Tom:                            Steve Elliott is the global director of the mineral management team at Alltech. He has 25 years of experience in the feed industry, 20 of them with Alltech. He joins us to talk about advances in the nutrition of farm animals that figure into our food chain. Thank you for being with us.

Steve:                          Absolutely.

Tom:                            Your present focus is on how organic trace minerals can improve the health and performance of livestock. What have you found?

Steve:                          Trace minerals are essential nutrients. In other words, animals must receive them every day in their diet. We found that by providing them in an organic form, we can meet the requirements and do so with much lower fortification levels in the diet. We can have a lower mineral concentration, less mineral excretion into the environment and less interaction with other components in the diet. There are a lot of advantages to looking at the natural way of providing trace elements.

Tom:                            Which trace minerals are key to improve livestock performance?

Steve:                          Most people will be familiar with zinc, copper and manganese, but there has been a lot of work on selenium over the last 15 years. Many parts of the United States are selenium deficient. By utilizing an organic form of selenium, we can raise the selenium status in the animals, thus improving their immunity, reproductive efficiency, etc.

                                    We can also fortify consumer diets with selenium by fortifying meat, milk and eggs, transferring selenium from the animal’s diet into the protein.

Tom:                            And just out of curiosity, where do you find selenium?

Steve:                          Selenium is one of those essential trace elements. It’s mined out of the earth. But at Alltech, we found a natural way of producing selenium: We take yeast and add selenium to the fermentation, and we can get the yeast to take it up and store it in an organic form. It’s much safer for the animal, safer for the people mixing the feeds and safer for the environment.

Tom:                            And which, in your opinion, is best: inorganic or organic minerals? Does it matter?

Steve:                          Yes, I believe it does matter. In nature, animals get all their minerals organically. We’ve supplemented with inorganic trace minerals for 50 or 60 years because they were an inexpensive alternative. Obviously, organic is a safer way of improving trace mineral status in the animals. We can do it in a form with fewer contaminants such as heavy metals, dioxins and PCBs (polychlorinated biphenyls) — things we’re concerned about passing into the food chain. We can avoid that by using organic trace minerals.

Tom:                            You’ve noted that research from around the world is influencing regional regulatory decision-making with the goal of improving the agrifood sector. Can you elaborate on that, and is this goal being achieved?

Steve:                          Yes, particularly on the mineral side. For example, the European Union reduced the acceptable amount of minerals fed to animals because of water pollution concerns. Japan has recently moved legislation on lowered levels of zinc and copper to address pollution concerns as well. Korea has done the same. One of the main initiatives in China is lowering levels of trace minerals in the feed. There is almost no potable water left in China due to pollution, particularly from pig farms.

                                    I think there are a lot of initiatives driving producers to look at alternatives to trace mineral fortification. That’s where Alltech is ahead of the game. We’ve been looking at organic alternatives for over 20 years. I think we have a very good understanding of the mineral requirements of animals and the optimum levels at which we can meet them. 

Tom:                            Let’s talk about the Brazilian Food Guide, which appears to be quite disruptive. What is it, and why is it noteworthy?

Steve:                         Brazil reestablished levels in what they call their Table 4. Table 4 was a system set up by the government to ensure that farmers put adequate fortification in their livestock’s diets. The government does not want feed companies to cheat producers by not providing enough nutrition in the diet. The initial acceptable mineral levels put into that guideline were exceedingly high. We can achieve lower levels by feeding organic trace minerals.

                                    So Alltech, in coordination with major universities in Brazil and professors on the regulatory board, conducted research over the last several years showing that, when you feed the organic form of trace minerals, you can feed or fortify the diets at a much lower mineral level.

                                    The Brazilian government has incorporated these levels in the new guidelines, which now say that if you’re going to use organic forms, you can go well below the old Table 4 levels, thus allowing producers to improve the performance of their animals while lessening environmental contamination.

Tom:                            The guide blatantly warns people about food advertisements, noting that the purpose of these ads is to increase sales, not to improve public health. How is that advice being received in the industry?

Steve:                          There’s a lot of misinformation that goes out in some of these ads. From a food quality standpoint or fortification standpoint, we’ve done a lot of work with the Brazilian government on fortification or enrichment of milk, for example, particularly with selenium. You feed selenium to the animal, it passes into the milk, and you then raise the selenium status of the people consuming that milk. We’ve done that with Brazilian school children, and we found that as we improve their selenium status, their cognitive ability, or their ability to pay attention in school, was improved as well as their immune status.

