food

Solving Real Food Problems

Image Source: By Stansfield PL (Wikimedia Commons) [CC BY-SA 3.0 (   http://creativecommons.org/licenses/by-sa/3.0   )], via Wikimedia Commons // Quote:   https://www.wired.com/2013/01/ff-qa-larry-page/

Image Source: By Stansfield PL (Wikimedia Commons) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons // Quote: https://www.wired.com/2013/01/ff-qa-larry-page/

The food sector is a hot. Investors of all stripes are piling capital onto the startups they think will be the next big thing. A small cadre of startups is drawing a large proportion of the funding: Blue Apron’s raised nearly $200M at a $2BN valuation. Impossible Foods raised $183M at an $800M valuation. Juicero raised $86.5M at a $270M valuation. The list goes on.

Some of these high profile startups are solving real problems in our food system. Others are going after opportunities, which don’t always correlate with solving a real food system problem. The problem in food is that there’s a shortage of companies that are looking to solve worthy problems and too many chasing after mere opportunities.

I recognize that parsing a problem versus an opportunity is a question of semantics and where we draw the line between a real problem and less-real problem is highly subjective. So for sake of argument here’s a very abridged list of things that I consider to be real problems in our food system…

Hunger: Some 795 million people in the world do not have enough food to lead a healthy active life. That’s about one in nine people on earth. [http://bit.ly/2jqXgKL]

Food Waste: Every year, consumers in industrialized countries waste almost as much food as the entire net food production of sub-Saharan Africa (222 million vs. 230 million tons) [http://bit.ly/2jqNdFs]

Biodiversity: 75 percent of the world’s food is generated from only 12 plants & 5 animal species. [http://bit.ly/1qeEDMb]

Climate Change: The 10 warmest years in the 136-year record all have occurred since 2000, with the exception of 1998. The year 2015 ranks as the warmest on record. [http://go.nasa.gov/2jqSUTS]

The above Problems (and many more) represent the “99 percent virgin territory” that Larry Page talks about in tech, except for food. Now contrast the magnitude of the above Problems with some of these problems:

Juicing: There’s a lack of good ways to make cold pressed juices at home from scratch - Solved

Meal Delivery: It’s difficult to get a meal delivered to me in Manhattan in about 20 minutes - Solved.

Hydration: I need my water to make a statement about who I am - Solved

It’s perfectly reasonable and commendable that the latter three companies will go on to be wildly successful and create great jobs for many people. They’re going after good market opportunities. And building a business is tough no matter what, so I’m not going to diminish what they’re doing as being easy or totally superfluous.

But if you’re going to the trouble of building an entire food organization of really smart people working long hours and burning investor capital, shouldn’t there be a moral obligation to make sure you’re pushing the system forward for the sake of planet and people? Food companies leave especially deep footprints and have the power to affect both our health and the planet deeply. That puts food companies on an especially influential plane where they can meaningfully change the well-being of our world while turning a profit. This is the Holy Trinity of what the future of food entrepreneurship is about: improving people, planet, and profit.

The developed world has climbed so high up Maslow’s Hierarchy of Needs that we sometimes forget about the parts of the world where they’re still clinging to the bottom layers of the Heirarchy. What’s more problematic is that so much of the investment capital going into food and food-tech is feeding companies that serve unique 1st world problems. There’s got to be a better way to earn a solid return while serving more noble causes for the planet and society.

Maslow’s Hierarchy of Needs: where do the most celebrated food startups sit?

Maslow’s Hierarchy of Needs: where do the most celebrated food startups sit?

How might we incentivize more investors and entrepreneurs to go after the more basic, devastating problems like hunger, food waste, climate change, and biodiversity? How do we create a system where climate change startups proliferate at a rate where we’ll gather at food conferences and collectively groan, “oh man, yet another climate change startup?”

I hope we can get to the point where we see as many climate change (or hunger, or food waste, etc.) startups popping up as we see food delivery startups. That’s the day we’ll know the food industry is chasing after as many problems as they are opportunities.

Food Product vs Food Marketing

I stumbled upon an old Steve Jobs interview where he lays out what happens when tech companies — specifically those with monopoly power — adopt a product-first mentality versus a marketing-first mentality. By adopting this kind of approach, he laments, companies eventually lose sight of staying connected to consumer needs.

The interview really hit home for me, because it eloquently encapsulates so much of what I see happening in the food industry today. In fact, Jobs even cites PepsiCo as a prototypical marketing-first company.

The interview excerpt is embedded below, followed by my thoughts on the parallels to what’s happening in the food industry.

"The product sensibility—the product genius—that brought them to the monopolistic position gets rotted out by people running these companies who have no conception of a good product versus a bad product..."

