ransomware attacks, if they're there long enough, they'll make it into your backups. So even going to that, isn't going to help you. And have you thought through the implications of all that? So I know a little bit long there, Vonnie, but that's where I think the biggest threats are at today.

Vonnie Estes, PMA:
And how do they get in, how do they even get a foothold in and start getting inside your programs? Bill Danker, AgTech, SAS: It's malware that sneaks it away in and there'll be getting very, very good at it. We held a forum last week on cybersecurity. This is the one that I didn't even know about. So in today's world, you go into a restaurant and you scan the barcode, but you can get the menu up. And then you can look at the menu for the restaurant, depending upon the security protocols that, that restaurant chain has implemented. It's possible to get malware embedded in that barcode. When you scanned it. It's now on your phone. It's now creeping through your phone, your systems. I don't want to scare everybody with that one, but the potential is out there, any kind of those phishing attacks you get the text messages that says, "Hey, it looks like Wells Fargo. You need to respond to this." Any of those layers where you accept it, and then you've got something coming back onto your phone or onto your device. That's how they get in. And you won't know it. It's a bot that then takes off and it starts replicating itself throughout your systems.

Vonnie Estes, PMA:
And those should the backups that you do. I mean, are you protected by if you keep your updates up to date or is there any way to protect yourself there? Bill Danker, AgTech, SAS: You definitely want to have the disaster recovery protocols in place. Again, for companies where you're taking the backups, either weekly or monthly, every six months, you've stored some of them away. It depends on how much you're changing things. Again, as you're changing applications that you're running with, that might impact how you might recover it because you might have to go back six months to that backup and then restore and run from that. So what's the implications if you have to do that? You can have backups to go back one, two years, and then that you're going to be fairly safe, the issue. And this is why I recommend the tabletop exercise. Well, what if we had to go back a year and restore everything? What are the implications to the business? Bill Danker, AgTech, SAS: And can I effectively do that and be back up and running? So I'm not having to pay the ransom. And for a lot of companies, they just pay the ransom. There's a lot of ransomware attacks. You and I will never hear about. Because they hit at the right time, the finance guy that looks at the dollars and go, "We're going to lose this much money. So they're going to cost me this much to pay him. We keep it under the covers. We pay him and we go on."

Vonnie Estes, PMA:
So when you do pay him, do you get your data back? And are you hold-in? Or what happens if you do go ahead and pay the ransom? Bill Danker, AgTech, SAS: They basically release that encryption, that was spread through your systems and all your data becomes readable again. You're basically, you're up and running in a matter of a few minutes.

Vonnie Estes, PMA:
But then did they sell your data? I mean, do you see? Bill Danker, AgTech, SAS: They could. That is the other issue. When we talk about this thereafter money. And you hit on the second one that's also very important. Any intellectual capital that you've developed as a company, if they've gotten in chances are they've pulled that off and they could leverage it to get money in other ways. The other one I thought was interesting that I learned about last week was what if you know that you've penetrated a company and you then announce it, that they're going to get shut down via the dark web, whatever. I can now have partners that can short that stock. And then when it actually hits the press, this company is shut down. Their stock takes a dive while they tried to recover from it, pay it off, they make money both ways. They make money on the ransom that they clear it, and they also make money if they're getting really that... I mean, the challenges are many.

Vonnie Estes, PMA:
Yes. So what should a company do if you come in in the morning and you try to start your computer up and you've been attacked, what are the different options of what company should do? Bill Danker, AgTech, SAS: In most companies there's usually a help desk where you call somebody right away and say, "Hey, I've experienced this." At a previous company, I won't say which one. I got a strange email. It looked like a phishing email. So what I did was pick up the phone and call the security office right away and say, "Hey, I've got this." And there was a couple of times where like, "Oh, bill, can you forward that to me or send me a screenshot of it so we can look at it." Bill Danker, AgTech, SAS: And then they can shut it down on their end in terms of understanding the IP, where it's emanating from and get it shut down that way. From a SAS perspective, I'll be talking about what we do, we've got algorithms in place that can monitor internally what's going on across a lot of your systems. And we can flag when something out of the ordinary starts to transpire, may not be an attack, it might be an attack, but it raises the awareness of something going on in the data. And you can then highlight your security folks who can take a look at it quickly and understand if they are under attack and respond to it much more quickly.

Vonnie Estes, PMA:
Great. Okay. I think that's given people some things to keep them awake at night. So thanks for that. Bill Danker, AgTech, SAS: Always be vigilant. It's always a matter of being vigilant and being aware of the different types of attack. And again, I can't stress enough doing the tabletop exercises. A lot of companies, they've got a disaster recovery plan. They've got a plan in place, run those through, practice them daily. It'll really help you be better prepared.

Vonnie Estes, PMA:
Great. All right. Thank you very much. Bill Danker, AgTech, SAS: You're welcome.

Vonnie Estes, PMA:
This is been eye-opening for me to learn about both how bad threat actors can be, but also how easy it is to block a good majority of the threats. Hope this was helpful. See you next time.

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

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Description:
Listen to a real life example of Lipman Family Farms and their supply chain management technology adoption journey. We hear about the value of a good partner, constant iteration and finding the right pace of adoption.

Speaker:

• Aaron Hutchinson, CEO, CropTrak
• Justin Roberson, Chief Administrative Officer, Lipman Family Farms
• Jamie Marin, Production Operations Analyst, Lipman Family Farms

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

Vonnie Estes, PMA:
Special thanks to PMA member CropTrack for their sponsorship of our new series of PMA Takes on Tech. CropTrack's cloud platform helps companies digitize their entire supply chain to enable real time visibility at any point. From planting to production. Go to croptrack.com/pma to track what matters.

Vonnie Estes, PMA:
Our podcast today is about technology transforming business operations. We will do a deep dive with Lipman Family Farms and their process of adopting CropTrack's real time supply chain management. There are a number of companies similar to Lipman and supply chain management companies but we really can't understand the value or the challenges unless we dig deep into a real case scenario. There are pearls of wisdom here that can apply to everyone in the supply chain. We talk to Aaron Hutchinson, President and Co-founder of CropTrack.

Vonnie Estes, PMA:
From Lipman we talk to Jamie Marin, Production Operations Analyst and Justin Robertson, Chief Administrative Officer about the incorporation of supply chain management into the Lipman operation. There are so many good nuggets in this conversation about technology adoption. I love the conversation about how the two groups continue to iterate and bring value in leveraging the data. Jamie talks about integrating and iterating with the technology to make sure that the tools fit the needs of the growers and the information is of value.

Vonnie Estes, PMA:
Let's start with hearing from Aaron Hutchinson.

Aaron Hutchinson, CropTrak:
I'm Aaron Hutchinson, Co-founder and President of CropTrack. I grew up in a small Florida agricultural community. I went to collage in Florida. I did my Navy thing and then joined my partners for our first company which was really focused on military 3D GIS and remote sensing, which we sold in 2005. Using some of those dollars we actually self-financed our second company, CropTrack in 2019. We did a lot of barbecue, a lot of beer and a lot of visiting growers to come up with the defining our mission.

Aaron Hutchinson, CropTrak:
Our mission here is to harness the power of data to address supply chain problems. Limiting the availability of safe, affordable and sustainable food. I think it's ironic that more than 12 years later we are still working on the same problem. And it's much bigger than anybody ever thought it was ever going to be. And to me our mission, CropTrack sells tools, deploys no-code development environments, to digitize our customers' unique supply chains. It allows them to be really efficient and agile, while making it possible to identify problems and opportunities to continue improvement. And those improvements can be in their crops, in their contracts and their sustainability or even in their relationships.

Aaron Hutchinson, CropTrak:
We're doing this in over 60 countries and 8 languages for 70 primarily fresh and high tea crops. And for global 500 kinds of companies and vertically integrated operators. Much like Lipman. We also work forward our mission through leveraging philanthropy. So we also have a goal here of amplifying non-profit organizations with similar goals that we have to help make a larger impact on the food chain. I'm excited to be here today and on this panel we'll talk about the topic.

Vonnie Estes, PMA:
Thanks a lot Aaron and thanks for your sponsorship of this series on rebuilding resilient, secure and transparent supply chains. So we also have two special guests. Two people from Lipman Family Farms. Justin, why don't you start and tell us about Lipman, yourself and a little about the relationship with CropTrack?

Justin Roberson, Lipman Family Farms:
Yeah, thanks Vonnie. My name is Justin Roberson. I'm the Chief Administrative Officer at Lipman. Part of my role is really to oversee the IT, the tech and the data technology strategy and initiatives for the company. You know Lipman is the nations largest integrated network of local growers, fresh cut processors and distributors. We're a family owned business for over 80 years and are vertically integrated. So from a vertical integration standpoint we have the opportunity to really control of our supply from seed and varietal tool development to farming, to packing and into some value added initiatives in fresh cut processing, repacking and even distribution.

Vonnie Estes, PMA:
Great thanks. And Jamie, how about you?

Jamie Marin, Lipman Family Farms:
Thanks Vonnie. Thanks for having us on. I actually started off as an intern here at Lipman about 6 years ago. Now I'm a Production Operations Analyst.[crosstalk 00:05:50]

Vonnie Estes, PMA:
Lipman's internships really work! How about that?

Jamie Marin, Lipman Family Farms:
I guess they do and so my first project was the implementation of CropTrack. As to that I led the implementation when we decided to do a full scale roll out here at Lipman. That's been part of my role, but within the enterprise my focus is really in deepening our understanding of our data operational to generate and try better decision making.

Vonnie Estes, PMA:
So just curious. If someone wanted a cool job like yours, what kind of training did you get? How did you end up with that internship and in this job?

Jamie Marin, Lipman Family Farms:
Yeah so I was asked to apply to the internship but my background is more in the traditional IS sense. So I worked a lot in sequel databases and analytics but now I'm like an effective intermediary between operations and IT. So kind of grow into it sometimes and learn as you go.

Vonnie Estes, PMA:
Yeah. Yeah great. All right. Justin I understand you're implementing this technology into your platforms and have made some interesting changes to your supply chain management processes. Tell us about the challenges you faces and how data has helped mitigate that challenge.

Justin Roberson, Lipman Family Farms:
Yeah so I think we, from a macro standpoint, a number of years ago we really began to see kind of the power of data. And that was when the big data buzz word was floating around. A lot of people were talking about it but I think few in our space were really beginning to look at how do we begin to harness that. And so from kind of a big picture standpoint we were asking really 3 questions. One was, how do we get better at forecasting our crops? So how do we get better in knowing how much crop we're going to have and when? The other is how do we gain insight into what, at a farming level was the unknown, right? There's almost this wall you come up against in farming where you kind of get from a lot of this anecdotal data, you just kind of learn through the years the art of farming, right? And getting past that into more of, well we wanted to find was some of the empirical data with farming in getting into that next level granularity and put the science behind it.

Justin Roberson, Lipman Family Farms:
And then the third kind of piece from a data standpoint was, we wanted to digitize the farmers notebook. We noticed early on that we have a network of farms across the US and in each farm has localized management and there's a plethora of knowledge and data that sits in that farm manager's notebook and his notepad and his supervisor's notepad and so we kind of asked the question, how do we begin to centralize that and digitize that so at some point we could begin to pull all that data together and really harness it. And so those were kind of some of the questions we were asking early on and that's when we met Aaron. It was gosh, probably about 6 years ago that we, I think I stumbled upon CropTrack just Google searching, trying to find solutions. And really what stood out to us with CropTrack was the ability to take what we were currently doing and built it, customize it into their platform.

Justin Roberson, Lipman Family Farms:
Most of the other solutions at the time were very off the shelf. We had to fit our operation into their platform and it was very rigid and didn't give us a whole lot of flexibility. So that's kind of how we began the CropTrack journey. And there's been a lot of different pieces to that along the way. But you're asking me about challenges, I think, with any kind of tech project, when you're trying to launch something I think this big is always a challenge. From the investment in resource standpoint, from the time and energy from key personnel and then to primarily the user adoption right? You're taking a lot of employees that maybe had never even hardly worked with a computer, because they're working more hands on on the farm as supervisors, mechanics, very kind of tractor operators and asking them now to carry an iPad and begin capturing a lot of their information and notes into and iPad. And I think the challenge is really in where we really going to make the investment to make this kind of change and have this kind of impact that we're hoping to see.

Vonnie Estes, PMA:
Yeah through the whole chain because that's a lot of different people. So you were actually looking. You said you did a Google search, so you were actually looking for supply chain management. Was there something that happened that you said, oh okay now we need to find someone to help us with this? What happened that made you think you needed help there?

Justin Roberson, Lipman Family Farms:
Yeah I think there was a lot of internal discussion you know. Lipman has been farming for generations and decades now, so there was never this feal that we were missing something. I think if anything, we've been one of the kind of best in cost from a farm operation standpoint. But a part of that is that we've always pushed ourselves on, how do we get better. And what are we missing? What's kind of the next step? The next iteration in this process and I think a lot of us came to the conclusion that it was, we needed really seriously to begin looking at, specific to our farm operations right. So the crops or supply chain on the farm operations, we needed to begin looking at a much more efficient way to begin digitizing data and then to begin harnessing it and mining it in a way that was going to be give us more of a competitive advantage.

Vonnie Estes, PMA:
Great. And so did you adopt a whole program at once? Or did you start with pieces and try one piece, and then try another piece and try to tie them together? How did that work? Because you said you didn't have to put your whole system into a system that was already set up and in a way that didn't fit you. So how did you kind of start with the whole system?

Justin Roberson, Lipman Family Farms:
Yeah that's a great question. We started slow because of that. We knew that if we really wanted to make something like this work it really had to be, it had to make sense to the operator, to the farm manager, the supervisors that are going to be using it. And we wanted it to mirror as much as possible what they were doing. And so to do that on the front end took a lot of work from our end to really customize the crop check platform the way that we really needed it to work with our operations. And so in general then yeah we started small. I think we started with one license probably for a number of months and sure Aaron and his team were really wanting to try and sell a lot more but we were slow adopters and we wanted to make sure it was going to work and we approach a lot of our projects that way and try and phase it.

Justin Roberson, Lipman Family Farms:
But build it in a way that if we can prove it out on a small level, that then we could quickly then be able to scale it right? And so I think there was a lot of work put in on the front end that gives us the ability really, once knew this thing was really going to work, begin to scale it across all of our operations, is the way we needed to, that's where Jamie's involvement came into play as an intern and then now it's his professional career. He's helping us really take some of that vision and some of those ideas and help make it then scalable and get all of our operations on board.

Vonnie Estes, PMA:
So how long did that take to implement or are you still in the process of implementing?

Justin Roberson, Lipman Family Farms:
We're still implementing. [crosstalk 00:14:15]

Aaron Hutchinson, CropTrak:
And I would say every customer is forever evolving, because they [crosstalk 00:14:19]. Their processes are getting better or they're changing the way they think about things and so it's not uncommon for some to be 4/5 years into it and still kind of evolving the product.

Vonnie Estes, PMA:
That makes sense.

Justin Roberson, Lipman Family Farms:
Yeah, you know, the minute we are not implementing is the minute I think we've gotten to comfortable. We've slid down. So we've been using the CropTrack platform now for a number of years and we're still adding to it. We're still building onto it. We're still finding new things that we can incorporate it with. So yeah, absolutely. And I think you said that on the onset, Aaron, just in terms of talking about the company. I mean he is always trying to evolve and iterate and get better and I think in the same token we are doing the same with the product. We're continuously adding features to it for sure.

Vonnie Estes, PMA:
So from a management perspective, what are some of the key learnings that would help others in the produce industry and improve the efficiency of their supply chains.

Justin Roberson, Lipman Family Farms:
You know change takes time. And I think there's a lot of expectations that, when we launched this we would have it fully implemented. That we would have all the users on board. But that was a process. There was a lot of stakeholders in a process like this and a lot of people involved and so something that we learned quickly was that this wasn't obviously going to be a success unless the user base was involved. And so really being able to build kind of the reputation with the user base and focusing on that I think really helped make this a success. I think just in general, change is always a challenge and it can be a challenge no matter what kind of solution we implement. But I think those things we kind of learned, and I think we still see it and there so much opportunity within our supply chain and within other supply chains to continue just to leverage some technology like this and even other solutions that will give us a lot more visibility into our supply chain. The ability to streamline and implement more efficient and optimized processes.

Aaron Hutchinson, CropTrak:
I think he said something really important there. He said he got his customer. His customer involved in the sense, his user, his field user. So many times big organizations adopt IT projects like this and IT rolls it out. And the person in the end gets whatever they deliver and one of the things that limited really well was almost at the beginning there was a user sitting there at the table, having a vote, on what was good and what was bad. Maybe it was bad for IT but it was good for them, and we had to figure out how to bend the data to make it useful on both ends. So I think that's a really important message.

Vonnie Estes, PMA:
So Aaron, just-

Justin Roberson, Lipman Family Farms:
Absolutely. And I think, yeah go ahead.

Vonnie Estes, PMA:
No I was just going to ask Aaron to follow up on that. So how much specialization do you have to do with customers in the ... do you have to change the product that you're delivering to them or can you just help them solve some problems on the current products that you have?

Aaron Hutchinson, CropTrak:
So we're a no-code environment and the way we assemble it is really how we bend it to meet their processes and everything. So hopefully, these guys would say yeah, Shani and the team where a part of their team because we had process engineers who were professionally trained to get into the process with these guys and help them out. But we're there in the trenches with them almost all the time to ... helping them push the envelope for the tools and then whenever we've got to bend the tool and the engineering to make it do something they want to do, we go do that too right. We we're involved in all our customers lives. We don't just get in to drop it and run. Which is good and bad right? So we learn a lot about food and a lot about our customers.

Justin Roberson, Lipman Family Farms:
CropTrack has been a great strategic partner through this rollout. From monthly to weekly calls, and status and as far as the implementation goes they have been our biggest partner aside from our user base for sure. And Jamie alluded to this in her introduction but it circles back to what Aaron was saying, having somebody like him, he was our go between, between operations and IT kind of helping to mend that relationship is critical and in key. So somebody that can speak the operation language, can understand it, can know exactly what the operators need, but then come back and also be able to speak some of the IT language and be able to help pull together some vision for the IT side of things as well. Like Aaron said, the CropTrack no code environment gave us the ability to kind of build out a lot of what we wanted to with little to no IT expertise. But then internally we've also layered on all kinds of, some of our IT systems and infrastructure to speak with and work with a lot of the CropTrack data. And so having somebody in a role like Jamie's really helps make that a success.

Vonnie Estes, PMA:
So Jamie, takes us onto the farm. Can you describe some of the improvements you've made and how growers are responding?

Jamie Marin, Lipman Family Farms:
Yeah definitely. Like Justin alluded to earlier, we set out with this immediate goal of digitizing that farmer's notebook which gave us a great template or a great platform for what we wanted to achieve. So right there it gave us everything that they think is important, and everything that they're referencing in order to make the decisions that they're doing. So from there we got a great foundation for a data collection system that previously was very inefficient and scattered across pretty much all parts of the US. We had issues with, we almost came up with a CropTrack dictionary that, at this location they call it this, and at this location they call it this. So being able to effectively put that together was a huge improvement operationally to begin with. So that was one of the very first improvements that we set out to do was, we need to make this universal, for us.

Jamie Marin, Lipman Family Farms:
And from there we just copied that farmer's notebook. We built some reports on top of it and now there's a source for data across lots of other departments and divisions. But then we took a really strong and early look at our scouting and our crop monitoring, so that's been digitized on CropTrack now for about 6 years. And with the ability to import or back load some of the information we have weekly crop monitoring information going back about 10 years. Which is invaluable to us and is available to us in any format that we think is useful at that time.

Vonnie Estes, PMA:
So how is technology helping you to assess the information and increase transparency across your supply chain?

Jamie Marin, Lipman Family Farms:
Yeah so I think data collection systems like CropTrack allow us to be really intentional about what we capture. One of the biggest advantages that we found using CropTrack is the flexibility to measure what we want, and how we want it and still be the owners and regulators of our own data. That ability to customize has really allowed us to place CropTrack right at the pillar of our data strategy and it's one of the first things that we look to when there's a novel problem to solve in terms of data collections. It's like, can we put CropTrack to do that?

Vonnie Estes, PMA:
So what did you have to do to engage your customers or your partners in the system? Was there any hesitation or worry, what were the issues that you had to solve and can you give an example of someone you worked with that was maybe in particularly challenging?

Jamie Marin, Lipman Family Farms:
Yeah. So I think, from the onset we recognized that we needed, that we had this opportunity to leverage out data. That was the goal that we saw from a data strategy standpoint, well not yet, because I was still an intern, but I came to learn that a little bit later. But we had to first and foremost make the farmers and their supervisory, their foremen, we had to make their lives easier. And we need to make it a farm censored initiative. Like Justin talked about earlier, it really was that a lot of the time I would be weeks and weeks away from the office because I was at the farms working on a problem, integrating, iterating and truly answering to them in order to create that bond between the user and the product so that it mended well and it was used properly. But yeah, I think innovation in general was really iterative. We tried capturing some data in some ways, and that didn't quite work, and it wasn't ... but I think they'll be the most honest when it doesn't' work. And maybe not so honest when it's working just fine.

Jamie Marin, Lipman Family Farms:
But when something's not user friendly it's quickly rejected. We can see the usage on some of the forms and we can see that they're not filling them out. But every year we have our farmers retreat where we group up all the farmers from around the country. And this year we did a presentation on how we're supplementing some of their existing reporting with machine learning models that we built using the data that they're collecting in CropTrack. And one of our owners came up to me after the presentation and he said something to the effect of, "If you would have told me that when we started this initiative you would have had an IT guy talking analytics, machine learning and AI and having those farmers right there and engaged in asking questions, and not throw me out of the room when I told them I can predict their yields better than they could, I would have called you crazy."

Vonnie Estes, PMA:
That's great.

Jamie Marin, Lipman Family Farms:
I think it's shows that making the tool about them as opposed to this sort of some corporative thing that they need to abide by, it created great rapport and communication channels between IT and farming. And I think they trust that they're not just the users, but they're key stakeholders and they can steer that ship in whatever way they want.

Vonnie Estes, PMA:
That's great. That's a great answer. So Aaron, you work with many growers in produce. Some in the beginning stages of their tech journey, others like Lipman that are way out ahead. What can others learn from your past technology implementation?

Aaron Hutchinson, CropTrak:
That is a great question. As you heard Lipman say, I'll kind of rephrase it, if you track it you can approve it, right. But based on who you are, and they also said this, the it. The thing that will likely make a difference in the organization, is it one size fits all? And we told you even within his organization and all of his farms had a little one size fits each organization, sub organization. So that's one of the reasons why we have a tag line on our website that says, track what matters, because in the end that's all that matters is that you get the kind of information you to ML or get to decision making that you're talking about. And one of the, and I explained a good reason why we have a flexible platform. I was going to say, when he was talking about rolling it out and all that, a company really shouldn't abandon what's really working for them because they want to do digital capture of important data. And instead what we need to do is put in place some sort of processes that allow them to capture the essential information and capture the business rules that go along with it.

Aaron Hutchinson, CropTrak:
Because it actually takes both of those if you want data confidence and data repeatability. Because if you don't have either of those you're just guessing all the time anyway. And you're not going to get to the kind of end goal that you're looking for. Kind of an example, I think COVID was a great validator of how important having data and embedded business rules in your digital platform can be for an organization. I think COVID required everybody to break their routines, distribute their employees, and find new ways to kind of get business done. And for all our customers, they knew that they didn't need every one of those contracted acres they had out there. But they still had to fulfill some their contract obligations. And so what was interesting was, they took the tools to determine the most profitable areas to harvest By considering their grower contracts, their hauling contracts as executed against them, where their processing facilities were and such and then they were able to tweak those business rules inside the tool and execute those changes. To only pick those individual fields and bring them in and meet those contracts.

Aaron Hutchinson, CropTrak:
We needed very little impact on their employees, their growers and ... because we were doing it at business rule level inside the tool, we also still were able to 100% audit all of the loads that came across the scale when we're working towards a settlement. And if you had had to try to do that on the fly with paper and that would have been just almost an impossible, untenable thing that you want to take on. And so I got really excited to seeing this software doing this agile task, because that's the way I think about it. Somebody in the room said, "If we could just figure out which ones are the cheapest ones, we should only harvest those." Then it led to all of these no code changes that allowed this to happen and what was kind of cool was to hear the customer's excitement. Where the time that took him to do it, which was really, really fast, and the money he saved making his decisions. And I'm sure Lipman has some examples somewhere that is relevant inside of their infrastructure.

Vonnie Estes, PMA:
That's a great story yeah.

Jamie Marin, Lipman Family Farms:
I think Aaron just to add onto that, we definitely do. I think we have created additional clear channels of information and communication flowing from the farm through payroll, packing, sales, accounting, they all rely on the data that's being stored in CropTrack to do functional business. That is a core part of what we do in that process. The CropTrack data comes first and we believe and understand it to be correct through the processes that we've set up. And there's always checks and balances in our system and in our enterprise but CropTrack being able to do some of those things has been a huge help for us.

Vonnie Estes, PMA:
SO kind of going out in scope a little bit for the group, what do you think are the biggest challenges you anticipate for the produce industry going forward and how will technology solve them? Aaron why don't you start?

Aaron Hutchinson, CropTrak:
Well well I would say labor is probably one of the biggest ones for everybody. Particularly in the produce world. And I think we're seeing all kinds of things happen around this, between robotics and vertical farming and I think there's no lack of creativity trying to be applied to this business to solve that business problem there. I think that's probably going be the biggest form because it's labor cost a lot and the number of people that takes to do these things and the number of people that are around we got to feed. These are compounding problems that we have to kind of deal with.

Vonnie Estes, PMA:
Yeah. Justin or Jamie do you have anything to add to that?

Justin Roberson, Lipman Family Farms:
Yeah I always come back to it's something like 40% of the product that's grown in the field never makes it to the fork. And that's really one of the challenges of the food waste problem. And so I agree with Aaron, absolutely labor is probably one of the biggest challenges for ag. But right there with it is the idea of, how do we get better. And so this idea of some of the food waste I think we see as an opportunity. And really it just means that there is so much more we can get better at across the supply chain. And the only way, or the primary way we're going to get there I believe really is with coming up with innovative tech solutions.

Justin Roberson, Lipman Family Farms:
And whether it's robotics, whether it's a lot of AI that's coming out that's going to help optimize supply and demand. There's all kind of things I think from technology on the forefront of it really is going to have an impact on the produce supply industry as a whole. And so we're excited to see that and I really think you're going to see a lot more sufficiencies gained in the whole fresh product supply chain.

Justin Roberson, Lipman Family Farms:
And we're starting to see some of it on our end. We just think there's so much more to go and so that gets us excited. We're opportunistic and I think it's reflective of the rest of the industry.

Vonnie Estes, PMA:
Mm-hmm (affirmative). So how has technology helped Lipman maintain its resiliency, be that to COVID, climate change or other economic pressures?

Jamie Marin, Lipman Family Farms:
Yeah so I think just as the cost of input and the landscape just becomes more and more complexed, having the visibility to our operations through that operational data that we're storing and capturing in tools like CropTrack, it will help us fill in the pieces of the puzzle that we fill in the market place or the labor force, and identify which ones we can control and the ultimate goal is to keep our operations costs low.

Vonnie Estes, PMA:
Mm-hmm (affirmative)- With increasing expectations for transparency across the supply chain, on the grocery shelves or label, or from an ESG perspective, where do you think the produce industry will be in 5 years? Get your crystal ball out.

Justin Roberson, Lipman Family Farms:
I'll would probably add to your list there, transparency of carbon. If we think about how we started with transparency with food and how it's grown to be just the food itself but the input into the food and all of that, I think we are going to look at carbon in the same way. I think carbon's a crop. And like a crop we're going to have to track it and do all of those bits and pieces. So in 5 years I think you're going to look back a 503 company is going to say, "Was that a good carbon? Was it collected by a dirty battery or was it collected by agronomic practice that left the world better than we found it kind of thing."

Vonnie Estes, PMA:
So Aaron are you guys thinking about how to track that then, and how to have that be part of what you offer?

Aaron Hutchinson, CropTrak:
We already do. And we do it for some really large companies on a global market.

Vonnie Estes, PMA:
I didn't know that!

Aaron Hutchinson, CropTrak:
So we're tracking, encapsulating, working with universities both in the US and Europe for ESG calculators and as well as sustainability and compliance. Because the other side of this is there's a whole level of compliance that's coming with the EU's version of the Green Deal some other kinds of things that are going on around the planet. So you can't just sell your food anymore. You need to sell with all the paper. And so all of that paper needs to be there at the same time as the arrival. And so for our customers we help them make sure that every piece of that paper is there as well as filled out properly, so their product is received and accepted.

Vonnie Estes, PMA:
Kind of leads to my next questions which is, earlier this month the UN issued a report calling on agriculture specifically to reduce the impact of climate change. What immediate and long term changes do you foresee?

Justin Roberson, Lipman Family Farms:
I think Aaron hit on that quite a bit. There's going to be more and more regulation requirement to begin to track a lot of this. I think some of the food waste issues that we talked about across the global supply chain is going to continue to be a focus. And then the transparency thing, I think it all has been there from the onset of the food safety requirement and it just continues to evolve and expand. And so the company we've called it excess to the acre, and really only give our customer that access to the acre and so in a lot of ways I think that there's of this that's going to become the new norm and is already with onset of blockchain and other technologies that are giving companies the ability to track some of their supply chain through this. But I think that the flip side is, it's going to reward those that are doing the things. And for those that are great operators, I think they're going to continue to be able to perform and do well. And I think the challenge is going to be maybe for those that have operated somewhat in the dark or under the radar.

Justin Roberson, Lipman Family Farms:
It's going to force them to change some of their policies and procedures with the things that they're doing into they perform to stand again and play, I think it's going to reward, like I said, a lot of the good actors will be rewarded to do this and there's going to be a lot of value to that. Some of that transparency and accountability will come with it.

Aaron Hutchinson, CropTrak:
I think you hit on something right. I mean the most progressive produce guys were already using sustainability resource saving processes, drip tape and everything else because it meant that they had less costs in their crop which helped them with their profitability and all of that. So this is not a new concept I think for a lot of the produce guys. I think it's a new concept for cows and people with large range areas. At the end of the day we're only talking about 2% of farmland usage in North America or in the Americas is really produce. So our impact as a community is a little bit small from that perspective because we don't a lot of acres to work with. But because water is so expensive in the places where we ... in Arizona and California where we grow these things, we've always been resource retrained and it has benefited those who've taken our sustainable kind of processes right out of the gate.

Aaron Hutchinson, CropTrak:
Like you said, I think if those who've been able to get away without being able to do that, because they live somewhere with unlimited water or the like, this is going to be a lot harder for them. I think it's going to be a documentation really issue. The UN's processes, when I look at them on a more global level for some of our customers, we're worried about the Jaborandi rain forest to plant that crop. Are you employing the indigenous population and not paying them, so slave labor, are you employing children under age, are you not paying a reasonable salary, are you not providing education and things like that.

Aaron Hutchinson, CropTrak:
So the paper part of agriculture is getting thicker and thicker. And the community wants to know that story on the receiving end of it. That they didn't do harm in the process of feeding themselves. When I think about all these things is, I can't be healthy if the thing I put in my mouth isn't healthy, and the place it was grown wasn't healthy, and the earth that it was grown in wasn't healthy. So there is a tie, this stuff does all tie back together in the end.

Vonnie Estes, PMA:
Mm-hmm (affirmative)- So my last question. Not meant to be a trick questions, but I was just curious. What's the favorite product to you all that Lipman grows or produces. And you can use either a crop or a brand. So Jamie let's start with you.

Jamie Marin, Lipman Family Farms:
I actually, I really like the Romas. We're getting them more and more close by at our grocery stores here in Florida. So I'm saying I think always the top favorite. I really like to cook and it's the core of a lot of my recipes, is tomatoes or tomato sauce.

Vonnie Estes, PMA:
Fabulous.

Justin Roberson, Lipman Family Farms:
I'll go with our flagship brand, the Crimson Queen. That's really a B&B food service standpoint so a lot of the people are probably eating the Crimson Queen without necessarily realizing it. But tremendous flavor, color, just probably one of the best fewer growing tomatoes that's on the market.

Vonnie Estes, PMA:
I hope you enjoyed this real life look supply chain management. Thanks for listening. That's it for this episode 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 podcast. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

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Description:
What is gene editing? How is it different from GMOs? Today, experts will discuss real world examples of gene editing. The ability to develop climate-resistant crops with higher nutrition and less food loss are a couple of benefits of gene editing. Could this be the path forward for our industry to develop improved foods with lower environmental impact? 

Panelists:

• Dr. Haven Baker, Co-founder and Chief Business Officer, Pairwise
• Gilad Gershon, CEO, Tropic Biosciences
• Dr. Fayaz Khazi, CEO, Elo Life Systems

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

Vonnie Estes, PMA:
This podcast is sponsored by Behr. At Behr, we believe human ingenuity can shape the future of agriculture. For more than 150 years, we've used science and imagination to advance health and nutrition, and together we can achieve so much more. We've committed to a world where biodiversity thrives in harmony with humankind, where hunger and climate change are terms relegated to history books, where farms are more sustainable with plants that are more adaptive and resilient to help improve life for families and communities. In short, where agriculture is part of the solution.

Vonnie Estes, PMA:
As a new leader in agriculture, we have the opportunity and the responsibility to grasp this moment to continue moving humanity forward by tirelessly shaping what's possible. Today's podcast is your opportunity to hear a rebroadcast of a well attended PMA virtual town hall on gene editing. Gene editing has been thrust into the public interest. It's a breeding tool that can help make our food more nutritious, convenient, and grown more sustainably. As we will hear, it also has the potential to save the banana from a devastating disease. One of the things that we learned from the Q&A and conversations around this virtual town hall is the misunderstanding of the difference between GMO and gene editing.

Vonnie Estes, PMA:
GMO stands for genetically modified organism and refers to plants created by altering genes with laboratory techniques in ways that conventional forms of breeding and nature can't, often by inserting genetic material from one species to another. There are very few genetically modified foods in produce. These include the innate potato, Arctic Apple, some sweet scorn and squash varieties, the papaya and the new Del Monte pink pineapple. Gene editing is also a molecular tool that can alter genes in an organism's genome, but gene editing is done without inserting any foreign DNA.

Vonnie Estes, PMA:
The types of changes gene editing does to the genetic code, like deletions or alteration of genes, occur in nature all the time. With gene editing tools, breeders can make desired changes more precisely and quicker than it would take in nature to get the sought after benefit. We will hear from a panel of executives from three top companies working in the area. Haven Baker is the co-founder and chief business officer at Pairwise. Fayaz Khazi is the CEO from Elo Life Systems and Gilad Gershon is the CEO from Tropic Biosciences. Let's join the conversation as Haven Baker is introducing Pairwise.

Dr. Haven Baker, Pairwise:
I represent Pairwise. Our mission is to build a healthier world through better fruits and vegetables, and we're primarily focused on increasing fruits and vegetable consumption. And we're trying to do that through differentiation, so we're using gene editing to create new items that, I mean, consumers haven't seen or solve a consumer problem that prevent people from eating fruits and vegetables. And I can talk a little bit more about that later.

Vonnie Estes, PMA:
Thank you. Fayaz, how about you?

Dr. Fayaz Khazi, Elo Life Systems:
Sure. Yeah. I'm here representing Elo Life Systems. I serve as the CEO of Elo, and Elo is a North Carolina based food and agriculture company which leverages computational biology and the power of genome editing together to develop products that improve human health and the health of the planet. And what we are trying to do here is two fold. One part is we are trying to show and demonstrate to the world that there is a whole lot to be leveraged by combining multiple technologies, and therefore, enable development, faster development in multiple products, especially in specialty crops.

Gilad Gershon, Tropic Biosciences:
Gilad Gershon, I represent Tropic Biosciences. We're based in the UK with a team of just over 100 professionals. Tropic Biosciences we've around since 2016, we focus on using gene editing in a host of tropical crops. And currently our main focus is around three of these which are coffee, bananas and rice, where we focus on the use of the technology in developing different products.