                                    There are a lot of good things we can do with fortifying foods, but there’s a lot of misinformation out there as well. I think the public should be careful and really look at the science behind some of these claims.

Tom:                            And how can the Brazilian guide serve as a model in the agrifood industry?

Steve:                          I think in the United States and globally, many people rely on the NRC, which is the National Research Council. The NRC reviews research every five or six years and then establishes guidelines on nutrient fortification levels for production species. Most guidelines were established using old ingredients. For example, inorganic trace minerals.

                                    Brazil and other countries are starting to accept that there is a better way of doing things by using organic minerals. By doing so, it’s going to help the environment and we can fortify diets at a significantly lower mineral level. I think because of the revised Brazilian tables that were recently published, Canada is now talking about revising their tables as well.  

                                    We’re hopeful that the next time the NRC reviews production species in the United States, they will take a closer look at organic forms of nutrients, particularly those that Alltech makes.

Tom:                            So, to bring this all the way down to the food chain, how does the adoption of the Brazilian guide affect the average consumer’s dinner table?

Steve:                          I don’t know that there is much effect on a consumer’s dinner table. Consumers should rest assured that the Brazilian government is taking a step forward by looking at natural alternatives — not just using the old standards that were used for many years — and not be concerned because the mineral levels have decreased. There’s good science for decreasing those levels: We can clean up the environment, and animals perform better at lower mineral levels in the right form. The consumer can rest assured that Brazil is taking a leading-edge approach by looking at natural feed additives.

Tom:                            Steve, what do you enjoy most about your work?

Steve:                          I’ve had the opportunity to travel the world; I’ve been to over 100 countries. I get to deal with the best food producers, the best producers of animal protein in the world. And I get to learn something new every day.

Tom:                            Steve Elliott, the global director of the mineral management team at Alltech. We thank you for your time.

Steve:                          Thank you.

I would like more information on organic trace minerals. 

Tom:                            Paul Groenewegen is the director of innovation and nutrition at Masterfeeds, Inc., an Alltech company. He’s joining us for a look into the question: more pigs, more problems? Thanks for joining us.

Paul:                            Thanks for having me.

Tom:                            What would you identify as the current big disruptor in the swine industry?

Paul:                            The big disruptor right now is keeping as many piglets alive as possible and getting them to market quickly. Our genetics companies have done an incredibly good job at allowing us to have prolific animals. Sows can now have lots of baby pigs. The key is how we get those pigs to market and how we make sure those pigs are of the best quality for consumers.

Tom:                            What does increased pork production mean for the global industry in 2017?

Paul:                            Increased pork production means a greater supply of high-quality protein in the form of bacon, ham, sausage — anything you can get from a pig — for an ever-increasing population and a more affluent society.

Tom:                            Are more piglets per sow sustainable?

Paul:                            Absolutely. When I started in the industry 30 years ago, if you could wean 20 pigs per sow per year, you were doing an excellent job. You were an industry leader.

                                    Now, if we look at countries like Denmark, their industry average of pigs per sow is in the mid-30s. Suddenly you’re producing 50 to 60 percent more pigs per sow per year than were produced a mere 30 years ago. So, that is extremely sustainable. Where the end is, we’re not quite sure. As of right now, it’s very sustainable, and it is an industry necessity to continue producing more and more pigs per sow per year.

Tom:                            What are the consequences of more piglets per litter?

Paul:                            Variability. One of the largest challenges we have in animal agriculture today is variability of animals within a group. So, if you have 16 to 18 piglets in a litter, you’re going to have ranges in weight from 500 grams to about 1.5 kilograms. The average may be 1.1 kilograms to 1.2 kilograms, but you have some very small pigs.

            The real challenge is not only from the survival perspective of those piglets, but also how we allow those piglets to survive and make it to market economically.

                                    We are also concerned with how the piglets are raised in utero, making sure that muscle fiber development is ideal for product quality when they go to market.  

Tom:                            How do producers find a balance between quantity and quality?

Paul:                            It’s a fine balance. As management and nutrition have continued to improve along with genetics, producers are learning ways to increase the number of piglets weaned per sow per year. They are always driving for more piglets, obviously, but the key is management, housing, sanitation and the health of these animals. Improving on those attributes is key to allowing those piglets to survive.

