The Lead
JAB Holdings deal to buy UK sandwich chain Pret A Manger will give them more reach into the pockets of higher-end customers willing to pay more for “socially responsible” food. We hope it goes better than their ill-fated tie-up with McDonalds over 10 years ago.
PepsiCo hedges its bets with purchase of Bare Foods Co., maker of healthy snacks such as dried fruit and vegetables. The purchase price was not divulged, but they better have set aside a huge marketing budget if they want people to kick their Doritos habit.
That was quick. Amazon is expanding its 10% discount program for Prime members to all Whole Foods stores in the US by the end of summer. Whole Foods customers also get the discount if they use their delivery service. Expect continued erosion of margins if you are an organic/non-GMO food supplier. Amazon is using its logistics juggernaut to muscle out other premium food vendors and still make good margins. But they need to be careful about commodification. As pricing lowers and demand increases, the organic/non-GMO supply chain will quickly be constrained and costs will rise.
Blockchain Me This
The salad business in the US, particularly romaine lettuce, has been hammered by another E. coli outbreak. Growers and grocers are both taking a hit as consumer confidence in greens drops. What’s clear is that nasties like E. coli and salmonella still cannot be managed well in the supply chain. The real solution is information systems built on blockchain which can track greens and other produce cost effectively from the farm to the store. Without rapid access to provenance, we are doomed to further costly sales interruptions when there is another outbreak.
Demand Drivers
Stocks in big food plays like Danone jumped on the news that China may be lifting any limits on the number of children a family can have before the end of the year.
Innovation Watch
Tyson Foods’ Innovation Lab has created its first hip brand ¡Yappah! and released a product, Protein Crisps, which checks all the boxes for the ecology-minded crowd. The product includes “upcycled” chicken breast pieces and “rescued” vegetable puree left over from juicing or “rescued” spent grain from beer brewing (sourced from Molson Coors). This is brilliant: taking low-value waste products and turning them into high-value products with a fancy name and clever marketing campaign.
CrowdCow, a Seattle-based craft meats startup, has raised $8 million to build out their model of connecting small beef producers with customers looking for high-quality steaks delivered to their door. Look for more start-ups trying this with other niche meat suppliers where there is sufficient margin to justify the freight and customized processing. Another online meat vendor Porter Road, just raised $3.7 million to grow their more traditional online business selling premium meat cuts. In both cases, provenance is of key importance to the customer.