Gilad Gershon, Tropic Biosciences:
Some of them intended to improve the quality of the crop, for example, our low caffeine coffee variety, and others more then to increase the resistance to different diseases. For example, different projects in banana against Panama disease or in rice against rice blast. So again, it's a pleasure to be here and happy to participate and address any questions.

Vonnie Estes, PMA:
Great, thank you. So I thought we'd start with my first question of just giving people an understanding of how gene editing works. Not necessarily technically, but when you work in a company that develops products using gene editing where do the ideas come from? How do you work with it? What kind of resources does it require? And how do you really get a product to market that's been gene edited? Fayaz, why don't we start with you and you can walk us through.

Dr. Fayaz Khazi, Elo Life Systems:
Sure. Our platform gene editing technology is called Arcus Technology, it's a technology that's derived from chlamydomonas. So we call it's nature's own editing system, and so it's a highly versatile platform that can do pretty much what we want it to do with a great deal of efficacy and efficiency. So in a typical process, what we try not to do is we try not to guess that this is what the market needs. So this is where technology and business models come into the picture. So we rely heavily on those who are leaders in the business, who are leaders in the market, to direct us towards what is that trait that the consumer has been looking for, for multiple years?

Dr. Fayaz Khazi, Elo Life Systems:
And what we bring to the table is how does one go about developing that trait? For example, our partnership in banana with Dole, the biggest problem in banana is TR4 Fusarium Panama disease, and this is where Dole came to us and they said, "We need to solve this." And so the very first thing was for us to identify those genes that contribute to resistance to Fusarium. And then from a genome editing perspective, we would identify approaches which fit into certain regulatory categories, or whatever the consumer has the preference towards, and then start developing or working in that direction. So that's just one example.

Vonnie Estes, PMA:
Thank you, Gilad how about you?

Gilad Gershon, Tropic Biosciences:
Sure, with pleasure and I'm happy to share my view. I have to say that unlike some of the experts here, my background is not in biology so for me, the last five or six years have been very educational. And I think that there's a difference between how I imagined this process to be five or six years ago, and what we've gone through over that time. With a different thinking about taking a product from the conceptualization phase and into the market, I think there's two main phases. And again, it's a very broad simplification I would say, but usually, when we begin it's very much science oriented.

Gilad Gershon, Tropic Biosciences:
We're fortunate to have a lot of really bright researchers and fantastic scientific advisors, we're constantly bouncing around ideas that we test through the market and try to see more. And if we're talking about for example rice, we look at different diseases and all the diseases that we can address, are these quality traits that are interesting? Maybe even on a personal note, I think that a lot of the conversations that we have, we have an open WhatsApp group for the team and every day I see the team keep shooting different research papers that they encounter and there's always the question, is this interesting or is that interesting?

Gilad Gershon, Tropic Biosciences:
So I would say that from that initial process, we end up with a few interesting products that we think that we would want to pursue or not. And then we have a good process of testing it against the market and seeing if those really have potential to justify the investment and the time to market. So this is the initial and usually the fun part, so after that there's a very long process of technological development, but I think this is also where there's different components that come into play outside of the technology phase. So very clearly, intellectual property is a massive component in that and we try to include these professionals very early on because that could have a massive impact on the commercial opportunity in the life of the product in the market.

Gilad Gershon, Tropic Biosciences:
And business development is massive, the different products require different partnerships and different collaborations, and we try to do that from an early stage. The least fun part I have to say is the regulation, which I'm saying it's the least fun because it's actually incredibly complex at sometimes. And at least in our experience, there's not a lot of people globally that are really big experts in the space, so we try to work with these professionals, again, relatively from an early stage to make sure that we tick all the boxes and we address our development in a mature phase. There's a fun part in the beginning, but the execution of making sure that, again, everything is done properly that can take several years and involve a lot of professionals, many of them true experts in their fields.

Vonnie Estes, PMA:
All right. Thank you. Yeah, we'll talk some more about regulation and especially get your input from Europe and the UK, which is different than the U.S. Haven, how about you? Walk us through how Pairwise thinks about products and product development, and what it takes to get to market?

Dr. Haven Baker, Pairwise:
You bet. So maybe separate the two things we've heard and a little bit on the idea phase, where the ideas come from, and then maybe I'll go a little bit more in the nuts and bolts about what gene editing is and how you eventually get to see plants or a product if that's okay, briefly. So we've taken a different approach which generally in agriculture, most technology development and in a lot of things is incremental, right? You're trying to solve last year's problems, but you're not trying to take this great leap forward. Again, we're about driving consumption with consumers, and where have we seen fantastic consumption increases?

Dr. Haven Baker, Pairwise:
And if you look in the last 30 years, it's things like baby carrots, and blueberries, and actually seedless watermelon, for example. And we've seen both growth rates that have been impressive as well as consumption increases, so that's what we're after. So for example, we're interested in cherries and so the first idea was, if we could just get a mirror around we'd add a whole bunch of consumption. And we hired a consultant and we had them go survey a whole bunch of cherry companies and growers, and only one out of 20 came back and said, "Please take the pits out." So that's the great leap forward to not have to spit out the pit, but yet it's not obvious.

Dr. Haven Baker, Pairwise:
So then all right we'll say, "Okay, now that's our idea, can we create a pitless cherry?" What we would do is we would go look in other all relatives of cherries, peaches, plums, pushes, ornamentals, and say, "Has nature already produced a seedless or pitless one?" And it turns out it has, and then the question is okay, "So could you do that through conventional breeding?" It turns out you can, but it would take about 150 years. Because you'd bring in this rare variant and you'd cross it with a cherry, and what you get won't be either a cherry or the rare variant and you keep crossing, 150 years later you might have a pitless cherry.

Dr. Haven Baker, Pairwise:
And we'll do now is say, "Okay, can we make that genetic change? It's very small, it's sexually compatible, and can we do that with CRISPR?" And so we'll take a couple of years to develop this process of getting the CRISPR into the plant, then we'll take a couple of years to make the plant. And then if it magically all works, and sometimes it does and sometimes it doesn't, now we've got one tree with pitless cherry, and now we have to go create root stock and clone it and go to market, and that takes about another five years to get all those orchards going. So where you had 150 years for the regular processes, these new breeding techniques can shorten that to what we're thinking about is 10 years for cherries.

Dr. Haven Baker, Pairwise:
And just for in our case, we're about three years in, so we think we'll get there by the end the decade. Some of the other things that we're working on berries and leafy greens are much faster, so hopefully that helps Vonnie.

Vonnie Estes, PMA:
Yeah, I think that's a really good way to talk about it, because people say, "Oh, this is so much faster, it's so fast." So then a lot of people think that's going to happen really quickly, like within a year you're going to have all these products on the market, but like you said, it's not that fast. It still takes a lot of time, and there's a lot of checks and balances, and there's a lot of testing, and so there is work that goes into it and it takes a while to get these products on the market. So I'm going to continue to work through some list of questions, but I do welcome questions from the audience because one of the things that we want to do around gene editing is make sure that we're bringing everyone that's involved in the whole food supply chain along with us.

Vonnie Estes, PMA:
And the understanding of what gene editing is, what the benefits are, what the concerns are, so this is a great platform to be able to ask your question. It's rare that you would have three experts like this that are working in the field, so really ask your questions and I'll try to work through as many of the questions as I can, and we'll get answers to your questions if we're not able to answer them on today's program. So I am going to look at some of these other questions. So what is the biggest bottleneck in getting new traits to market? Where is innovation getting stuck right now?

Dr. Fayaz Khazi, Elo Life Systems:
The number one thing in my opinion is the lack of disconnect between real consumer needs and the perceived consumer needs, and I think there needs to be some level of leveling between those things. And there's always that cycle of hype and then leveling off, and then what comes out in the other end is something that the market always wanted, but didn't really know that it wanted. Something like one of the examples is plant based foods. Plant based foods it was a need in the consumer space, and it showed up over the last few years and we are riding the wave.

Dr. Fayaz Khazi, Elo Life Systems:
And then the second part is, I want to emphasize that science or the biology of the plant has never been the bottleneck, but still in this day and age we still continue to believe that there are certain bottlenecks, technological bottlenecks. I think that's a personal bias in those of us who are in the industry and those of us who are in the sciences who believe those, but that's changing. And then the third part is the lack of or improving situations in terms of harmonization of regulatory guidelines across the globe. So to me, those are the three different things that always show up on my radar every time the bottleneck question is up on the table.

Dr. Haven Baker, Pairwise:
We got lots of good ideas, and more good ideas than we know what to do with. Our primary bottleneck is that just like in breeding, a raspberry breeding program is not a strawberry breeding program, which is not a pineapple breeding program. Each of these crops, and sometimes each variety, requires its own CRISPR system. And that tech development is a couple of years of work, and it's maybe as much as a dozen scientists or more getting that right. And so we see this crop by crop, and all of that technology has already been developed in the row crops by the big Ag companies, but for fruits and vegetables each one of these is different.

Dr. Haven Baker, Pairwise:
And sometimes a university have done this before like in strawberries, and sometimes there's been absolutely no effort and the companies have to do that from scratch, but each crop is a different system and for us it's a primary technology development area right now. We're on track where we've developed those technologies.

Vonnie Estes, PMA:
Hey Haven, I'll pick on you on this one a little bit. When I look at it from where I sit since I'm no longer in a technology company, I'm concerned about the market pull through of these products. And so when you look at are retailers going to carry the products? Are consumers going to accept the products? Kind of going into the social license part of it. In the products, the produce products that you're developing, is there a concern that there's not going to be pull through? Or how do you think about that?

Dr. Haven Baker, Pairwise:
I don't know, do you actually like the pits in cherries Vonnie? We're actually not that concerned. I think there needs to be a clear benefit, and you need to be transparent, and so let me give you another example. We're working on a seedless blackberry among blackberries, and we're getting the taste right too so it tastes really good, but we've surveyed blackberry buyers and 85% of them do not like the seeds. There's a few people who like the crunch, every once in a while someone says I really like to chew on them, but most people don't like them. And then there are a bunch of other consumers that won't buy because they get their seeds or maybe they have diverticulitis or something.

Dr. Haven Baker, Pairwise:
So our goal is to expand these markets, but I think that you're right, that you have to have a clear benefit, and if you have a clear benefit I don't think they'll be an issue. Now, the overall technology acceptance, it is new this time and it does help that gene editing is not GMO. So this is another breeding technique, it's not GMO, at least in the U.S and most of South America, Australia and Japan, and so we've got really good alignment, but this just get back to is the benefit really there for consumers to try something new?

Vonnie Estes, PMA:
Yeah, I think that's really the case, and we've talked about this in the industry a lot about some of the early traits in GMOs, but if you have a benefit that consumers really want, I think that changes the conversation. And I think we were talking about bananas that both other companies are working on, and if you're going to save the banana industry just like we saved the papaya industry, I think those become different conversations. And I think that's really we need kind of the killer app. Why so much emphasis on consumer needs rather than agronomic needs of growers?

Gilad Gershon, Tropic Biosciences:
I'm happy to address it. I think that it really addresses your earlier comment about the market pull. I think that when we think about the value chain of some of these products, we do need to take into consideration the different components of it. So you have the growers, you have the processors, and you have the consumers, and the reality is that each one of them seek different types of values. So for example, if we think about disease resistance, or yield it could be very appealing for growers. Whereas, perhaps higher or better nutritional content or with other type of quantity traits is something that's very appealing for consumers.

Gilad Gershon, Tropic Biosciences:
And I think that, at least for us, the Holy Grail is trying to combine both. Meaning that if you have a killer type application for the farmers addressing a major need like climate change, drought, diseases, you have a very strong entry point in the market. So perhaps the seed market is smaller than the consumer market, but then you have this very strong call it adoption. If you can, at least in our view, bolt on top of that also a quality type for them it opens up not just the production margin, but also the premium that the consumer can pay, that can be incredibly important.

Gilad Gershon, Tropic Biosciences:
I can say that in Tropic Biosciences, I would say probably over the last three years we've dedicated more and more of our time and effort into agronomic traits. Partly because I think it's realistic to assume and over the last year we've seen it come into play more and more, that with climate change the challenges that farmers are going to experience are going to grow more and more. So, at least in our view, I think we are transitioning into a period where people are going to speak more and more about diseases unfortunately, but I think as an industry if we can combine both of these, it's magic.

Dr. Haven Baker, Pairwise:
Maybe I'll take a different take on the same question and try to be brief. I look at the salad industry and we're getting ready to bring some new products to market so I've been buying everything that's out there and bringing it home. And my kids, and I got a bunch of kids, flat out tell me, "I do not want to eat anything with cabbage in it, I want Caesar salad." And so we want to bring healthy green, but all they want is romaine. I mean, they do the iceberg if we let them too, but this gets to this disconnect that our mission is to increase fruits and vegetable consumption, we're trying to grow the category and grow the industry.

Dr. Haven Baker, Pairwise:
And so that's probably a place to start with the consumer first. The other thing is the technology is expensive now. 10 years from now the technology will be quite a bit cheaper, and maybe we can work on these diseases that happen every other year, but finding a consistent problem that will still be a problem in five years after you spend all this money developing products, that's an important point and I think the consumer is a much better place to start with that than probably the farmer.

Dr. Fayaz Khazi, Elo Life Systems:
I would agree with both you guys. And also as a slight qualifier, climate change is something that's here now, and we've been talking about HLB, and we've been talking about Fusarium PR4, and Pierce's disease in grapes and what have you, so those are big binary questions. Your consumer has decided at this point based on all the surveys and all the data, there is a technology pull, there is a need for technology to solve these problems. And therefore, we are in the space. On the flip side, our zero melon program for example, there is also a hybrid need for a natural zero calorie sweetener that we are producing in watermelon at scale to get over the bottlenecks of utilization of monk fruit based sweeteners in beverages and food items.

Dr. Fayaz Khazi, Elo Life Systems:
So that's where I think the the consumer pull will then instigate or initiate an inquiry, but then input traits, agronomic traits, and what have you, based on the demand that we create on the consumer side. What I'm trying to say is, they are not independent of each other, it is which one pulls the other and at what time? And it depends on the crop, it depends on the time of day, and depends on the market segment.

Vonnie Estes, PMA:
Yeah, I would add to that, just as my experience of working for a lot of technology companies in the '90s. Is that one of the things that I think we realized is how important it is to bring the consumers along in this conversation. And I think in some of the early products that were genetically modified with grower traits, the consumers felt like they weren't getting the benefit, and they felt like they were taking a risk. And so I think a lot of the focus with gene editing is just been to to make sure that consumers understand and that they're getting this amazing benefit that technology is bringing to them in a safe way.

Vonnie Estes, PMA:
So those of us who showed the scars of early genetic modification, I think this is a way to make sure that consumers are brought along. What do you think will be the future of agriculture related with the farmer's adoption of genetically modified crops being based on GMOs or gene editing? Will both coexist in the market, or GMOs are going to be displaced sooner or later?

Dr. Haven Baker, Pairwise:
I think in produce you won't see GMOs. One, they're too small of markets, there are some things that gene editing can't do, right now. I mean, Gilad is actually more cutting edge on this with insect resistance, but insects resistance right now is a GMO trait and I'm not sure you can create that with gene editing, maybe you can someday. But I think with produce with the small crops will want to stay gene edited, there's plenty of innovation to be done there and it'll be a long time. So row crops, it's probably going to be a mixture of technologies.

Vonnie Estes, PMA:
Yeah.

Gilad Gershon, Tropic Biosciences:
I mean, we need to build on that and absolutely I agree with that. I think that what is likely, and I'm going to change this differentiation between genetic and GMO is the time and cost to market. So GMO with the regulatory requirement it will always be more expensive to make, and if we think about produce the likelihood that some of these GM type traits is going to make any return on its investment is low. So absolutely agree with Haven's analysis that something very catastrophic will need to happen in order to justify a GM trait, and you mentioned the papaya which is one good example to that. Well, in row crops it can justify it, there's GM trait that cannot be created using gene editing, and it does have a return on the investment over long terms. These two things can coexist.

Dr. Fayaz Khazi, Elo Life Systems:
Yeah. I think in the near future based on where we are with the secure rule and whatnot, those two categories will blend into one products of biotechnology category. And that is we won't see any true transgenics, but you might see a blending of editing and GMO recycled elements from the past GMO components very soon.

Vonnie Estes, PMA:
Here's a question, I love this question, and none of us know the answer for sure, but I'd love to hear your opinions. We currently see the wonders of gene editing and science in the medical field with the COVID vaccine, but yet even with this science and its success we are seeing public resistance. What can the food industry learn from the COVID vaccine experience?

Dr. Haven Baker, Pairwise:
You're not going to keep everyone happy. I think maybe another aspect of some of our consumer studies that will be obvious to some people in industry, but maybe not to everyone. Which is that when you go study a produce buyer and you want to study them, we would study it by berries, or in the past did it by potatoes, there's a percentage of the population that wants to know everything, right? Every last detail you can possibly get, they want to know all the information.

Dr. Haven Baker, Pairwise:
And sometimes those are your organic buyers where it might be 10 or 15% of the population, but there's another 50% of population that don't want to know anything. They just want to buy a product, not engage with it emotionally and enjoy it, keep it simple. And so I think that that's one of the challenges we have with all these new technologies. It doesn't matter whether it's self driving cars, or AI, or better iPhones, is how do you satisfy an audience or a customer segment where one part of the population is never satisfied with the information, and a lot a large portion don't really want to engage, they just want to enjoy their item and move on with their lives?

Dr. Haven Baker, Pairwise:
And so I think that that'll be one of the challenges that we'll continuously have in this fields and others is getting the appropriate level of communication to the right audiences. And maybe that we were in a pandemic, I don't think that quite happened this last go around. We tended to over saturate some of these markets with too much information, or the wrong information or too early information that we got pushback.

Dr. Fayaz Khazi, Elo Life Systems:
I would agree. And part of it is what we are trying to avoid is to get into that conversation, because it's very difficult, it's the situation to please 100% of the consumers. And therefore what we are trying to address are these big, hairy problems where there is a massive technology pull. And I think in those kinds of situations, the question always is it's like I mentioned before, it's a binary thing. Would you rather go without bananas? Or would you rather go without natural zero calorie sweetener? Or do something else? Or live at status quo?

Dr. Fayaz Khazi, Elo Life Systems:
And in those kinds of scenarios for us, I think two components come into the picture. One is the commercializing entity or our partners become a big component of that data and keeping the consumers happy and satisfied. And then the second part is for us, what we have learned over the COVID period is that there are technological solutions for any kind of problems. Yes, it may not make 100% of the consumers happy, but those are viable solutions, and we have seen this over the last year and a half that it is a life saving approach the COVID vaccine.

Vonnie Estes, PMA:
So a number of people in the chat saw the New York Times article that was in the New York Times Magazine on Sunday, and would like to know what your reaction to that article is and what reaction you've gotten. And in the article, it's a great article I recommend anyone read it, Pairwise is interviewed, so Haven why don't we start with you and see what reaction you've gotten from the article, what you thought of the article, and then we'll hear from the other two panelists.

Dr. Haven Baker, Pairwise:
I think that overwhelmingly, the response we've received has been positive, and I think there's two levels of that. One is the reporter that wrote it was interested in the products they're writing and also Kathy Martins and some of these others. So the products you'd start with there's some signals that products are interesting, which is great market feedback or pre-market feedback. The other piece is that an institution like the New York Times which has an incredible reach, is willing to engage on the conversation in general.

Dr. Haven Baker, Pairwise:
I think that's a very positive signal for this field. So it's been overwhelmingly positive from our perspective, and I think maybe the last thing is, is that we do think transparency is really, really important both for the consumer and the public in general. And I think you'll see some of that paying off as if you can be as open as you can be, that people recognize the sincerity and it's easier to get to these benefits without the secrecy.

Vonnie Estes, PMA:
Any other comments on the article? Positive or negative?

Dr. Fayaz Khazi, Elo Life Systems:
It was a great read and it was a very well written article, and congratulations to Haven and his team for great coverage. And I think it's an overall great win for the industry, because it's the next level of dialogue, right? It is not about whether or not this is good, dangerous or safe, it is what is the benefit? And how are the industries and the consumers and the companies all taking the technology forward into products of the future? So to me, I welcome the article.

Vonnie Estes, PMA:
Yeah, I thought it was really fantastic and really put a human face and human stories, and it's a way when you look at how do we communicate to consumers about this type of technology? This is a great way to do it with colorful pictures and personal stories and benefits, so I really welcomed it. So this is a great question, why is this not considered GMO in the U.S? And are there countries where it is considered GMO?

Dr. Haven Baker, Pairwise:
The difference here is for most the world, outside Europe, and I guess New Zealand, that if you're using foreign DNA, so DNA that didn't come from the species or the family you're working on, it's considered GMO. If it could have breeding it's just being done faster, then it's like many of the other technologies that we are already using like DNA chips and things like that. It's just a laboratory methods to make breeding faster, and that's what makes it non-GMO. It's really that there's nothing there's no more foreign material left in the plant.

Vonnie Estes, PMA:
There's a number of questions around transparency and communication. And this is certainly a conversation that's happening in the industry of if you're using gene editing, and this is for the U.S, and you don't right now it's not considered GMO. How do we communicate with consumers? The consumers want to know given the choice, is there going to be a code? Is there going to be a sticker? What will happen when gene edited products in the produce industry hit the market?

Dr. Haven Baker, Pairwise:
Well, since we're going to go first, I'll say all our products are going to be branded. So it's not only going to be differentiate it's going to be branded, and we probably won't have the big technology story in the package, that'll be on the website, but it'll be transparent and clear. And so I think I can't say for other approaches, but initially that's one of the reasons we're going to have branded produce.

Vonnie Estes, PMA:
That makes sense.

Dr. Fayaz Khazi, Elo Life Systems:
It's got to be and I don't know Haven, is you're innate potato website still on? Do you know?

Dr. Haven Baker, Pairwise:
I haven't checked it in a few months.

Dr. Fayaz Khazi, Elo Life Systems:
No, I really liked what you guys did there back when you were at Simplot, there was a link and think there was a QR code you could go in and that would open up the website, and in there they had all the details of the technology. But I think that way, those who are seeking details or the information that's available to them, but you don't want to have too many technical details printed on the label or whatever. But that's how we are looking at our zero melon product, and also our chickpea products as well.

Vonnie Estes, PMA:
So you would have some kind of a QR code or some kind of link where people could find out, but if they picked up the product to buy it, they wouldn't necessarily know? I'm just clarifying.

Dr. Fayaz Khazi, Elo Life Systems:
I think it would be clearly labeled that it's a product of genome editing. And how exactly it was edited, and what was edited, and what was changed, and all the details, whether this would have been a natural change or whatever would be available on our website.

Vonnie Estes, PMA:
I've got a great comment here from someone from Del Monte saying that they're not seeing any consumer resistance on the pink pineapple.

Dr. Fayaz Khazi, Elo Life Systems:
Absolutely.

Vonnie Estes, PMA:
So I didn't know that, that's great to hear. I still haven't had one, anyone want to send me one I'll take it, but they look great.

Gilad Gershon, Tropic Biosciences:
But maybe that's a good example of communication. I think that eventually, I think all of the different products that the companies represented here and others we're working are quite valuable and things that we're very proud in, and again, the Del Monte pink pineapple, which is delicious and I think is a phenomenal product, are the same. So I think maybe instead of thinking about it as being very defensive and saying this is what... Being in a position where we need to explain as to defend our product, I think we can be in a position where we can be very proud and say this product was developed using gene editing and it allows you to be more nutritious.

Gilad Gershon, Tropic Biosciences:
Or we saved a lot of chemicals, or we allowed for use of less water in production, so there are ways to address that. Again, good example of that and someone mentioned in the Q&A, the Arctic Apple from Okanagan. I think that the way that they explain it on the packaging was this is a GMO apple, but if we didn't make this apple non-brown using genetics, we would have used to use like sulfate et cetera so it's your choice. And people buy that Apple, it's a good Apple.

Vonnie Estes, PMA:
If it takes 10 years or so for a new gene edited product to get to market given the costs and the licenses et cetera, is the pain worth the gain versus just best plant breeding?

Dr. Fayaz Khazi, Elo Life Systems:
Depends on the crop, first of all. Some might take 10 years and some might take four years. And then the pain versus gain also depends on the crop and the market. So, for example bananas, we hope to get to resistance trait very quickly, but the scaling up and adoption of that in the plantations is going to take some time, right? So that's the reality of the industry. On the same note, if you develop something that's suited for vertical farm, let's say you're developing a trait in lettuce or everything there now Pairwise is doing or Topic is doing in that space, that could take a shorter period of time. So either way, I think if you have a successful consumer focused trait, or a quality trait, I'm in the business because I do believe that the pain is worth the gain.

Vonnie Estes, PMA:
Even if these new gene edited products have attractive consumer traits, big retailers will still need to trial them and they have been written reticent to do this with GMO, how will you change this? And do you think this is an issue?

Dr. Haven Baker, Pairwise:
It's interesting. I mean, I think that that question is well framed, but I think the other examples of tech food have grown quite rapidly, whether it's the plant based milks or the Impossible Burger, or things like that. And I mean that's maybe an older view in the world and different retailers will be different, but when we do our consumer surveys and we look at all the other new tech enhanced foods we think this is absolutely on trend, and the innovation will be important. And frankly, you'll want to start with places where produce is important for the retailers, where it's not just about cost, it's about driving a better consumer experience.

Gilad Gershon, Tropic Biosciences:
Maybe another benefit in this regard of gene editing is the precision. I think that when you try to bring something that's absolutely different from everything that everyone used to consume, there's a lot less certainty. But when we think about genetic traits, a lot of the time these are very, very clear and very well defined. So for example, you can have exactly the same fruit that everyone is used to, the same size, color and even the taste and maybe you only change one nutrient in it or a disease resistance. So it's a much more controlled change, and to some degree what we're seeing is that it creates more confidence from the industry itself.

Vonnie Estes, PMA:
How will you access germplasm and hybrid varieties? Do you consider collaborating or partnering with fruit and vegetable or other seed companies? So quick answer on that from each of you.

Dr. Fayaz Khazi, Elo Life Systems:
Our business model is entirely based on partnering, so we access through our partners and we work only on elite germplasm and nothing else.

Vonnie Estes, PMA:
Thanks.

Gilad Gershon, Tropic Biosciences:
I think for us, when we select the crops that we focus on and develop from zero and eventually become dominant players within these crops, we actually look for crops where we can access not just an elite germplasm, but also the distribution without being in the door or connected in the hip to a single provider. We feel that that creates... It doesn't lend itself to healthy margins long term, so I think that venturing into crops where there is a few dominant players that own the germplasm is a challenging in itself. So there's a lot of crops outside that can be addressed.

Vonnie Estes, PMA:
Okay, Haven wrapping up.

Dr. Haven Baker, Pairwise:
Yeah, real quick. So sometimes elite means bad tasting in produce, right? Where they're high yielding, but they don't taste good. And so we're absolutely part of the germplasm, but we want to bring the best tasting fruit and vegetables forward that we can get. And so we'll actually sacrifice on yield if we have to a little bit to bring that great taste on with the genetic because it doesn't do any good to bring some new attribute, but have the produce not taste good. And that's generally something I should say maybe that gene editing is not doing is enhancing flavor, that's still way too complicated. What we're really doing is adding some other benefit or maybe reducing a negative and so that germplasm selection is really, really important to bring that consumer experiences, make it as positive as it can be.

Vonnie Estes, PMA:
Great, thank you. I hope you found that episode as fascinating as I did. Gene editing is a precise breeding tool that will help solve many of the problems we are facing today, along with delivering more convenient and tasty fruits and vegetables. Please let me know if you have additional questions or are looking for more resources on the topic. We want consumers to gain the value of the technology to both them and the environment and be able to make informed choices.

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

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Description:
A conversation with Nate Storey about how Plenty thinks about and deals with food safety issues. Listen to this candid discussion about the challenges and types of solutions the produce industry (indoor and out) faces with food safety and traceability.  

Speaker:
Nate Storey

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

Vonnie Estes, PMA:
Today's podcast is powered by our sponsor AgroFresh. AgroFresh is a global leader and ag-tech innovator in the produce industry with a mission to prevent food loss and waste, and to conserve the planet's resources by providing a range of science-based solutions, data-driven technologies and high touch customer services. AgroFresh supports growers, packers, and retailers with solutions across the food supply chain to enhance the quality and extend the shelf life of fresh produce. With decades of experience across a range of crops, AgroFresh is powered by a comprehensive portfolio that includes proprietary solutions such as plant-based coatings, as well as a complete line of packer equipment that helps improve the freshness supply chain from harvest to home. Visit agrofresh.com to learn more. AgroFresh, we grow confidence.

Vonnie Estes, PMA:
Today, we will hear a recording of a fireside chat I had with Nate Storey, the chief science officer of Plenty at the 16th Annual Canadian Summit on Food Safety 2021. At the end of the conversation, you will hear a Q and A that I think you will find interesting and was worth leaving in. We will talk about food safety at Plenty and in the CEA space. When indoor ag was first getting going years ago, many companies, not saying Plenty was one of them, positioned indoor ag is us versus them, them being outdoor growers. And that indoor was better on many dimensions, food safety being one of the big ones. Plenty and most of the other indoor companies talk now about growing the pie, that producing more fruits and vegetables in different ways is better for everyone, indoor and out. Nate talks about the problems both sectors face in transparency, technology adoption, and labor. Let's jump into this very candid discussion about food safety and technology.

Nate Storey, Plenty:
My name is Nate Storey, and I'm one of the co-founders at Plenty. Plenty is an indoor farming company. So we grow food indoors under artificial light. These are in big warehouses basically. And we're able to condense a lot of production into a very small amount of space. So we got started because we felt like we needed to grow the world's capacity to grow fresh fruits and vegetables. In the United States, we're incredibly blessed. We have a lot of farm land. We have a lot of agricultural capacity. Other parts of the world, not quite as fortunate. And as we start to think about a global population that's much larger than it is today, the need for fresh fruits and vegetables is only going to grow, but the capacity that we have today, running full bore 100%, for the next decades won't be able to keep up with that demand.

Nate Storey, Plenty:
So that's why we started Plenty. To meet that demand with this new source of supply. Yeah, so our farms are very large. We're growing on these vertical planes. It looks like you took a field and you stood it on its edge and put another field back-to-back with it. And these are very big, very complex farms, but they're pretty awesome. They allow us to control everything. The environment's completely controlled. Our day length is controlled, nutrients. We're able to exclude pests. We're able to collect a lot of data in keeping with the theme of these conversations. And we're able to understand a lot about plant growth in our systems and produce a product that's really pretty great day in and day out. So we produce that product and we sell it and people get the same thing every single day when they buy a Plenty product.

Vonnie Estes, PMA:
What are you growing? Let people what crops are you growing now and what crops are you planning on growing in the next couple of years.

Nate Storey, Plenty:
Yeah. So right now we're mostly focused on leafy greens. Most folks in the space start with leafy greens because they feel like an easy crop to grow. You're focusing on that primary production, but we have been working very hard on strawberries. We've got a partnership with Driscoll's developing strawberries for indoor production. We've been working very hard on tomatoes. We've got a few other crops like raspberries and a few other things in the works. So I anticipate we're going to be taking a lot of new crops to the world over the next few years.

Vonnie Estes, PMA:
And how many farms do you have now?

Nate Storey, Plenty:
So right now we have three farming sites. So we have basically our R&D farm. This is our advanced research facility in Laramie, Wyoming. And there we have around 50 discrete environments that we use for plant research. These are relatively small production spaces, but other people call them farms. I think we'll just call the whole complex a farm site. You've got the South San Francisco farm, which is our pilot and we're growing there in South San Francisco and distributing to a number of sources throughout the Bay Area. And we're in currently in the process of building the Compton farm, which is the first instance of this very, very large farm. It's also probably the smallest farm we'll ever built.

Vonnie Estes, PMA:
Oh, interesting. And when are you projecting that will be completed in Compton?

Nate Storey, Plenty:
We'll be finishing that up towards the end of this year and bringing it online. Yeah.

Vonnie Estes, PMA:
Great. So this conference is about food safety. How do you think about food safety at Plenty?

Nate Storey, Plenty:
Yeah. Food safety is something that we spend a lot of time and money and attention on. I think it's become one of these things which is one of these top concerns for consumers. And when they buy product, it used to be the assumption is this is a safe product. I think that that's still generally true, but there's been a lot of food safety recalls. There's been a lot of things in the news lately that I think have people questioning safety. And so at Plenty, we recognize that that's one of the most important things that we can be focused on. I will say, we've got a fundamentally different kind of problem compared to folks who are growing in uncontrolled environment.

Nate Storey, Plenty:
So you look at a lot of the food safety recalls of the last few years, and a lot of them had nothing to do with best practices in some instances, right? Or they're totally uncontrolled things, right? You've got a wild boar that walks through a field and poops, right? How do you control for that? So at Plenty we have a very different scenario, that a wild boar can't walk through our farm, right? Because it is inside of a building. It's locked. People are using key cards to get in and out of the farm. They're gowned up from head to toe. We're able to practice really excellent exclusion practices. So keeping pests and pathogens out altogether. So I guess all of that to say, it's a very different problem that we have to solve compared to someone who is still trying to grow in the field and trying to keep wild boars out, right?

Nate Storey, Plenty:
So all of that to say, we think a lot about prevention and risk management, sanitization, exclusion, cleanliness, all of the components that keep our produce very, very clean. Human hands don't touch this stuff because we've automated many of our processes in an effort to eliminate all of the potential points of contamination in the growing and processing process. We practice really good traceability so that if something ever does go wrong we know where and how. And then we've got testing and analysis that's quite aggressive. And I guess the thing that I'd say there is testing is getting a lot better. But testing and traceability go hand in hand because you don't want to be using traceability to try and find the source of a problem that's exposed by food your consumers are eating.

Nate Storey, Plenty:
You want to be testing really aggressively hand in hand with traceability so that you can catch anything before it ever occurs. And I guess the last thing I'd add is, again, in keeping with this idea that we've got a very different... In some ways a much simpler problem to solve. Our supply chain is not complicated. There aren't a whole lot of handoffs, right? Traceability can be hard when you've got lots and lots of handoffs, when there's a lot of on process changing hands, 14 times in some instances if you're a field grower. For us, we drive it directly to the distribution center or directly to the store and it's a single handoff. So traceability for us is much simpler. It has more to do with process steps than it does to do with who had it, right? Who had it at this point in the process.

Vonnie Estes, PMA:
Do you think that's going to get more complicated as you get bigger and you have more farms? Is that going to become more complex and how will you deal with that?

Nate Storey, Plenty:
I mean, I think managing those farms becomes more complex and the number of instances grows because we now have more farms. But as far as the actual process, the process itself doesn't get more complex. So if you think about it this way, if I was growing in a field and I had a farm in California and I'm managing multiple fields but we're aggregating all of that produce with the packing, at the packing stage and then shipping it out and it changes hands half a dozen times across half a dozen different retailers and ends up in stores all over the US, that's still quite complicated.

Nate Storey, Plenty:
Whereas with the Plenty farms, because we're very close, generally, relatively close to the distribution centers, each farm is going to be servicing certain distribution centers, certain stores. So when you look at it kind of like the nodes, if you were to diagram it out, farm to distribution center, distribution center to stores compared to the insane logistics problems that many of the field growers have to manage, where it's a hard, hard problem. Our problems are relatively simple. There's just not that many exchanges, right? There's not that many transactions.

Vonnie Estes, PMA:
Yeah. That makes sense. Are there any problems that Plenty or anyone else that's in controlled environment ag has around food safety that are different than outside? Are there problems that are more unique to CEA growing around food safety?