Tom:                            Why is weaning such a critical time?

Paul:                            Well, it’s a critical time because you’re going to change the diet of the baby pig from a milk-based diet to a dry feed-based diet. And there are big implications on the gut of the pig and the gastrointestinal tract. We get villous atrophy. We get different things happening as feed intake drops.

                                    It’s a whole social order as well. So, you have 12 to 14 piglets in a litter. Everyone knows one another. They get weaned. They get taken to a facility where all of a sudden they could be with 30 or 40 others. They’re mixed by size because it helps from a production perspective. So, there’s a whole new social order that’s required.

                                    Mom is no longer there. It’s a fact of life. And they have to learn to eat out of a feeder. They have to learn to drink out of a water bowl. They have to learn to do things differently, and that’s why it’s such a huge challenge for these pigs. In some cases, they’re trucked a long way. In the old-fashioned farrow to finish operation, you would run the piglets down the hallway to the nursery. Now, you put them on a truck and you may truck them one or two hours to the barn. That’s a huge stress on those pigs. But, from a nutrition management, health and welfare perspective, farmers are doing an excellent job to make sure all those pigs survive and do the best they can.

Tom:                            What should producers be paying attention to during this critical time?

Paul:                            I would say one of the most critical things is making sure mom is looked after. Everything that you want the piglet to receive comes through mom in the first three to four weeks of life, before weaning. Make sure the sow’s nutrition program is fully implemented and that the sow can transfer trace elements like selenium to the baby pig, which they really require around weaning time.

                                    Make sure technologies in the feed increase immunoglobulins in the colostrum. As litter size increases, we want mom to produce more colostrum so that all piglets get the same amount and quality. Start with how the sow is treated, from gestation to lactation, to give the piglet the absolute best start. Look after the other details once they get to the nursery.

Tom:                            What lessons can we learn from human infant formulas for pork feed formulas?

Paul:                            That’s a great question because pigs have been used as a model for human infants for years. In fact, I worked with a university professor who spent his whole career using baby pigs as models for human infant formula development. As we enhance human infant formulas and look at technologies such as different types of structural carbohydrates or DHA and selenium, we can learn from those formulations and apply them to baby pigs.

                                    We want the diet that piglets receive after weaning to deliver nutrients in the most bioavailable form, enhance gut development and overall performance, and to increase survivability.

Tom:                            You’ve brought up colostrum. How do we ensure for piglets that they receive an adequate supply?

Paul:                            There are on-farm techniques that can be used such as split-suckling, analyzing litter size and the duration of farrowing time. Obviously, the first pig born has a better opportunity for receiving colostrum than the last pig born. But, there are management techniques that ensure each piglet gets the same amount of time with mom to access as much colostrum as they can.

                                    Also, technology can be used in sow feed to enhance colostrum production. Research shows that by using some Alltech technologies, we can increase colostrum production and also increase immunoglobulin concentration of that colostrum. We’re ensuring that even in bigger litters, all piglets are getting the same amount of higher-quality colostrum, which leads to increased survivability and increased weaning weights.

                                    Pigs never overcome a bad start. If we can get the baby pig off to a good start with colostrum via the mother sow, then we’re off to the races!

Tom:                            What is lactoferrin, and why is it important?

Paul:                            Lactoferrin is a protein that’s required for iron absorption and gut development within the baby pig. It’s one of the proteins found in milk.

                                    New research shows that when lactoferrin is available in the post-weaning diet, it continues to enhance gastrointestinal function. When you enhance gastrointestinal function and development, the baby pig will absorb more nutrients of high-quality feed.  

Tom:                            What about DHA?

Paul:                            Again, since baby pigs are used as models for humans and vice-versa, we know that human infants and baby pigs both require DHA for overall health. DHA enhances the function and development of central nervous system tissues and promotes the general welfare of pigs.

Tom:                            We’ve talked about colostrum. We’ve talked about lactoferrin. We’ve talked about DHA. What about nucleotides? Why are they important?

Paul:                            Nucleotides are the building blocks of DNA. We know that the baby animal already produces some nucleotides. But to support fast-growing intestinal cells, we should also provide nucleotides.

                                    As intestinal tissue grows very rapidly in a young animal, we need to supply enough nucleotides to build the DNA, to build the tissue, to build a more functional gastrointestinal track so that the pigs can absorb more nutrients from their diet.

Tom:                            What would you say is the ideal starter diet for piglets?