A Lack of Innovation Investment

If big food companies want to survive in the future, they need to completely rethink how they innovate and how much they invest in innovation. Launching funds and incubators is certainly an important part of an innovation strategy, but companies also need to figure out how they can create great products for 21st century consumers. No longer can they succeed by solely milking their legacy products for diminishing shreds of market share with lavish marketing campaigns.

Are the monopoly powers in big food in marketing mode? Absolutely. At PepsiCo, from 2013 to 2015, the company spent 3.1 to 3.6 times more on advertising and other marketing activities than they did on R&D.

Source:  CB Insights

Source: CB Insights

 

At P&G it’s about 4-5 times more spent on advertising than on product development.

Source:  CB Insights

Source: CB Insights

 

Compared to other industries, the CPG industry as a whole spends 1.58 percent of revenue on R&D compared to 13.38 percent in tech and 11.15 percent in healthcare. Food is just not investing in its own future via product innovation.

Source:  CB Insights

Source: CB Insights

 

People Want Better Food, Not Better Marketing

Since the Green Revolution, food production (especially of the packaged variety) has been pretty opaque. Enamored with fast, convenient food, consumers didn’t seem to care enough to ask where things came from.

For decades, big brands really didn’t have to think too hard about the product, vis a vis how wholesome it was, the quality of the ingredients and the integrity and sustainability of the process. R&D was mainly focused on food science to prolong shelf life to unprecedented lengths or dosing a snack’s salt/fat/sugar content to trigger the maximum bliss point in your mouth.

Marketing led the conversation in big food, not product. As Jobs stated, “for PepsiCo, that might have been ok,” especially because of their duopoly over the market. While marketing is a crucial part of the business that won’t ever go away, the future of food means a return to food products taking center stage.

Product Takes the Lead

We’ve entered the age of product-first, marketing-second food. It’s a paradigm shift driven by consumers who now demand better food, and can see right through the bullshit of any disingenuous campaign. Smaller challenger brands, like Back to the Roots, Justin’s and Sweetgreen, are leading with well-crafted, wholesome, sustainable products first and letting that be their marketing focus. Gone are the days of cheap catch phrases or mascots to sell product, it’s the product quality doing the selling now. Digitally powered word of mouth weeds out the subpar, so you really can’t hide behind anything inferior for too long. This shift back to product-first food production is a good thing.

There are some great people doing amazing things at big food companies today, and I’m optimistic that they will help their companies lead the charge for a better food future. Yet, I’m shocked at the number of people I’ve encountered in leadership positions at food companies who treat food like a mere widget on the shelf. Yes, food is a widget, but it’s one that’s inextricably linked to the well being of our planet and society. Maybe selling food as a mere marketing exercise is a good strategy for moving units, but is that really how we want to look at our food system?

In tech companies, the product people are the designers and programmers who have the consumer’s best interest in mind and who craft the products for marketers to sell. These are the people that Steve Jobs championed and raised the bar for the whole industry in Apple’s heyday.

In food companies, we must ensure that food designers, chefs, farmers and dietitians are empowered in the right decision making circles to create food that’s better for people, planet and profit. Intrinsically great food products might mean less work for the marketing department, but certainly more value for the consumer.

The True Cost of Food

“In a startling development, almost unheard of outside a recession, food prices have fallen for nine straight months in the U.S. It’s the longest streak of food deflation since 1960.” reports Bloomberg.

Food prices have never been lower, but food prices are not the same as food costs.

These low prices — not just today, but for the past few decades — obfuscate the true cost of food in terms of the environmental and health impacts they make on our society over time. Negative externalities like fossil fuel consumption, air and water pollution, soil degradation, and poor labor practices are all food costs that aren’t reflected in the price tag.

Without a way to bring the impact of these abstractly large negative externalities down to the human scale, it’s a struggle to viscerally connect the actions of an everyday grocery shopper to these big systems issues.

Take a box of corn cereal for instance: The corn was likely grown in a monoculture sprayed with pesticides that can seep into groundwater, with petroleum based fertilizers that bolster our appetite for fossil fuel. The price of that corn is even cheaper when you consider the heavy government subsidies to promote corn production.

The prices are low because this way of farming yields a lot. But at what broader cost to the ecosystem and society does this maniacal focus on yield create? What’s the aggregate cost of global warming caused by fossil fuel based transport and production methods? What’s the aggregate cost of water purification needed to remediate the effects of pesticide ridden runoff? What’s the aggregate cost on healthcare from making junk food insanely cheaper than real food?

How might we better represent the impact of buying a particular food product on the food system?

What if we could represent this on the label so everyday consumers could easily understand the cost of their food beyond what the cash they shell out at the checkout? Might it look like this?…

The True Cost of a box of Corn Cereal. How might we account for the environmental impacts of monoculture food products?