Nate Storey, Plenty:
Yeah. I mean, I think if there are, they're more around process steps, but even then I don't think that indoor necessarily has any more or any less problems. I think that's simplification of the idea of how pathogens could get into the system. Everyone has to be vigilant. Everyone has to be really careful. The difference is the simplicity of the system, right? And the ability to measure. So I think if there's one thing that's probably true for indoor growers or Plenty at least is we tend to over-index on testing. So because we have this super tight contained facility, because we have these really well-defined process steps, we're able to test with more frequency and more often. And one of the drawbacks of testing is that you learn things, right?

Vonnie Estes, PMA:
Yeah. Yeah.

Nate Storey, Plenty:
You actually have to do something with that data. And so I think the reality is we just have a much more granular view of say the microbiology of the system. And even in systems that are super sterile, there's always a microbiology no matter what. Germ theory, everything is everywhere, right? And the reality is that no matter where you go, no matter what kind of a system you're working with, there will always be a microbiology. So we just need to make sure it's the right microbiology. Is it safe? Is it a good microbiology? And so all of that to say, I think for a lot of field growers, the testing equipment just doesn't exist to engage in the kind of testing that we can engage in, in a controlled facility with a lab onsite, right?

Nate Storey, Plenty:
It's a different scenario. And I think that lack of information in the field both represents a risk in terms of not necessarily always knowing what is in or on your product. It also mitigates the risk of knowing and having to respond to it, right? We just don't have enough historical data to understand how we balance our reaction to some of these things in the field. So often times we end up with these scenarios where it lands on a shelf and some gets sick, and then they do a bunch of testing and we've got big recall on our hands. It's definitely worse in the long run than testing in the field and understanding what's going on and just holding stuff back.

Vonnie Estes, PMA:
So what did you have to do? I hadn't even thought of this. That because your ability to constantly test and you're able to see things at a much lower level and to follow them through, what did you have to learn and was there anybody else doing that research? Or did you just have to build this whole body of research yourself of really understanding, "We've never seen this pathogen or this microorganism"? It's not necessarily a pathogen, maybe pathogen to the plant, but just that whole body of knowledge probably didn't exist before you started looking, right?

Nate Storey, Plenty:
Yeah. I mean, so people have been doing research on the microbiology of hydroponic systems for a while. That being said, every little ecosystem is different, no two are alike. They can be the exact same system side-by-side and they might have a slightly different microbiology. So some existed, and it was helpful in a very broad sense and unhelpful in a narrow sense. So there's just a lot that we have to learn about our farms, right? How they behave, how they work. And they're very safe. They're very safe in terms of the microbiology that we have. They tend to be closer to the sterile end of the spectrum than the super diverse into the spectrum.

Nate Storey, Plenty:
And that's frankly the way we want it. We clean the floors, we sterilize the equipment between harvest, right? We're sterilizing everything. So that's how we want it. That's not necessarily to say that it's a good or a bad thing. That's just the management approach that we've taken. And learning how that impacts food safety, learning how that impacts the microbiology of the system has been quite the learning process for us. We are fortunate to have a system that allows us to collect data constantly, test constantly, and really keep tabs on the system microbiology, as opposed to more of the black box approach that frankly we're stuck with in a lot of other production systems.

Vonnie Estes, PMA:
And you have everything all in one place too, which has got to be a big advantage. So you're growing and any processing, any packaging, anything, it's not moving across town or it doesn't have to go through a bunch of different steps.

Nate Storey, Plenty:
That's right.

Vonnie Estes, PMA:
So that control has got to be a huge advantage from a food safety point of view as well.

Nate Storey, Plenty:
Yeah. Again, just going back to this concept of simplification, right? It's like when you simplify the problem, there's only, say two transactions rather than 15 transactions. The number of places where something can go wrong, or the number of points where there can be contamination or the number of processes to audit, or what have you, right? It's a fraction. It's a fraction of what it is otherwise. So we just have a simpler problem.

Vonnie Estes, PMA:
Yeah. You've talked a little bit about traceability. So let's move a little bit about traceability and data. So how can traceability and enhanced data transparency make the CEA sector more responsive to food safety concerns?

Nate Storey, Plenty:
Yeah. That's a good question. I mean, I think the thing to point out about traceability is traceability is typically used to try and understand where a problem happened after the fact, right?

Vonnie Estes, PMA:
That's awful.

Nate Storey, Plenty:
It's kind of like the police, right? They show up after the crime has been committed. If you're the person getting robbed, the cops aren't that helpful in that moment, right? And so traceability is the same way. Usually something has happened and we've got a recall, we've got something on our hands and we've got to go back and figure out in the produce industry, right? So at Plenty, we've taken a little bit of a different approach and we've said traceability is very helpful in terms of food safety, yes, and always managing our food safety, but it's also very helpful at managing our system and our system efficiency.

Nate Storey, Plenty:
So for us traceability is as much about system efficiency and material management as it is about human health and safety. And I think the thing to point out there is in most systems traceability again, is something that's helpful generally after the fact. At Plenty because we're able to pair it with this testing, right? Constant testing, just constant, constant, constant testing, it becomes a tool for really rapid diagnosis if we see something that's weird or off, or if we see a shift in system microbiology, or if we see ATP counts go up somewhere, right? So we basically have a unique opportunity to leverage traceability. And the other thing that I'd say is we've simplified the traceability problem at Plenty with our architecture, right?

Nate Storey, Plenty:
So it's not like we're coming into an existing system that's already complex and trying to bring a traceability system to try and understand a super complicated thing. We basically just said, "Hey, what's the more simple form, right? How do we get to a more simple form?" And that doesn't make the traceability obsolete per se, but it does make it maybe a little less critical to understanding the system, right? Because the system is just more understandable. It is simple. There's only a couple of transactions there. I guess that's how I would describe our approach to traceability. Consumers want honesty, consumers want transparency, consumers want to know that their food is safe.

Nate Storey, Plenty:
And I think we've used labels for a very long time to try and communicate those things, but I see a world and a future where consumers want to be able to scan a barcode and see how the product was grown, scan a barcode and see who grew it, where it was grown, how it was handed off, whether or not it was cold chain compliant or not. I see a future where people want to be able to take more of a firsthand approach to auditing the food that they eat. I don't think that's everyone, but I think that's an occasional thing that people want. And in a world where we're moving towards more transparency, I'd bet on it rather than bet against it.

Nate Storey, Plenty:
So regardless of the system that folks are using to produce, traceability is something they should be investing in. I will also say the fact that we have some of the food safety incidents on the rise, I think in my opinion indicates we need to invest in more testing as well. So in the same vein as pairing testing and traceability for field producers, that's something that we need, is rapid modular testing.

Vonnie Estes, PMA:
Mm-hmm (affirmative). So we've been at a huge time of disruption with COVID and then some regulatory changes. How can data make the CEA sector more resilient in these times of disruption?

Nate Storey, Plenty:
Yeah. That's a good question. I think there's a lot of things that we can learn from the last year and a half as it relates to resiliency and the food supply system. Some of those things have to do with things like traceability and data, knowing what is where, right? There were all sorts of logistics breakdowns the last year. And a lot of that is a data problem. A lot of that was a labor problem, right? In some places we just didn't have the people. So investing in more autonomous systems or systems that can basically function in the absence of human supervisors, that's important.

Nate Storey, Plenty:
And then location. So at Plenty our goal has been to solve these by putting farms close to distribution centers, minimizing the amount of labor, minimizing the amount of complexity that can interfere with us, growing the product and then handing it directly off to the retailer and then they hand it off directly to the consumer, that's the simplest possible process, right? And so when we think about resilient food systems, I think it's important to think about simple food systems. Could we just make these super complex things a little bit complicated and reduce the number of dependencies in the system? So if we're dependent on constant labor prices and constant labor supply, that's not a good bet looking forward.

Nate Storey, Plenty:
The other thing I think really changed was consumers started to think about their health and they started to think about their safety, and maybe they're thinking about it through the lens of COVID, but I think that it's going to transfer to the things that people choose to put in their bodies, to the food that they eat. And as people moved home, we saw it in our sales. Our sales went through the roof, right? As people started staying home and started cooking for themselves, they started investing in healthy food. And I think understanding what they're eating, who grew, where it came from is an important part of that decision making process for some folks. And certainly the folks that are the advocates, right? The folks that are quite vocal and the folks that are really involved with promoting fresh fruits and vegetables, fresh, healthy food.

Nate Storey, Plenty:
So I think consumer behavior is another thing to consider here and the speed of change in that behavior. A lot of things happened overnight with COVID. And I think we need to get used to consumer demands, for change. Consumer demands for things being something that we have to respond to. So when we think about data systems and how flexible they are responsive, how we're able to audit, where something was and who was touching it and who handed it off, that's another thing to keep in mind looking forward. So all of that to say, it's just a long ramble there. We have this tendency as humans to engage in this additive improvement, right? So we're like, "Oh, we've got to figure out how to make the system safer. Let's add things to it." And what that results in is a super complex system.

Nate Storey, Plenty:
And it gets to the point where we just hold out this, "Hope machine learning AI is going to come in and solve this problem for us. It's too complicated for humans now." And maybe the question doesn't need to be too complicated for humans, right? At its core, do we really need to make this thing so complex that we need insanely complex computer programs to actually help us understand it? And I think the answer at Plenty is no. As we start to think about how we grow the world's capacity to grow fresh fruits and vegetables, I think we can grow that capacity with a simpler system, with a system that empowers producers, empowers consumers and really makes it something that's understandable.

Vonnie Estes, PMA:
Yeah. Those are a bunch of different great points. I think certainly around consumers it's very important. And we at PMA we've seen a lot of changes in consumers and how they want to get their food and how they think about their food. And I know for myself personally, in the beginning of COVID where we went to the grocery store a lot less frequently, just the decision of what do you buy because I'm not coming back for 10 more days. And so those types of behaviors and looking at how long will this lettuce last on my refrigerator, or how long will this strawberry last in my refrigerator? And so I think just those types of changes in behavior and people wanting to buy online and have it delivered, we saw an ability to really be able to react to those types of things.

Vonnie Estes, PMA:
And I think that made for a lot more resilience. And at the same time, a lot of consumers really got to see what does our supply chain look like when there was people plowing onions back and in the field because they couldn't go to food service or milk being dumped. I think that really highlighted to a lot of consumers what our supply chain looks like and how important it is on food.

Nate Storey, Plenty:
Yeah.

Vonnie Estes, PMA:
Yeah.

Nate Storey, Plenty:
And we were all really in the hands of these complicated logistics, right? And anyone could produce or could be the victim.

Vonnie Estes, PMA:
Yeah.

Nate Storey, Plenty:
Any group with consumers could be the victim of inefficiencies that jump out.

Vonnie Estes, PMA:
Yeah. So what technology do you see still needs to be developed to decrease the number of food safety recalls and produce? And this can be indoor or outdoor grown. Just what do you think we should be working on from a technology point of view to solve this better?

Nate Storey, Plenty:
Yeah. I mean, I think for me there's probably three things that matter the most. And I harp on this with my teams a lot, right? You have to make something easier, people won't do it. You have to make it easy or people will take shortcuts and do it wrong or they'll figure out some way to cheat the system to make it easier. So human beings are always optimizing for conservation of energy. So I think number one is testing and I'm still amazed at the lack of really effective testing for pathogens that exist. So-

Vonnie Estes, PMA:
Onsite testing.

Nate Storey, Plenty:
Onsite. That's right. In the field. So starting in the field, right? Again, traceability is fine. Traceability is great, but it just tells you what is and it's usually after the fact. And so it tells you where something was. It doesn't necessarily tell you the state of the product at that position in the supply chain. So when we think about the fundamental problem here, it's like no one knows whether there's pathogens on the product or not until late in the game. And so if we had modular testing, they could go to the fields, it could be very effective. That would be awesome.

Nate Storey, Plenty:
We at Plenty we've got the advantage of we've got a lab on site, right? We have the lab in the field, if you will. And I think for us, that's awesome. It means that we can do that rapid testing. It means that we can understand what is true and we can walk anywhere in the farm and tell you what the state of that product is. But for the field which needs to keep producing to meet demand, testing is so, so important. And there just aren't any great solutions today that are rapid, modular and really effective. And then second on traceability, this is just a super simple thing, but automated data entry.

Nate Storey, Plenty:
Just figure out ways to make data entry automated, fast, effective, easy for people. And the folks especially who are in the field, this is the last thing that they want to think about. Make it easy. So this is technology that already exists, RFID tags, barcodes, the systems around managing and tracking things. And then I think lastly integrated data systems. So getting people to share their data and building data systems that transfer. Before we were talking about blockchain, but these ways of understanding where something came from in a way that's integrated, retailers, producers, everyone.

Vonnie Estes, PMA:
So these aren't Nobel Prize level technology discoveries. These are mostly adoption and just paying attention to putting solutions together that people can use, right?

Nate Storey, Plenty:
These are not sexy.

Vonnie Estes, PMA:
Yeah. That's the area that people don't want to invest in, I'm afraid, but...

Nate Storey, Plenty:
Yeah.

Vonnie Estes, PMA:
Well, I think we have some questions from the audience, right? Beth, were you going to [crosstalk 00:31:47] those? Yeah. Okay.

Beth:
We do. So the first question comes in from Sean Moore who asked, "What forms of technology does Plenty use today?

Nate Storey, Plenty:
Oh, that's a really big question. I mean, we're a technology company and so there are a lot of technologies that we use that we don't work on. So think industrial robots, industrial controls, that kind of thing. There's a lot of technology that we've developed because it's either something the market didn't provide or couldn't provide for our specific application. So these are things like, I would say our growing technology, vertical towers and the conveyance systems and just the way that we manage things, the architecture itself of the farm. We have lighting systems that we've designed, HVAC systems, air management, environmental management systems.

Nate Storey, Plenty:
We have nutrient and fluids control systems. Then we have genetics, which I consider technology. It's proprietary genetics that we've paired to match with those environmental technologies. And then on top of genetics there's the classic GEM, right? We've layered all of these management technologies that we've developed in order to help make sure that that match of genetics and environment is perfect. So farmOS, sensor and sensing systems. We're using machine learning and AI in some instances, data management storage, data pipeline, and that kind of thing. So everything from the hardware to the software and then the plant software of genetics.

Beth:
That's a lot. But yeah, it keeps everything moving, that's for sure. So another question came in, how often do you use pesticides in CEA? Is it needs-based only or preventive as well?

Nate Storey, Plenty:
Yeah. At Plenty we don't use pesticides on our crops. Again, just going back to this concept of simplicity... I know that's not true for all producers, but for Plenty it is. Going back to this concept of simplicity, right? If you can keep the pests out of the farm then you have a much lessened likelihood of having to use pesticides, right? We do our production cycle, is always about 12 days. And so there are very few pests and pathogens that can keep up with those types of... We just outstripped the life cycle of most of our insects, pests. We don't have weeds. So all we're left with is fungal and bacterial pathogens. And those we control with air filtration and fluids filtration, right? And so we can manage all of the different risks to our crops with means other than pesticides or insecticides.

Beth:
Awesome. Thank you. Next question is, are you having a challenge finding enough of the right people to fill this roles at Plenty? Are you partnering with any university programs to ensure the skills needed in the future to allow other companies to get on the indoor farming bandwagon or idea, concept here?

Nate Storey, Plenty:
Yeah. I mean, I think the answer to that is yes. And I think there are a lot of young, talented, amazing people that are lined up to work at these places. The job market right now is particularly tough. So yeah, I mean, we could always use more. I'd say that the place where we've historically really struggled is to bring in really great mature growers who had experiences in traditional industry. The reality is, ag-tech is tough because you have agricultural problems and you have this partner in a much more conservative established industry.

Nate Storey, Plenty:
And so getting good growers to the door who can come in, have an open-mind and engage with you on new technology is a pretty tough thing. Most growers tend to be more conservative in their outlook and their approach on technology and getting their engagement has been hard. But we're slowly getting there as people start to realize we're a real thing and we're going to be around for awhile. We're getting a little bit more of a response.

Beth:
I was going to ask you if it's changing over time and you're seeing more of understanding and acceptance of new ways.

Nate Storey, Plenty:
It is. It's slowly getting there. We just keep putting out this message, it's like, we're not here to replace the field. We're here to build agricultural capacity on top of the field. Everyone has to produce. There's no one in the world who can slack off here for the next 50, 60 years. The population of this planet, the rising middle-class, none of those things allows anyone to take a break. So there's good job security in ag moving forward. And I think as people start to realize this isn't a competitive thing where we're going to take out the field growers and we're not competing. As people start to realize that they realize, "Oh, well, maybe there's an opportunity here for more collaboration. Maybe we can share people and share ideas and get better together." So we're getting there.

Beth:
Well, and one question that comes to my mind too is domestically versus internationally. So is there more or less interest particularly in the EU or in other countries? What's the difference that you might be seeing relative to interest domestically versus internationally?

Nate Storey, Plenty:
Yeah. I mean, there are massive differences, some of which are cultural, some of which are societal. Some of which are a direct result of the pattern of development to that area. So when we look across the world, there's interest from everywhere, right? The reality is that the world supply of fresh fruits and vegetables can't keep up with demand. That is a fact. And people are not consuming enough fresh fruits and vegetables. And so when we think about what we have to do, we've got to triple the current supply of fresh fruits and vegetables in order to meet that need. How are we going to do that? Right? And I think everyone's wrapping their heads around that.

Nate Storey, Plenty:
Obviously some places in the world are way ahead of us where we have plenty of agricultural capacity. You go to Saudi Arabia, you go to Shanghai, China, you go to Singapore and they're thinking about food security constantly because they don't have our capacity. So for them, this is a no-brainer, right? It just makes perfect sense. So I think there are areas of the world that are going to adopt this very, very quickly. And they're going to be areas of the world that are slower simply because there's less pressure on them from a supply standpoint.

Vonnie Estes, PMA:
I think what we're going to see moving forward is a blurring of the lines between indoor and outdoor. We are already seeing partnerships like Plenty and Driscoll's, for example, between outdoor companies and indoor companies. There are both ways to produce food with their own sets of benefits and challenges, which vary by growing regions and crop. We will see growers produce food in ways that are best for them in terms of labor, water, availability, and markets. That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

Hide transcript

Description:
I sit on the other side of the microphone with Sarah Nolet from the agtech….so what podcast. We discuss a wide range of topics from genetics to clean tech.

Speaker:
Sarah Nolet
Founder & CEO, AgThentic
Co-Founder, Tenacious Ventures
Host, AgTech...So What? Podcast

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

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

Vonnie Estes, PMA:
Today we will listen to a conversation I had with Sarah Nolet on her podcast, AgTech So What. Sarah is extremely knowledgeable around all things ag-tech. Along with the podcast, she is a partner with Matthew Pryor and AgThentic, an advisory group, and also Tenacious Ventures. Sarah and Matthew recently announced the final close of their first VC fund, raising $26.8 million from a diverse group of limited partners to target seed and series A rounds. Our conversation spans many areas of mutual interests, from molecular breeding to carbon markets to biologicals and supply chain. Let's jump in.

Sarah Nolet:
Hello, and welcome to AgTech So What, brought to you by the AgThentic group. I'm your host, Sarah Nolet. I'm really excited about today's guest, Vonnie Estes. Not only is she an industry leader in food and ag, but she's also refreshingly candid about her own experiences working for large and small ag and food companies. This is Vonnie remembering the U.S. biofuels craze of the mid-2000s.

Vonnie Estes, PMA:
They said, "Build these gigantic plants." And my job at the time, I was working for DuPont, and I was in charge of a program that we were looking at converting corn stover into fuel. And I had, it was a beaker in a lab. That's where my technology was. It was a beaker fermenting in a lab. And people were saying, "Here's a check for 100 million dollars. Go build a 100 million gallon ethanol plant." So it was a lot of push without really looking at the system.

Sarah Nolet:
These days, Vonnie is the vice president of technology at the Produce Marketing Association, or PMA. Her role is to help fruit and vegetable growers in industry to adopt and integrate new technologies. Previously, Vonnie's worked for Monsanto, Syngenta, and with numerous ag and biotech startups. In this episode, you'll hear some of the hard lessons she's learned along the way, what the future of gene editing might look like, and the parallels between the hype around biofuels two decades ago and the hype around soil carbon today. But first, this is how Vonnie came to join the ag and food world.

Vonnie Estes, PMA:
So I got my undergraduate degree from New Mexico State University in horticulture, and worked for a little bit in greenhouses and realized that I was never going to pay any bills working in greenhouses. But I did have that early experience of working in indoor ag as a greenhouse. And then I went to UC Davis and got my master's degree in plant pathology. And so that was the beginning of that. And my first job out of graduate school was working with a company called DNA Plant Technologies, which was one of the very early genetically engineering plant companies. It doesn't exist anymore. But that was a really exciting time. I got to be on very early stages of what was happening with genetic engineering and crops and where that could go.

Vonnie Estes, PMA:
And so for the next 15 years, I worked in ag biotech in Nashville area, really on the cutting edge of, what is this technology? What can we do with it? How can we grow more sustainably? How can we make better crops? So that was a really exciting time. I worked for DNAP, like I said, and a company called Paradigm Genetics, and worked for Monsanto for a while, and also worked for a company that was buying seed companies all over the world and helping integrate some traits into those.

Sarah Nolet:
Vonnie was at Monsanto in the mid-1990s. It was a time when Roundup could be found in garages across suburbia, used commonly as a spray for weeds. But for agriculture, the '90s brought about major leaps in biotech when Monsanto introduced the first Roundup Ready seeds in soybeans, corn, and cotton, using genetic modification. At the time, the science was revolutionary. But no one imagined how much pushback there'd be against GMOs. Vonnie was right in the middle of this and learned a lot about social license.

Vonnie Estes, PMA:
Now, when you say you worked for Monsanto, everybody cringes. So that was in the mid-nineties. And I'm sure there were conversations in the board room that are different than this. But for me being there, it was, we had these cool tools. Like we can do these really cool things so that you don't have to spray insecticide and so that you don't have to till, and so that you can do all these other things that are more sustainable. So the conversations internally were like, this is really cool stuff, and this is going to allow us to grow more sustainably. So that was the conversation. And what we completely missed out of arrogance, certainly, was that we needed to bring people along with us in that little journey of that thought process.

Vonnie Estes, PMA:
And so, when it wasn't communicated to consumers in a good way, and consumers certainly didn't see any benefit for them in Bt cotton, then that's when a lot of the problems happened. But it's really interesting to think back on. To me, it was quite exciting that the technology could do this and really seeing the missteps that happen from a communication, social license point of view.

Sarah Nolet:
Yeah, for sure. Was there ever a moment or a story of consumer pushback, or something happening where you started to realize maybe you got it wrong or that how you guys were thinking about it internally was really different than how the world was seeing it?

Vonnie Estes, PMA:
Yeah. Actually, I'll tell you a more recent story that even reflects on me worse. So I was up in Washington State, summer before last, before COVID and we were still traveling. And we were doing grower visits, and we did a dinner with a bunch of apple growers. And I was talking about the Arctic Apple, which is a GMO apple. Right? And non-browning, great sustainability food waste story. I think they've done a pretty good job of communicating to consumers. They don't hide it. They tell people this is GMO. And so, we're at this brewery outside. There's like hops growing in the background, and it was really beautiful.

Vonnie Estes, PMA:
And so I started talking about technology, because that's my job. And I started talking about technology, and there's always great technology. Then it's coming to apples, and I start talking about the Arctic Apple. And I just see the room just go dead. Well, it wasn't. It was outside. But I see the group go dead in the eyes like daggers. And I'm like, this is very familiar. Like I remember this, and of all people, I should know not to bring up a topic like that until you really understand how it affects the people in the room and what their feelings were.

Vonnie Estes, PMA:
And their main feeling about it was that before Arctic Apple, when they were trading outside the country, like when they're selling their apples, they never had to answer the question, is this GMO? And so that was one of, they said, "We're getting hit. We're getting the negatives and not the positives about this." So that was an interesting flash-forward 20 years later, that you really need to pay attention to who you're talking to and how you talk to them about technology and food.

Sarah Nolet:
Yeah. My sense is that the industry hasn't fully learned this lesson, because it's not an easy one to learn. That we say now, "Oh, we need to listen more, and we need to have more conversations and highlight the benefits." And then we sort of do that. But the response isn't really all that different. And yet at the same time, there's lots of research about how agriculture is really trusted, and we have all this goodwill and people do believe in farmers. So I guess my sense is, I don't know what we do differently. Do you have a good sense of how to do this differently or any hope around what's changing?

Vonnie Estes, PMA:
Well I think we've got another opportunity with gene editing, and I've worked in gene editing at a couple of different companies and done a lot of consulting work on gene editing. So one of the big differences is that we can do a lot of good consumer traits with gene editing. And so, if you lead with a trait that consumers want, like if you have better-tasting strawberries or a pit-less cherry or foods that are more convenient, foods that are more nutritious, foods that have a better sustainability story that you communicate correctly, I think consumers are going to come along. And I think it's possible, through COVID and some people getting a better understanding of science and what science can really do to help us, that there's going to be a more openness to what is science doing for our food in a way that's helping me.

Vonnie Estes, PMA:
So I'm hopeful. And I think we're trying to do the right things with gene editing of, this really can help with climate change. I mean, so many crops are going to have to be grown in different places or different varieties or grown differently because of climate change. And this is one way that we can do something about that.

Sarah Nolet:
What's the conversation like with growers? You're now at PMA, and you'd be talking to companies that are on the production side and marketing side as well. Thinking about how to have these conversations, but also what technologies to invest in and adopt and which ones maybe to wait a little longer and kind of see how it goes. What's the sense from industry around gene editing in particular, but to ag-tech more broadly?

Vonnie Estes, PMA:
I think with gene editing, there's a real fear of production breeding and production companies, that they don't want to be first. They don't want to be the ones that the consumer says, "Oh, you're the biggest blueberry company, and we know that you're using gene editing. We're not going to buy it." And they don't want the blow-back. And so, I think we're in this really funny state right now, because lots of companies are using gene editing in their breeding programs, but they're keeping it very separate. So hear me, that is not mixing. People are not doing it on the slide. But they're keeping very separate breeding programs just to see what the technology can do, but they're afraid because they don't want the consumer backlash.

Vonnie Estes, PMA:
And so, I think there's companies like Pairwise that's in North Carolina, that's doing a lot of breeding in produce. And they're a straight-up firm. Like that's what we are. We're a breeding company. We use gene editing, and we're going to come out with these four crops. And I think companies like that, being out in front and seeing what the benefits are, is going to help. And producers will be willing to grow it if there's pull on the other side. And one of the examples that I use, and other people use this too, is looking at Impossible Foods and the Impossible Burger. So that is GMO soy. And they use a heme protein that's made in a genetically modified yeast. And people can't get enough. Right?

Vonnie Estes, PMA:
And they're going to IPO. They're going to really be big. And so, I think if you can be upfront, be transparent with consumers, and give them something they really want, then that's going to bring things forward.

Sarah Nolet:
Hmm. How do you think that gene editing will change? Or will it change supply chain dynamics and who owns what part of the industry? Like does ownership change when more companies have access to gene editing or can differentiate in different ways at different parts of the supply chain? Like does it actually shift how traditional lines have been drawn, in terms of who does breeding and then who does growing and who does marketing? Do you see more vertical integration, more fragmentation?

Vonnie Estes, PMA:
That's a really interesting question. I think if you look at corn and soy. Now you have big broadacre crops. I mean, you have people that do the science and own the germplasm and sell the seeds. Those crops, I don't think it's going to change. I think it'll be interesting in some of the crops that I work in more in the produce area, because those companies that have the germplasm probably aren't going to invest in the tools and hiring the people to do that work. And I've done some projects with a variety of people trying to look at, okay. Say we want to do gene editing in table grapes. How do we do it? Like how do we even do it? It makes sense to me for it to stay separate and for there to be platform-based companies that do genome mapping and that do the actual edits and that test in the greenhouse.

Vonnie Estes, PMA:
And I'm hoping that those companies stay separate from the germplasm companies. Because it just doesn't make sense for, say, a grape producer to make big investments in that type of technology. That should be a separate platform company. And as far as how the value goes, that's what these companies have to look at. Like who captures the value, and where is that value captured? And that's a lot of what these companies that are doing the breeding. They're like, how do I get to capture the value that happens at the Kroger store? Like how do I get that value? And so that is something that I think everyone's trying to work out, is if you're capturing consumer value, how does that go back to the genetics company? And that isn't worked out yet, but I think those are going to be interesting conversations.

Sarah Nolet:
These questions, like who pays and what business models will win, are not just playing out with gene editing, but also with all kinds of emerging technologies in food and ag. Soil carbon markets are another very hot example.

Vonnie Estes, PMA:
Yeah. I listened to your last podcast that was talking about carbon, which is fabulous, because it's such a hot area. And there are some parallels, I think, in just trying to figure out who owns what and where does the value accrue. I think it's a little different, because right now, that whole breed and all of that is just better set-up. It's more established. And I think with carbon markets, it's the Wild West right now of like, what are we trying to do? And what is the government going to do? And what are the tools we're going to use, and how do we affect this huge system? You can't just have something that measures soil carbon and that's all you have. You have to have this whole system that it's in. And so I think that's the broader thing with carbon that I think is pretty fascinating.

Sarah Nolet:
And you've drawn parallels to biofuels, and I'm really curious to hear your thinking there. And I would say probably U.S. listeners are decently familiar with biofuels and what's happened. Maybe international listeners or Australian listeners, less so. So maybe give us a little bit of 101 there and why you see parallels with carbon.

Vonnie Estes, PMA:
All right. So when I was talking about my history, so ag-tech ended up consolidating into a very small number of companies. And so, I was off looking for the next thing, because I didn't want to work for another Monsanto and I really wanted to stay in more cutting-edge technology. And so, this was in the early 2000s, like 2004. And everyone was really looking for, we need a different source. We need something besides oil and gas, because the prices were going up so high. And so everyone started looking at biofuels, and first it was corn ethanol, which I was personally less interested in just because there was no great technology leaps we were going to have there.

Vonnie Estes, PMA:
And so we started looking at second-generation fuels, is what I ended up working on for 10 years of my career. And that was taking either crop residue or crops that were grown specifically for energy crops, like sorghum and switchgrass, miscanthus. So it's a number of others that were grown to make biofuels. And so, this kind of got going. And this was one of the parallels that I was thinking about with carbon is like, so in 2007, then-President Bush made a comment in the State of the Union Address about switchgrass. And then suddenly switchgrass was a thing, and everyone was working on switchgrass. And the government started putting so much money and said that there was going to be 35 billion gallons of ethanol by 2017 that was going to be made. And half of that was going to be from second-generation fuels.

Vonnie Estes, PMA:
So lots of money started pouring in, and people who'd been very quietly studying switchgrass and some of these other things, they were in the limelight. And so much money went into this. So the U.S. government tried to create this market by saying, "You're going to produce this amount of fuel." And they put a bunch of money, and they picked companies to put money in. So in 2007, they invested over a billion dollars into developing the technology for this. But they started with the technology at a really high level. They said, "Build these gigantic plants." And my job at the time, I was working for DuPont, and I was in charge of a program that we were looking at converting corn stover into fuel. And I had, it was a beaker in a lab. That's where my technology was. It was a beaker fermenting in a lab.

Vonnie Estes, PMA:
And people were saying, "Here's a check for 100 million dollars. Go build a 100 million gallon ethanol plant." So it was a lot of push without really looking at the system. One, without looking at what technology do we need? What's the state of technology? And what entire system do we need to change for this to work? And then letting the government pick winners and losers. So I think when we look at carbon now, the government's got to be involved, because they set emissions. They set a lot of the standards, so the government's going to be involved. But how do we make sure that we're going after this in the right way and we're not getting too far ahead, putting too much money in when the technology's not ready?

Sarah Nolet:
Hmm. And do you see parallels now, with Biden's talk about climate change and a possible carbon bank and the conversations today?

Vonnie Estes, PMA:
Yeah. And it's like, ugh. I've lived this before. And so, I'm actually very interested in it, and I'm starting to dig deep into it too, just because it is the next shiny thing. And so I'm really interested and have talked to a number of startups that are thinking about different ways of doing things and how do you measure. And I'm putting together some conversations at PMA about, how do we get the people that are thinking about it, like some of the people you've had on your podcast from Cargill and from General Mills and those people that are having those conversations. How do we talk to produce about that? How does produce get involved in it? And how do they get something out of it? How do they not go down the wrong path? How do they make money, not lose money?

Vonnie Estes, PMA:
So, yeah. I think it's a very exciting time, but there's a lot of pitfalls and just, fools rush in. I mean, the amount of money that the government may put in the wrong place. And here in the U.S. when suddenly all of the venture capitalists are trying to string together the carbon buzzwords and fun things. I think we just need to be kind of cautious.

Sarah Nolet:
100%. I talked to an investor this week who was saying, "Wow. You guys are really understanding this carbon stuff. Great to hear it on the podcast. You've made the investment in Nori. We just feel like we don't know enough yet. And we're going to always be behind the curve, because it's moving so fast. And the people that are on the top of the wave are just going to stay on the top of the wave. And so we'll just stay out." Which I thought was really interesting.

Vonnie Estes, PMA:
That is interesting.

Sarah Nolet:
There's others who are like all in. And so you're almost already seeing the fragmentation and whether more capital will come in or everyone will go, ah, too confusing. Just see what happens and let it crash. Or actually, this is really big. We need to get involved. So we'll see, I guess.

Vonnie Estes, PMA:
Well, I think, at least in the U.S., when the government starts putting money in, then I think that gets investors interested and they'll start pushing along. Because they'll know that that money's there. And so, a lot of what happened with biofuels is there was a company called Range Fuels. I think they got, I don't know, I'm going to get the exact numbers wrong, but it's around 200 million from the government. And then Vinod Khosla came in and put in a whole bunch more money. And so, I think that pushes things along. And so I think in the U.S., with all the people looking at climate change and the DOE world.

Vonnie Estes, PMA:
So it kind of mitigates the risks a little bit for investors. So I think we will see investors rushing in. And hopefully we're just smarter about it, because it's a good thing. I mean, we're solving a very important problem. I don't want to make it sound like I think it's the wrong thing to do. It's just cautionary.

Sarah Nolet:
Hmm. Yeah. That's kind of what I was going to ask, is how do we balance the sense of potential hype or frothiness with the actual need to have solutions to climate change? Like over a large period, but also ones that enable growers to be profitable and meaningfully participate. Any thinking on how growers can and should be getting involved, especially in produce?

Vonnie Estes, PMA:
Yeah. I think that's something I'm exploring right now. Because I certainly don't want to get people involved with, here, buy this. Buy this other new tool, or try this other new thing. And you're already putting the risk and the cost on the grower. And we've talked about this before, that that's not where it belongs. And so, how do we incentivize them in a way that makes them interested and that mitigates the risk from them? And so, I think with carbon sequestration, look at trees. I mean, you look at all the trees that grow produce, and that's a pretty good deal.

Vonnie Estes, PMA:
You've got a lot of carbon that's staying there for a long time. And so we should be able to figure out a way that if that's what we're looking to do, is to reward that, then there should be way to do that without them having to bear a lot of costs. So it is something that I'm exploring right now. And I don't know the answer, because the carbon systems that are getting set up through places like Indigo and FBN and some of the commercial carbon systems aren't really looking at the produce industry. And so, I just want to be cautious to not get people into something that then ends up being so much work and so much time, just trying to figure out what tools do I use to measure it and filling out the forms, that it's not worth it.

Sarah Nolet:
That's for sure the number one thing we see and hear from growers, is the sense of it's a lot of work for a very uncertain benefit, other than the practices that I can do that improve soil health and create a more productive farm. And all those things obviously make sense. But any of this exploration of other credits or markets feels a bit tenuous right now, especially in produce. Maybe I'll just wait. Where we have seen a difference is when it can be consumer-facing, like wine brands, for example.

Vonnie Estes, PMA:
Yeah.

Sarah Nolet:
Looking at branding as a carbon neutral winery, or when they actually have that connection to consumers, especially around sustainability. What are you seeing in that space?