Paul:                            The ideal starter diet is high in digestibility, contains functional proteins and contains nutrients like nucleotides and glutamic acid, which is the primary energy source of the developing enterocyte. We want to make sure we support gut development as quickly as possible. We’re looking for diets with highly palatable ingredients and diets that contain other functional nutrients like lactoferrin to drive absorption and the development of the gastrointestinal tract.

                                    An overall ideal diet should improve intake and digestibility while reducing nutritional inadequacies and disorders.  

Tom:                            Given everything that you’ve just discussed, can producers continue to decrease production cost without affecting performance?

Paul:                            To a point, I believe we can. As we increase pigs per sow per year, our cost per piglet weaned will go down. You’re going to spend more money to have a better sow diet, but your overall cost of production per sow or per piglet weaned per sow will go down.

                                    Then, as we enhance the starter diets post-weaning, we are going to improve nutrient absorption. It becomes a cycle: As we provide functional nutrients in a diet to drive gut development, that enhanced, developed gastrointestinal tract then absorbs more nutrients out of the diet.

                                    Subsequently, we know that the faster a pig starts post-weaning, the faster they go to market. That will reduce cost of production overall.

Tom:                            Based upon that, as the global population increases and as parts of the world such as India and Africa enter the middle-class, how are we going to meet the increased demand for pork? You’ve addressed efficiency. Are there other ways to meet that demand?

Paul:                            When you think about it, there are approximately 100 million sows globally. If a sow has two litters per year and we save just one pig per litter from dying of inadequate nutrition, we’re talking about 200 million more pigs available to consumers.

                                    By enhancing nutrition to allow for increased survivability of piglets, those 2 million additional pigs provide high-quality protein to the ever-growing population.

Tom:                            Bringing this home and considering all the aspects of the life cycle of a pig, how do these changes affect the average consumer’s kitchen table?

Paul:                            What we’re going to have is high-quality pork raised with the utmost humanity at a very affordable rate for our consumers.

Tom:                            Are there any other trends, any other things that we should be paying attention to in the swine industry?

Paul:                            I think the big trend to focus on is the advancement of nutrition, management and genetics. We have to make sure nutrition management keeps up with the ever-changing acceleration of genetics. By utilizing technologies like we’ve discussed today, we’ll provide the nutrients required by faster-growing, more efficient pigs and continue to produce that high-quality protein that the consumer demands.

Tom:                            Paul Groenewegen, director of innovation and nutrition at Masterfeeds, Inc., an Alltech company. Thanks for joining us.

Paul:                            Thank you.

Paul Groenewegen spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab.

Luther:                        Dr. Aoife Lyons is director of educational initiatives and engagement at Alltech. She received her doctorate in clinical psychology from DePaul University and is a licensed clinical psychologist. Thank you for joining us.

Aoife:                          Thank you so much.

Luther:                        You have a unique blend of education and work experiences. How’s this given you unique insight maybe into the customer or into business psychology? 

Aoife:                          Well, thank you for that. I do have a unique blend because I’ve been very much immersed in the world of academia, but I also have a bit of business sense. I ran my own business in Chicago for a number of years before joining full-time with Alltech. So, I think that it gives me a sense of the humanity behind business and that not everything is driven by profit. And what people buy and what people decide to do is really not driven by price.

                                    My father often says, “Make a friend, make a sale.” He’s not a psychologist. He discouraged me from psychology, but I think at heart he knows people.

Luther:                        It sounds like you basically have a deep understanding of how people think — maybe sometimes not even cognitively or in their conscious mind — and how business works at the same time.

Aoife:                          Well, I hope that I do, and I hope that I contribute something to that. Something that I was talking about yesterday was price anchoring. What that means is that price is arbitrary. I was teasing my assistant, Ailish, yesterday. She loves to go to the mall when we come over to the States. She will only buy things that are on sale because she loves to see that sale tag. I pointed out to her that she could buy the same thing from Gap Kids at the exact same price, but actually she won’t if she doesn’t see that sale tag.

Luther:                        Give us a definition of what that anchoring really is. It’s our perception of a sale price maybe versus a regular price.

Aoife:                          I’ll give you a real-life example that I gave yesterday. When I was in Chicago, I was running a private practice. The cost of an hour of therapy with me was $150 and a lot of people would pay that price, but I have a commitment to helping the underserved, and they couldn’t pay that price. So, I charge them $40, which was a deep discount, but also a lot for them. I made sure that they knew that the cost of a therapy hour was $150, so they knew the value of what they were getting. That’s price anchoring.

