May 4, 2018
Kenneth Scott Zuckerberg, AIF® AFA®, Wells Fargo Sector Manager, Agrifood Technology and Packaged Foods
Welcome to my first Food Matters blog, intended to provide insights and perspectives on the tidal wave of change impacting food producers, value-added processors, and distributors. Against a backdrop of low commodity prices, increasing global competition, and changing consumer preferences, the time has come to embrace new technologies — such as data analytics, robotics, automation, and artificial intelligence — that can improve returns and reduce risk. I hope you’ll remain tuned into Food Matters with each issue of our Food for Thought e-newsletter.
The greatest risk is often not taking one
The food sector is undergoing structural change that arguably compares in magnitude to the automation of American factories during the 1950s. While farming is one of the last, large industries to fully embrace data analytics and other modern technologies, industry challenges, such as cash flow pressures, can be viewed as the catalyst to adopt new value-enhancing tools and processing already commonplace in other product manufacturing industries. We have begun to witness the reinvention of business models by several major food brands and retailers, with Amazon’s acquisition of Whole Foods Market being a prime example. When one considers the size and complexity of the existing food value chain, it seems logical that technology plays a role in driving efficiency gains. My key message is that, oftentimes, the greatest risk facing a mature industry is lack of evolution as new companies and ideas enter the marketplace and displace legacy players.
A ‘new wave’ of technological innovation is already here
First, I’d like to offer some perspective on farming and innovation within the food production system. Innovation in agriculture has been happening for literally thousands of years, and the basic tools of farming have been constantly augmented and enhanced. The plow, an implement used for cultivating soil before seeding a crop, was one of the most important inventions in crop farming. It was first operated by humans and then pulled by horses. Subsequent innovations included the invention of the seed drill by Englishman Jethro Tull in the 1770s, followed by combination harvesters and threshers, and ultimately mechanized farm equipment such as gas powered tractors and combines. Today’s progressive farmer is likely to be using various cutting-edge technologies, ranging from tractors with auto-steer and GPS, to soil moisture sensors, to milking robots on dairy farms.
Second, there is an exciting answer for where things are today, and where they are headed. Robotics and automation figure prominently in the next chapter of innovation in production agriculture. Evidence of this is John Deere’s 2017 acquisition of Blue River Technologies, along with the emergence of other technology companies that serve both agricultural producers and food manufacturers.
The prominence of technology in daily life
The pace and magnitude of technological change has been more dramatic over the past 10 to 15 years than the preceding 100 years. Think about how far society has come with respect to digital interface with other consumers and businesses. And, also, how different things were prior to the global financial crisis. Following are two case studies that provide helpful perspective.
Case study 1 — the smartphone
One need not look further than the Apple iPhone to recognize how one new product can positively and dramatically impact daily life and business efficiency, while simultaneously disrupting entire industries. This can be seen by unbundling the individual product and service capabilities that can be accessed from a smartphone, with consideration to the multiple industries that provide these products and services.
Case study 2 — public company rankings
At the end of 2017, seven technology companies ranked among the world’s most highly valued companies. What is most important is that several of the names on the list — Alibaba, Facebook, and Tencent — were nonexistent or off the radar in the year 2000.
Next month, I’ll recap a Wells Fargo webinar that I moderated on May 1 on the impact of robotics and automation on agricultural production and processing. The panel featured 3 subject matter experts: Sebastien Boyer of FarmWise, Carl Vause of Soft Robotics, and Ron Hadar of Vibe Imaging Analytics.
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