Vonnie Estes, PMA:
Certainly with consumer-facing brands, where you can tell that story, then there's going to be a real plus there of how to tell that story, and consumers hopefully will pay for it. I'm not seeing, I'm trying to think of anything that I've seen that is specifically pulling through yet. And consumers, I mean, we've found this on everything. You put a bunch of people in a focus group, and you and I would be guilty as well. It's not saying anything negative about anybody. But you'd say, "Oh, would you pay more for this great brand?" "But of course I would!" But then you put them in front of a shelf, and you look at their basket, and they really won't.

Sarah Nolet:
100%. We say this to startups who are testing their market, where it's like the diet question. When you say, "Would you like to have a six pack and a beach body and all these things?" Like yes, of course, great. And you give them the celery versus the cheeseburger, and they choose the cheeseburger every time. It's like, what people say they'll do is not actually what they'll do, and that's pretty challenging.

Vonnie Estes, PMA:
Yeah. Yeah, definitely. For a while I was working in bio-controls, and it was a consumer brand. And so we had a number of bio-control consumer brands, and we put them in the aisle of the garden stores. And these things, they were before their time. They did not sell. And so we started saying, people want legs up. People want to see bugs' legs up. And so I think it's hard, and we see this in all sorts of ag-tech companies. You see this as well, is that people go and they talk to two or three really forward-thinking producers. And then they think, okay, I can base a business on this. And it doesn't always work out that way.

Sarah Nolet:
You mentioned bio-controls. I'm really curious what you're seeing in this space. Is the time now for that? And it's exactly, as you said, a psychology problem with some of these products. Like does it actually work? How do we know? And what are you seeing in terms of solving that psychological problem and just bio-inputs, I guess, more broadly? Has the time come?

Vonnie Estes, PMA:
Yeah. I think the time has come, I think for several reasons. One is the reason that you say, is that we're actually able to measure it now, much better than we were 15, 20 years ago. And the products have gotten so much better. They've gotten a lot more specific, and they just work better. And I think also because we're starting to see resistance, and a lot of insecticides and fungicides and some of the bio-controls don't have that resistance. And maybe it's not you can stop using pesticides completely, but you can mix them so that you can use those other chemicals a little bit longer, because they don't build up resistance. So I do think the time is now, and I think it's really exciting.

Vonnie Estes, PMA:
Because I beat my head against that one for about five years, and partly, products just weren't good enough. So you have to have a product that works. But I think they are now. And I think just with all we're looking at in the soil and using microbials in soil, and all the things that we can do and test and understand what's happening in the soil, I think it's really positive. That's an exciting area.

Sarah Nolet:
Vonnie's also excited for the future of plant breeding, which has always been her first passion since the greenhouse days. But now she sees breeding as a critical tool to help meet some of the big climate challenges we're facing.

Vonnie Estes, PMA:
So you're going to have a lot of issues where you're not going to have as much water if it's places that aren't irrigated. Or even if they are irrigated, and you won't have enough water to put on. So I think certainly drought resistance is a big one. I think there's going to be areas that are going to freeze where they didn't freeze, or not freeze where they used to freeze. And so that's why blueberries expanded. Why they did was through genetics, where you could grow them where you couldn't grow before. And that wasn't GMO, that's just genetics. So I think there's a lot of just, the climates are changing, hotter and colder and wetter and drier. And we need to be able to respond to those.

Vonnie Estes, PMA:
And breeding is a great way to be able to do that. Storm events, too much water or too much wind, or all sorts of pests that blow in that weren't there before, what kind of resistance can you get? So I think there's a lot. Breeding takes a little longer, but I don't know. Developing a new pesticide takes a long time, too. But breeding is just kind of a better way, if you can do it through breeding.

Sarah Nolet:
Yep. And one of the things we've dug into is this changing landscape due to climate change and how these weather events will be more extreme. But also certain things won't be able to be produced in certain areas, or other things will be able to produce there that weren't, but we don't have a supply chain infrastructure. Do you see this combination of new breeding technologies and pressures from climate re-engineering landscapes, like changing what it means to be a farmer? Like are companies going to have to move locations? Will they have stranded assets and have to do something else with them? What's the shift in, again, how the structure of the industry or even what the landscape looks like might be?

Vonnie Estes, PMA:
I think that's likely to happen maybe over a longer period of time. But I think one of the things that's happening anyway is that people are starting to think about monoculture and do I really want to just be growing this one crop, and maybe I can grow different crops. And I think that's going to continue to happen, and that's climate change. And just do we need this much corn? This is just my view, but I think that's going to happen slow enough that the supply chain can react to that. It's not going to be like, you're going to have to change this tomorrow.

Sarah Nolet:
Right. And how about other countries getting involved in this? Like we've done a little bit of work looking at the Middle East, and obviously Singapore has massive food security goals. Some other countries are looking at, how do we think about food security? How do we think about breeding and using these technologies to grow things here that we maybe couldn't, or now that we have to? Is that a trend you're seeing?

Vonnie Estes, PMA:
Well certainly. I've been having conversations in Singapore this week. And so, they import 90% of their food. And especially during COVID, this was a very scary time for them. And so the government has started to pump quite a bit of money into looking at eggs, fish, and vegetables, are the three areas. And they're trying to produce 30% of their food in Singapore by 2030 and putting lots of systems in place. And it's vertical. All they can do is vertical. They can't go out. They have to go up.

Sarah Nolet:
Nowhere else to go.

Vonnie Estes, PMA:
Yeah. One guy was telling me about, they're doing vertical sheep farming, which I just can't imagine. Some of them are on the 20th floor. But that's certainly happening in Singapore, where they're looking using different technologies. And countries like Brazil are certainly adopting a lot of different technologies and looking at, what else can we grow? How can we grow it? How can we do this better? So it's certainly happening around globally.

Sarah Nolet:
Vonnie also predicts a shakeup in some of the traditional food supply chains.

Vonnie Estes, PMA:
And so when you look at the whole supply chain, starting from that first mile of leaving the farm gate, getting all the way to retailer or food service in the produce industry, and all that needs to happen there. And I don't know if you've seen it, the landscape map on the supply chain that Seana Day and Brita Rosenheim have done. It's amazing how many different companies are in there. And they really looked at the different verticals, and how do we do supply chain that works? That really goes all the way from the farmer to the retailer and what kind of systems need to be in place. And there's all sorts of systems, computer vision systems, and just the traceability that's important. And so I think that's an area that's really under-invested in and super important.

Vonnie Estes, PMA:
And especially, I think, since COVID really exposed how scary that supply chain is, I think people are starting to look at it differently. And I was talking to a company the other day, SWARM Engineering, and it's a bunch of guys from Microsoft. And they're really looking at, how do we do this logistics system all the way through and figure out how to save money and really support the industry? And so I think that's an area, not exactly the area I know the most about, but I think it's a really important area for food to really understand how can we do things there. There's so much going on in the field. And I know you guys work in this area a lot. A lot of the robotics and the automation and artificial intelligence, and then in what's happening in the field.

Vonnie Estes, PMA:
And I was talking to a company the other day about this, and I almost had this feeling of, oh yeah, this. And it's so ridiculous that I'm thinking that this is just like old hat. Because it's amazing. It's amazing what they're doing. And I think the adoption on that is going to be slower. I think it may be faster in some ways in produce, because the farms are smaller and the information is more valuable. But it is amazing what's happening. Like being able to know exactly when to pick and knowing exactly which apple flowers to reduce so that you have a better crop. And really using AI to be able to see almost every plant and make a decision on how to treat that. So it's pretty amazing. Yeah.

Sarah Nolet:
We're actually seeing that connect to the supply chain, what you made before, where when you have more information about what's happening in the field, what does that mean for how you can re-engineer the supply chain? Do you need as much cold chain infrastructure, or do you need different kinds of logistics support? When you know, basically ahead of time, what you're going to pick or when it's going to be ready or what you're going to do in the field that's going to be highly responsive to what consumers want and on-demand. Does that actually change how supply chains look and work and, to your point before, who creates and captures value? That scenario we're really excited about.

Vonnie Estes, PMA:
Yeah. And so when you look at what you just said, that whole piece. I mean, how do you look at interoperability? Like how do you talk to people about that? And that's, I think, one of the biggest issue. It's like you've got 20 dashboards and all those different pieces of data. And so, I guess just all industries go through a process of maturing and that putting together. But have you seen anyone that's trying to crack that?

Sarah Nolet:
I mean, we've seen people trying to crack it both from like a, we'll build dashboards and we'll be a kind of Power BI, or whether they're ag-tech specific or not. Kind of aggregate data and give you your view of it, which I think is interesting. Probably hard to get to venture scale, but useful tools that we see growers really, really appreciating right now. There's, I think, a play around some kind of open source approach to creating the standards and helping build the pipes in this space. The challenge is there's a lot of initiatives doing that, OpenAg Data Initiative and different industries. Specific initiatives to say, here's how we talk about vine rows, or here's how we talk about broadacre cropping and what the farm looks like.

Sarah Nolet:
It really can be a whole industry approach, but who has the incentive to do that? Who wins? And that's where we are increasingly thinking about open source. How do you harness the momentum of the community to build those tools? But you can still have a venture scale business model, which I think you do need, and world-class tech and software talent, because it really is a tech play. But right now we're in the early stage of industry maturity where everyone's building their own APIs, doing their own work to connect the dots. And that just makes it more confusing. But over time, I think we'll see more standards and more pipes being built. And there are opportunities there for sure.

Vonnie Estes, PMA:
Yeah. So do you think that, sorry, I'm interviewing you now.

Sarah Nolet:
That's okay. Yeah, yeah. Great.

Vonnie Estes, PMA:
So do you think that's five years? Do you think that's eight years? I mean.

Sarah Nolet:
Gosh. Yeah. I mean, we haven't seen any companies that are doing that, that we would necessarily bet on. We're starting to see companies recognize that problem and think about how it might be solved. So that's exciting. And if you look at a venture timeframe, then maybe it's five years. Three to seven, ideally, for venture capital. But I would say that's probably the next phase of industry maturity.

Vonnie Estes, PMA:
Yeah, that's great. Yeah. It has to happen, and it happens in other industries, but it's hard to get a sight on how long that's going to take and how everybody fits into that.

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

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Description:
Kalera is one of the fastest-growing and largest vertical farming companies. It has high-yield, automated, data-driven hydroponic production facilities designed for rapid rollout with two operating facilities in Orlando, one in St Paul, MN and one in Atlanta. It plans to open five additional large-scale facilities across the US by early 2022, including locations in Houston, Denver, Hawaii, Columbus, and Seattle.

Kalera has had a very busy year with the acquisition of Vindara, an indoor ag breeding company and building an impressive team and board. Hear from Daniel Malechuck the CEO of Kalera about their journey and also from Jade Stinson, co-founder and CEO of Vindara about the importance of breeding to indoor ag.

Speakers:

• Daniel Malechuck the CEO of Kalera
• Jade Stinson, co-founder and CEO of Vindara

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

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

Vonnie Estes, PMA:
Our conversation today is with Daniel Malechuk, CEO of Kalera. Kalera is an Orlando based vertical farming company. It has high yield automated data-driven hydroponic production facilities designed for rapid rollout. Indeed, Kalera is one of the fastest growing and largest vertical farming companies with two operating facilities in Orlando, one in St. Paul, Minnesota and one in Atlanta. It plans to open five additional large-scale facilities across the U.S by early 2022, including locations in Houston, Denver, Hawaii, Columbus, and Seattle.

Vonnie Estes, PMA:
To me, Kalera seemed to have exploded onto the vertical farming scene this past year, but as Daniel explains, the company has been diligently at work for 10 years. In February, Kalera also acquired Vindara, a company that develops seeds specifically designed for use in vertical indoor farm environments. Jade Stinson co-founder and CEO of Vindara also joins the conversation to discuss the importance of breeding for indoor AG. Let's jump into the conversation with Daniel about his background in the food industry and what drew him to Kalera.

Daniel Malechuck, Kalera:
Yeah. I spent my entire career in food for nearly two decades now. I have been in various degrees of the food industry across multiple different verticals, whether it be retail, food service, manufacturing and have really enjoyed, always working on something that is powerful, which to me, is feeding people.

Daniel Malechuck, Kalera:
And so have worked in again, a lot of different opportunities there, before I had the chance to come to Kalera here and have been with Kalera as their CEO for about two years now. And really before that, about five years ago, three years ago, didn't know what vertical farming was. Wasn't very familiar with it to be totally candid got intrigued when the opportunity came to me and have not slowed down since. Very excited and passionate about waking up every morning, knowing that it gives me a chance to feed people locally, safely, sustainably.

Vonnie Estes, PMA:
Great. I have to admit before you purchased Vindara who I was tracking because I like breeding companies and then you also became a member of PMA so thank you for that. I had not heard of the company. I think that's mostly because my personal feed and the information that I get is a bias towards VC backed companies and also West Coast companies, which is a lesson to me to pay more attention.

Vonnie Estes, PMA:
So I was so excited when I started reading about the history of the company and how fast you've grown. You're the fastest growing vertical farm company and we'll soon have farms Coast to Coast.

Vonnie Estes, PMA:
So please tell us about how the company started and the number of farms you have now?

Daniel Malechuck, Kalera:
Yeah. Kalera has been around for a little over 11 years now, and it really started with the science. And as we all know that Science and Technology continues to accelerate, but our two co-founders formed the company originally as part of a project to have a fully self-sustainable city here in Florida. And although that project fell through many years ago, the two founders continued the dream of working on indoor vertical farming. And so that process continued as trial and error and lots of great science that has gone into the company continued to be the focus.

Daniel Malechuck, Kalera:
And it was over really the last two years that we've come out from underneath the radar, out of stealth mode and that somewhat coincided with when I joined the company. And very aggressively, we've worked for years to get to the point where we are today, which is to really have a model that's able to be scaled very successfully and fairly quickly and inexpensively again, having industry leading unit economics, to be able to take our facilities coast to coast, as you've mentioned and even beyond.

Daniel Malechuck, Kalera:
And that's part of what's been really exciting about the last two years is how quickly we've accelerated and executed. Of course, when I got here, we had already our Marriott HyCube, which is located on the largest Marriott property of the world's property here in Orlando, Florida. And it was really a proof of concept for Kalera to go out of the lab for say, or the research and development segment and right into practice. And it really redefined what pick the plate freshness means for the future there. And so that was an exciting undertaking for the company, but it also gave us the confidence that we would be able to then scale more quickly and much more of a larger scale.

Daniel Malechuck, Kalera:
So we opened our Orlando facility, which was here in Orlando, Florida, and we opened that in March of last year. And then beyond, we have now opened our Atlanta facility, which is up and running and we are actually now grand opening our Houston facility this week. And the weeks ahead, we've got our first seeding going into that. So we're really excited that the momentum continues as we continue our expansion.

Vonnie Estes, PMA:
And so when you build and open these new farms, are they all exactly the same or are you innovating as you go along? How does that look?

Daniel Malechuck, Kalera:
Well, we continually learn. That's a really great question. So no two farms are exactly the same. Every time we go, we tweak, we get better and we continue to improve.

Daniel Malechuck, Kalera:
As well as that, not every design is a 100% identical. So we like to think we improve each time we go and we'll continue to develop, but the basis and the baseline is always the same, which is great science that we've worked on for over a decade. A lot of it proprietary and the ability to rapidly roll out very cost-effectively and hyper focused on being farmers first and leveraging the technology when and where and how we can as we come along. But that never changes. We never lose sight of that fact that at the end of the day, what we have to do is provide an incredible quality product, but yet at a very affordable price, because those two things are table stakes for us. We want to have a great product that's affordable.

Daniel Malechuck, Kalera:
And so where we take our design, it's generally the same every facility that we go into. It may have some slight adaptations and continual improvement as we go along. So for the most part, they're the same, but there are tweaks for every facility as we advance and as we open new facilities.

Vonnie Estes, PMA:
And what are your growth plans going forward? It sounds like you're just moving amazingly fast. Are you going to keep that growth rate up or what's the plan there?

Daniel Malechuck, Kalera:
Yeah. Kalera is excited that as you've heard me mentioned already, not only did we open Orlando, but we've got Atlanta that just opened, then we've got Houston, which is opening as we speak. And then beyond that, we've got facilities that we're opening in Denver, Colorado outside of Seattle Washington, St. Paul Minnesota area, as well as Columbus Ohio and Honolulu Hawaii.

Daniel Malechuck, Kalera:
So those are all in the works. They're being opened as we speak and construction is underway. But beyond that, we're very excited that there's much more in the pipeline, not only domestically, but Internationally for Kalera here as well.

Vonnie Estes, PMA:
Wow. So who do you sell to when you go into an area, say you went into Houston, do you look for local retailers that you sell to there? Or do you sell, do you have Nationwide chains that you sell to and then sell to the local area to those chains? How are you thinking about that? And how does that work?

Daniel Malechuck, Kalera:
That's a question that we do spend a lot of time thinking about. And more importantly is really everybody is our customer. But it always starts with quote and quote, the big guys and gals out there that can really help move some volume with you.

Daniel Malechuck, Kalera:
But what's so great about Kalera's model is we're balanced well between food service and retail, because we understand that 50% of any given market is really a food service. And so we see that here in central Florida, for example, where we have a really great balance between our customer in the retail segment of Publix. But then of course you go beyond Publix into the restaurant or a hospitality industry. And we have such amazing customers such as Universal Studios, where we do the theme parks here for Universal Studios, and then all the great restaurants we work with Levy Entertainment Group and the Orlando magic here. If you were to go to the Superbowl that the Tampa Bay Buccaneers played in back in February at the stadium here in Tampa Bay, we supplied the product for there.

Daniel Malechuck, Kalera:
And so we have a really great mix and a good balance, like I said. So as we expand into new markets, for example, as we move into Houston, Texas. We've got great retail customers lined up there as well. For example, Kroger who is going to be working with us on our product. And so that is a tremendous new customer for us. We're excited, but again, keeping that balance of always being focused on everybody needs our products. And it's not just retailers, specifically, you think about great restaurants and hospitality people and they want fresh, clean, local, safe, sustainable product as well. And so it's a really great balance for us as we expand across the nation and beyond to always keep that in mind that we're focused on both segments.

Vonnie Estes, PMA:
I didn't know that. I don't know that any other indoor farming facility or company is, they may be doing that, but I haven't heard them really push that except maybe some of the really small ones that are very local, but that's a really great business model because that is what people want. And that's great that you're really focusing on that. I bet that's been challenging this year, as you're trying to focus and get out into food service with all the challenges and food services this year.

Daniel Malechuck, Kalera:
It has but I tell you what it's coming roaring back, which is really exciting. And we've got some really great restaurant customers and even some larger chains that we're working with and have even secured partnerships with. And I'll give a quick example of say, for example, Tavistock group. They are a phenomenal restaurant chain. That's got multiple locations here not only in Orlando, but in Atlanta, for example, one of the finest restaurants in all of Atlanta is called Atlas and The Garden Room. And it is just an, if you haven't been there in Atlanta, it's probably one of the finest restaurants I've ever been to. The service, the food and everything, but they feature our products. And when you come there, it's the finest ingredients and why would you stop at the center of a plate keep going to produce and Kalera has been no exception.

Daniel Malechuck, Kalera:
And so it's been really neat to see how chefs really have gravitated towards local and fresh and all of those attributes that our product have. That I think for them, are quite a bit revolutionary. And a lot of times we're selling our product to them alive root ball on product. So when they get it, it's a fresh experience that sometimes they'll even serve. For example, Alfond Inn, here is a very nice hotel in Orlando, which they serve the product with root ball on. They come to the table and we've even heard that they've presented the product to the customer and they twist the root ball off and make it an incredible Caesars Salad for example, right there in front of the customer saying that "This product was alive until now." And they serve it to the customer right then. And the customer just is overwhelmed by the crisp nature of the product and how fresh it is. And so equally important to retail is that food service experiences as well.

Vonnie Estes, PMA:
That's a great story. Yeah. I think with a lot of these types of products, when you're selling through food service, you really have an opportunity, especially in these more high end restaurants to showcase the product and to tell a story about the product and to give this amazing narrative and background that you don't have on a label because people in retail, people just don't have time. So it is a great opportunity to be able to showcase the product.

Vonnie Estes, PMA:
So what do you grow? What are your different products? You said you do some root on, you must do some not root on. So what are the different products and different types of things?

Daniel Malechuck, Kalera:
We're very focused on greens right now. And that's micro greens where we have a variety of up to 50 different micro greens that we can do. And this is everything from cilantro to pea shoots, to broccoli to spicy micro mix, et cetera. And we even do something that has a flavor of almost like a sweet popcorn. And we do that for one of our really good customers as well.

Daniel Malechuck, Kalera:
And so we have a really great portfolio of micro greens but then we of course do a lot of leafy greens and we do everything from romaine to Kalera crunch, which is an incredible item that sounds like a cracker or a chip when you eat it, it's so crunchy. All the way through to Oak leaves and frisee et cetera. And so we continue to expand our portfolio of the items that we can do in the varieties and how we serve them with and for our customers. And so that is part of the innovation that our team never stops on our product portfolio mix, but we are, again, hyper-focused on greens at this point.

Daniel Malechuck, Kalera:
One of the things that's important to me is number one, to do things and to do them very well and just stay focused on what you can do very well in such a large market. We feel that it's something that we want to continue to fine tune and perfect to be the best at not only here regionally, but globally. And so that is... We'll talk a little bit more about our acquisition and how that plays into that part of commitment for excellence, but I'm excited about what the future holds as well as we continue to expand our product offering to our customers.

Vonnie Estes, PMA:
So we'll be talking about breeding, as you said in a minute, but what is the technology behind Kalera that makes the company successful? Did you develop it yourselves or with partners? And how did that come about that you're able to grow this great product and do it so quickly?

Daniel Malechuck, Kalera:
Well, to be honest, nothing was quick about it. We failed and failed and failed.

Vonnie Estes, PMA:
It just looks like that from the outside.

Daniel Malechuck, Kalera:
Yeah. And keep in mind, the company's been really focused since 2010. And so it's nearly over a decade now, a labor of love by our team and our scientists. And one of the things that we think we do extraordinarily well is to continually focus on keeping a great quality product affordable. And that's one of our mission statements, or it's one of the key words in our mission statement rather is that affordable, not only fresh and clean and sustainable, but to have the ability to go to the market and to offer a product that is in line with, but yet significantly better for you healthier, cleaner, and sustainable than traditional product. And so we don't want to do it and just have it be elitist or something that only a certain segment of the population has to make a very strong, conscious decision to be able to afford. Not everybody can afford 5, 6, 7, $8 for four or five ounces of greens.

Daniel Malechuck, Kalera:
And so instead we've made our product and we've had this focus since day one to be lean, mean and really strategic about how we get high yields. And again, we are very confident that we have industry leading yields and with this and through the ability to leverage our technology, as well as the design process that we've utilized to be able to offer product out there at very competitive pricing, but yet superior in many ways to traditionally farm product. And so that's something that we're very, very excited about, but also very proud of the fact that we, again, continually to fine tune that. But yet we feel that we've essentially perfected mother nature indoors through that combination of science and technology with farming to offer a very great product from a quality standpoint yet at an affordable price.

Vonnie Estes, PMA:
Let's switch a little bit to talk about the company. And as I was starting to read about you and learn about you, and then I started reading about some of your newest board members. So to me as someone who hadn't been following the company, and maybe some of the people listening to this, it just felt like you exploded onto the scene with these impressive board members. So tell us a little bit about that process and who you've added?

Daniel Malechuck, Kalera:
Well, like all things that Kalera does, we're very deliberate in trying to build the most incredible company that we can both domestically and globally. And that doesn't stop with board members, right? It's not only about the product, but it's about management and building a world-class management team, which we feel that we've done a really great job of, but it continues with the board of directors. And we're very pleased to have assembled a fine board that is going to help us continue to scale and think about our business, not only domestically, but abroad and internationally, and some of the folks that we've been able to assemble on this board. I mean, you look at Sonny Perdue. He was this time last year, the head of all the food for the United States of America, one of the largest food, if not the largest food producing country in the entire world.

Daniel Malechuck, Kalera:
And what was so great about adding Sonny to our board is not only, to see him come from a farming family and understands that background, but he's been Governor of great state of Georgia. He served our country at the very highest level as the Head of USDA and the Secretary of Agriculture and his perspective is unparalleled. And to add him to the board and believe me, he's not just a figurehead on the board or a name only. He's here and he's active. In fact, I just chatted with him a little bit earlier, right before this call. And so he's very active in the business and a very, very valuable asset to not only the management team, but to our shareholders as to the company as well.

Daniel Malechuck, Kalera:
But then beyond that, you've got great names such as just Kim Lopdrup, who is been a CEO of Red Lobster and help them globally and be very successful. And he's very active and moving to the Chairman of our board position here in the very near future. And then we've got several other big names that we continue to add. Maria Sastre, who has been just in, across multiple boards and throughout multiple different industries, including travel and the cruise lines and was on the board of Publix and is on General Mills's is board.

Daniel Malechuck, Kalera:
And keep looking forward. You're going to hear more great things, continue to come on the Kalera board. And we've got several other members, probably for the time of the podcast, you won't go through them all. But it's all very deliberate against to assemble a world-class team, both at the board level and throughout the company. And Kalera is very, very diligent on being very quiet. And then when it came time to really expand and to have our coming out party, that's what I think you've seen over the last 18 months even, or so as we've prepped for this moment, and now we're ready to run and run hard, run fast. And I think we probably caught a lot of people in the industry by surprise, but here we are and we're ready to keep on executing and moving forward.

Vonnie Estes, PMA:
Yeah. No question here you are. So you're publicly listed on the Oslo exchange, but I have heard rumblings of the potential of you going public in the U.S. Tell us why and how it would be an advantage to do this? And as much as you legally can about your plans in this area?

Daniel Malechuck, Kalera:
Yeah, sure. Kalera is a US-based company. We've got a US-based management team, US-based operations, and our original investors came, this is years ago back in 2013 even when the company was really just getting started and almost eight years ago or so, the U.S was probably not as hyper focused on sustainability in this arena specifically as perhaps Europe was. So our original shareholders came from, at least the bulk of them, from the Nordics and from Europe.

Daniel Malechuck, Kalera:
But over time, obviously now we are so blessed to have over 1000 shareholders all around the world on all continents, practically and a lions share them still in Europe, but certainly here in North America and the U.S and Asia and Australia and beyond. And so we are excited to bring the company home and get on a U.S main listing and our targeting. We're working heavily with that. You've seen some press probably about that process and it continuing to go well, as we move forward here, but we've also been very deliberate, just like you saw with the board members that we select. We're very focused on having the best process with the least amount of dilution for our shareholders to absolutely continue to accelerate Kalera's growth, but to bring us back into the U.S and to have access to the U.S capital markets, which have all kinds of advantages for our existing shareholders and for beyond for future shareholders as well.

Vonnie Estes, PMA:
Well, let's pivot and talk about breeding one of my favorite subjects. So in February of this year, Kalera acquired Vindara, a company developing seeds specifically for the indoor vertical farm environment. So first let me welcome Jade. Jade Stinson is the President and Co-founder of Vindara. So welcome, Jade. Thanks for being here.

Jade Stinson, Vindara:
Thank you. Great to be here.

Vonnie Estes, PMA:
Please tell us a little bit about your background and how you came to start the company?

Jade Stinson, Vindara:
So up until the past few years, I've spent my time between University and Corporate America. At school, my PhD focus was to work on a project to protect the British potato from quarantine diseases, which really kicked my interest in agriculture. From there, I joined BSF within the Performance Chemicals Division here in the United States, and then relocated to the Research Triangle Area to head up Global Operations for the Professional Specialty Solutions Business within the Agricultural Products Division.

Jade Stinson, Vindara:
After 10 years in the company, I decided to join a venture development accelerator as the Chief Science Officer also known as the VP of Will it work. So from there, I sourced and scouted a number of deal flow. I mean, we looked at probably 400 different companies and technologies to really try and find transformational technologies that would ultimately benefit the food system. And it was within the accelerator that we founded Vindara.

Vonnie Estes, PMA:
Ah, okay. Yeah. Another way I look at that is how many miracles would it take to make this work? And I always stop at "If it takes three, it's probably not going to happen." That's really interesting. So when did you realize there is going to be a need to breed for indoor crops in mind? And what did you do first when you started thinking about that?

Jade Stinson, Vindara:
Yeah, after doing diligence in the sector, we learned quickly and we knew straight away that the off the shelf varieties have been bred for very different environments these outdoor or greenhouse environments. And when you think about the phenotypes or the characteristics of the crops, this is a direct result of the genotype and environment interaction. So these highly controlled environments are actually great for predicting the phenotypes of crops. So now we can actually focus on output traits and not the input traits relating to developing varieties around disease and durability.

Jade Stinson, Vindara:
So the first thing we did was we went to the market and we asked different players and we needed targets. So we had to develop varieties that would benefit the growers directly as a drop-in solution. We didn't make a decision on the variety or the type or the traits, we listened to the market and that's what we run after.

Vonnie Estes, PMA:
And which crops did you start with then?

Jade Stinson, Vindara:
So our first crop program is the obvious one, which is lettuce. But if you think about lettuce, it's very segmented and you've got Full heads, Teen leaf, Baby leaf, Cut leaf in terms of the structure. And then you've got the different species. So you've got Romaine, Butterhead, Crisphead, Oak leaf et cetera. So that's where we started. We ran hard after Romaine variety, and then we introduced a Basil program followed by a Spinach program. And right now we have nine active crop programs.

Vonnie Estes, PMA:
And what technology do you use that makes this go faster within the company? What makes your ability to breed faster, to get different varieties up quicker?

Jade Stinson, Vindara:
Yeah, so we're accelerating the traditional breeding methods. Our speed is what differentiates us. So I'll keep the specifics a little bit confidential, but what I can say is that we leveraged genetic diversity and we're only able to move as fast as we can due to advances in various different types of technology. This predominantly is around genomics and deep machine learning, having the computing power and analytics.

Jade Stinson, Vindara:
And so we heavily leverage these to get our products to market unprecedented speed. We'll have commercially available seed at large volumes in September so we've proved out that we can get there in that time. And our ultimate goal is to really democratize the breeding selection process even down to the consumer level.

Vonnie Estes, PMA:
Oh, wow. So do you plan on using some of the new molecular breeding technologies like Gene editing as consumers get more comfortable with the technology?

Jade Stinson, Vindara:
So what we'll say here is the traits for anything code is Multigenic. So you need to understand these, the computational breeding, which is a part of the data that we gather in our development process. So the same targets can actually be used for Gene editing. So while it's not core to Vindara, we do partner with a University on a CRISPER project on one of our proprietary varietals.

Vonnie Estes, PMA:
Oh, that's great to hear. Yeah. It'll be interesting to see this move forward as a good tool when the industry gets comfortable with it.

Jade Stinson, Vindara:
Yeah. Absolutely.

Vonnie Estes, PMA:
So how opening back up to the conversation here with Daniel. How did Kalera and Vindara meet? Did Kalera realize the power of genetics? Other companies aren't doing this, so how did this come about?

Daniel Malechuck, Kalera:
I'd like to say it was something as amazing as that but actually goes back to my undergraduate studies. I went to North Carolina State University and had gotten a call to donate money to the school, which I've done in the past. And any ways they said, "Hey, have you heard of this company, Vindara, they're a startup coming out of NC State and they're working in this arena and maybe you should connect with them and have a call." So it actually was a result of Dr. Stinson was coming out of an NC State incubator. And so we got connected that way over a year ago now. And I think so it gave us the opportunity to connect with Jade in an early stage. And our team started very quickly working with her and testing the seeds that she had generated and going through that.

Daniel Malechuck, Kalera:
And so the conversations continued over the course of several months and our teams got together and we were seeing great results from the seeds that Vindara had developed. And so it just became more and more important for us to secure up the supply chain of what we think is one of the most critical steps to having incredible product, which is the seed obviously. And so if you could find a way to increase yield and shorten, grow time by having seeds that are specifically tailored for indoor farming, and you could secure that, then we moved very quickly. Once we realized the power of how incredible what Vindara had to offer was.

Vonnie Estes, PMA:
Yeah, that's great. I think a lot of people don't realize the power of genetics, especially in an environment like yours, where you can control so many other things. And so what's left to control is the genetics to really work the best that it can in that environment. So why did you decide to acquire the company instead of partner?

Daniel Malechuck, Kalera:
Well knowing how quickly Kalera is growing and going to continue to grow for the future. Seeds, number one, they're a significant expense as part of your cost to goods sold, but number two, to have that ability to guarantee that supply chain, to continue to develop and Kalera is always committed to being the leader in this space. And that's no exception when it comes to having the only company in the world that does what Vindara does. And I think it became clear that this could be a very strong play for Kalera to continue to focus on growing great plants and continuing to have the ability to have that affordable function of our plants remain present for us as we go forward.

Vonnie Estes, PMA:
And for you Jade, why did you decide to be acquired instead of Partnering?

Jade Stinson, Vindara:
I think we have a shared vision on, we want everyone to have access to affordable food. And we really loved that about Kalera. We saw their great growth strategy and we were really pleased to partner with them.

Vonnie Estes, PMA:
So what trait, you talked a little bit Jade about what traits you are focusing on, but can you talk a little bit more about how soon the consumer will notice a difference with new improved traits and what traits you're looking at for the future?

Jade Stinson, Vindara:
I think initially it's agronomic. Right? It's getting to improving these unit economics, which everyone always points to in the sector. So how can we make great seeds and actually great economics for the growers? We focused a little bit on texture and color, but I think the next iteration, now we've kind of got our tuned in, pedigrees, I'll say is really around dialing in the nutrient and the flavor profiles, which at that point you'll see a direct impact to the consumer.

Vonnie Estes, PMA:
It is interesting to hear the focus Kalera and Vindara have on breeding for indoor environments. Outdoor plants are bred for qualities necessary for outdoor environments, such as drought, flood and insect resistance, traits not needed in indoor growing. Breeders for indoor AG are focusing on traits such as rapid growth, performance in low light environments and manipulation of plant stature. In addition, novel crops can be bred for flavor and nutrient density.

Vonnie Estes, PMA:
Germplasm developments have the potential to expose consumers to a variety of different products with additional desirable traits. Kalera's fast paced growth and dual focus on food service and retail. We'll get these products in front of consumers quickly.

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

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Description:
The development of agricultural biologicals - biostimulants, biopesticides and biofertilizers - is growing as global agriculture looks to move towards more sustainable ways to boost yields and new methods of crop protection. Growers are increasingly looking to agricultural inputs based on microbes to both reduce and complement the use of synthetic pesticides and fertilizers in their fields. Biological controls have been around for years, but represent only 10% of fungicide and sales and have not yet made a dent in nutritional inputs and skepticism still remains.
 
Speakers:

• James Pearce,
  Chief Scientific Officer – Boost Biomes
• Karsten Temme,
  CEO — Pivot Bio
• Dr. Brynne Stanton,
  Head of Strategic Innovation — Joyn Bio

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

Vonnie Estes, PMA:
Today's podcast is powered by our sponsor AgroFresh. AgroFresh is a global leader and ag tech innovator in the produce industry with a mission to prevent food loss and waste, and to conserve the planet's resources by providing a range of science-based solutions, data-driven technologies and high touch customer services. AgroFresh supports growers, packers, and retailers with solutions across the food supply chain to enhance the quality and extend the shelf life of fresh produce. With decades of experience across a range of crops, AgroFresh is powered by a comprehensive portfolio that includes proprietary solutions such as plant-based coatings, as well as a complete line of packer equipment that helps improve the freshness supply chain from harvest to home, visit agrofresh.com to learn more. AgroFresh, we grow confidence.

Vonnie Estes, PMA:
Today's topic is biologicals. This is a recorded webinar focusing on biologicals and their viability as an alternative to conventional inputs. What you will hear is one of the most candid conversations I've been a part of on the promise and current status of biologicals as pest control and biofertility. Our guests are experts in the field. We are joined by James Pearce, Chief Scientific Officer from Boost Biomes, Karsten Temme, CEO of Pivot Bio and Brynne Stanton, Head of Strategic Innovation at Joyn Bio. We will jump into the conversation with James Pierce of Boost Biomes describing his company and their products.