Luther:                        Thank you very much for that example. That makes a lot of sense. Is this part of the “predictable irrationality” that you’ve brought up? I know that it’s important to how we think about pricing, how we think about a business, a product, a service.

Aoife:                          Everything is predictably irrational. We just go around our worlds thinking that we’re rational beings and that we’re making decisions based on the pros and the cons. We just don’t.

Luther:                        I’m sure there are all kinds of examples of that, which you just kind of gave us. What about our human perception? Does this affect our buying decisions as well?

Aoife:                          It affects everything. One example is you get a bill in the mail, and it says that you owe $90 to the television company or whatever it is. You might ignore it. You’re going to get another bill. But, if they change the wording of the bill to include your name and then say 90 percent of the people in your area have already paid this bill, you will pay it. That is social pressure. We can use this.

Luther:                        What are some illusions in our decision-making? I think a lot of us think, “I’m logical. I make decisions based upon logic. If I make a buying decision, it’s because I’ve thought it through.” That isn’t always the case.

Aoife:                          Absolutely not. Let me ask you a question, if I can. What was the last big purchase you made?

Luther:                        A TV.

Aoife:                          How much did you pay for this TV?

Luther:                        About $800.

Aoife:                          When you went in to buy the TV, you probably saw one that was $1,200. You probably saw one that was about $600, and so that $800 looked good to you. If you had walked in and saw one for $800, $600 and $400, you would have bought the one for $600.

Luther:                        What is social proof?

Aoife:                          Are you going to go to the restaurant that has no one in it, or are you going to go to the restaurant that’s crowded? You’re going to go to the crowded restaurant because that food must be better. That is completely irrational. You base that on nothing except for the people in the restaurant. They might be actors. You just don’t know. But social proof, it’s called “herding” in psychology. We follow what other people have done.

Luther:                        In some experiments I’ve seen online that were reality comedies, so to speak, they will have a group of people in line to start off a process with no end in sight and people will come and get in line. Is that similar to what—

Aoife:                          Yes. Yes, that is exactly the same concept, and that’s social proof.

Luther:                        How can a business take advantage of that?

Aoife:                          Well, if you’re a restaurant, hire people to sit outside your restaurant, or form a line and they’ll come in.

Luther:                        Maybe scarcity is also a way to do that, perhaps?

Aoife:                          Scarcity is. But really the driving force in terms of business and what you’re going to sell right now is online. If you have enough online reviews and people who are endorsing your product, people will follow. Print ads are over. Do you believe print ads?

Luther:                        Yeah. I can understand that.

Aoife:                          I know if I’m going to buy a product, if I’m going to buy something online, I’d look at what other people have bought. I look at what they say about the product, and that is hugely powerful.

                                    Big data companies, they draw people in with their big data, but then they use the data that we’re giving them to draw more customers in. I think that’s really the way of the future.

Luther:                        It sounds like one way that you’re saying you can take advantage of it, very different from scarcity, is through social media, through social sharing, through a buzz factor. Like you said, reviews, that’s a form of being social online, and it sounds like you’re saying that we trust each other, or at least the perception of another person, over the marketing or branding that the company may be doing.

Aoife:                          One hundred percent. In Alltech, I think our driving force is our people. I often give a presentation on how to be a good Alltech ambassador, and part of that is saying we’ve got a great brand. I’m very proud of the brand. It’s a family brand, but that’s not good enough.

                                    Every time an Alltech person walks out there, they need to be an ambassador with how they dress; how they interact with people; if they’re warm; if they follow up with what they say they’re going to do; if they’re trustworthy.

Luther:                        So, moving along, what is choice overload?

Aoife:                          Choice overload is a really, really interesting point. If I were to put six jars of jam in front of you and you could taste them, you would probably pick one and buy it. If I gave you 34, you would be overwhelmed and say, “Forget it, Aoife. Not going to buy any more.”

                                    When it comes to Alltech, we used to have a huge portfolio of products. A few years ago, it was thought, “Let’s just narrow this down. We’re not going to sell products anymore. We’re going to sell solutions.” This has been really, really successful because we’re not giving a choice overload. We’re giving a solution, and the solution might be one of four. It’s much easier for us to decide if we’re given one of four.