Or like this...

The True Health Cost of a Soda. How might we account for the full health impact of a daily soda habit?

We humans are hard-wired to overemphasize short term effects over long term ones. When we smoke, we don’t think about the lung cancer, we think about the relaxation. When we sit on the couch, we think about the tv show, not the weight gain.

Food is no different. We touch food so frequently that it’s sometimes hard to stop and think about these hard issues in each purchase. Our brains would shut down if we had to think about the full impact of the supply chain on a box of cereal each week at the supermarket.

While people are becoming more mindful about the bigger effects of the food they buy, there’s a lot of room to improve on how we boil down the true systems impact of a food to the individual product.

In 1990, the Nutrition Labeling and Education Act mandated Nutrition Facts labelling, changing the game forever for how we think about buying food. Food and health felt more connected as a result of the nutrition facts label. Looking toward the future, as public health and the environment are increasingly being linked to our food choices, isn’t it time we start to rethink how to represent food’s real impact on our world on the label and the price tag?


Notes: Receipt & Nutrition label stats based on the following.

ACME INDUSTRIES CORN CEREAL

Acme Industries Corn Cereal — $5.29
Monoculture Nitrogen Loss Fee (per 1 ton soil)* — $0.63
Corn Subsidy Refund (25% COGS)** — $0.13
Pesticide Hazard Surcharge (Per US Citizen / 1,000)*** — $0.66
GMO Corn License Fee # 1ZX78211A (Flat Fee) — $2.25
TOTAL — $8.96

*Monoculture Nitrogen Loss: USDA-NRCS studies estimated a loss of 1 kilogram (2.32 pounds) of nitrogen and .45 kilograms (1 pound) of phosphorus for each ton of soil eroded, costing farmers US$.63 and US$.64, respectively, in 2012. (Page 24 — https://foodtank.com/news/2015/11/exclusive-food-tank-event-the-real-cost-of-food/)

**About $13.9 billion of net farm income this year will be federal payments, or about 25 percent of total profit estimated at $54.8 billion, according to estimates by the U.S. Department of Agriculture. (Farmers Get Biggest Subsidy Check in Decade as Prices Drop — Bloomberg (http://bloom.bg/2hxtshj))

***Endocrine-disrupting chemicals found in pesticides are estimated to cost the European Union €157 billion (US$209 billion) in actual health costs and lost earnings per year, due to their linkages to cancer, birth defects, infertility, and learning disabilities. (Page 11 — https://foodtank.com/news/2015/11/exclusive-food-tank-event-the-real-cost-of-food/)

COLA NUTRITION LABEL

Serving Size: 1 Can

Amount per Serving*
Calories — 140
Total Fat — 0g — 0%
Sodium — 45mg — 2%
Total Carb — 39g — 13%
Sugars — 39g
Protein — 0g

Annual Weight Gain Amount** — 0.25 lb
Diabetes Type II Risk Increase*** — 26%
Heart Attack Risk Factor Increase**** — 20%
Gout Risk Factor Increase***** — 75%

*Percent Daily Values are based on a 2,000 calorie diet.

** “A 20-year study on 120,000 men and women found that people who increased their sugary drink consumption by one 12-ounce serving per day gained more weight over time — on average, an extra pound every 4 years — than people who did not change their intake.” [Sugary Drinks and Obesity Fact Sheet | The Nutrition Source | Harvard T.H. Chan School of Public Health](https://www.hsph.harvard.edu/nutritionsource/sugary-drinks-fact-sheet/)

*** “People who consume sugary drinks regularly — 1 to 2 cans a day or more — have a 26% greater risk of developing type 2 diabetes than people who rarely have such drinks.” [Sugary Drinks and Obesity Fact Sheet | The Nutrition Source | Harvard T.H. Chan School of Public Health](https://www.hsph.harvard.edu/nutritionsource/sugary-drinks-fact-sheet/)

**** “A study that followed 40,000 men for two decades found that those who averaged one can of a sugary beverage per day had a 20% higher risk of having a heart attack or dying from a heart attack than men who rarely consumed sugary drinks. A related study in women found a similar sugary beverage–heart disease link.” [Sugary Drinks and Obesity Fact Sheet | The Nutrition Source | Harvard T.H. Chan School of Public Health](https://www.hsph.harvard.edu/nutritionsource/sugary-drinks-fact-sheet/)

***** “A 22-year study of 80,000 women found that those who consumed a can a day of sugary drink had a 75% higher risk of gout than women who rarely had such drinks. Researchers found a similarly-elevated risk in men.” [Sugary Drinks and Obesity Fact Sheet | The Nutrition Source | Harvard T.H. Chan School of Public Health](https://www.hsph.harvard.edu/nutritionsource/sugary-drinks-fact-sheet/)