James Pearce, Boost Biomes:
We are a startup microbials discovery company based in south San Francisco and we have 16 employees. And so what do I mean by a microbials discovery company? Well, we discover and deliver live microbes to serve as crop inputs. And that can be the full spectrum from row crops to a specialty crops, such as fruit and vegetables. And indeed it's a specialty crops that are our primary focus. Within that, we're focused on bio control. So these are live microbes that prevent the infection of the fruit and vegetables by pests, bacteria and fungal disease causing agents. And those of you on the webinar can see one of our microbes in action here delaying gray mold on raspberries. And so, some of you may know there are many biological companies out there selling microbes and other biological inputs for agriculture, indeed two excellent examples are with me on this panel. What makes Boost Biomes different?

James Pearce, Boost Biomes:
Well, if I use bio-control as an example to explain this, traditionally we've thought of bowel control in a binary sense, and that you have a pathogen in the soil or the roots or the leaves, then you have a plant and the pathogen causes disease on the plant. And then you introduce a microbial inoculant, which inhibits the pathogen and the pathogen goes away, and the disease goes away. Well, if only it were that simple, these two species do not exist in a vacuum. There are millions of other bacteria in these environments, in the soil and the roots, and fungi, and collectively we call that the microbiome. And this is a term that you will have no doubt heard in other spheres beyond agriculture. And within that microbial community, that microbiome, there's a pretty much infinite number of conversations going on between bacteria and fungi, and some positive conversations.

James Pearce, Boost Biomes:
There are synergistic relationships between microbes that help each other's growth and there are antagonistic microbes that actively inhibit each other, and collectively these interactions we call the interactome. And what makes Boosts Biomes discovery platform unique is that we take into consideration these interruptions when we discover and deploy microbes. And what does that look like in the lab? Well, I haven't got time to go into the details, but please follow up with me afterwards, if you would like to. We basically recapitulate that interactome in the lab. And in doing so, we can identify and isolate synergistic pairs or sometimes consortia of several microbes that are synergistic, they support each other's growth. And we believe, and this is sort of the premise of our technology, that if you subsequently deploy those consortia back into the environment in which they came, they're more likely to be persistent and robust and therefore active when faced with the many biotic and abiotic stresses that they come up against in the environment.

James Pearce, Boost Biomes:
Think of it as sort of going out into the world, supported by a sycophantic entourage of friends. You're more likely to survive with that group than a loan. And then subsequently you can screen that consortia for any activity you're interested in that relates to crop health. And as I say, our primary focus is on bio control. And I think this premise of robustness and persistence and consistent performance, which has been a bane of microbials over the years, and I'm sure we'll talk about that later. I think because our microbes have proved to have such broad applicability across a wide variety of environments, I think it is testament to this hypothesis. We can control pests in the field, we can control pests in the packing house, along the washing and spraying lines, and we can control pathogens in the clamshell all the way up to the supermarket.

James Pearce, Boost Biomes:
We can control fungal pests, bacterial pests, nematodes, and interestingly, we have products that get inside the crops where some pathogens lock, for example, classically Panama disease of banana we've shown we can get inside the fruit and control that disease which is a major breakthrough. Also a testament for synergistic microbes is the fact that all our microbes seem to play nice together in the fermentation tank. So although we have multiple microbes, we can co-ferment them, which is obviously has a cost of good implication. And also because they're robust and persistent, they seem to do well on the shelf and we have two year shelf life products.

James Pearce, Boost Biomes:
So that's all I have time for. I'm afraid a brief introduction, please reach out to me, this email address [email protected] I'll be happy to answer any questions and getting into any discussions if you'd like to partner with us. And now I'm looking forward to hearing from Karsten and Brynne and getting into discussions. And I'll be defending the corner of the wild type native microbes against the engineer cousins from across the bay.

Brynne Stanton, Joyn Bio:
My name is Brynne, and I am the Head of Strategic Innovation here at Joyn Bio. Today I'll talk to you a little bit about Joyn, our mission and how we're engineering next generation biologicals. And throughout the course of the next few slides, I'll very quickly tell you a little bit more about what that means. So I still consider myself in fact, to being new to the ag space. I've been with Joyn for about four years now. And given that the microbial complexity and content of soil still truly amazes me. For instance, it's estimated that a single teaspoon of soil contains billions of microbes. Now over time, microbes and plants have evolved to exist in a mutually beneficial relationship with respect to one another. In this relationship, plants provide microbes with food in the form of carbon. And in exchange for that food, microbes provide plants with essential nutrients. These nutrients are so important to crops that they go out of their way to cultivate and maintain their microbiome as evidenced by the fact that they release up to one-third of their photosynthate into the soil.

Brynne Stanton, Joyn Bio:
At Joyn we're looking to harness this long withstanding naturally occurring relationship that takes place between plants and microbes, but to take this even one step further by engineering our microbes to provide even greater benefits to our target crops. I'll walk you through at a very high level quickly, just what we mean or what this process entails of engineering microbes. So on this side, I've likened the process to the plant biotech model, which is likely familiar to many of you. In this model, you take a beneficial trait and leverage biotechnology to insert that trait into a crop. The resulting crop then produces that beneficial trait whereby it confers protection to the crop.

Brynne Stanton, Joyn Bio:
At Joyn, we've replaced the crop with a soil microbes. So specifically what we're doing is using biotechnology to insert this beneficial traits into a highly characterized soil microbe that we've confirmed to be highly associated with our crops of interests. It's that resulting combination of the soil microbes with the beneficial trait that constitutes the engineered microbe. We then apply that engineered microbe to our crop of interest at which point that engineered microbe then confers that benefit to the crop. And so we really think about this as the microbe or the engineered microbe as the vehicle that's then delivering these traits to the target crop. We refer to what we're doing at Joyn as engineering better microbes for agriculture, because we're able to go in and really increase the levels of the active ingredient or the beneficial traits, or also provide access or exposure to that beneficial trait over a longer period of time. And so what you get by combining those two things is more consistency with our engineered microbes for agriculture.

Brynne Stanton, Joyn Bio:
So if you haven't heard about Joyn, we are in fact, a joint venture between Gingko Bioworks and Bayer Crop Science. Even though we are a joint venture, we are wholly independent from our parent companies. We're also a bi-coastal company. So we have a presence, both in Boston and in Woodland, California. In Boston, we are located approximately to Gingko's high-throughput organism engineering foundry. So that's where the bulk of the microbial engineering work takes place. And then conversely, in Woodland, we're located within a Bayer facility. So of course that's where the majority of our implanted work takes place.

Brynne Stanton, Joyn Bio:
Having the parent companies we have provides us with sort of the best of both worlds. So through Gingko, we're able to have access to sort of breeding edge synthetic biology tools, and through Bayer, we have a lot of exposure to considerable commercial ag expertise, as well as expertise in the field of ag biologicals.

Brynne Stanton, Joyn Bio:
And then the last thing to mention is that we've been around since 2017 and the company started at that time, with an a round of over $100 million. Before I hand it over to Karsten, the last thing I want to share with you is the four key areas where we are applying or looking to apply our technology. So our technology is focused right now, mainly on crop protection and sustainability, but we could also envision using our technology in areas of crop quality, and we'll talk about that a little later during the Q & A, as well as crop efficiency. We are right now, most active in the areas across the top row. So in crop protection and sustainability, and it's our bio fertility use case that falls under this umbrella of sustainability, which I'm sure we'll talk about a little later today.

Brynne Stanton, Joyn Bio:
And then the last thing to mention is that we are primarily focused or only right now focused on row crops. So we're taking these areas and applying them to row crops, and that would be mainly corn and soy. And so that sort of a whirlwind intro to Joyn Bio. And with that, I will stop sharing and I am looking forward to sharing additional details throughout the Q & A.

Vonnie Estes, PMA:
Thanks, Brynne, let's turn it over to Karsten.

Karsten Temme, Pivot Bio:
Hi. So my name is Karsten Temme, one of the co-founders at Pivot Bio, and I'll start by sharing a bit about the cause that motivates my team, that drives us. And that's, I probably shared with many of the folks on our webinar and podcast. And that's, we want to see every farm out there be a lot more profitable and have the kind of economics and business sustainability. That means there's longevity, that operation gets passed down to the next generation. And then ultimately, the ripple effect is that we've got a more resilient agricultural system than we have today, better for the health of the soil on that operation, better for the broad environment around us. And just ultimately, the connection between us all gets a little bit shorter.

Karsten Temme, Pivot Bio:
And the passion I have, the passion my team has is to contribute towards that cause through the fuel that powers the nutrients every crop needs, and that's rethinking what it means to use fertilizer and maybe coming up with a little bit better way to produce the nitrogen crops need and deliver it directly to the crop in a way that doesn't have some of the side effects that using fertilizer has had across the last century.

Karsten Temme, Pivot Bio:
And our focus, like Brynne mentioned, at Pivot, we are focused on the broad acre row crops, and really rethinking fertilizer for the main cereal grains of the world. It turns out that about half of our nitrogen fertilizer is used on corn, wheat and rice. So the impact we want to have is to make that better for a grower. So most of the growers in the US who are in the Midwest planting a corn, soybean rotation, the dilemma they face is on average, about half of the fertilizer that gets applied every year doesn't actually end up in the crop. It's not the fuel that allows the crop to have sufficient nutrients to build the DNA, the protein, and ultimately the grain that drives their economics. And so that nitrogen is lost to the environment. It's either turning into nitrous oxide as a greenhouse gas or it's running off to pollute our waterways.

Karsten Temme, Pivot Bio:
And the challenge is that fundamentally moving big, bulky tons of fertilizer around is just inefficient. It's hard to apply it to a field at the time when the crop needs it, and we're forced to bank inorganic nitrogen in the soil. It's like the wrong place to store nitrogen. So the more we can remove inorganic nitrogen from the equation, the more we can produce it on demand for the crop, it has benefits for the economics of that operation, it has benefits for the sustainability of our environment, and ultimately, it's going to lead to a more stable agricultural system.

Karsten Temme, Pivot Bio:
So what Pivot has done is go back to nature for inspiration. All of the legumes of the world have symbiosis with microbes that live in their roots breathe in the nitrogen gas from the atmosphere and turn it into ammonia, a form the plant can use. And that symbiosis, it actually exists for all the plants on this planet. It's just not as sophisticated, it's not as evolved as legumes for the crops like the cereals. So what happens is that symbiosis is a looser relationship between the soil microbes and the plant. And when we as humans invented fertilizer, 120 ish years ago, we disrupted that symbiosis. We forced those microbes essentially into hibernation. And the key enzymes that carry out that process of turning nitrogen gas in the atmosphere into ammonia, those have been dormant inside of the genome of these microbes.

Karsten Temme, Pivot Bio:
So what Pivot does is we rediscover those microbes. We reawaken those genes, the enzyme that's critical to that process. And we package that up into a product that's easy to use. So it simplifies the work on the farm. It shrinks the entire Haber-Bosch fertilizer factory into something that is living and breathing and working on a daily basis to spoonfeed the plant its nutrients, and ultimately it's packing all of that nitrogen that's produced into the plant instead of storing it in an inorganic nitrogen form in the soil to be lost to the environment.

Karsten Temme, Pivot Bio:
So Pivot has spent the last decade developing that breakthrough and bringing it into the marketplace. We've also built a business model that connects us directly with growers. So we sell our product to our customers through independent dealers across the US today. We've been serving our customers for three years now across millions of acres in the US. And we really see it as just the beginning of something different, something that brings us a bit closer to our customer, and ultimately through the benefits to the farm, a bit closer to all of us as consumers on a global stage. So what we've started is something that our aspiration is to grow to be a global company that serves farmers across the world. Primarily is going to be focused on the major cereal grains, and then partner with other types of companies to be able to bring products in the market for different types of crops. And our goal is to be a a partner across agriculture for decades and decades to come.

Karsten Temme, Pivot Bio:
So I'm really looking forward to today's conversation around biologicals, happy to talk on nitrogen to any degree folks want, and really jazzed up about the conversation.

Vonnie Estes, PMA:
Great. Thanks. All right. If everyone can turn their cameras and mics back on and we can start our discussion. So hopefully that was helpful for all the listeners to hear about the companies and their products and how they're approaching biologicals and give it a little background. So thanks for that. So as all the speakers mentioned, there are benefits for using biologicals. There's a lot of benefits over some of the traditional inputs. So the big question of today is, are biologicals a viable alternative to conventional inputs and pest control and fertilizer? They've been around for years, but represent only 10% of fungicide sales and are not making a huge dent yet in nutritional input. And skepticism still remains among a lot of growers. So why is this, and how are your products different and how are you doing this differently that's going to make an impact. James, why don't we start with you?

James Pearce, Boost Biomes:
Yeah. I think in general, inconsistent performance, as I mentioned, shelf life, traditionally they haven't last a very long on the shelf and there can be compatibility issues. So you might have to ask to grower to adopt a separate practice. I think it's an unfair, it's not a level playing field either. I don't think the agricultural industry or the food chain has been asked to pay the true price of chemistry. And so when you have a more sustainable solution, you're up against something that's cheaper in terms of money out of pocket, but from an environmental perspective is a lot more there. And therefore, I think fixing that will go a long way towards doing this. And I think outside of the bio-control space, there is no requirement to demonstrate efficacy. So you can sell something on Amazon tomorrow with no data. And that has led to a lot of snake oil out there and that has solid the reputations of decent products that I think are produced by at least the three of us. And we all suffer for it.

Vonnie Estes, PMA:
Brynne.

Brynne Stanton, Joyn Bio:
Yeah, sure. We would love to build upon that. So I think it's important to keep in mind the intended use of biologicals and the goal. And I think the goal has always been for biologicals to allow for a reduction in the use of conventional products, but not serve as an all out replacement. So I think it's really important to keep in mind the specific context for under which their use is recommended.

Brynne Stanton, Joyn Bio:
So, first and foremost, I think you hear a lot of people mentioned that biological should be used as part of an integrated pest management program. So one input of many to control pets, and then taking that one step further. I think a lot of cases where you've biologicals to be quite effective are typically in spaces where they're controlling low to moderate disease pressure. So I think it's really important to keep these things in mind when you start talking about their efficacy. And I think once you start to get outside of this space of low disease pressure or using in combination with a whole suite of products, then you start to see some of that inconsistency and the bad rap that biologicals have come to be known for over the years creep in.

Vonnie Estes, PMA:
Karsten, do you have anything to add to that?

Karsten Temme, Pivot Bio:
Maybe I'll take a little bit different approach and that's put on my hat as an entrepreneur and say, why do I see a customer's eyes light up in some cases, but not others. And I think it comes down to better. And for a long time, I don't think biologicals have been better or able to deliver something that an incumbent product can deliver. And the real power of a new innovation to captivate a customer's excitement is because it can do something that nothing else before has been able to do. And I think that's now possible because of so many new dimensions of science or technology that are coming together in a bunch of companies and beyond just the three representative today. And so, we think about product design at Pivot as being able to get at the Achilles' heel of the thing we're trying to disrupt. All the things that classic inorganic chemical fertilizers can't deliver today, that's really the thing that if we can design a product to solve, it translates to happy customers and a growing use of our product.

Karsten Temme, Pivot Bio:
Similarly, I've been inspired by the team at Provivi and what they're trying to do to scale up the use of pheromones as a bio control mechanism. And really being able to have a different way of looking at what it means to be precise and accurate, something that really hasn't been possible at the same scale with maybe the classic uses of chemistry.

Vonnie Estes, PMA:
So kind of keeping with you, and really what customers want and what makes them happy. So nitrogen is pretty cheap and it's pretty effective. So what is the incentive to change? And do you see legislation is going to force the issue for that?

Karsten Temme, Pivot Bio:
I think that innovation is best when it stands on its own outside of legislation. And for us, while fertilizer may seem cheap because it's a commodity, it's still often either the biggest or the second largest expense on broad acre row crop operations. And the challenge is much bigger than just the cost. It's the unpredictability of the performance of that product. Everything's transacted today in terms of the number of pounds and dollars you spend to apply that nitrogen to the field, and nobody holds the fertilizer companies to account for how much of that fertilizer actually ends up in the crop, how much nitrogen is there to fuel the harvest, and that's the equation that we're trying to solve. So when you buy nitrogen from us, it all ends up in the crop.

Vonnie Estes, PMA:
Go ahead, James.

James Pearce, Boost Biomes:
Sorry, I'm going fly the flag for Pivot. I think one of the major issues with nitrogen is that generally speaking, you added all of the beginning of the season when the crop doesn't actually need as much. And it's actually later on in the season and the Pivot microbe would still be there and it's impossible to get more nitrogen while it's hard to get nitrogen to the crop mid season. So I think then an appeal of the Pivot technology is getting nitrogen to the crop throughout the season. If you need to add me to your sales team Karsten just say.

Karsten Temme, Pivot Bio:
I think that my parting shot is always, I love to be able to find everybody who has a like-mind towards the bigger goal, and we'll take you on the team any day and we'll load your praises throughout as well. So thanks.

Brynne Stanton, Joyn Bio:
James has got tied a side gig. I love it. So I did want to add, so there are years when nitrogen is cheaper, but I think one of the things that doesn't go away is that it's not in fact cheap for the environment. It's quite taxing on the environment to be continually producing at an industrial scale, the levels that we're producing. So I think one of the biggest incentives to change is what you would get as a concomitant reduction in both the production of greenhouse gas, but also our reliance on fossil fuel. So if we're even able to reduce just a teeny bit the amount of nitrogen fertilizer that's industrially produced that we're providing to our farm lands, this should go a long way in just leaving the environment in a much better state.

Vonnie Estes, PMA:
Well, I think, of course, all of us listening agree with this, but I just wonder if it's unproven technology in the grower's mind and they're maybe having to pay more, or it looks to them like they have to pay more, or just changing practices can be costly, the time involved to change your practice and to try a new product and worry whether it's going to work or not. We're all kind of thinking, okay, in a world of full cost accounting, when we're really looking at what's happening to the planet, of course, this makes sense, but when you're out there, Karsten, when you're talking to customers, are they willing to take this leap and say, okay, I'll try this even though I know nitrogen works well enough and I've been doing it forever? How do you make that sale?

Karsten Temme, Pivot Bio:
I'll try to frame my answer so it's maybe then applicable to some of the other types of applications for biologicals. One of the things I think that's possible today more than ever in the past for biologicals is we can all talk about the mechanism of action, get into the details on why something works and why this new innovation or product can deliver exactly the benefit we all claim. And that is a great spot to be in.

Karsten Temme, Pivot Bio:
One benefit, I think for Pivot is Agronomy 101. Every farmer has talked about nitrogen fixation for 100 plus years. It's not a technical subject that we need to educate customers about, it's something that's near and dear to everybody that we interact with. And so for us, it's really just delivering the proof that we have broken through on what's been this elusive holy grail. And once we can demonstrate that proof for each customer, the flood gates open, the use of the product across all their acres follows very rapidly because it's a reduction in the amount of work required to manage new nitrogen. It's an added piece of mind. It's all these other things about just the equation of nitrogen becomes easier. And I think that is really what we see is driving the flywheel for us.

Vonnie Estes, PMA:
Biologicals for the most part are better for the environment, decreased nitrogen runoff, improve soils and result, and fewer chemical applications. However, because many of the microbes used are genetically engineered, they cannot be part of an organic farm. Here the panel has discuss what this means to their companies and the products.

Brynne Stanton, Joyn Bio:
I think organic farming specifies that your agricultural products have to be produced in a very specific way. And one of those specifications is that these products can not be produced with any engineered components. And so by definition, right now, Joyn microbes cannot be used in a process for something that's destined to be organic. They just don't qualify today.

James Pearce, Boost Biomes:
Yeah, that's one advantage that we have. We are all organic wild type made of microbes. We haven't mentioned it. That said, it's still very hard. When we ferment and formulate our microbes in order to be organic, all the ingredients we have to use have to fall under a list called OMRI. Don't ask me all the acronyms down. So I would guess the O is organic and the I is ingredients and you can make the other two up, but basically that's very restrictive and inexpensive. And I feel for Brynne and Karsten because ultimately, engineered sygenics, gene editing, you can call it what you will, what's frustrating, at least for me is, the people that control what the consumer understand as organic, basically the NGOs who basically make the rules as to what is and isn't organic, no matter all of our best intentions. And so we can talk about EPA regulations until we're blue in the face, but ultimately if you can't get non-GMO project on your label, then you're kind of screwed, no matter how hard we try at our end.

Karsten Temme, Pivot Bio:
Thinking about kind of the problems to solve in organic, the challenge with organic today is so many of the inorganic fertilizers used in broad acre conventional farming can't be applied into that organic system. So there's really a shortage of routes to get nutrients into that field. And so what we've done at Pivot, the way we structure our company is we want to be able to push the boundary of knowledge available to all of us. We want to be able to bring those innovations to market as fast as possible. And today, we've put a constraint on our science test to say, we want to avoid making products that are transgenic, that would fall under, I think what the public has perceived as GMO today. And the way it's constrained our product design is it means, in some places we dig into our toolbox, we use things like gene editing. Those are products that won't qualify for inorganic label. And then we've got products in the pipeline that are built with more classic methodologies that do qualify.

Karsten Temme, Pivot Bio:
And I think the goal is ultimately to say that the big challenge is we don't have as many tools for nutrients in inorganic operation as you do in conventional. So we just have to really get to the heart of what's the allowable set of tools and then apply those to microbes, which are the wonderful vehicle for doing things that you just can't in any other way. So I think the conversation maybe over time could be, how do we better meet those long-term goals for sustainability or performance, and does that toolbox of what's allowable expander or not?

James Pearce, Boost Biomes:
A question I would have for Brynne and Karsten is, given the majority of your product is consumed by chickens and cows, is organic less of an issue for you than it would be for Boosts who are basically selling products that gets sprayed onto raspberries, strawberries, et cetera. Is that an ignorant statement?

Brynne Stanton, Joyn Bio:
No, I don't think so at all. As I mentioned, we're focused on row crops where for the most part engineering is widely accepted tool for row crops in the United States.

Vonnie Estes, PMA:
So this is a question I was going to ask later, but for Karsten and Brynne, do you see applicability to the produce industry? I know what your focus is right now, and I understand why, but do you see, as you move forward that you would bring products into the produce industry in fruits and vegetables?

Brynne Stanton, Joyn Bio:
I think the technology itself lends itself quite well to fruit and veg. I think the challenge is one that we've already hit on, which is this issue of public perception and sort of meeting a pretty drastic shift there, where people are open to biotechnology and engineering for food. I can look to pharma where biotechnology and engineering is perfectly acceptable. So the question is how can we sort of shift a little bit more towards pharma and deal with some of the stigma associated with engineering when it comes to food? And if we can make progress and headway there, I can think of a bunch of different avenues, like shishito peppers, where they have just the right level of heat. So you're not playing Russian roulette every single time you eat one or something of that nature. You can think of a bunch of different ways to leverage engineering for nutrition or quality or taste.

Brynne Stanton, Joyn Bio:
So I think absolutely, Vonnie, but we would need to see some shifts in the perception. And I think that really just starts with hopefully who's benefiting, why this is beneficial and just talking much more publicly about it.

James Pearce, Boost Biomes:
Can I jump in? So those consumer-based traits are obviously attractive, but how would a microbe effectively impact those? You've got Pairwise leading the way on genetics for taste and nutrition and flavor. It's a harder task for a microbe to do that indirectly, wouldn't you say?

Brynne Stanton, Joyn Bio:
Well, I think for us colonization is key. So it just depends on where in the microbe that, oh, sorry, where in the plant that microbe is colonizing, where it's localizing within a particular plant. And so if you're getting into the right environment then, or within the right compartment within the plant, then you could start to impact some of these qualities. But yes, I see on principle how that might be a little more challenging to grasp.

Vonnie Estes, PMA:
So the microbe, in that case, you would have some kind of microbe that would colonize the plant that, would it actually change the genetics of the plant or how would it have that kind of effect? This is very cool.

Brynne Stanton, Joyn Bio:
Sure. So I think there's a bunch of different ways that you could do this, but microbes themselves wouldn't be changing the DNA of the plants, but they would be inhabiting parts of the plant and producing molecules that give you an interesting flavor profile or something of that nature. That would be one way to do it. You could also sort of spray them on where they're then producing these interesting flavor profile molecules on the surface of the plant. So there's a bunch of different ways to look at this and could be really exciting. But again, I think whenever you start talking about food and engineering, there's a lot of concern that comes along for the ride.

Vonnie Estes, PMA:
Right. Now, I think those of us in produce in this area are really working at communicating with consumers and making sure we bring the consumer along, but there are so many exciting tools and ways to get at how do we adapt to climate change and how do we work with nutrition and flavor in these areas. So we can add microbes as some of the possible tools. That would be great.

Vonnie Estes, PMA:
So I have another question. Could the three speakers speak to persistence in the field or on the shelf. And then specifically for James and the same question, how does the infinite number of molecular conversations that they characterize in the lab shift over time, both in the field and on the shelf?

James Pearce, Boost Biomes:
Okay. I'll take the first one. I didn't seed this question I promise, but basically that's the beat of our, that's our premise because microbes deployed are as consortia. They are self-supporting synergistic consortia, and therefore, we've got evidence to show they persist longer. Okay. Not in the field, that's a very long, hard experiment, but in terms of colonization on roots, et cetera. And how the interactions change over time, they will, that's really all I can say. We know the microbiome of a cone roots store relief, whatever it is, changes over the course of the season, because the plant is giving out different exudates, both on the surface and on the roots. And that will affect the microbiome, which in turn will affect who's talking to who.

James Pearce, Boost Biomes:
All I can say is that we know our microbes persist as an endophyte inside the plant for up to 45 days. What happens after that, I don't know. And frankly, once the food has been harvested, we don't really care. If we can get the fruit off the field without any fungal disease or if we can delay the onset of those horrible furry strawberries you find at the bottom of your clamshell, then our job here is done and we can move. That's really all we can claim to achieve in the moment.

Vonnie Estes, PMA:
Karsten or Brynne, any comments on persistence in the field?

Brynne Stanton, Joyn Bio:
Yeah, I can touch on that quickly. I think for us, all of our microbes that we're working with have been bioprospected from the field, are existing naturally already in close association with our crops of interest. As far as persistent studies, from a regulatory perspective, we are required to do those studies or we're asked to do those studies. And so we're conducting them right now. Joyn is still a relatively new company, but we've got, I think our second year of field trials. No, in fact, third under our belt. So persistence is still exploring that and can share more later.

Brynne Stanton, Joyn Bio:
In terms of shelf stability, this for us is really key. And that's why this decision of the microbial canvas that you start with is so critical because we really want to be starting with microbes that are shelf stable for a number of years, that can then just seamlessly fit into a grower's process.

James Pearce, Boost Biomes:
I think it's an interesting answer. So how you regard persistence is a good thing or a bad thing depends on what it is you're putting out there. A regulatory person would say, that's a GMO microbe. I don't want it to persist. Whereas I take the question of, well, this is a wild type microbes that came from the field. So we want it to persist, and that's what makes out good. We're not motivated to try and get, we don't want a microbes to go away. It's naturally part of the environment. So the longer it's out there doing its thing, the better. It's an interesting take on whether you think persistence is good or bad.

Karsten Temme, Pivot Bio:
Well, and I'll add on a layer to say for us, it's all through the lens of performance. The microbes we work with are part of that native microbiome with any of the crops that form our product portfolio. They start in small numbers when the seed is planted, they grow, they multiply, they flourish as the root system is developed and more of the photosynthetic has exuded the sugars to feed them. But once the crop is harvested, they die off. And I think that natural life cycle, the symbiosis with the plant is perfect in the way we design our product, because it means that we have the most number of microbes available to produce nitrogen for the crop at just the time the crop needs the most nitrogen.

Karsten Temme, Pivot Bio:
And to James's point earlier about the challenge with using inorganic nitrogen as a fertilizer is, they're in the field at the wrong time and the microbiome is able to produce at just the right time. And so, I think persistence maybe is just the first layer of thinking about microbes can be present or absent at different densities. They can change that relationship with the crop throughout a growing season and that can be a very powerful design tool in tackling some of the problems we all face.

Karsten Temme, Pivot Bio:
And so for Pivot, I think we've done a lot to build a model around those broad acre row crops, the cereals, and the technology is applicable into produce. The challenge is they are going to be slightly different. And that's where I think we need as much by way of partners for go-to-market, as we do for really fine tuning what the microbes can do on a day-to-day basis for the crop that gets at the limitations of using inorganic fertilizers today.

Vonnie Estes, PMA:
One of the questions I wanted to ask is... So another thing that's been talked about a lot recently is around carbon neutral foods, carbon sequestration, and carbon credits. Do any of you see how biologicals could capture some of this value that's being thrown out and talked about in carbon farming?

James Pearce, Boost Biomes:
This is a hot one for me. Technically, yes, microbes can suddenly be a big part of the carbon farming world, but commercially, there is just not currently a powerful word. All the carbon credit systems at the moment are based on models, and those models are built only on practices that have been ongoing for at least 10 years. And that basically leaves you with cover crops and no tail. So if you had a microbe that you said, well, I put all this organic matter in the soil because I've got bigger roots, great, but you're going to be taking carbon measurements for the next 10 years before anyone's going to give you a carbon credit.

James Pearce, Boost Biomes:
I also think that putting organic carbon into the soil is a very short-term fix because what happens to organic carbon, it gets respired and therefore releases CO2 into the ground. I think a much more intelligent play would be to mineralize carbon and microbes can certainly do that. I also think it's very tough at $15 a ton of carbon, I think to try and persuade a grower to change their agronomic practice at that price. I'm told it's just not viable. It needs to be in the $50 to $60. And so do we need tax incentives to get people to do that?

James Pearce, Boost Biomes:
And I'll be interested to know what my two nitrogen replacing friends on the panel will think about this. There's currently no nitrogen trading system or any, in fact, any model that will give you a credit for inputs. So, even for Boost, were replacing chemistry with a biological, there is an input to play there that is relevant to the greenhouse gases and yet there is no way of capturing that. I'm told they are developing models that will allow for other inputs and other practices, but right now anything you see on a website claiming X bucks an acre for carbon credit is really noise right now.

Brynne Stanton, Joyn Bio:
I appreciate the practical response to that question, James. I wanted to tackle it from the microbial side of things. So microbes actually are really good at naturally pulling carbon down into the soil where it can be stored for hundreds and in some cases, thousands of years. And so if we're able to pull more carbon into the soil, we'll eventually end up with a more fertile soil. And so I think from the microbes perspective, if we can enhance the microbes ability to do this through engineering, that this could be something that could really, I would say at the end of the day result in more nutritious soil. So just from the microbial perspective alone, I think this is something that is achievable, and I don't think it would have to be far outside of a grower's regime if you could come up with something where that microbe was simply part of the seed package.

Karsten Temme, Pivot Bio:
Yeah, I'd agree. I think it's an exciting time. James, you highlighted just the challenge. Nobody's been able to link these things together to date and there's many, many folks interested in working on the space. So maybe we'll see some breakthroughs over the coming years. At the end of the day, EPS footprint is driven by nitrous oxide emissions and methane emissions from livestock. And then we have this potential to sequester carbon if we can figure the permanence challenge out.

Karsten Temme, Pivot Bio:
Really the nitrous oxide, the more we can reduce inorganic nitrogen in the soil, the bigger impact we have there. And for the first time we now have a new class of products, not just from Pivot, but I potentially Joyn and many others that are all going to contribute to changing those inorganic nitrogen levels in the soil. And the science tells us that permanence for carbon sequestration is ultimately linked to inorganic nitrogen levels as well. So there's a lot of potential. We still need these business mechanisms to allow record-keeping, measurement, verification, being able to link those into the markets, but it's at the early days of something that could be really powerful. And some of those opportunities are going to have immediate impacts, and some of those are going to depend on solving that challenge of permanence.

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

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

• Paul Lightfoot
  President & Founder
  BrightFarms

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

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

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

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

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

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

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

Vonnie Estes, PMA:
No.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

Vonnie Estes, PMA:
So you-

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

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

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

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

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

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

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

Vonnie Estes:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gaston Dussaillant Venezian:
Yeah-

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

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

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

Gaston Dussaillant Venezian:
Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Oh!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Oh, wow.

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

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

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

Vonnie Estes, PMA:
Great.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Doron Meller, Israel Innovation Institute:
Exactly.

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

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

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

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

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

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

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

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

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

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

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

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

Doron Meller, Israel Innovation Institute:
Yeah. Exactly.

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

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

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

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

Speakers:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Tyler Nuss:
Yeah. Very casual.

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

Tyler Nuss:
Oh, that's awesome.

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

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

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

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

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

Tim Nuss:
So Tye, what do you think?

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

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

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

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

Hide transcript

 

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Yeah.

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

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

Vonnie Estes, PMA:
Yay.

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

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

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

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

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

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

Vonnie Estes, PMA:
Wow.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Oh.

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

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

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Oh, I love that.

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

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

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

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

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

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

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

Vonnie Estes, PMA:
That's agriculture.

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hide transcript

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Uh huh.

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

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

Benny Chng, SGInnovate:
Yup.

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

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

Vonnie Estes, PMA:
Oh.

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

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

Vonnie Estes, PMA:
Wow.

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

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

Vonnie Estes, PMA:
Okay.

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
How interesting.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Wow. Fascinating.

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

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

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

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

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

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

Vonnie Estes, PMA:
Oh.

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

Vonnie Estes, PMA:
Oh.

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

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

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

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

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

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

Vonnie Estes, PMA:
Oh.

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

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

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

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

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

Vonnie Estes, PMA:
Strawberries, wow.

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

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

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

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

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

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

Vonnie Estes, PMA:
Yeah.

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

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

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

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

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

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

Vonnie Estes, PMA:
Oh.

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

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

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

Vonnie Estes, PMA:
Oh.

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Yes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Brita Rosenheim:
Yep, yep.

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

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

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

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

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

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

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

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

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

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

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

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

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

Brita Rosenheim:
Certainly. Yep.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Brita Rosenheim:
Absolutely, our pleasure. Thank you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Wandile Sihlobo:
100%.

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

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

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

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

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

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

Wandile Sihlobo:
Thank you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes, PMA:
Did that work?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vonnie Estes:
Okay.

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

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

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

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

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

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

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

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

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

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

Vonnie Estes:
They're not, okay.

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

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

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

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

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

Vonnie Estes:
I haven't.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Martha Schlicher:
Yeah I'll actually maybe answer it in reverse. So, no, I worked for Monsanto for a long time. And then I left and worked with a startup called Divergence that was here in the St. Louis area. And Divergence was founded by Dr. Jim McCarter, who had come out of academia who's very familiar with grants. And so he was very instrumental in having Divergence go after SBIR grants. That became a significant amount of the actual dollars, R&D, dollars that Divergence had to work with and really became a roadmap in my mind of what startups in many cases, didn't know how to do and didn't take advantage of.

Martha Schlicher:
Divergence, successful exit, ultimately bought by Monsanto, but that stuck with me. And so knowing what BioGenerator was doing with the two companies that I'm leading, Impetus Ag and Plastomics, that approach to looking to see what grants we might be eligible for and going after them, is clearly instrumental. Now I always say you don't want to be tail wagging the dog, you want it to be aligned with something that's critical to your business model. And so in the case of Plastomics actually started before my time but going on right now, have an NSF, SBIR grant, that's absolutely a critical part of our R&D development platform, because it's a pretty high risk technology, that's hard to get significant venture funds for at this point in time.

Martha Schlicher:
Alternatively, in the case of Impetus, that company, while it's still very early stage with only a couple million invested, over 50% of its investments come from corporate or venture. And by the rules, they vary a little bit by organization. But generally speaking, if you've got more than 50% corporate or venture, you're no longer eligible for those grants. So that's tough, because you can be at a very early stage, you could have only raised $200,000 but if it came from a corporate or venture, you wouldn't be eligible.

Vonnie Estes:
So when is the best time you think for a company to apply for like the phase one? There's three different phases, I understand. I guess, and part of that question, as well is, is it like a different kind of technology? Like if you're a company and you say, "We want to innovate and try this new thing that's not part of our core business?" Is that something you'd go after grant with? Or is that the whole company itself? Or both?

