The closure of US meal-kit business Chef’d is symptomatic of the challenges in that fledgling sector but, Victor Martino argues, it is also emblematic of an underlying issue in the wider industry – the disconnect between those in the food industry and those working on the technology that is rapidly impacting the market. Here, just-food’s US columnist outlines why food and tech need to work more closely together – and how.
The news this week US subscription meal-kit company Chef’d, which counted among its financial backers Campbell Soup Co. and Smithfield Foods, abruptly went out of business is a reminder that, although technology is playing an increasingly important role in the food industry, food-tech is by no means a sure bet.
Last month, I participated in the 5th annual Food IT conference at the Mission Bay campus of the University of California San Francisco, a high-tech campus set among green lawns and trees in one of San Francisco’s newest and most “up-and-coming” neighbourhoods.
The campus’ physical setting, high-tech buildings and labs (the campus’ focus is on science, medicine and related technologies) mixed with bucolic landscaping, served as a good metaphor for the conference, which had as its mission the connecting of the people and industries feeding the world – farmers and the food industry – with the people and industries – Silicon Valley – that are changing the world through innovation in information technology.
Rob Trice, a partner in The Mixing Bowl, the Silicon Valley-based group that hosts the conference and connects innovators in IT with the food and agriculture industries, told me increasing communication and connections between information technology innovators, agribusiness and the food and grocery industries has never been more important amid the technological innovation and disrupting the status quo.
Technological innovations like artificial intelligence, machine learning and IoT are moving at warp speed across the sector
It’s imperative those of us working in the food industry gain a better understanding of technological innovations like artificial intelligence, machine learning, IoT and others that are moving at warp speed across the sector.
At the same time Trice, who’s also a partner in California-based venture capital firm Better Food Ventures, says it’s equally important the information technology innovators working in food and agriculture gain an understanding of how these businesses operate and connect with the people who feed the world.
Better communication and connectivity between information technology innovators, investors and the food and ag industries, sounds logical and simple. But it isn’t happening anywhere near the degree it needs to be happening.
I see this problem on a weekly basis. I divide my time between San Francisco, which arguably has become the food, ag and grocery tech capital of the world, and the Central Valley, which is the largest farming and food-producing region in the world.
The geographical distance between these two places is 90 minutes. But the communication and connectivity gap between Silicon Valley and the Central Valley – between food, farm and tech – seems at times to be worlds apart.
The people and industries that feed the world and the people and industries that are changing the world through tech innovation need to become better connected.
Chef’d is a perfect example of this void. The founders of the subscription meal-kit company set out to use technology to disrupt grocery retailing and the CPG industry using a direct-to-consumer model based on digitalisation. The goal was to disrupt the intermediary, the grocery retailer, taking meals directly to consumers using technology, which at the same time would disrupt traditional packaged foods by creating an alternative, meals ordered via a smartphone app and delivered directly to consumers’ homes.
It failed, as a number of other subscription meal-kit start-ups are failing, with the direct-to-consumer subscription model.
Like Chef’d these companies have pivoted in the last year, adding the grocery retail channel to their distribution strategies not out of desire but rather out of necessity and even desperation.
Two meal-kit companies, Home Chef and Plated, even went courting grocery retailers in search of an acquirer. The result: in the last 12 months, Kroger has bought Home Chef and Albertsons has acquired Plated.
A lack of communication and connectivity between the tech innovators and the people who feed the world is partly behind the failures playing themselves out in subscription meal-kits.
Big food companies Campbell and Smithfield invested in Chef’d, for example, without having a good understanding of the technology and the direct-to-consumer subscription meal-kit model.
Conversely, the founders of Chef’d, Blue Apron and most of the other subscription meal-kit companies have, or at least had, very little understanding of the retail grocery channel, and little appreciation for its power. If they did they wouldn’t have waited so long in a last-resort fashion to use an omni-channel distribution strategy of direct-to-consumer plus retail grocery.
Better communication and connections between the tech innovators and the people and industries that feed the world could have prevented a lot of mistakes and saved investors tens of millions of dollars in the subscription meal kit business.
Technology is having a disruptive effect on the food and grocery industries but, at the same time, the jury is still out – something the nearly 400 participants at the Food IT conference agreed with collectively – on what that effect really is and how significant it will be.
The consensus of the group at the conference, which included representatives from global CPG companies, food start-up founders, agribusiness titans, farmers, venture capitalists and Silicon Valley technologists, is better connectivity between tech innovators, agribusiness, farmers and the food industry is imperative
I have five prescriptions that will go a long way towards helping to better connect food and tech.
1. Corporate VC as connector
One of the fastest-growing phenomena in the CPG industry is the rise of the corporate venture-capital arm. The function has gone from zero to nearly ubiquitous in the packaged goods industry in three years.
A corporate venture capitalist can be either in-house like Reese Schroeder, the managing director for Tyson Foods’ Tyson Ventures, or the function can be farmed out, which is what Kellogg (partly) does, using the Silicon Valley venture-capital firm Touchdown Ventures and its senior associate Brent Kadesh, who is helping the cereal giant with the management of its Eighteen94 Capital in-house, venture-capital arm.
At Food IT, Schroeder and Kadesh expressed the view better connectivity between tech innovators and the food industry is needed. Both also noted they think it is coming.
Corporate venture capitalists are in the perfect position to enhance the connectivity between tech innovators and the food industry and it would be an important addition to their job descriptions because the position can act as a bridge between the two worlds.
2. More joint-ventures
Big and even medium-sized CPG companies should initiate more joint-ventures with technology-focused food, grocery and agriculture start-ups.
Doing so will enhance connectivity, lead to better cross-fertilisation of ideas and new business creation and help to reduce the growing dichotomy between ‘Big Food’ and ‘Small Food.’
3. Tech innovator-in-residence
Big CPG companies might want to consider bringing a tech innovator in-house say for a one-year residency as “tech-innovator-in-residence.”
The position needs to be meaningful and the tech innovator needs to have access all the way up and down the corporate chain-of-command, from the CEO down. This is different than an incubator programme because the “tech-innovator-in-residence” becomes a member of the management team for a year and has a specific focus – tech innovation with a focus on product and new business ideas and formation.
4. The rise of the rest
AOL founder, entrepreneur and investor Steve Case has as his mission the creation of “Silicon Valleys” throughout the US, particularly in America’s heartland.
As a variation on his theme, I believe we need to advocate for the diffusion of food and agriculture tech beyond the coastal high-tech capitals.
Many big CPG companies, for example, are headquartered in the US heartland. They can play a key role in the diffusion of food and ag tech, bringing it closer to the farm and sources of food production.
This will increase connectivity and expose tech innovators to the inner workings of agriculture and the food industry, while at the same time better connecting the people who feed the world to the tech innovators.
5. Get back to the farm
A not so positive reality of our modern food industry is the further it has come in process efficiency the further from the farm it has gotten. It’s not common for food industry executives and managers to spend time talking to farmers, and vice versa.
The connectivity of food and farm has weakened dramatically, which is why farmers’ markets and small, local food companies and brands are becoming increasingly popular.
Information technology can help to better connect the food industry and farmers, as can conferences like Food IT.
Humans need to enable and guide the vast array of technology out there, which was another central theme that won consensus at the conference.
If we do it right, information technology can help us to reconnect food and farm, along with creating a better degree of certainty when it comes to the brave new world of food and tech.
Lastly – and most important of all – is the consumer, who what we do is all about. Consumers must be kept in every aspect of this equation. Our ultimate challenge and mission is to connect with consumers, without whom all we do we do in vain.