Lest I get kicked off Meatingplace or out of my cattle raising family, let me state up front this is NOT an argument for (or against) alternative meats.
This is a look at the approach meat & poultry companies can take responding to innovation.
Setting up a venture fund is neither necessary nor sufficient for responding well to innovation. Responding well to disruptive threats is however, about being open to the possibility that tectonic changes could occur. It’s about designing market agility into the organization.
Given that nothing is more American than the livestock business or meat and poultry, especially not chicken that sells for $6,000/lb (current price of cell cultured chicken – granted that price is dropping fast as alternative meat companies look for scale), will Tyson and Cargill start swapping slaughter facilities for lab cultured beef plants?
But will Tyson and Cargill have a better read on the development of these emerging technologies? And be able to get in front of these market opportunities, should they materialize?
New products aren’t the only threat to the established order in the meat & poultry business, so are new business models.
Just ask Jefferson Heatwole, co-founder of Shenandoah Valley Organic, a startup chicken company that’s staking its claim as the “microbrewery of chicken.” The entire business model is built to serve the millennial consumer that doesn’t trust big institutions, wants the quality of an artisan product, and to be part of a community.
So SVO is tapping into this segment and earning fanatical consumer loyalty by flipping the typical contract chicken grower model and investing in marketing. Not investing in advertising to push out corporate messages. No, SVO’s new retail label FARMER FOCUS has a Farm ID code which a consumer can enter into the company’s website in order to see the farmer’s story where that chicken was grown. Not just a farm, THE farm where the chicken was raised, by a farmer who contractually owns the chickens until ready for processing.
Think about it. SVO is the anti-Tyson, the anti-Pilgrim’s. SVO’s business model is literally the opposite-of-every-chicken-company-in-America model.
(It’s not about which one is “better”, the point is to do the mental exercise of considering that the status quo could look different in the future.)
Think that a little ol’ upstart company can’t impact an established industry?
Ask the macro beer players how the rise in craft breweries is affecting them. (Actually don’t, they’re too busy acquiring the small craft guys to maintain market share and increase margin.)
So does every meat company need to create a venture fund in order to be competitive in the long run? Do chicken companies need to start indiscriminately changing up the contract grower model?
Of course not.
The point is that there are competitive threats that meat companies need to prepare for. Not in an academic sense, but in a practical it’s-2018-and-innovation-is-coming-at-ya-fast-so-buckle-up-cowboy sense.
Those threats come in the form of both innovative products (i.e. cultured meat) and business models (i.e. microbreweries of meat), and more.
The companies that win in a fast changing environment will be the companies that are agile, the companies that take an eyes-wide-open approach and adapt their business model to the current (future?) market.
If you’re in the meat or poultry business, you know that culturally speaking companies generally have 1 of 2 postures:
- Looking for industry trends to take advantage of….
- Or too busy explaining “we’ve always done it this way” they can’t even hear anything else.
For meat and poultry companies, what got you here won’t get you there.
This article was originally published on Meatingplace.