Martha Schlicher:
Yeah, I think I'd say, for an early stage company, you got to be so focused. That if you're going to go after a grant, it's got to be directly related to the core of what you're doing, or just something that could add incremental value to that core. But by definition, to be eligible for one of these grants, especially an NSF grant, you've got to be doing something pretty transformative.

Martha Schlicher:
So getting that funding, because of the potential of course, for a phase two, is really a big deal. The other thing is it gives you credibility with investors. That "Wow, the NSF has said this is transformative technology." That's a pretty big deal. I would say the other thing is they require you to actually do customer interviews. And I think, again, especially if you're somebody coming out of academia, or a different kind of industry, those insights from those customer interviews can really help you refine what you're thinking about.

Vonnie Estes:
For phase one? They require that, or is that...

Martha Schlicher:
Yeah.

Vonnie Estes:
Wow. I bet that's really eye opening for some people.

Martha Schlicher:
Oh, my goodness, yeah, really eye opening. And also that can help and open the doors to other possibilities with those companies to be on an advisory board or to guide further thinking, bring in new ideas, I think if you're going to try to go after it to do something that might be a different approach, a different platform from your primary work, venture probably isn't going to get real excited about that. Your investors probably aren't going to get real excited about that. It's like, focus on your primary objective first.

Martha Schlicher:
But I think all of the... So right stage, I would say it's best if you've had some seed, you've had some early stage investment. So what you're doing isn't just a paper exercise, you have some proof of concept of what you're doing in the laboratory that's foundational for putting together a really good research plan for the grant. Because it's rigorous. You got to put together milestones, a budget, what your resourcing requirements are going to be. And so you really want to have thought it through in terms of how you'd actually implement it. Versus "Oh, shoot, I got this now what in the heck am I going to do." Now the project managers are really great about working with you and coaching you and guiding you throughout the process, so you can certainly make refinements and adjustments, but it couldn't be I was going to Mars and now I'm going to Neptune.

Vonnie Estes:
And how much oversight... Once you get the grant, how much are you involved with the project managers and are they watching how are you spending the funding or is there reporting? How does that work?

Martha Schlicher:
Yeah, certainly there's, there's kind of rigorous time tracking and record keeping. So if I've said, it's going to be one FT of molecular biologist and one FTE of an organic chemist, if that changes, I have to talk to the PM and explain why. I mean, they want to be looking for early signs that something's amiss. But generally speaking, if you put your operational systems in place, you provide good tracking, then the PM will generally leave it up to you for how frequently you want to engage and talk to them. And if everything's on track that's maybe every few months, every quarter. Probably, if you're having greater challenges, or run into something else. In the world of COVID, maybe your laboratory was shut down or something. They'll work with you to try to figure something out. They spent a lot of time to review all these applications and to pick the winners, they want to try to do their best to help ensure you can be successful.

Vonnie Estes:
Are there reasons to not apply for a grant? I mean, have you ever told someone, "This isn't the right situation for you." Or "This won't work for you?" Are there situations where it’s not the right thing.

Martha Schlicher:
I think certainly, early-stage companies are so desperate for money, that sometimes they try to make a solicitation fit their work, when it just really doesn't fit the work. And you can't afford that time. You can afford that time. Or sometimes if it's... Let's say it's a company that maybe has raised a million to a couple million dollars. If you're going to go after grants of $100,000 or something, you really got to start thinking about the investment of your time, the investment in the oversight to know if that's really going to be worth your while. Then you kind of have to start thinking, maybe I got to go back to my overall business model and business concept if I can't get outside funding here.

Vonnie Estes:
Grants for small businesses can be hot commodities, you have to do your research to find available grants and fill out the application. If you're feeling intimidated by the application, consider bringing in another party to help you fill it out as Diana suggested. Grant writing classes, conferences and workshops may also be able to help too. No matter how you approach the process the rewards are there for small business owners who put in the time and energy to submit a complete and compelling grant proposal. The process itself will help you think about your business differently and more professionally.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts, please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now stay safe, eat your fruits and vegetables and we will see you next time.

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Description: Understanding where investors put their money in 2020 will help guide predictions for 2021. In this session Ingrid Fung, an Investment Director with Finistere Ventures, will discuss what areas of agricultural technology venture capitalists invested in in 2020. We will also hear from AgTech companies about what it took to weather COVID-19 and fundraise during such a difficult year.

Panelists:

• Ingrid Fung, Investment Director, Finistere Ventures
• Jacqueline Heard, Founder & CEO, Enko Chem, Inc.
• Han Chen, Co-founder and CEO, ZeaKal, Inc.

Vonnie Estes:
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of technology for the Produce Marketing Association, and I've spent years in the AgTech sector. I can attest, it's hard to navigate this ever-changing world in developing and adopting new solutions to industry problems. Thanks for joining us, and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry, and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsor, Sensitech. Sensitech's innovative supply chain solutions help customers retain quality, managed supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need, when you need it, to increase efficiencies. Learn more about Sensitech's suite of real-time visibility solutions at Sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than 100 years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries. Today's episode is a rebroadcast of my conversation for PMA's Virtual Town Hall on AgTech Investing, where's the smart money going?

Vonnie Estes:
My guests are Ingrid Fung, an Investment Director with Finistere Ventures, personally located in Toronto. Jacqueline Heard, founder and CEO of Enko Chem, a crop protection company with a revolutionary approach in the Boston area. And Han Chen, the co-founder and CEO of ZeaKal, a plant traits company in San Diego. This is a very unplugged conversation about AgTech and what it was like for an investor, and two startups in 2020. These three are very optimistic people, and it's great to hear their vision for AgTech around better business models, better science, and better communication. Let's jump in.

Vonnie Estes:
I can't tell you how excited I am about this panel today. I've had the opportunity to work with this group before, and I can assure you that you're in for an entertaining, exciting, and a different type of conversation. I'm really looking forward, and appreciate the panelists being with us. Ingrid is going to start us out with an overview of AgTech investing, and then she'll introduce Han and Jacqueline, and we'll take it from there. So I will now turn it over to Ingrid.

Ingrid Fung:
My name is Ingrid Fung, I'm an Investment Director with Finistere ventures, and we are an early stage AgTech investment fund. That means, we invest into startups that have technologies that apply in agriculture. We've been around in the space, investing into early stage AgTech companies at Series A and beyond since 2006. As technology investors, we're really data and information focused.

Ingrid Fung:
As part of the work that we do in order to benchmark the investments we make, if they're good decisions or not, we've partnered with PitchBook to really build a database of companies and investments that have happened within the AgTech startup scene over the last 10 years. We've partnered with them to put out reports annually as well, to allow the industry to benchmark trends as well as investment flows within the sub sectors of our industry.

Ingrid Fung:
Really, what this information has allowed us to do is to look at how AgTech investment has grown over the last 10 years. Suffice it to say, over the last decade, AgTech investment has shown incredible growth, going from less than 100 million invested annually to about 3.2 billion invested over the first three quarters of 2020. A lot of this growth had to do with generalist investors moving into the space, and an increased interest from private equity groups and pension funds to invest in ag with a sustainability lens.

Ingrid Fung:
Going into 2020 from 2019, we expected to have another banner year, after all, there was about 2.7 billion invested into the sector in 2019. But when COVID hit, we weren't really sure what to expect. To our surprise, COVID had the effect of accelerating investment into AgTech as investors sought to bridge their companies beyond the impact of the pandemic, and consumers became increasingly aware of food, supply chain challenges, and risks.

Ingrid Fung:
What are investors investing in within our sector, and what are we interested in? Well, investors are attracted to technology companies with great positioning for product market fit. When we take a look at where capital has flowed with AgTech in 2020, we saw that indoor ag captured about 28% of capital deployed within the sector. We believe this was actually due to benefit from supply chain risk tailwinds as investors sought to mitigate risks from supply chain disruptions, from growers like yourselves that produce produce, to bringing production closer to cities.

Ingrid Fung:
Now, indoor ag companies are still a long way away from becoming the dominant produce producers, but there has been significant capital that's flowed into the sector over the last years. We also saw about 28% of investment into the sector flow into crop protection, companies like Enko Chem, as investors became a lot more interested in investing in technologies that would allow climate proofing, food production, and provide producers with tools to secure food production in a profitable way.

Ingrid Fung:
Then lastly, we saw a rise in investments into animal technologies with the sector capturing about 16% of investment into AgTech. This was because COVID brought an increased awareness of the intertwined nature between animal health and human health, in terms of both active molecule management as well as issues of disease spread, and so forth. Now, while overall capital flows into each of these subsegments within AgTech, can shift depending on trends and interests. We can all speak to the interest in digital ag earlier on in the decade as well as the rise in interest and investing in carbon credits, and financial tools.

Ingrid Fung:
Investors are really at the core looking for several key components that we believe make good investments into startups. That's, startups with unique technologies that are defensible allowing them to build a moat around their business, startups that create value, and startups that have great product and technology market fit. Now, the first three of these components have always been table stakes. But over the last year or so, it's becoming increasingly important for startups within our sector to have clear communication and positioning around how their technology add its value within farms.

Ingrid Fung:
We believe that, as we move into an increasingly digitized world in the coming decade, clear communication and brand positioning for even the most serious of science and technology startups within AgTech will be key to succeeding. So, today, I brought along two of my portfolio companies, Enko Chem, and ZeaKal, who I really believe exemplify these components of being solid science companies that create value on the farm. But have also been incredibly thoughtful and strategic about the way they've positioned their technologies, and how they're going to be communicating their technology value, not only to producers, but to consumers alike. With that, I'm going to hand it off to Jacqueline Heard, CEO of Enko Chem, to introduce herself and tell you a little bit about her company.

Jacqueline Heard:
Thanks, Ingrid. Great introduction. I'm Jacquelyn Heard, and as Scot had mentioned, I guess if you used one word to describe me, it would be entrepreneur. I started my career as an entrepreneur, and now I'm ending it as a CEO of a startup company called Enko Chem. In between the two startups, I actually had a 12 year career in Big Ag. I worked at Monsanto Company, from leading R&D programs, to doing venture capital investing.

Jacqueline Heard:
I'm, again, always finding a niche to get to that innovative, entrepreneurial spot within the organizations that I've worked. It's about three and a half years ago, I founded Enko Chem, when I was a venture partner with Anterra Capital. The company really was focused on addressing some of the biggest needs in agriculture today, which is, having safe and sustainable solutions for growers around the world to protect their crops and their yield from pests and disease.

Jacqueline Heard:
We're taking a slightly different approach that hopefully we'll get a chance to talk about more, which is, we're using a human health paradigm and bringing that to crop health. We can talk about what that means, but we're using a target-based approach and a novel set of tools to get to differentiated products for the global market.

Han Chen:
Thank you everyone for having us on board today. My name is Han Chen, I'm the CEO and co-founder of ZeaKal. My story is one of serendipity. I never thought I would be in agriculture, and even our entire technology journey is one of, I'll say, very fortunate accidents that ultimately led us to discover a new trait technology called PhotoSeed which changes the photosynthetic capacity of plants.

Han Chen:
If we all rewind a little bit to our high school biology, what that means is, we're letting some of the key crops in the world, we're improving their ability to capture sunlight and CO2 to make better yields, more nutrition, and obviously improve their sustainability index. We started with our roots in New Zealand and California thus the name, ZeaKal, and our original focus was in perennial ryegrass, a crop that many of us here in North America hadn't heard of.

Han Chen:
But over time, as we saw this great platform technology evolve and its applications across so many different crops, we ultimately migrated the technology here to the U.S., and we're focused on soybeans. That's our flagship products. In soybeans, we're trying to use that enhanced photosynthetic capacity to improve the nutritional density. With our last round of investments, we're now also broadening out into other crops including rice, hemp, and obviously with our continued efforts in forages in New Zealand.

Vonnie Estes:
Great. Thank you guys for those introductions. Like I mentioned, I've had the opportunity to work with Han and Jacqueline quite a bit specifically, and watched their companies grow and have watched their careers, so it's really fun to have them on the virtual town hall and talk to them about their journeys. Looking at COVID, it's been hard for a lot of startups that I've talked to, during this last year, not being able to go out and talk to people.

Vonnie Estes:
I mean, most investors say, "We want to spend this amount of time with a management team before we would ever invest in them in person." So it's been a struggle for some companies that weren't out there to raise money and keep going. It's amazing to see that Jacqueline closed a $45 million round of funding during COVID. If you could tell us a little bit about that, Jacqueline, and what that magic was, I'd appreciate that.

Jacqueline Heard:
Yeah, we can chalk that one up to an experience. But actually, we started raising our funds... Well, first, let me just tell you that the number one role of a startup CEO is to raise operating capital. You're constantly trying to look for ways to raise funds so that you can support the operations of your company so that you can continue to drive value for investors. You raise funds, and then you manage your stakeholders and your investors, but it's very much a relationship process, right? It's all about your network and the relationships that you build.

Jacqueline Heard:
As Ingrid said, at the beginning of 2020, it was a challenging environment. I think a lot of investors were hunkering down and saying, "Well, we've got to really focus on providing those support that our current portfolio might need in case there's liquidity, or cash availability issues that arise as a result of the pandemic." We started raising in the fall, or before that period of time.

Jacqueline Heard:
I would say, if there's any learning that I had from actually getting to our close in the summertime was that, it started off tough. But then, things started opening up where Zoom was actually a huge benefit to actually getting meetings on the calendar to tell your story, to give your pitch. That was fantastic. But the one issue that I did notice was that, you need time to do due diligence and to really build a relationship with your potential investor.

Jacqueline Heard:
When you think about it, any investor is going to be a part of your company, and have a close relationship with you for years and years. It's really so essential to make sure you have that rapport, you have that relationship, and that you have the time to build it. That's where I felt like COVID was a little bit... It was challenging to meet in person and to build some of those relationships.

Jacqueline Heard:
But like with Ingrid, it was wonderful because we had a chance to do a lot of due diligence before the shutdown happened. I would say that, it ended up being fine for Enko Chem. We feel very fortunate to have raised the 45 million, and just in terms of agriculture, it was a great year. It was a great year for generalist investors to come into the space. So I feel very encouraged by the future for AgTech.

Vonnie Estes:
Great, thanks. Han, you had closed a round in 2019, so the rush wasn't as much on you to do something in 2020. But you spent your time looking at your business model, and communication strategies during COVID. I encourage you to go to the ZeaKal website. I love what you've done, and how you're presenting the company, and how you're presenting the solutions. It's really great. I think a lot of what Ingrid was talking about of really being good communicators around science and science products, I think you've done a great job with that. What was it like to continue your operations, and then make some of these business changes during COVID? What was that like for you?

Han Chen:
Yeah. 2020 was definitely, I would say, the year where my expectations were the exact opposite of what they were going to the New Year's. I remember, January 1st, I said 2019 was such a great year." It was one of those breakthrough years for ZeaKal. Our team was growing, we signed two major partnerships, closing investment, and 2020 was going to be that upward trajectory as well. Then, COVID hit.

Han Chen:
Very quickly, I remember spending February and March seeing which of our operations were shutting down, and saying, "Well, how many milestones do I need to adjust now?" I remember thinking, "Gosh, how am I going to tell my investors that we're now at beginning 50% capacity, ooh, maybe now at 70% capacity, and how do we manage those expectations?" I remember the best I could do at the beginning was saying, "Well, everyone's in this boat, so maybe it's not that bad."

Han Chen:
But then around April and May, and this was one silver lining I would say, of COVID, is CEOs of startups, we rarely get quiet time. We rarely get a time to pull back and actually analyze our business, and what we really believe in, and what we're doing. It's because of that constant pressure to deliver, that constant need for focus.

Han Chen:
Without travel, without the conferences, without constantly putting ourselves out there, we stepped back and we said, "Well, what is it that we have, and what is it that we're really trying to solve?" To Jacqueline's point, I had a number of great Zoom meetings. It felt like, the so-called gatekeepers and those key holders went all the way. People were more willing to have honest, transparent, and really authentic conversations about what they wanted, who they were, and there's nothing like seeing someone's dog or kid run through and photobomb Zoom call in order to have that connection in real time.

Han Chen:
That led us down this journey of actually broadening beyond what we were focused on as a seed genetics company, and speaking to end users, speaking to the supply chain about, "How has COVID impacted you, and how do you feel about innovation in the space? What are your priorities?" Surprisingly, when we had that conversation and we learned so much stuff that we don't really talk about publicly, the ZeaKal experience, and our focus right now primarily in the major row crops, we started seeing that there's a lot of, I would say, disconnects in the value chain.

Han Chen:
Those disconnects were leading us to come to the conclusion that, maybe in addition to innovating great science, we had to innovate a better business model, and in turn, communicate those two things at the same time. And Vonnie, that's where you're saying, with the rebranding. For the first time, as a science company, we felt like we could actually build a brand, a message that could go all the way through to the consumer around science that was really at the front end of something, at the genetic side. That's really been our COVID journey and our, I will say, repositioning and recreation of who we are.

Vonnie Estes:
Thanks. Ingrid, you talked about building better business models, and better science, and improve communications as things that you look for to invest in, and that's really important in your portfolio. Is that something that's specific to Finistere? Do you think that's a branded Finistere thing, or do you think that all AgTech investors are starting to think more that way?

Ingrid Fung:
I think, recently, with the increase in food tech investment and some of the really, really headline numbers that are coming through from, really what our food ingredients companies that are creating a consumer brand, there's been an increased awareness across the agri-food investment value chain around the importance of branding. I think, I wouldn't say this is a unique Finistere thing. It's something that we have pushed our portfolio companies to do quite a bit, especially over the last year when digital presence has been more important than ever.

Ingrid Fung:
I would say, as an investor, Finistere really focuses on technology first. We're very technically trained team. I'm a molecular biologist by training, one of our managing partners is a geneticist by training. We want really, really good science. But the flip side to where we've seen the challenge of science adoption has been really around the communications piece. This is where I think, at Finistere, we focused a little bit more on in the last year in encouraging our companies that, while small, can build a really strong digital presence where they can punch above their weight compared to a lot of the corporates out there.

Ingrid Fung:
I remember chatting to one of my girlfriends at the beginning of the pandemic when everything hit, looking through the Twitter accounts of all of the major ag chem and seed companies, and they had a really fragmented presence, the branding wasn't aligned. We realized, at that point, that our portfolio companies really could capitalize on this digital presence piece and this captive audience that we'll have during the pandemic to really make a presence and a brand for themselves, that they otherwise may not have the opportunity to do. I would say, while at Finistere, we've always pushed our portfolio companies to communicate market, and so forth. More than ever, over the last year, we focused on that. Clarity of messaging, brand positioning, and clear science communication piece.

Han Chen:
On that note, it's because of Ingrid's actual introduction to Canopy Rivers, that's how we got our 2019 investment, and I often talk about this. But we always look for investors that bring more than capital. I would say that, one of the strongest assets that came out of that Canopy investment was, I got to meet a much younger team that was very much focused on marketing and branding in a highly regulated sector, right? I realized that, all those lessons could translate into agriculture.

Han Chen:
If you like the way our website and our materials look, I got to think Alessandra, from Canopy Rivers, who handles all this. We had none of that at the beginning. We didn't have an Instagram, I was barely on Twitter, someone on LinkedIn. But I realized that, we're doing great things, but we weren't talking about it. I think that's the biggest weakness in ag is, we often win over the minds of people, but we rarely win over the hearts of people. When we don't do that, it allows this vacuum to exist. Unfortunately, what fills that vacuum is often misinformation.

Han Chen:
One of the things that we just never thought about in the early parts of our journey is, do we need to communicate anything other than data? We always said, "The data speaks for itself." Data rarely ever speaks for itself. You really need to have someone get it to a point where it's honest, it's accurate, but it's also accessible and meaningful to the people that need to interpret it. Until that happens, startups will compete in a very limited space about how we can make impact and make a difference.

Vonnie Estes:
How is that different messaging being received? What feedback are you getting, and who's reacting to it?

Han Chen:
I've been pretty surprised, to be honest, Vonnie, because we always thought that the startup message, when we got out there, we'd be a little drop in a very big ocean. What we've been really surprised about, even among very large players throughout the supply chain is, "Wow, this is refreshing." We have actually not heard of a seed genetics company that is trying to use genetics to understand how we can make this better for processors, how we can make this better for end users, and that in turn, how can we create something that's relatable and important for consumers?

Han Chen:
Because they say, "That bean goes into one part of supply chain, we have no idea what happens afterwards." At the end of the day, they call themselves a silent majority. They say, "We might be some of the largest customers and consumers, but we have no power or say over how this innovation happens." I don't think it's malicious, I don't think it's intentional. But it is a series of unintended consequences that's emerged from an agriculture system that's prioritized volume, that's prioritized efficiency and scale, that hasn't really stopped to say, "Well, why are we doing this? Who are we doing this for? And do we even need to communicate why we do this?"

Han Chen:
I would say that, with our messaging and our ability to go in there and our tagline as carbon to nutrition, we want to capture more carbon to meet the needs of environmental sustainability, and produce more oil, more protein, healthier foods. That is something that's really resonated because right now, that's not a message that's getting out there, at least, the money changing the fundamentals of biology.

Vonnie Estes:
Jacqueline, you say that you use drug discovery technology for crop inputs. What does that mean, and how are people responding to that message? It certainly falls into the better science category and I'd love to see that happening, but maybe you could talk a little bit about what that means, and how people respond to it.

Jacqueline Heard:
Sure, sure. Really, for decades, the agriculture industry has used the same tools to solve increasingly urgent problems and more difficult problems. As a result, these R&D methods are really proving to be too slow and too costly to deliver what consumers and farmers need, so as a result, the pipelines are stagnant. But if you look at the healthcare industry over that same time period, they're using a target-based approach, and a modern toolkit of AI, and computational biology to solve the increasing challenges for disease treatment.

Jacqueline Heard:
If you take, for example, cancer drugs, if you look at them a decade ago where they would non-specifically target any growing cell in the body versus now, they can be very specifically targeted, I mean, it's just been a revolution. We're trying to take the advances that pharma has made in designing these very selective molecules to the crop health space. That's what we mean by applying healthcare and drug technologies to agriculture.

Jacqueline Heard:
What we do is, we really zero in on solutions to very specific challenges, whether it's a fungal disease, or a resistant weed. Then, we specifically designed molecules that will effectively target, and target the control of those pests without harming humans or other species in the environment. We've really proven out our technology pipeline can deliver, so we have a really diverse pipeline of molecules that we think will be game changing in agriculture.

Jacqueline Heard:
In terms of how it's being perceived, I think, small molecules for healthcare, they're very well accepted by consumers. I mean, I take a drug every day, a small molecule every day for thyroid. I see the result, I know how important it is. But when you think about food production, it's very difficult for consumers to understand, or they're very removed actually, from what happens to grow the food, to what they actually see on the grocery store shelves.

Jacqueline Heard:
We really see pest resistance challenges and growers really face some huge problems today. We're trying to communicate this idea of using these really novel innovative technologies to bring better, safer solutions to agriculture. So far, the reception has been welcomed. We just came out of stealth mode in June, so we are just starting on this journey of branding. But like Han said, transparency is going to be essential.

Jacqueline Heard:
We recognize that consumers are key stakeholders of us, even though our customers are going to be growers. We see this role of a small startup bringing this awareness and technology to this industry and seeing the improvements, and the impacts they can have on sustainable agriculture.

Vonnie Estes:
That's a very different way of talking about crop protection and crop inputs. I think it's, people think about that, they think about, what I put in my body to take care of myself, it's very specific. It's made very specific and targeted to what's happening in my body, and you think about, that's what you're doing with your crop as well. I think that, that is a great way to communicate that.

Vonnie Estes:
Switching to supply chain, there's been a lot of focus on supply chain in the past year, especially in the produce industry, we've had our share of issues. It's clear that innovation is needed to create new and different supply chains in all parts of ag. Han, this has been something you have focused on, and you talk about harmonizing the supply chain. What do you mean by that? And can you give some examples?

Han Chen:
Sure. As I mentioned earlier, our major focus is on the major row crops. But when we were reinventing the business model, we actually borrowed a lot of lessons from the organic sector as well as high value produce like berries, fruits and nuts, et cetera. Because in these high value sectors, you can't get away with being anonymous. Your brand is on that product, even though it is a supply chain. Ultimately, what you grow in the field ends up in the hands of the consumer that would then judge you based on your nutrition, your tastes, your appearance.

Han Chen:
In the major row crops, I feel like we've let opaqueness and anonymity become, I would say, a shield for doing things the way they are, and this race to the bottom mentality. I'll give this example. When you look at what an end user of soybean wants, they want oil and protein. That's what soybeans are grown for. When you talk to a processor, they'll tell you, "Well, I want the best margins from taking that bean and make it into those components." Then, when you go to the farmer, and then you go to the seed innovators, they only get paid on yield.

Han Chen:
Between what an end user actually wants and needs and what the growers are actually being paid on, it's completely disconnected and different. When I mentioned earlier that there's a lot of unintended consequences, everyone has said, "Oh, you can't create a value added trait. You can't create a technology that's based around an identity preservation at a scale that's meaningful." Yes, we have high oleic soybeans. Yes, we have an organic market. But these are still relatively small compared to the overall size.

Han Chen:
That was, again, one of the first things where we said, "Well, why is that assumption necessarily true?" Why do we have to continue to race to the bottom where we keep producing more and more yield? But that yield, what people don't talk about is, that comes at the expense of quality and nutrition. I spoke with a large end user who said that his rations of soybeans went somewhere from 20%, a few years ago, down to 10%, and now declining.

Han Chen:
The reason is, is because the quality has dropped year on year per bean. Because as we've briefed or so-called yield, what we're really putting in there are more carbohydrates as, so-called, filler material. I've heard soybeans issue be called styrofoam, I've heard it be called empty calories, little black holes. What do they do? They're looking for alternatives. They're moving towards other crops, they're moving towards corn DDGS, synthetic amino acids. That's all fine, but who does it ultimately hurt though? When this supply chain is a race to the bottom, who ultimately bears the cost of this?

Han Chen:
Well, it's who we all care about. We all say, "We care about the farmer and the grower," but that is the group that's ultimately bearing this costs. They're the ones that ultimately say, "As this crop value decreases, we're going to see long-term challenges." Yes, we have boom-bust cycles where, this year, it's a great commodity crop season, but let's not forget the past eight years, where soybeans was at $8, $9 per bushel.

Han Chen:
How can we actually increase the margin of farmers? How can we actually increase the value that they create, diversify either incomes and actually connect that grower to that end user? And that has to be a reinventing of the supply chain. One of the investment thesis that we're challenging right now is, is a startup better at re-inventing a supply chain, or does it come from the majors?

Han Chen:
I think this is something that Jacqueline and I have talked about over the years. I'm sure, Jacqueline, you remember when I was sitting, when you're starting Monsanto saying, "Well, do these large companies, these large ag companies behave like pharma?" Are they going to integrate new innovations in this pipeline and feed the beast, if you will. We don't really see that in agriculture. I think a lot of the issues are, is that agriculture is ladened with legacy assets, fixed infrastructure, possibly, outdated business models.

Han Chen:
One of the things that we're thinking about right now is, do we partner, and who do we partner with, and what parts do we need to recreate? Given the fact that we're a startup, given the fact that we're a blank slate, and we might be, to recreate some of this. ZeaKal, right now, what we want to do is to have an end user that can value the higher nutrition sustainability index. Build that integrated supply chain, and get the grower paid on metrics other than yield that can then increase that resiliency of the supply chain and the food supply in the long-term.

Vonnie Estes:
Ingrid, in what you're looking at in small companies versus large companies, I mean, do you see that the large companies are going to make more innovations? Or do you think more innovation, it's going to come from smaller companies?

Ingrid Fung:
I think there's a balance. I certainly see large companies continuing to invest in their innovation pipelines. But even from the conversations I've had with R&D leaders at the large ag chem corporates, at the large companies, they do say that, there is an inherent culture within each company. They're focused on the way they've done things. For ag chem companies, that's high throughput screening. It's, they've invested in a lot of infrastructure in terms of talent, in terms of equipment to be very good at this one thing. It makes it very difficult for them to shift and pivot and look at novel ways of innovating.

Ingrid Fung:
I think we're going to continue to see innovations coming out of the ag corporates, but the truly unique and different approaches are going to come from startups. I think, when we think about business model innovation, these large companies can try, and some of them have tried, for example with premium cotton products, to integrate that to consumer through gene brands, and so forth. But they're not very good at it, and it costs them a lot, in-house, to run these things, right?

Ingrid Fung:
I think it's going to be a balance. What I hope to see, ideally, is, startups like ZeaKal innovating on the business model on the technology front, and then large corporates following suit or acquiring, but I think it's going to have to come from both. Really, the model that Enko has, I think is quite interesting. They both partner with the large companies to work with them as well as develop molecules on their own to build value within their company. I think, it's going to be this double-pronged approach that will win in the end.

Jacqueline Heard:
Yeah, I really agree with that if we want to take this any further. Because I see a huge role for startups serving as disruptors of the supply chain. Without those challenges, I think it would be more difficult for the large companies to innovate. Our role is to really look at agriculture 10 years from now. What does it look like? What could it look like? And then bring technologies that service that future. It's a little scary, but it's also a really exciting thing about being a startup.

Jacqueline Heard:
In the input space, I think we're pretty unusual in that, we're a small company trying to bring innovation to something that has traditionally been held with the ag R&D majors. But we think that the situation has been provided to us in a way, in that, there's so much resistance that's developed, and the speed of innovation, and the pipelines today is inefficient. It's not going to deliver on what's needed. There's an opportunity to really think about things differently.

Jacqueline Heard:
We're not developing things that have to work with trait, for instance, in row crop agriculture. We can drive selectivity with the molecules that we deliver. That gives all farmers, globally, the opportunity to have solutions for their pest and disease problems on the farm. I should highlight too that, we see eye to eye with the Gates Foundation. So the Gates Foundation led our Series B and we partnered with them to deploy our technologies to underserved markets.

Jacqueline Heard:
That's a critical component of the... Yeah, the supply chain today has driven these inequities that not all farmers have access to technology. For us, the partnership with the Gates makes a ton of sense, and will allow us to bring our technologies to global markets including underserved markets at a reasonable cost. So we were very excited about that partnership.

Han Chen:
I mean, Jacqueline, you make a great point, which is about access to innovation, but also just the nimbleness of innovation. I wonder, one of the things that we feel is that, startups, despite not having the same resources, the same scale, size... Look, I've visited a lot of the large company facilities. It's like Christmas. Every time I go, I'm like, "I wish I had that machine, I wish I had those 10 benches." But the reality is, is that, we're also innovating without any of those constraints. I think Enko Chem is a great example of lower cost, nimble innovation, and that's something that ZeaKal has always prided itself on as well.

Han Chen:
For us, any acre that we get on is a win. That's one acre we didn't have for, whereas large companies have a lot to lose. Every time they see a new idea it's, "This is exciting." But if I get 1% of the market, it's incremental at best, and it might be cannibalizing what I have, so why do this at all? I see those ships not being able to change direction very fast, and as they get bigger and bigger with consolidation, probably not at all. Till you feel like, startups, there's an asymmetric advantage here as we're able to target smaller markets, more localized, and this whole theme of, COVID with resiliency going more local, that if we take that all the way back to the innovation space, that there's actually competitive advantage there.

Vonnie Estes:
Looking forward, I'd like to hear from each of you, what you think how things are going to play out in 2021, where will investment go, will investment go up or down, and what do you see for your companies? Ingrid, why don't we start with you?

Ingrid Fung:
Yeah, for sure. I'm actually quite excited about 2021. I think that, where the shock of all this disruption that came with COVID has passed a little bit. We're all hitting our stride in terms of figuring out, how to make investments, how to look at companies. You're starting to see companies come back around to, one, seek investment, and two, establish new partnerships. I think it's going to be a pretty interesting world to be in, in this world of Zoom where, as Han spoke to, a lot of the gatekeepers have gone away and you can get a lot more meetings with people. You can have a lot more conversations. Yes, it is more work, but it is certainly worth digging into.

Ingrid Fung:
Investment-wise, I'm still very bullish and excited about crop protection. I think, we spoke briefly in our prep call about technology flows. I think there's a lot of technology flow from pharma that can be leveraged to do really interesting small molecule discovery with a sustainability, and safety lens put at the forefront. I think, any company that looks at sustainability, not just environmentally, but economic sustainability for growers, as well as equitable access, will start to succeed and define themselves differently.

Ingrid Fung:
So, very excited about plant sciences, crop protection as well as animal health. We're starting to see a lot more companies pop up in the animal health space, trying to be strategic, trying to push for better stewardship around small molecule active management in mammalian health, in general, because human health and animal health are linked. Those are the three buckets that I think we'll continue to see a lot of investment and a lot of useful innovation flow out of.

Vonnie Estes:
Jacqueline, how about you? What do you think the year is going to be like?

Jacqueline Heard:
Yeah, I think it's going to be a good year for ag, but I'm always optimistic. I've spent my whole career in ag, I've got to think it has promise. Yeah, absolutely. I don't think ag is going anywhere. It's the oldest human technology on the planet, so I think it's definitely here to stay, and I see a lot of interest in generalist investors coming to agriculture, so that's positive. I also think that COVID really was something that revealed some of the vulnerabilities that we have in our supply chain. I think that, that revelation has provided opportunities and a clear target for focus capital.

Vonnie Estes:
Han?

Han Chen:
Well, I mean, so far 2021, unfortunately, it feels like a bleed through 2020. I would say, personally, my goal is to create more barriers between my personal life and my professional life. Because it literally feels like-

Vonnie Estes:
Good luck with that.

Han Chen:
Yeah, good luck with that, exactly. Because literally, you're in my guest bedroom and everything just flows through from one to the other. That's a personal goal. But with that being said, we spent a year, like I said, in this meditative state, really trying to have clear minds and open ears, listening to what industry really wants, listening to what the needs of the supply chain are, and our ambitions have become a lot larger.

Han Chen:
Before, we just wanted to create the best science, I think right now we're trying to create better business models. We've launched two major initiatives, our Carbon to Nutrition. The idea that, plants are photosynthetic monsters, they eat carbon for lunch, let's have them eat a little bit more with PhotoSeed, and we're really pioneering a NewType of agriculture. Our NewType model is based on this idea that, we want pillars of sustainability, and sustainability is about resource sustainability. So obviously, the inputs, the environment, but we can't forget about the major resources and the most important in agriculture, which is, the people.

Han Chen:
The people that grow the crops, we have to make sure that their incomes, their mental health, their appreciation by society, that all of these things are sustainable. That requires bringing the grower closer to the end user, letting the end user embrace the innovation that we're producing, acknowledging the sacrifices, the hard work that these growers do every day. Getting up way earlier than I would to plant the crops that we need to feed the world.

Han Chen:
We just announced a partnership with Gro Alliance yesterday that gave us access to a network of growers and seed producers across eight states in the Midwest, and we're building the supply chain piece by piece from the ground up with no preconceived notions. We want to see other people come to the table and say, "We can do better, we can, and we will." It's not going to take a lot of resources. I think Jacqueline and I, hopefully, I've proven that point today that, the limitation is not capital. It's culture, it's willingness, and it's courage.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com, and wherever you get your podcasts. Please, subscribe, and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

Hide transcript

Description: 
Join the conversation with Nate Storey of Plenty and Scott Komar of Driscoll’s about their R&D collaboration. Driscoll’s and Plenty are partnering to bring berries with superior flavor to all regions of the world.  Plenty will incorporate Driscoll’s proprietary genetics and berry expertise into its advanced, indoor farming technology using its plant science, data science, and robotics expertise. Through this controlled environment, Plenty can consistently deliver great flavors from Driscoll’s varieties, while also optimizing for texture and size. The indoor environment allows companies to meet the future needs of consumers worldwide, including geographical locations that are not hospitable to growing strawberries.
 
Speakers:

•  Nate Storey: Co-founder and Chief Science Officer, Plenty
• Scott Komar – Senior Vice President of Global R&D, Driscoll’s

Vonnie Estes: 
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of Technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So I can attest, it's hard to navigate this ever-changing world and developing and adopting new solutions to industry problems.

