New Options in Expanding Markets
From farming to retail, economic shifts have started the journey to multiplying the successes of early adopters in regenerative agriculture. New consumer research data points to spiking interest.
Last week’s report highlighted that regenerative agriculture could pose as big of a threat to conventional agribusiness firms as the iPhone did to the Blackberry. Today let’s dig into how, at various stages of food chains, customers of agriculture are being offered new options for allocating resources… and the tools and technologies around cost-competitiveness.
Because these trends are driven almost entirely by consumers, as opposed to commodity producers in agriculture, marketing opportunities are most apparent at retail and in short-chain distribution. There are new economies emerging for commodity producers as well, but these are teased out through expense savings, rather than value-adding, for now.
Retail Food Consumers
Big-box retail will always have a role to play to feed households. Alongside, food bought directly from farms is a growth category driven by customers seeking experience, connection, authenticity, and to participate in circular economies. Online sales and farmers markets are the channels expanding most rapidly.
For meat and dairy, dry ice has allowed online sales and courier shipping to lift up new brands selling foods with novel attributes, and an origin story. Transformative finance like Square is allowing in-person purchases to spike at farmers markets, urban craft markets and pop-ups.
A feedback loop will continue increase the supply of products available in these channels. New vendors are encouraged to launch by efficiencies created that broaden the commercial feasibility of farming, that weren’t available in the cash-only days.
New retail brands are emerging on a large scale too. Above Food can trace ingredients back to its grain origination facility in Saskatchewan, and ADM’s Knwble Grwn product line is manufactured from regeneratively-grown flax, hempseed and quinoa.
Short-Chain Distribution
This area of the food system is ripe for new investment. Particularly since Covid lockdowns exposed the vulnerability of just-in-time and cold-chain infrastructure, government subsidies are available to help with up-front capital costs in most jurisdictions.
However, black markets and outdated health inspection regulations represent a serious risk, depending on the food category. Meat processing isn’t feasible unless the business controls the entire value chain, including supply and demand, and can approach big-box retail prices. Fruit and vegetables, on the other hand, are facing a gaping hole in supply options outside of California and Arizona, where upwards of 90% of North America’s fresh produce originates from currently.
Primary Production
While consumers are rapidly gaining curiosity about where their food comes from, producers are diving deep into how plants and soils interact on their lands. Here for the taking are several new sources of value.
Techniques like intercropping are more profitable,
Managed grazing on croplands rapidly restores soil carbon, builds organic matter, and fights herbicide resistance; and
Multi-species pasture mixes outperform corn silage in raising livestock.
These are each unique examples of economic value creation, that don’t hinge on supply chain traceability today in any way. Soon, however, farmers will face even greater new economic expansion opportunities that will require end-to-end data capture and reporting. Until then, expect them to remain resistant and suspicious of devices and platforms tracking their activities.
The reason that established farms are dipping into regenerative practices today is for the crop input expense savings. Also, they are fearful of government regulations forcing change in the future.
They typically quite enjoy the process of learning and community building that it takes to be successful with regenerative practices. If they don’t… they’re unlikely ever to adapt.
The technologies working to scale up farm practice adoption are more tactical than digital at this stage, and that’s OK. Across the food chain, stakeholders need time to change, to be highly observant of the outcomes along the way, to analyze and manage new risks.
Summary
The strength and dominance of incumbent operators of opaque supply chains has thus far prevented a shift in commodity buying patterns as massive as the move was from BlackBerry to iPhone. Traceability solves a wicked problem for consumers at the retail level (greenwashing), but there are no economic motivations today strong enough to budge most bulk commodity resellers.
New consumer research suggests some big moves coming soon. Kiss the Ground recently found that:
45% of Americans support organizations combating climate change,
54% feel it’s important to ‘do my part to protect the planet’, and
70% purchased organic, non-GMO and/or sustainable products in 2022.
In addition, independent research firm HowGood found that, in 2022:
549 entities in food and agribusiness are using the term ‘regenerative agriculture’ in 2022, up from 219 the year before, and
Companies with combined annual revenues of over $1 trillion are now using the term.