Vonnie Estes:
Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsors Sensitech. Sensitech’s innovative supply chain solutions help customers retain quality, manage supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need when you need it to increase efficiencies. Learn more about Sensitech suit of real-time visibility solutions at Sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than a hundred years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries.
In this episode, we dive deeper into the R&D collaboration between Driscoll's and Plenty. In case you don't know Plenty, they are a vertical farming company in South San Francisco, California that has raised a total of $500 million. Their last round that closed in October was 140 million series D that was led by existing investor SoftBank and Driscoll's as a new investor. The two companies had been working together on a joint development agreement to grow strawberries. Driscoll's was so impressed with Plenty's technology they decided to invest in the company and deepen their R&D partnership. This is such a fun conversation, to hear about a collaboration that is really successful and is, "One plus one equals 10," as Nate says, the two R&D groups are top-notch and are able to work and react quickly to their learnings, given how fast things can be tested in an indoor environment. Nate and Scott, talk about where the partnership can take them globally with superior berry attributes. Let's jump into the conversation with Scott Komar, Global VP of Driscoll's R&D a Nate Storey, Co-founder and CSO of Plenty. So welcome Nate and Scott, thanks for being here.

Nate Storey:
Thanks for having us.

Vonnie Estes:
Great. Well, we're going to start with the Driscoll's story. So, Scott, if you could tell us a little bit about Driscoll's?

Scott Komar:
Sure. Well, I'd like to start with our mindset Vonnie, which is really embodied in our mission statement and it's very straightforward, it's to delight our berry consumers. And so I hope I'm talking to a berry consumer here of Driscoll's?

Vonnie Estes:
Oh yes.

Scott Komar:
Okay, great. All right. We're off to a good start here. And so we want to continuously delight our berry consumers through alignment with our customers, our retailers, and our berry growers, our independent berry growers. And we're privately owned, our family, the Reiter family is still very much leading us through our growth and expansion of the company, now is over a hundred years old. And today we reach over 350 million consumers, 22 countries, six continents.

Vonnie Estes:
Wow.

Scott Komar:
A little over 4 billion in sales. You can see the products in the background, strawberries, blueberries, blackberries, raspberries, and from an employment standpoint, we're now around 7,000 or so direct employees of Driscoll's. And then through our grower network, these are all independent growers working with us, there's over 900 of those growers. And we estimate that their employment reaches around 115,000 employees worldwide. So it's quite an enterprise and just a reflection of the huge demand for berries around the world.

Vonnie Estes:
That's an amazing footprint. And I appreciate it every time I open my refrigerator door.

Scott Komar:
Okay.

Vonnie Estes:
So what does the marketplace, the consumer and other customers value in terms of product innovation?

Scott Komar:
Yeah, well, yeah, I think we can see through, take your favorite retailer, but when you visit their store, you can see how prominent produce is set within that store and going a step further berries have really been put to the front of that part of their store and category. And the reason for that we believe is that the consumer is really looking for something healthy and flavorful they can bring home to their families. So our mindset really centers around flavor, and that goes back to our mission statement, continuously delighting consumers. We want to delight them through flavor. And so our brand first and foremost, conventional organic really stands for that consistent, delightful flavor, but we can go a step further. And I think today we'll probably have an interesting conversation about breeding and genetics and so forth, of plants, but we can go a step further with flavor, and there are occasions where we can offer something just really remarkable.

Scott Komar:
I mean, something that you're just thrilled to bring home to your family. And so our innovation, for us, really comes on those two levels. Every year, we're adding to our core offering of products. And so we'll introduce a new variety that continues to notch up the quality and flavor of our everyday offering. And then at certain times of the year, it could be under a Sweetest Batch label, or a Rosé maybe you've seen those products?

Vonnie Estes:
Mm-hmm.

Scott Komar:
But they're really an exceptional flavor and eating experience. And so both of those levels provide us a nice avenue for introducing new product innovation.

Vonnie Estes:
And how do you look at trying to service and delight customers in different cultures around your flavor profile? Do you think about different parts of the country and what they might, or the world, they might want differently?

Scott Komar:
I think this is an interesting question, because it gets at the heart of what... Are there strong consumer preferences that are distinctly different by continent? And I would say at this stage in our journey, Vonnie, we have a mindset where we're really just trying to satisfy the demand that we see globally. So I'm talking about not only North America, but throughout the European Continent, Asia, Australia. And so that's the stage I'd say we're at where we're really striving every day to provide that delightful flavor. But we do see on a horizon that there could be differences, how a European consumer values a certain flavor profile of a strawberry we think could be different than in Asia, for example. And so this is something that we're going to explore as we stay close to our consumers. And we do believe it's going to unlock a level of product innovation that so far we really haven't crossed yet.

Vonnie Estes:
So that kind of brings us to what we're here. So why invest in Plenty and how did you guys end up talking to each other and getting interested in working together?

Scott Komar:
Yeah, well, I'd like to start with really the wellspring within Driscoll's, which is our R&D group. And so these flavorful varieties that we bring to the consumer come from many years of dedicated breeding and careful selection. And so of course flavor is our strongest trait that we breed for, but clearly also yield and certain characteristics about the mouth feel the color of the fruit, all these aspects, so it's a very complex picture. And Driscoll's has a dedicated R&D group, which I think sets us apart at a certain level of innovation. And so it's that wellspring that is feeding our system globally, that I mentioned earlier. That being said, what Plenty has innovated we find particularly interesting in a couple of ways. One is that there are regions in the world that are very difficult to reach even with the most capable supply chain.

Scott Komar:
And so I can share an example, like in the Middle East, where there's not much of anything growing out in some of those regions, and yet we have fantastic consumers there that enjoy our fruit. And so we see with indoor farming possibilities where we can reach globally in partnership with them that we could not do with a standard supply chain, so we're very intrigued by that. Now other conversations that Nate and I are having is that there are varieties that come out of our R&D group that probably are not going to adapt very well to say traditional growing methods, but they have a really intriguing flavor or some aspect that we think the consumer would really appreciate. And we have a hunch we're just starting this journey with Plenty, but we have a hunch that there'll be some of these varieties that will just flourish in an indoor farm. And so there we can bring another level of innovation to our consumers, continue to grow the category and continue to delight our consumers.

Vonnie Estes:
Wow. Yeah, I've done some work with your R&D group in different functions that I've had over time, and I've always been so impressed on how, just interested in looking outside, you guys are which is different than a lot of breeding companies where everyone's looking at what's going on outside, that we can bring inside and continue to improve and innovate. And I think that's unusual for a breeding company, in my experience anyway.

Scott Komar:
And it's a fun experience. We, if I can think back a couple of years ago when I was at our research center and a couple of our scientists had come back from Hawaii and found a wild species of blueberry that was off colors. And so I was like, "Well, let's bring it in the program." So yeah, they can come from all corners of the globe very that's the amazing part is we all know of science. I mean, the possibilities when you understand how complex and vast the plant genome is, then we know the possibilities are truly limitless. I mean, it's just truly, every day is a wonderment.

Vonnie Estes:
Yeah. I did a podcast that came out this week on looking at personalized nutrition. And it was interesting in that everyone I talked to, I was pushing them into saying, "Okay, we can know this now," like, "You're going to tell me you're going to make my food mode more nutrient dense, and I'm going to be able to know what that is. And I'm going to be able to know from my personal genetics, what I should eat." And basically I kind of got the information that we're not quite there yet, but, I think that in the work that you're doing and the work that you're doing with Plenty, I think that brings us a step closer in starting to understand what can we do around nutrition in addition to flavor? Are you guys talking about that as well?

Scott Komar:
Well, I can't say that we've... That Nate and I kicked that around yet. We've got a lot of work ahead of us and I'll let Nate share... So he's got a heavy lift going on right now for sure.

Vonnie Estes:
Yeah, great. Okay, just...

Scott Komar:
You're right. Vonnie, you're right. There's this wave of food is my medicine and I can understand the connections between my own unique genetics and how food responds, but also how food can benefit my health. And we see that entering really the mainstream of the consumer thinking. And so no doubt as we continue to unravel the genome, we're going to come across some really interesting insights from a nutritional standpoint as well.

Vonnie Estes:
Yeah. I think it'll be fascinating. And so I want to pivot and get over to Nate, but just, I've heard you talk about this, Nate, a little bit just about around, because you're able to dial so many different things up and down in your farms that you're going to have some good control on being able to do some nutrition work, at least in the greens that you're working in, but stepping... Why don't you answer that first and then go into just talking about Plenty and give us an idea of who Plenty is.

Nate Storey:
Yeah. I mean, control is at the heart of what we do, right? So, we really view Plenty as being on this continuum where we started in the field and the field was a rough and rugged place 10,000 years ago, you're out there with a stick scratching a furrow, right and planting feed by hand. And you look at where we're at today, right? It's been this constant evolution of the field towards more and more control, we're out there and we're laser leveling. We're controlling our fertilizer inputs. We're controlling as much as we possibly can outside of the weather. And we view Plenty as being at the end of that continuum, right. We went from the field and the greenhouse industry arose starting around 150 years ago. We started to see this idea of more control is good for humanity, it's good for society, it allows us to grow things out of season. And that evolved, evolved, evolved, and Plenty is at the end of that continuum.

Nate Storey:
So yeah, we think about environmental control, but to your point earlier we're thinking about nutrition, we're thinking about flavor. We're thinking about all the things that we can manipulate. We've got our genetics, we've got our environment, how do we go out there and manipulate both, right? To get to the right outcome? And that's the right outcome for plants, that's the right outcome for people, that's the right outcome for the planet. See how I worked our mission in there?

Vonnie Estes:
Yeah, very good.

Nate Storey:
But at the end of the day we are kind of kicking open the door to things like personalized nutrition, we're kicking open the door to being able to grow things that people want and need. And that's really at the heart of this partnership with Driscoll's. There really aren't that many folks out there who care about both the genetics and their consumers. They're always separated from their consumers, right, by growers, by distributors, by these other things. And Driscoll's is one of the few companies in this space that deeply cares about the consumer experience. That cares about giving their consumers something really awesome. And so that really stood out to us as we were looking at this, because I think we're really well aligned there around going out and giving consumers something that's delicious, something that's nutritious, something that's consistent and giving it to them year round.

Vonnie Estes:
Yeah, I hadn't thought about that as far as the alignment between the two companies. I mean, if you walked into my kitchen right now and opened up, you'd see boxes of Plenty and boxes of Driscoll's because I lived close enough to buy Plenty, but the two companies actually have that alignment of you're producing and you're involved in the production side of it. And you're involved in thinking about, "How do we grow? What's the genetics? What do we do here?" And then you're also touching the consumer. And so you really... And the whole supply chain. And so you really are very vertically integrated both of you and you have that consumer voice in your ear, which is different than a lot of companies. You can't not listen, right? You won't sell product. That's very cool.

Scott Komar:
I think it's a great call-out, Vonnie, that as the two companies are partnering here, not only is the end to end starting with the genetics all the way to the consumer, that's directly connected, but you can imagine the turn time that we have is greatly shortened. So in fact, just yesterday, Nate and I were meeting and we check in every couple of weeks and we were just discussing about, "Okay, well, some of these plant varieties are showing this indication." "Okay, great. That's working nicely." Okay. Now I can go back to my team and say, "Well, let's find some more of that and we'll bring it forward." And then we put it in Nate's magical factory over there and we'll see how it performs. And so we anticipate the cycle time of input from the consumer, here's what they like. Okay, we go right back to, "Great, let's pull forward these genetics, let's maximize the Plenty growing system get in front of the consumer." What do they think? That cycle time, it may be a record-breaking cycle time for our industry. We'll see.

Vonnie Estes:
Yeah, yeah. I would bet, and you don't have to contend with what season is it? And do I need to go plant this someplace else? And that really does get you much faster. So Nate, most of the people in the US probably know who Plenty is, but there's a number of my listeners who are outside of the US and may not have read as much about you. So can you just give us some background on Plenty and what you guys are working on and kind of what the state [inaudible 00:19:43] you are development right now?

Nate Storey:
Yeah, you bet. So Plenty is an indoor farming company or vertical farming company. And we grow plants in giant warehouses, basically we build farms indoors. And what that does is it gives us complete control over the environment. It allows us to really manage the plants for maximum growth, maximum flavor, maximum nutrition. And that's been our focus. We started the company because we realized that the world needed basically three times as much fresh fruits and vegetables as it produces today. So globally we're only producing about a third of what we need to, to feed this growing population, the growing middle-class, the demand that is rising around the world. And there's only so many places that we can do this really well and economically at scale. And so Plenty was really created to grow the size of the world, the production capacity of the world, so we built Plenty to that end. And today we are building our first mega-sized farm down in Compton. It's going to be the first of many mega, mega-sized farms. And these farms are really-

Vonnie Estes:
Are you saying what size it is publicly? Are you guys saying how many...

Nate Storey:
So, I'll put it this way, if we went out and we bought enough land to produce the same amount of value, we would have to go buy around 720 acres in the Central Valley. So a little over a section of land, a section and a quarter, condensed into a building that's roughly two acres. So that gives you an idea of the scale and also an idea of how much land we can basically pack into a pretty small package. And if you were to walk into that farm, you'd see the actual growing space is probably only about a third of that total floor layout.

Vonnie Estes:
Square footage, yeah. And when are you planning on opening Compton?

Nate Storey:
So we're going to be running Compton about midway through this year, it's going to be up and going, and then we're going to spend several months getting it going. And by the end of the year, we should be pretty close to a hundred percent capacity at that farm and debugged and running smoothly.

Vonnie Estes:
Wow. And is it... I just have to be careful because I'm so interested in what you guys are doing and I don't want to ask stuff that you don't want to answer. That's not public. So just tell me if I asked you that, but yeah. Are you growing the same crops that you're growing in South San Francisco or is the product mix going to change a little bit?

Nate Storey:
We're going to be growing the same crops plus a number of others. So we're going to be taking a larger product portfolio to market down there. Yeah.

Vonnie Estes:
And did you iterate much? I mean, I know you guys, you guys are the King of iteration and the South San Francisco, the number of... I actually got the privilege of spending some time there when you guys were first building and you were tearing things down and building things and tearing things down and building things every time I went up there, it was like something was torn down and built up, which is amazing that you can iterate like that. And I think that's why you've grown and learned so quickly. So, is the Compton farm, a complete iteration from what you have in South San Francisco? Or is it kind of the same?

Nate Storey:
It's a massively leap forward for us. So technologically and frankly from a product standpoint too, to Scott's point, this ability to go really fast is one of our fundamental advantages, right? We're growing out a crop a week, basically. So what many farmers in the fields, it takes them many, many years, right, of learning to accumulate the same amount of data and understanding of their crop conditions, the market factors. And we can do that in a week, right, sometimes less. And so for us, just this iterative cycle, it is at the heart of what we do, build the data, right. Understand the data, make decisions off of the data. And that's at the heart of... I think one of our advantages in this space, right. And one of the reasons we've been able to go as fast as we've gone. It feels slow sometimes because we're impatient-

Vonnie Estes:
To you.

Nate Storey:
To us, real slow, but it really is quite fast in the agricultural timescale.

Vonnie Estes:
Yeah, definitely.

Scott Komar:
One comparison I might give if we get a little techie here for a second, is that the data that's being collected through the Plenty system, it is really impressive. It's unlike anything I think I've seen in other forms of growing. And in a way, if I use an analogy it's, back in the day, if something's going on, and then the physician says, "Well, let me take an x-ray and we'll see, Oh yeah, here it is." That gave a certain level of insight. But now with a cat scan or an MRI or whatever, it's a whole nother level of insight into what's going on. And that's kind of the analogy here with Plenty, they're running their trials.

Scott Komar:
And then they're sending back to our plant physiologists and breeders data, it's rich data, and it's giving us deeper insight from a scientific standpoint. And of course in this full picture, you can see the ways in which artificial intelligence, machine learning is just... Nate, you can call it here, but I would imagine this couldn't even be done without that core capability and harnessing these data sciences. So, this level of data sciences is a whole new level, I think we're seeing certainly for our experience. And I would say for our industry.

Nate Storey:
Yeah. I mean the opportunity to collect this kind of data, as you have these farms that are more and more controlled, right. So in a field you've got to figure out how do you power device out there? How do you control for all of the conditions around that device in trying to understand the plant experience? You've got to control for a lot of things that have nothing really to do with the plant and in our farm we can measure the plant directly. We're able to go in there and take temperature and humidity measurements, and these vast arrays in the canopy outside of the canopy or measuring all of the energetics of the system at any given second, microseconds in time, light levels and all of these things because they're consistent and because they're controlled, they're now measurable.

Nate Storey:
And we're able to kind of go down these layers of data getting into fluorescent state of getting into these forms of data that have historically really been constrained to the lab, right. Because what we've built is a giant scaled lab in a way. And that gives us an opportunity to understand plants and plant metabolism and their physiology at a whole new level. And we're far from perfect, we've got a long ways to go on this, but it's pretty amazing how that data becomes really, really useful. And as a scientist... I know we're off track here, but as a scientist-

Vonnie Estes:
No, this is perfect.

Nate Storey:
As a scientist, the really exciting thing is historically it's been very difficult to bridge the applied and the fundamental sciences, right? This bridge, or this divide formed about 20 years ago especially, right there was this separation of the fundamental and the applied. And what we're seeing is that in our farms, we're bridging that gap really effectively. And now, this really fundamental physiological data about the state of the plant becomes useful in our decision-making and our understanding of the farm and our understanding of growth rate, our understanding of quality, our understanding of all of the things that matter to us economically as a business.

Nate Storey:
And so I think we're on the cusp of an entirely new kind of agriculture of an entirely new opportunity for the world and for people to eat really great food. And for us to produce that food with incredible efficiencies and in a way that's really great for the planet. So data is at the heart of the business, we couldn't do it without it. And certainly we couldn't achieve the massive multi-fold yield gains and improvements in quality and shelf life, and all the things that we're focused on over the last couple of years without it.

Vonnie Estes:
And, Scott, have you had to hire differently? It must be hard to keep up with these guys? So have you had to hire some data scientists and some people that can interface and understand how to use the data in what the work is that you're doing?

Scott Komar:
Okay. Well, I want to call out the competitiveness of the Driscoll's team here, because for us picking Plenty was we saw an opportunity to have two groups that are very aggressive and very innovative coming together. And so we're challenging ourselves with these learnings and the feedback loop that's going back and forth between two companies. So, that's kind of fun. Now, what I'll say is, let's take this as the core of the indoor farming wave, okay. And, Nate, he might want to touch on also... I don't know when the last time you had a chance to tour their facility, Vonnie, but some really cool things around robotics, for example. And look, we know when we work with our growers that are growing outdoors, they might be growing in soil. They might be growing in table tops. Those are challenging environments for robotic machines to rove around and try to get that exact pick at a certain speed that's commercially attractive.

Scott Komar:
And they'll get there but imagine building on Nate's comment about this indoor lab, this indoor factory. It really does provide some advantages where we can innovate quicker, let's say with something like robotics, you can imagine the harvest of the strawberry being done. And we know that some level of these learnings, we can take back to our other growing systems around the world, whether it's traditional greenhouse or hooped growing or just open soil. So there'll be a certain benefit that'll come back to all forms of growing and lift that whole sector. But we expect some really neat breakthrough innovation will come first from the teams working together in this environment.

Nate Storey:
Yeah. I've got to jump in and say the Driscoll's team brings incredibly deep expertise to the table, right. So we have, before we started working with Driscoll's, we were working on strawberries for a couple of years. So we kind of got to learn the ins and the outs of how do you work with this crop? How does this crop behave in the systems? And working with the Driscoll's team has been a breath of fresh air and trust me, they have no problem keeping up with the data. They've looked at similar data, right, for decades, and we're just starting to touch on it. And so this really is like a one plus one equals three, or maybe like more like a one plus one equals 10 scenario, right. And both of those teams are phenomenal. And it sounds like I'm just marketing the partnership at this point, but I'm not. It's been remarkable how great the teams have worked together. You've got two teams that are passionate about the same thing. Right.

Nate Storey:
The Driscoll's team's like, "What does quality look like coming out of the system?" It's new, it's exciting. It's interesting. We're measuring things in ways and with kind a frequency, that's impossible in the field. And you've got the Plenty team who's just soaking up how can we learn more about these strawberries? How can we work together to make the right decisions around cultivar selection? How can we make the right decisions around the environmental aspects of the farm? And so, even though it sounds super rosy, like we're really just marketing the partnership at the end of the day, it's been a delight. It's been a lot of fun.

Scott Komar:
It is a lot of fun.

Nate Storey:
A lot of fun.

Scott Komar:
Yeah.

Vonnie Estes:
That's great. That's really wonderful to hear. That's the kind of partnership where you do the contract and you put it in the drawer.

Scott Komar:
That's exactly right, it's just a document somewhere in the background.

Vonnie Estes:
Yeah, exactly. So I know that you're focusing on flavor. What else can you tell us about the hopeful outcomes of the program? And I know some of this is probably not talked about publicly, but whatever you can talk about of what you're working on in addition to flavor and a variety selection?

Scott Komar:
Well, I guess I'd highlight two things. So I'd go back to the robotics, for us labor is a shortage worldwide. Okay. That's no mystery for our crop or any crop. And so our ability to innovate with a robotic harvest is a big deal. And if we can do, if we can get some breakthroughs in our working with Plenty and their environment, then that's a big deal for us. And we hope that, that day comes in the near future. In addition to that, there are ambitions we have with our global footprint. I mentioned earlier being on six continents and so forth, I can tell you that getting fresh berries to the consumer every day in Shanghai is a crazy complicated supply chain. Okay.

Vonnie Estes:
I'll bet.

Scott Komar:
That is just, it is a puzzle, but so are most... Every major city in the world. I mean, they weren't built for easy distribution of perishable goods. And so we envision this footprint of these large indoor farms, like the one Nate mentioned in Los Angeles, but that's our ambition. We see these being placed around the world and probably going to be in mega urban environments or these extreme environments, like the Middle East that we talked about early on. And the beauty is that indoor farm can be replicated around the globe and between our two teams, we've already identified the optimal genetics for the optimal growing system. And so we can then start to build this global network and have a way of getting some really special fruit to these consumers every day, just 52 weeks, a year, super fresh. So there's a really intriguing global network here that we have in mind.

Nate Storey:
Yeah. I mean, I would just add to that to say, for us, working with Driscoll's, especially to this end of growing the global supply of berries, right. Growing the global opportunity to consume really great, fresh, delicious strawberries anywhere in the world is a great demonstration of really what we set out to do. And obviously we've got a lot more work to do, but it's a great demonstration of this idea of growing the world's agricultural capacity, right. Growing the size of the planet and growing it to meet the needs of people.

Nate Storey:
And so I think Driscoll's has led the world for a long time in genetics and quality for strawberries, but there are still these incredibly difficult problems to solve that are so tied to just the way agriculture works, right. We can produce in one place, we've got to get it to another place and that's a problem that we need to help. And so I think this is representative of really what we set out to do. Obviously it crossed a lot of crops ultimately, but for now showing how this problem of getting strawberries to everyone in the world can be solved with indoor ag and with Plenty.

Vonnie Estes:
I hope you enjoyed that conversation with Nate and Scott. As indoor farming is growing and taking its rightful place in food production, I see additional advantages to this collaboration. What they learn about robotics and plant science and breeding will be a great advantage to both the indoor and outdoor growing of fruits and vegetables. The speed at which we can gather and analyze data around breeding in the environment will support and grow the industry. That's it for this episode of PMA Takes On Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables, and we will see you next time.

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Description: In this episode, we continue our virtual tour to Brazil to explore the AgTech explosion. We discuss the flourishing tech and innovation ecosystem developing in the country. Startups in Brazil have access to a market with one of the highest levels of mobile saturation, a wide range of investment options from local and international Brazil-centric funds, and support from a government that has made driving business growth one of its key priorities. In agriculture specifically, Brazil has transformed itself from food importer into one of the world’s leading producers in less than 30 years. Brazil is the first tropical country to be among the world’s leading food exporters. It is now the leading producer and exporter of sugar, coffee and orange juice, and the second largest for beef, soybeans, tobacco and ethanol. With such growth in tech, innovation, and access to capital and talent in an Ag powerhouse, the AgTech sector is thriving. Listen to our discussion with the top people in Brazil making it happen.

Guests:

• Francisco Jardim – General Partner at SP Ventures
• José Tomé – CEO and Co-Founder of AgTech Garage
• Mariana Vasconcelos – CEO and Founder at Agrosmart
• Mario Portela – Partner in Circularis Partners

Vonnie Estes: 
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of Technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So I can attest, it's hard to navigate this ever-changing world and developing and adopting new solutions to industry problems.

Vonnie Estes:
Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsors Sensitech. Sensiech's innovative supply chain solutions help customers retain quality, manage supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need when you need it to increase efficiencies. Learn more about Sensiech's suit of real-time visibility solutions at sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than a hundred years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries.

Vonnie Estes:
Anyone who knows me knows I love Brazil. I started traveling to Brazil in 2005, looking at using sugar cane bagasse as a feedstock for second gen biofuels while I was with Syngenta and Versa. I continued traveling to Brazil with positions at DuPont and Codexis, also working on second gen biofuels. Partly because of the business opportunity and partly because I loved going to Brazil. In 2013 to 2015 I worked with a Brazilian company, Gram Bio to help discover and deploy technology for second gen fuels and chemicals. It was wonderful to spend more time in the country and work with a group of people with a great vision. As you will hear from my guests today on the podcast, the ag-tech ecosystem was just beginning during that time. There were very few startups and the culture of entrepreneurism was just beginning. That's why it's so exciting to witness the growth there now.

Vonnie Estes:
When I was planning this episode, I wanted to get people I knew together and have a party. Well, this is the closest thing. We will hear from leaders in the ag-tech industry in Brazil about the development of the ecosystem, how Brazil is able to leapfrog technologies and in some cases go from notebook to the cloud, bypassing all the steps in between. Also, we will hear how using technology in fintech is making a big difference to farmers in Brazil. This is a crowded episode because I wanted to get the opportunity to catch up with so many people. I may have to do some more episodes on Brazil. We will start with Francisco Jardim, general partner of the SP Ventures in Brazil. Francisco gives an animated background on the growth of the industry and Brazil's strength. Let's drop in to the conversation with Francisco.

Francisco Jardim:
How difficult it is in Latin America for entrepreneurs and even medium-sized businesses to raise capital and to fund their operations, no? And when I looked at what pillars of the economy here, the capital markets were missing entrepreneur finance, capital that came with risk appetite for entrepreneurial activity that brought a value-add in terms of intelligence and governance. All these things were clearly something that mature economies such as American economy had, and we saw that our entrepreneurs who didn't.

Francisco Jardim:
So, we decided to start the business back in 2007. The business SP ventures, a venture capital firm, focused in Latin America tech in early stage companies. We had no ag-tech focus at the time. So we really went out generalists, openhearted, to look at the best opportunities, the best verticals, to be able to invest in tech in the region. We raised the very first fund back in 2007 and we went out thinking that we would be investing in software, e-commerce, AI, all these things. And 50% of our portfolio, the first fund that we invested was an ag. We did IT, biotech, livestock, entomology widespread range of sectors within the ag space. And during those first years, we received a barrage of ag entrepreneurs and we started to devour a lot of reports on where ag was going and what was going to happen to the global food production system.

Francisco Jardim:
And that's really when we started to gradually one day at a time, and this was a process that took many years, fit the puzzle and really take a step back a couple of years later and look and say, "Wow, what an opportunity it is to be investing in ag-tech in Latin America." And the team, myself included, we read during those early days, Peter Thiel's book, Zero to One where he explores the contrarian truth concept. And we just could not get around saying, "Wow, if there's ever going to be a contrarian truth, something that we're fundamentally convinced and sure, and we think it's a no brainer in which the rest of the market disagrees and thinks we're crazy for believing in, it's going to be ag-tech investing." The fundamentals are there. Nobody believes in the thesis. So let's bet and jump face first in this. And that's exactly what we did.

Vonnie Estes:
So how did ag-tech come to the surface? Given that you were looking at all these different markets, and looking more at tech. Did some of your team have an ag background? Or did ag-tech entrepreneurs find you? Or how did it raise to the surface of what you invested in?

Francisco Jardim:
That's one of the things I think it's most beautiful. We're pretty much no ag background, right? So we were really looking off an open heart. I mean, the team didn't have deep operational expertise in any of the major tech industries, let's say in health tech, in ag-tech. In the IT, the internet, so we're looking pretty much from a blank slate. And when we started looking at the fundamentals, there's one thing that I think is critical. When we look at ag and we look at markets like the US and Australia, it's usually not very representative from the GDP perspective and from population perspective. Meanwhile, in Brazil specifically, ag is 23, 24% of our GDP. In Australia, it's up at around 3%. So even in an economy that is strong in ag, it's still not as overweight. And here ag is very overweight and very representative of everyday life. That's one point.

Francisco Jardim:
The second point is when we looked at the sectors where we had global presence, and we were competitive globally. I mean, we can find companies here in Brazil, like Embraer, that will be very competitive in the aerospace sector. But it's tough to say that Brazil as a whole has a vocation is competitive in the aerospace sector. But when we look at ag, it's the direct opposite. We are a market leader, a global leader in pretty much most of agriculture commodities. By leader, I mean top three, right. Either leader, runner-up or third, but we're on the growth state.

Francisco Jardim:
So I mean, we lead in soybeans, we lead in cotton, we lead in cacao, we lead in coffee, we lead in several verticals of the animal protein value chain, such as beef, poultry. We've been growing in swine. So we are a powerhouse. And not only a powerhouse in production, but also in market development. I mean, we have strong market share in China and Asia. We have a strong market share in Eastern Europe. So we've developed a lot of markets. So when we look at the ag story from where we're coming from, it's very difficult to be ignoring it. So I think that that was one point.

Francisco Jardim:
The second point is when we look, and this is a story that I think as a success version is very common in places like the US and Israel and these other places. But when you look at a country like Brazil, you really have to dig deep to be able to find a success story like ag, and what does a success story mean? In 1976, Brazil was a net importer of food. So we were very different stage. And then through deep tech investment, doing a lot of R&D with Embrapa, with University of Ag in Sao Paulo, developing technologies that would allow us to go to the center west of the country and prepare soil and create agronomical methods such as the Santa Fe method, such as the integration between forestry, grains and livestock and several of these other methodologies allowed us to conquer our savanna which we call our cerrado and transformed a huge region, our Midwest, into a huge breadbasket.

Francisco Jardim:
So and then of course, what enabled this besides R&D was the entrepreneurial activity of small farmers and very risk-propense farmers that left the south of Brazil and went with nothing except a little bit of capital they managed to raise selling their houses and their smaller farms and bought cheap land in this region. And then seeded, planted, harvested, went bankrupt several times, continued to plant and to believe in the development of the region. And after many, many years they built these huge success stories. Success stories like the Mahji family and the Logman family and these other ones where they built literally empires of hundreds of hundreds of thousands of Hectares being farmed. Right.

Francisco Jardim:
So it's an entrepreneurial activity with entrepreneurship, a lot of technology and a lot of risk-propense appetite, which reminds us of very well developed ecosystems like Silicon Valley. So when we started to discover this back in 2007, 8, 9, 10 when we're starting the company, I think this caught our attention.

Francisco Jardim:
Another thing that caught our attention, Vonnie was in a region like Brazil, and I think this is valid for Argentina, for most emerging markets. When you look at a sector that does not depend on the government. And you look at a sector that is pretty resilient to external and internal domestic economic shocks of political instability, it also gets a lot of points. And when we look at ag, even before 2020, we always show investors the peak crisis years. Years when Brazilian GDP fell 3%, 4%, 5%, 6% and we show how ag continued to grow very healthily, even in those years, right.

Francisco Jardim:
So the fact that it's denominated in hard currency, in dollars, because of the fact that food specifically but also fuel is at the bottom of the Maslow hierarchy of needs. So it's a very inelastic demand. And because of the power that the ag economy has developed from a lobby perspective, and also from a private sector perspective, it's become a very resilient value chain. So even when the countries perform very poorly, the sector tends to go well. So the story was eye catching. The resiliency and the defensiveness considering the sector also impressed us.

Francisco Jardim:
And then the last factor that really impressed us Vonnie was, besides all these things, which would be normally associated with a very safe and secure investment, the growth opportunity in ag in the region was fantastic. So when we looked at the projections of the possibility that the plan here was going to consume 60% to 80% more food in the next 30 to 40 years. And we saw where this was going to come to, in terms of who was going to take up the most of this demand. Of course, from the various geographies that could benefit from this. But when we look at Brazil, and the greater tropical agriculture surrounding us here, I mean, we're very comfortable that we can bite 40, maybe even more percent of this delta, this incremental leap that we're going to have in food demand.

Francisco Jardim:
So there's also a growth aspect. So it's a big growth opportunity. It's a defensive opportunity. And it's a very unique success story in our region. I would say these were the general concepts that caught our eye. We had been studying for many years already also the carbon markets. We we're betting that the carbon markets were going to take off in 2008, 2007. At the end of the 2008 crisis, I think it took a step back. But we had already been introduced to the science behind climate change. And we did expect climate change to become a reality in terms of increasing the risk profile of farming globally. Raining more where it's not supposed, to less where it's supposed to, and simply transforming the business of food production to a risk your business, which is more dependent on technology for risk management.

Vonnie Estes:
So do you expect that you'll be investing in some carbon and climate mitigation and carbon strategies? Is that an area do you think Brazil is going to get strong there?

Francisco Jardim:
For sure. I mean, I think that the correct pressure that is being applied to Brazil from investors globally, and I say correct, because I think it's not only very effective, I think it's already giving results. We're seeing not only deal flow in the sector, very interesting companies coming up with carbon models. But besides that, we're seeing technologies that we've invested in the past that are starting to get the wind in its favor because of the carbon markets.

Francisco Jardim:
I'll give you a very good example. We invested in a spinoff from Embrapa a couple of years ago in the soil analysis or testing business. And the original investment thesis that we had was that through chemometrics, which is data science applied with chemistry, and innovations in spectroscopy, we're going to be able to do remote soil sampling much cheaper than the traditional model of having to collect samples, put them in the mail, send them to a laboratory 400, 500 kilometers away, use chemicals to be able to do the formulations and then have to wait a couple of days to get the results and then you have these leftovers that are dangerous chemicals. So I mean that whole process which is expensive, slow, difficult to do is what's holding back a lot of the soil sampling that would enable precision agriculture in terms of variable rate applicants of fertilizers.

Francisco Jardim:
So the investment in that company was very much base that we would be able to have a much cheaper, easy to use technology that would democratize access to variable rate fertilizer application. That was the thesis that we backed. What we realized was, over the past two years, the entrepreneurs have really been very successful in doing this is that they discovered that what their technology really has a mega-power and is unique globally is that it's probably the cheapest soil sampling technology in the world for testing carbon, right?

Francisco Jardim:
So we all of a sudden have a huge new market for this company. And they partnered up with Bayer, about a few months ago. And I don't know if you remember, but Bayer ran a test or a pilot here in Brazil with 500 farmers, where they started using carbons as a potential way for these farmers to finance their farming activities with Bayer, right. And Bayer tested a few very sophisticated technologies, one of them was these guys. And the results have been very impressive. So we're seeing not only business models that are coming natively focusing on carbon nowadays. But we're also seeing business models that were originally focused on soil sampling, on water efficiency, on optimization of farm equipment, use all these things. They discovered, "Wow, we can monetize this in another way, which are these carbon markets." So it's transforming the business models of existing technologies. And I think it's very exciting.

Vonnie Estes:
Yeah, that is exciting. And it's great to see that coming from Brazil. I think a lot of the things that we're seeing that you're doing is kind of leapfrogging maybe what we're doing here that... We've got kind of entrenched ways of doing things and things that slow down progress. But I think Brazil is able to leapfrog some of the things that we have in place and bring new technologies to market with these new business models faster.

Francisco Jardim:
You're 100%, right. And I think for you to leapfrog and to really create a business that leapfrogs, there are a few things that you need to have in place. One is you need to have these holes in the business value chain, right? Which we have. Another one is you need to have technology, let's say, disruption or rapid adoption. That's another point. And if you look at places where you had these things going on over the past, you need to have a very large addressable market. So you need to have big enough to be able to recreate this infrastructure. If you look at places where this has happened, let's get China for example, where they had all the core factors that we're looking at, when we look at Brazil ag-tech. They had a barrier to entry. So the government blocked the major technology giants from abroad.

Francisco Jardim:
Brazil is not blocking companies from abroad, but because we're a tropical agriculture ecosystem, and we're seeing all these technologies that were developed for mature temperate agriculture, we do have a natural barrier to entry. It's much more difficult for you to scale a company in the US and then bring it here in the ag space going into Mato Grosso. So we have a natural barrier to entry. We have a very large addressable market, probably a top three ag market, when we look at the size of the hectares being farmed, and the growth. So that's also super important. And three, we have all these holes in the value chain. And I'll tell you, maybe two or three.

Francisco Jardim:
One of these is we don't have a rooted financial services industry for ag. So we have a weak penetration, small penetration of ag insurance, we have a small penetration of ag credits, and even that ag credit, it's divided between barter from industries, subsidized loans from the government. And we don't think the industries want to continue to finance farmers through barter programs, I think they do it to enable sales, that's one.

Francisco Jardim:
Second, the government was already intent on reducing its size in the ag credit sector, because their balance sheet is taken and they ended up crowding out private markets, private credit. And now with COVID, the balance sheet of the government exploded, so they're being forced to do quicker what was going to be done. So, I mean, you have this perfect environment for you to create these leapfrogging businesses, which we hope will create businesses similar to what the Chinese created in their leapfrog activity, which as we know, you have Tencent, you have Alibaba, you have Baidu and then you have the entire new generation. Companies that really innovated in using technology and business model experimentation. And we're seeing this I mean, I meant I mentioned SPEC Labs, SPEC saga which is our abrupt spin off in the soil sector.

Francisco Jardim:
But we also have companies like Aegro, which is a leader here in the farmer management system in Brazil. It's probably one of the most efficient companies in the world in the ag space in terms of using digital marketing for customer acquisition, customer onboarding and customer retention. And then when we see this company operating we say, "Well, why are we just an FMS selling software to small and medium farmers? If we have the farmer, we have is data, we have access to all that he's transitioning. The data belongs to the farmers. Why can't we be more efficient than a bank or an insurance company in assessing and distributing financial services to this farmer?" And those are the things and I hope that we can create something similar to what Jack Ma created and Alibaba with Ant Financial and we can move to create and Ant Financials in the ag space in Brazil, distributing and democratizing the access to financial services and products.

Vonnie Estes:
Yeah, I think that's really an exciting piece in this podcast. I also talked to Mariana and she talked a little bit about what they're doing. And I hadn't realized she'd gotten into kind of the financing space as well. But it sounds like that's a really important part of making the whole ecosystem work and allowing farmers to adopt technology and allowing them to try different things. What do you see are some of the barriers of producers adopting technology and having technology really work there?

Francisco Jardim:
Yeah, and even a step before moving on to the barriers Vonnie, you mentioned Mariana from Agra Smart. It's an interesting point, because it's one thing for me to come here and say these things are happening. It's another thing when Bradesco, Brazil's second largest private bank, anchors the series A and moves to finance Mariana at her company or when BTG, the Latin America's leading investment bank anchors around on Agra now and other portfolio company. And then we've been seeing large financial service institutions in the region not only doing venture deals behind these leading ag-tech companies in the ecosystem, already betting that this will be the future of financial services for the ag economy, but we also see acquisitions happening. So we have the largest bank and broker in the new discount broker model, XP acquiring an ag fintech company, do aggro early last year. We saw Banco Santander acquiring an ag fintech company in June when they acquired Cheetah.

Francisco Jardim:
So we've been seeing a lot of them in activity from financial services players buying ag-tech companies in the region, always thinking that this will be a way to drastically reduce their transaction costs in act so they'll make it cheaper for them to source farmers' price. The risk of those farmers structured the credit, so structure the collateral, all from a digital perspective. And last but not least monitor those collaterals once they've done it all. So instead of sending physical teams to be able to go to the farm and inspect if he really planted what he said he was going to plant and how the plants are growing, to be able to do that remotely in a much cheaper, less fraud-prone and assertive fashion. So I think it's really something that's under the right direction.

Francisco Jardim:
Concerning the biggest bottlenecks for tech adoption. I mean, I get that question from investors all the time. So Brazil had never had a unicorn until 2018. Since 2018, till today, we've had maybe 12 unicorns. It's huge. And of these 11 or 12 unicorns, let's say seven or eight are in the fintech space in payments and credits across the board. And then you have three or four that are in consumer tech, such as last mile delivery and some of these other opportunities. And then they always ask, "Well, why don't we have any ag?" I mean, ag is very representative, it's a huge part of our economy. We know that it's very lacking in certain technology. So why haven't we been able to build an ag unicorn so far? And the answer is exactly bottlenecks behind the industry that have made it progress and mature a little bit slower than consumer tech. I would say the biggest bottleneck was connectivity. For you to build any exponential business you need connectivity infrastructure, to be able to collect data, to be able to process data and give that data back and serve clients in an efficient, scalable manner.

Francisco Jardim:
So I think connectivity has been a very big pain point. And then with connectivity, comes a lot of other things, which is digital literacy, with farmers being very well versed in contracting a loan, in contracting insurance, in selling their goods and services. And then I think this has been probably one of the biggest bottlenecks. But besides the connectivity, I do think it's also a little bit more... It's a little bit slower for you to develop, launch and scale a product in ag even if the connectivity is there. Because farmers, they have this very strong seasonality culture here in Brazil, at least where they have the months of the year when they're looking for technology for seeding, planting, crop protection, a harvest. So you don't have a 12 months a year of window to be able to sell the same product, the same technology, even in Brazil when it's a continental farming country where you have different seasons and different crops, and then you can end up being busy all year long.

Francisco Jardim:
Still, each specific segment buys during a time of the year. So you have to be able to do proof of concepts. You have to spend a lot of time showing the farmers that technology works, and then increase the area that he's acquiring that technology for every single year. But it takes a few harvests for you to get 100% rollout. So, I mean, these are some of the bottlenecks that I think it just makes ag a few years behind and a little bit slower on the tech adoption curve than traditional consumer technology. But at the same time, I think it's slower, but it's sure. It's definitely more constant than more directed.

Vonnie Estes:
Yeah, I think that those things are all true here as well. In North America, I think we have the same types of of issues. Well, thank you very much for your time. I really appreciate it. There's so many other directions we could have gone. But I really appreciate hearing about what's going on. I really miss traveling to Brazil. So it's great just to talk to you and at least pretend I could actually be there. But next year, maybe.

Francisco Jardim:
It was an honor to have you here. Recently when you came, visited us and hope you can come back ASAP and we can hopefully straighten our ties.

Vonnie Estes:
Next, we will hear from one of Francisco's portfolio companies. Mariana Vasconcelos, founder of Agra Smart. She is bringing digital ag to developing countries and is adding product features to serve growers as fast as they are needed.

Vonnie Estes:
So tell me about yourself and your company.

Mariana Vasconcelos:
Well, so I'm 29 years old, I come from the south of Minas Gerais. A countryside resident state that is very known for being a farming region, especially in coffee and other crops. And I started this company AgroSmart because I really wanted to help farmers to make better decisions, and therefore become more resilient and make their business more profitable. And in Agra Smart, what we do is we are a digital transformation platform, where we use sensors and satellite imagery in order to monitor farms, and help farmers to make better decisions like how much to irrigate. We have the most precise weather forecasting in Brazil to help their planning their operations where we can forecast with ease. But we also support the whole supply chain not only the farmers themselves, but from the input companies, food industries and banks and insurers.

Vonnie Estes:
Great. So you have a lot of different kinds of clients. You have farmers, you have input and corporate clients. And so what do you offer each and what kind of services do you give to these different kinds of clients?

Mariana Vasconcelos:
Okay, so starting from the farms. We follow their digital transformation journey. So the first step collecting data, right? It is still in emerging countries, especially like Latin America, when activities in issue like having data collected automatically is still an issue. So we provide certain sensors and a connectivity solution to allow us to read weather stations, rain gauges, soil sensors and so on. And combine that with the imagery so they can buy a monitoring package. And then on top of that, we sell insights such as irrigation management, the disease forecasting model, the weather forecasting model, alerts and so on.

Mariana Vasconcelos:
And to the corporation's it differs from each one. We generate collective knowledge out of the farmers, so we can support the supply chain. So for example, we have input companies testing new seeds. They want to understand how seeds performs in different microclimate and which one would be the best feed for drought, for example. So we help them to monitor their research sites, and come up with more efficient protocols for the usage of their products. And therefore we many times create digital offers together.

Mariana Vasconcelos:
On the other side of the supply chain. We work with the food companies like Nestle, Carfil, Coca cola, AvianBag that are sourcing from smallholder farms to their industry and their main concern is about climate resilience and sustainability. So we monitor these small farms, but we generate to them reports on their water footprint impact on carbon footprints. We help them to allocate their labor and agronomists in order to understand which farmers need more attention up to long-term planning of that supply chain. Or I guess, "Climate is changing. When and where should I source this product from," or for example, "We are building a barley disease model. So how do I understand the risk of disease, and therefore I can predict price variations." And of course, that comes with the traceability to tell the consumers.

Mariana Vasconcelos:
And last with the financial sector that send data, supports risk evaluation. And by understanding better the risk we can price better financial products. So for example, we did a partnership with a Bradesco in Brazil to distribute the digitally, credit. And that credit has more competitive fees than going directly to the bank. Because we understand that farmers that have data and more informed, they have less risk. And also creating new financial products in terms of insurance and so on. So it's more accessible for the farmers.

Vonnie Estes:
Oh, wow. I didn't know you were doing that. Is that new, going into kind of the financial services part of it?

Mariana Vasconcelos:
Yes, we were interested by the corporate ventures arm of the Bradesco bank in 2019. So it's the last few years where we started working on it, and we see growing a lot our interactions with the food chain, and the banks and insurance, as we think everything is connected with the new regulations of the carbon markets, and green balance and so on, and how sustainable practice in the farm will communicate with financial instruments.

Vonnie Estes:
Which is really needed everywhere. But in Brazil and Latin America, that's going to be a really great service for all your different customers. Yeah. So what crops do you work in across... in all the different types of markets, but what are the types of crops you work in?

Mariana Vasconcelos:
Well, we today work with more than 30 crops. And on the PMA, like interest, I would say we would have orange, watermelon, melon, lemons, garlic, any kinds of vegetables. We have a platform because Brazil is huge and we work with so many crops at the same time. And we have so many different microclimates, that we built a generic platform that actually can support any size of the farmers, any microclimate and almost any crop. So independently, if we already work or not with the crop, it's very easy to create the parameters to support any new crop into the platform.

Vonnie Estes:
Ah, okay. And how do you deal with connectivity issues? I've spent quite a bit of time in Brazil and I know there's lots of places where I don't get cellphone service. So, how do your products work in areas where there's not connectivity?

Mariana Vasconcelos:
Yeah. Last week, there was a report that said that 76% of Brazilian farmers did not have connectivity. So that's a big challenge for accessing... and not necessarily sometimes they don't have at all, but in the majority of the cases it doesn't reach the field themselves. And the way we work with, right in the beginning, I come from a region in Brazil that's where the telecom industry was born. So we have a lot of connections there and some of my co-founders have expertise in telco and hardware in general. So we create our own mesh network using radio frequency, where we would get long range communication between sensors like up to 15 kilometers. Then we would carry the data until we find a point of connectivity.

Mariana Vasconcelos:
But today, besides that we work with Sigfox, with Narrowband IoT, with satellite communication, whatever is more convenient. We provide a service to the farmer and the connectivity is our problem. So we just make sure that the data arrives, and we have this modular hardware, but we will choose what is most convenient to each region and therefore cheaper as well.

Vonnie Estes:
Oh, that's great. So that it becomes your issue to solve, not their issue. 

Mariana Vasconcelos:
Yeah, exactly. And we gained a lot of expertise, with more than six years now. Collecting real time data everywhere in Latin America.

Vonnie Estes:
Yeah. So what other geographies are you active then?

Mariana Vasconcelos:
We're mostly focused in Latin America. We do have projects in the US. We have some projects in Israel, for example, but they're more oriented to research or to corporates. The majority of the farms, they are in Latin America, like Brazil, Argentina, Paraguay, Colombia, Peru, Guatemala, Costa Rica. We have more than nine countries in total where we are operating with projects.

Vonnie Estes:
Wow. And how do you do that? How do you staff that you can go across so many different countries?

Mariana Vasconcelos:
We made partnerships, important partnerships for a while like for distribution agreements and so on. And those partners help us get into the countries and we just started having our first employees outside Brazil in Paraguay and in Argentina.

Vonnie Estes:
So in the work that you do, how much do you think about sustainability and climate change mitigation as part of your main reason for being and how can your products help with those issues?

Mariana Vasconcelos:
All the time. I think we in fact business and we were born focusing on how we could support farmers and climate resilience was there since the beginning, because when we started, there was a huge drought in Brazil. And Brazil is so abundant in water that it was a surprise. So we have always been there. We address the different Sustainable Development Goals. We are highly engaged and impact community like in the World Economic Forum. We recently joined the Natural Climate Solutions Alliance. We are also a member of the UN Global Compact. So we really dedicate our work on how technology is an enabler for a more sustainable and productive agriculture.

Mariana Vasconcelos:
So it's literally at the core. And the reason why we support is by having the data and especially climatic data, it's so important to coordinating the operations. And when farmers do inform the decisions, they are able to reduce water, they're able to reduce inputs, usage, energy fees, and so on and increase yield at the same time. There's a direct savings and reductions that is natural. That's what happens when you go to the historic culture. But we literally focus on that. And we took it to another level in this whole climate resilient issue, especially engaging these small holder farms. So we created this framework with the companies, with the corporations to be able to make this solution available for the small holders. We've got lots of farmers in regions that are under stress. And by having the data and supporting their insight, we help them to adapt.

Vonnie Estes:
Great, that's really fantastic. So stepping back a little bit, how have you seen ag-tech develop and grow in Brazil? And what's the ecosystem like there? And how do you see it going forward?

Mariana Vasconcelos:
It grew so much. When we started, you have outtakes of the younger generation, the older generation, let's say like that, like Sodin, Fitech, and now you've got Agrotools. They are ready as technology companies for the art, but in the new art, and we and Trigger kind of started in the same time. And it seemed like there was only us, and we were literally trying to understand what was going on and educating the market was so complicated. And then suddenly it became a boon. And especially in Brazil where our agriculture is so representative within our economy, that everyone saw it as an opportunity, right? We can provide value. We can aggregate value. We also produce technology here. So we can scale just as we did with agriculture in general.

Mariana Vasconcelos:
So we saw it growing a lot, and the ecosystem got more mature. There was no ecosystem. Now you have many hubs such as the Ag Tech Valley in Piracicabas, in Cuiaba you have the AgriHub. Londrina in Parana you also have another ecosystem. So it's growing and becoming something unique. And capital is also coming, little by little. It's not the same as in the US but still. It is still a taboo for many investors to look into agriculture. But it's growing. So I'm very excited for it. And I think there is great opportunity for consolidating our region and to reach agriculture  around the globe. I think there is no more space for farmers to stay out of that movement.

Vonnie Estes:
And is most of the capital coming from within Brazil or people from outside of Brazil coming in and investing? Or both?

Mariana Vasconcelos:
Both I would say. In the beginning, more inside Brazil. One of our early investors was SP ventures, Fransisco. They are one of the main ag-tech investors in the world and for sure the largest in Latin America. And for a long time, it was only them. And now we see more appetite. We have, for example, two corporate ventures, from Bradesco as I mentioned, from Positivo that are industries that somehow interact with agribusiness. We have a family office and then some from the US and some other a small firms there that also are in the agriculture industry and looking into Latin America as an opportunity to expand their business.

Vonnie Estes:
Yeah, it's so exciting because agriculture is so important to Brazil, both for food that you export but especially around produce. There's so much that you grow for yourselves just because you guys eat a lot of fruit and vegetables, which is wonderful. So it's wonderful to see the technology be developed there. And then some of the technology that's being developed there being deployed in other parts of the world, instead of the other way around. So it's great to see that movement happening in Brazil.

Mariana Vasconcelos:
Yes, and I think it supports a movement that will help we've produced. That it's like it's commoditization, right? How we can aggregate value to the consumer in the end and then I think technology will play a role in developing the produce industry in Latin America as well.

Vonnie Estes:
Next up is José Tomé, CEO of AgTech Garage, one of the most important ag innovation hubs in the world. Tomé and I have known each other for years since he was at CTC and it's wonderful to watch him build this hub. Let's drop into the conversation.

Vonnie Estes:
Tell me about yourself and AgTech Garage.

José Tomé:
Thank you. I'm José Tomé. The people call me Tomé. I'm the co-founder and CEO of AgTech Garage. I'm a chemical engineer. I have been working with R&D and innovation since 2008 but since 2011, more foots on open innovation and entrepreneurship and everything about the innovation ecosystem. And I was the co-founder of AgTech Garage in 2017, two years ago. We're very excited about the results. Our network with partners and the startups are growing fast. And the results about the interaction between these actors is very interesting.

Vonnie Estes:
That's great. And you actually have a facility where you have people in that I got to visit last year. That's quite an exciting place.

José Tomé:
Yeah, we have the hub, the physical place. But also, we are working a lot in a virtual mode, to connect everyone around Brazil.

Vonnie Estes:
So what do you see are the barriers for ag-tech and technology adoption in Latin America?

José Tomé:
Sure, it's a good question. And I can say that, in general, we are following the natural adoption curve. Always when we talk about new technology, we face the challenge to accelerate the adoption curve, and not only in the agricultural space, the people need to learn how to use different tools and advice. But if we can point to all three aspects, very specifically in ag, we can say about things about connectivity, and also distribution for entrepreneurs, how they can escape, how they can support the solutions, it's because in Brazil, specifically, large, large areas.

José Tomé:
But also we need to consider who is our target. We are talking about the small farmers, large farmers. In Brazil we have large farmers. I think that when you talk about this profile, another point is how they can manage the innovation process. I think that we can accelerate the adoption curve if these guys start to manage the innovation process, because if they just test one, two technologies in a year, it's not enough. But if we can have the team, have the process to test to validate the new technology and start to test five, eight, ten new technologies in a year, you will accelerate the process. Then I think that we start to see a lot of farmers come to the hub and start to pay attention in how they can manage the innovation process. It's pretty new, because some of them finish the... how they can manage the financial aspects in the best practice. And now they start thinking about managed innovation.

Vonnie Estes:
I've seen in the states anyway, sometimes there's just not people on the farm that understand how to use the technology. So are they learning themselves? Are they hiring consultants? Or how do they manage bringing innovation onto their farm?

José Tomé:
It's very interesting. They're starting to build the specific teams to manage innovation. Some of them are using consultants to start the process and establish this culture in the organization. And after that, they connect in the hub like us and sometimes they ask us if we prefer some people inside the team or will we hire from outside to manage this process. And we can say that most of them are using internal team, internal people with new activities and fictions.

Vonnie Estes:
Great. So what different types of technology have you seen developed in Brazil? And specifically around the hub, what kind of technologies are you working on? And what are new technologies coming up?

José Tomé:
Yeah, a lot of new technologies. Nowadays, we have more than 1600 startups connected with the hook. But I would like to highlight robots, for example. A lot of partners come and say, "I need some robot solutions." It's growing very fast. Also fintechs use new business model based on new technologies to monitor using satellites. And also credits, different ways and more specifically, using the risk and monitoring fintechs are also growing a lot. And of course, that some aspects you related with sustainability also, traceability also. I think that's the top three highlights about new technologies that we're starting to see in the world.

Vonnie Estes:
Interesting. On traceability, is that all the way through the food chain? Is that mostly on the farm or are you seeing technology after the product leaves the farm that's helping with traceability.

José Tomé:
It is. Yeah, you start to see solutions to monitor and track all the evolution, from the production into the trade market.

Vonnie Estes:
So tell me about the ag-tech ecosystem. When I spent time in Brazil, eight years ago, there wasn't much of an ecosystem and now because of people like you, there's such a great ecosystem. So how has it grown? And where did it start? And where is it now?

José Tomé:
Yes, we are very excited because the ecosystem is growing and growing a lot. It's very new for a lot of people. But just to have an idea, our network with partners, we doubled in one year. We also doubled the network with startups. Nowadays, we have 440 corporate partners, leaders in their segments. Also, more than 600 startups connected. One year ago, it was just half of these numbers. We will also start to promote a lot of innovation challenges for the community. It's become a practice and it also attracts new entrepreneurs. Entrepreneurs that have succeeded in other sectors. They start the second journey in ag and choose ag as the sector of choice to build the new solutions, a new startup. It's very interesting. And also the researchers in the academy also start to use lean, startups' concept and also more able to be partners with the corporates. And one and another connecting and both the ecosystems are growing very fast.

Vonnie Estes:
And with corporates are you working with companies mostly in Brazil or also corporations outside of Brazil?

José Tomé:
Yeah. Nowadays we are starting to become more connected globally. Our inclusive connections for example, is an important program. It's the first addition now that it's Latin. Then we start to be more driven to connect outside. Some problems with Singapore and other countries. Yeah, it's a start. We are in the infancy learning how to connect cyber geo, practice the business model and partnership with the startups. And I think that the next level will be connecting Latin and abroad.

José Tomé:
Last year, we launched the version of our digital community for startups on our platform in English. Also thinking about connecting outside. Nowadays we have some startups, one from Australia, one from Xavier, two or three from USA. We're starting to have some startups here in our hub as the residents. It's very interesting.

Vonnie Estes:
That is interesting.

Vonnie Estes:
I wanted to get a view on technology that starts in Brazil and expands out. Mario Portela is a partner at Circulars Partners, an investment firm focused on supporting technology enabled companies that advance the circular economy, promote sustainability and enhance resource efficiency. Circulars invests globally with offices in Brazil. Mario and I worked on at least three different projects together on second gen fuels and chemicals, and it was great to catch up with him here. You will hear him mention one of his portfolio companies Solinftec, a digital ag company, and how that company has expanded from Brazil to the US. Let's jump into the conversation where Mario talks about the ag-tech ecosystem in Brazil.

Mario Portela:
We found early on entrepreneurs and the dynamic ecosystem over the last decade, both in entrepreneurs as well as venture funds, and the willingness to adopt new technology, which is typically a resistance. Everybody says that farmers don't like to adopt technology. That's really not true. It's no different from any other industry where you have the early adopters, you just have to show ROI. And of course, you have the seasons. And if you don't make it this season, you have to wait for the next season. But we have by and large been able to find a good group of people to invest with. We found amazing founders and entrepreneurs.

Vonnie Estes:
Mario talks more about the arbitrage opportunity between Brazil and the US.

Mario Portela:
So we've been kind of confirming this investment thesis that there's a significant arbitrage to actually bring entrepreneurs and technologies that have been proven and developed in South America, in Brazil in particular, to the US.

Vonnie Estes:
Yeah, that's what we were talking about before we started recording is that yours and my experience before has always been, "Let's develop this technology in the US and then bring it to Brazil and try to-

Mario Portela:
I think it works there. See how people adapt it.

Vonnie Estes:
Yeah, and done by people who don't understand the culture, don't understand the growing conditions and it's exciting to see. And I think my time there, more 10 years ago, there was less entrepreneurs, there was less capital, there was less of that going on. How have you seen that grown over the time you've been investing in the last decade or so?

Mario Portela:
It has surprised us favorably because it has grown even faster than we had anticipated. The number of startups in 2017 in ag-tech was I think in the three hundreds. It's over a thousand today. The quality and what they are doing, whether it is the opportunities in logistics, in inputs, in digital, in marketplaces, traceability. They have started some sort of a carbon management recovery reaction program, which is RenovaBio, that has been in the design phase and testing for a while. And last year was the first time they actually put it to work. So, we have seen the number of funds that are now dedicated to South America, and the amount of money raised, the quality and number of the deals being done... and has become a vibrant ecosystem, even in a shorter period of time than we had anticipated.

Vonnie Estes:
So what do you attribute that to? Is that just kind of a momentum of more money means more companies means more success or how do you think that got going?

Mario Portela:
That is an interesting question. And I think Brazil has a very high quality education. People actually spend a lot of time in different parts of the world, also for their education. There is a huge influence from the US. There is a significant influence from Europe. But for example, Europe still lags behind in our view when it comes to early stage investing, and it's certain in the sector in particular. Whereas, for example, there is more of a comparison with China. With the advent in China of the big tech firms and a lot of universities and a government-sponsored, digital revolution. This has created a lot of startups and ecosystems and hubs where you have incubators, angel investors, strategics wanting to come in, et cetera, which all of these ends up generating the flywheel because it takes time.

Mario Portela:
The interesting thing in Brazil is this is happening in spite of the government, because there is no government policy to encourage these things. It's much more the entire kind of desire of the economic and social fabric to make things happen. And it's been very interesting to see a lot of these startups beginning to actually have visibility for huge IPOs. They have attracted a lot of talent, even from the outside. It's common for us to actually see not just Brazilians, but for example, Solistec is a group of Cubans that went to Brazil. You have a lot of Argentinians that are brilliant in very strong education. But Argentina is a much tougher environment to make things happen because of the issues that the country has been going through. But I think more and more-

Vonnie Estes:
Brazil is actually drawing people then. 

Mario Portela:
Yes. Brazil is drawing people from all of these. And we see very often in these early stage companies and founders, either Brazilians that were educated elsewhere, Brazilians that grew up in Brazil, but a lot of other foreigners, Europeans, Americans that have come to... which is a sign of vitality. Yeah.

Vonnie Estes:
Yeah. Interesting. Well, is there any other point you think we should know about your experience of investing in Brazil? And what things are like?

Mario Portela:
Yes, I mean, in general our experience is that offshoring, just kind of going there and finding a few places, and putting money to work if you don't have a local presence, is not a recipe for success. We have our partner, Ruh Calieh, that has been based there. For years, we have had a very strong network of investors and new relationships, whether it is with the strategics, with the ecosystem, making a huge difference.

Mario Portela:
It's very important to be there on the ground, to be able to kind of put the work and nurture and support these entrepreneurs. And it's also important to be able to have the perspective of looking beyond Brazil, so that you can also understand and bring the best of breeds from other geographies. But to be able to chart the path as we've done with Solinftec, and we've done with other companies in other sectors. To bring them to North America, and create that arbitrage. The opportunity in North America for Solinftec, for example as a digital, ag, real time, online company is much bigger in the US. But they have a very strong foundation in South America from which to go, but a lot of things to adapt to when they come to the US, in kind of a much more different structure of how the market is established in terms of the size of the farms, the growers needs, the infrastructure that exists today in terms of connectivity, the channel, all of those things. Whether it is for large acreage crops or perennials or different types of crops.

Vonnie Estes:
So, when they do that. When companies come to North America, does the management team move to the US and set up an office or do they hire people in the US and they stay in Brazil? Like how did they make that happen?

Mario Portela:
That's an excellent question. We've spent so much time trying to figure this out. Of course there is no real recipe for it. Each company has its own characteristics. But I can give you the recent examples of the companies, including Solinftec that we've gone through. We've debated, "Do we go to Silicon Valley and be closer to where the action is-

Vonnie Estes:
Well, some sort of action.

Mario Portela:
... or do we go closer to the customer? Like in Midwest. Or do we go to Indiana, and tie ourselves to a university like Purdue that has an amazing ag school and engineering school." And this is actually a very good ecosystem for us to hire people, to partner with universities and to partner with kind of all of the actors already in place to deploy your solutions and you learn and adapt your products.

Mario Portela:
Fast forward two years into this now, the biggest part of product development that exists in Solinftec is the solution needs that are much more cloud-based in North America, that feeds all of this product development back to Brazil, which is where we have the R&D again. And we thought we hire a US team, we hire a head of North America, we hire locals. But we ended up with issues of, "If we do, it's much more challenging to have that adapt well with the culture of the company, and the pace at which, and how you get things done."

Mario Portela:
So we chose to send a scout team in the beginning, who understand the market, understand the needs, and with the idea that it's always the marketplace that is going to tell you what the need is. You can bring the best technology, you can say you have all of this ARR that you have in other countries. In many respects, it doesn't mean anything. What is important is when you come to the market, to spend the time to understand where the needs are. And where you see the opportunity to make a difference in terms of providing a service or a value or ROI.

Mario Portela:
Because many times it's not what you thought, it is the marketplace that is going to tell you. That's why you need to do so much testing, and proof of concepts. And in the US, it ended up being 60% of farmland is covered by co-ops and the co-ops were in dire need of getting more efficient and they were very receptive to the technology as long as you could show that you could develop their solutions. That they can implement. That they're going to deliver ROI now, not in the future. But in this season. And that has been a huge success. But it started with bringing a team of people that understand very well the technology and have the ability to read what the market needs and spend the time there. And then progressively we start hiring more people locally to become not an antenna of a Brazilian company, but an entity unto itself in North America. And progressively the idea that this is actually the center of gravity and it's going to shift towards the US.

Vonnie Estes:
Well that's it for my quick trip south. I would love to see all these people in person when we can all travel again, hopefully in Brazil and with a caipirinha.

Vonnie Estes:
That's it for this episode of PMA Takes on Tech. Thanks for allowing us to serve as your guide to the new world of produce and technology. Be sure to check out all our episodes at pma.com and wherever you get your podcasts. Please subscribe and I would love to get any comments or suggestions of what you might want me to take on. For now, stay safe, eat your fruits and vegetables and we will see you next time.

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Description: We would all like to know what exactly we should eat to make and keep us healthy and to support maximum performance. And some of us would follow the advice! This would require knowing our genetics, immediate environmental factors, and the nutrient make up of the exact food you’re are eating. This requires data from your body and the food. I would love to open an app and have it all there for me. Listen to this episode to find out where we are in the that process. We hear from Dr. Sarah Laskey, a data scientist, Dr. Haven Baker from Pairwise and Greg Shewmaker from Teak Origin talk about what their companies are doing to make and keep us healthy.  

Guests

• Dr. Haven Baker Pairwise
  
• Greg Shewmaker Teak Origin
  
• Dr. Sarah Laskey 

Vonnie Estes: 
Welcome to PMA Takes on Tech, the podcast that explores the problems, solutions, people, and ideas that are shaping the future of the produce industry. I'm your host, Vonnie Estes, vice president of Technology for the Produce Marketing Association. And I've spent years in the ag tech sector. So I can attest, it's hard to navigate this ever-changing world and developing and adopting new solutions to industry problems.

Vonnie Estes:
Thanks for joining us and for allowing us to serve as your guide to the new world of produce and technology. My goal of the podcast is to outline a problem in the produce industry and then discuss several possible solutions that can be deployed today.

Vonnie Estes:
This series of PMA Takes on Tech is powered by our sponsors Sensitech. Sensitech's innovative supply chain solutions help customers retain quality, manage supply chain risks, and reduce costs associated with transporting food shipments around the world. Ensure that you have the visibility you need when you need it to increase efficiencies. Learn more about Sensitech's suit of real-time visibility solutions at sensitech.info/pma.

Vonnie Estes:
The series is also powered by Driscoll's. Driscoll's is the global market leader of fresh strawberries, blueberries, raspberries, and blackberries. With more than a hundred years of farming heritage, Driscoll's is a pioneer of berry flavor innovation and the trusted consumer brand of Only the Finest Berries.

Vonnie Estes:
This episode was a personal journey for me. I'm really interested in how we use food to make and keep people healthy. And what do we know now at the human genetics, plant genetics, and food density level, to make the best choices for ourselves personally?

Vonnie Estes:
Today, I have three amazing guests who are brilliantly working on all pieces of this knowledge chain. What I found is that we are, unfortunately, not as far along as I thought. Doubtful that next year I will have an app that tells, me per my genetics, what specific piece of produce I would benefit most from. But we do have so much information at our fingertips to make better choices.

Vonnie Estes:
Genetic testing companies can tell us what diseases we might be more susceptible to, and we know diet plays a big role in that. Pairwise, a breeding company is breeding for convenience and taste to have us eat more produce. And teak origin can give us a better view of the nutritional intelligence of the food we grow, sell, and eat.

Vonnie Estes:
Let's start with Dr. Sarah Laskey. Sarah is a data scientist and health product R&D at a genetic testing company. Sarah's bio says, "I am a data on a small team focused on developing the next generation of a consumer-health platform. We develop predictive models for human health that utilize genetics, lifestyle, and environment." How cool is that? Let's drop into the conversation with Sarah.

Vonnie Estes:
So, Sarah, what do you do? And what's your background

Dr. Sarah Laskey:
My background is that I have a PhD in bioengineering. And actually for my PhD, I studied immunology and pharmacology of HIV.

Vonnie Estes:
Now Sarah is a data scientist. I asked her what did data scientists do?

Dr. Sarah Laskey:
Data scientists like me put that information together to make discoveries about health and wellness. And so some of these are our published research discoveries. So we publish papers...

Vonnie Estes:
Sarah talks further about how she uses all of these data.

Dr. Sarah Laskey:
And so that is the work that I do, is using genetic and non-genetic data to develop machine learning models of health and wellness, make discoveries about health and wellness, and then return them to our customers in the form of a product features.

Vonnie Estes:
So, in this episode of the podcast, what I'm trying to dig into is just thinking about personalized nutrition. And I realized that this is not something that we can do today, we don't have all the information throughout the chain, and so what I'm trying to think about is what do we know now and what are all the different pieces that need to come together so that people can know, personally to them what, what do I eat that's good for mem, me as who I am not just a white woman at a certain age, but be personally. So what can we know through testing and genetics about what people should eat or not eat on a personalized level to keep them healthy? What do we know now? And then talk about what you think we'll get to in that?

Dr. Sarah Laskey:
Yeah. This is a very big question. There are a lot of angles and a lot of details here. There are some things we know now. I think what we know now is more subtle at times than people want it to be. I think people are really excited about the future and they want things to be possible that aren't possible yet.

Vonnie Estes:
But we do know some things. An example Sarah gives is a particular saturated fat and weight report.

Dr. Sarah Laskey:
And this reports on a specific genetic variant where if you have this variant, then having higher levels of saturated fat in your diet is actually linked to weighing more even if it's the same total amount of fat, like replacing saturated with unsaturated fat in your diet would be associated with losing weight for people with that genetic variant.

Vonnie Estes:
Oh, wow.

Dr. Sarah Laskey:
So we do know some things, but the effect of that is pretty small. You're not going to lose 20 pounds from that. It's subtle, and it's something that is easier to measure on a population level than on an individual level. And I think a big part of that is because genetics is important, but it's not the whole story. If you think about, let's say a high school kid who runs cross-country and eats 3000 calories a day, versus a new mother who's breastfeeding, and it may be in her late-twenties versus a senior citizen who has Crohn's disease and is overweight and pre-diabetic. I've just described three people who could all be the same person over the course of 50 years.

Vonnie Estes:
So they have the same genetics they're just in different stage?

Dr. Sarah Laskey:
Identical genetics. But you could imagine that these people have very different nutritional needs. And so genetics alone will never be enough to tell you everything you need to know about your nutritional needs because there are all these other factors in your life that play a role. And I find this exciting because I'm a data person, and so the answer is like, "Oh, we just need more data to learn more data. One more thing and then with all of the data, we can make all of the discovery." So that's great. I love it.

Vonnie Estes:
It's job security for you, right?

Dr. Sarah Laskey:
It means I won't have to be worried about intellectually interesting work for the rest of my time. But it's challenging because nutritional data is notoriously challenging to measure. And this is true of the food itself. So this is what you're talking about earlier in the episode where even for something that you'd think is fairly well-defined, an apple, there's dramatically different p