                                    I think that this also relates to the millennial generation. Many people our age complain about them and their lack of decisiveness, and they just bounce about from job to job. The reality is I think they have too much choice.

Luther:                        From a millennial standpoint, there is so much choice out there. There are so many things to choose from that perhaps that’s part of why they do bounce from one thing to another or struggle, perhaps, to even find happiness or true meaning at times because there’s so much different variation available.

Aoife:                          Yes. Perhaps.

Luther:                        Often, companies think about focusing their products and services, narrowing them so that they can spend more of their attention and time on them, but perhaps the other effect of making that choice is that it gets rid of choice overload for consumers.

Aoife:                          We have to be in the space of creating a product that we all love and want, but we didn’t even know we wanted it until it comes on the market. So, that could be in the case of Apple, the iPhones. In the case of Alltech, we acquired a company just a year ago called KEENAN, and KEENAN makes big mixer wagons for cows. What is fascinating about them is they have gone with tech, they have gone with an app, and they have a system where someone on the phone, a young person, calls the farmer and tells the farmer what those cows are going to need before the farmer knows it. It’s the beauty of the human touch with technology. The farmers love that they can just dial into this big green machine as they call it. They have a solution, and they didn’t even know that there was a problem.

Luther:                        We spoke earlier with Jay Johnston from Fermentrics Technologies, and they actually have facial recognition for cows. They’re able to observe behavior and then they’re able to adjust according to behavior. So, these technologies are allowing us to have insights not only from humans, but honestly into animals and observe behavior and change accordingly.

Aoife:                          I’ll tell you an even crazier example of this. We have The Pearse Lyons Accelerator program going on, and one of the companies is a cow sensor company. They are putting a sensor on the tail of the cows when they’re pregnant. This sends a signal to the farmer when the cow is going to give birth. Now, it sounds simple, but it is revolutionary for the farmers because they don’t have to stay up all night waiting for the cow to give birth. They just get an alarm.

Luther:                        Wow. That’s fascinating. Consumers have more tools available to them, more information than ever before. So, with that being said, are they able to bypass some of the decision-making, some of the predictable irrationality, so to speak?

Aoife:                          We can’t bypass it. It’s just in our genes, and it serves us well.

I was asked a question yesterday, “Do younger people respond differently?”

                                    No, they actually don’t. We are programmed to have these mental shortcuts for a reason. You and I are looking at each other while we’re doing this interview. We’re focused on each other. I’m not focused on everything else around me and neither are you. Our brains need to do that in order to get things done.

Luther:                        What is the take-home message for businesses based on mixing all of this together, the psychology with business, with the consumer, decision making? What would you give as advice in how to think about this and apply it to business?

Aoife:                          First of all, be aware. We’re so influenced in our decisions. We think that we’re making decisions. We actually aren’t.

                                    Be aware of price anchoring. Use that to your advantage, what you price something at.

Second, your perception is not the same as everyone else’s.

The third point is the illusion that we make these decisions.

Luther:                        What do you find most surprising when you look at predictable irrationality in how human beings make decisions?

Aoife:                          When I stumbled on this field, I was at Harvard taking an economics course. They were talking about market demand and market supply, and they were showing me all these graphs and mathematical figures.

                                    I actually said to the professor, “But that’s not how people behave in the real world.”

                                    She just looked at me and said, “Which real world are you talking about?”

                                    Economics is so different than the real world. Then I discovered this whole world of behavioral economics, which is basically taking economic theory — which brought the downfall of the stock market because all these economists were assuming that we were going to behave in predictable ways and rational ways — and putting on psychology and trying to look at people as human.

Luther:                        At the end of the day, it still is people consuming services products that we produce.

Aoife:                          I’ll tell you two examples of this. One personal and one sort of professional. I love Apple products. One of the things that I love is their Genius Bar. I also love that, when I have a problem, I get a person on the end of the phone and that person helps me. So, Apple is selling a product that I buy all the time, but it’s also that person on the other end and that human feel. And, I would say within my own team in Alltech, the human touch and loyalty is what it’s all about.

Luther:                        Dr. Aoife Lyons is director of educational initiatives and engagement at Alltech. Thank you very much.

Dr. Aoife Lyons spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab. For access, click on the button below.

Tom:                    As a registered dietitian/nutritionist and a nutrition solutions specialist at Alltech, Nikki Putnam helps farmers and producers apply the lens of human nutrition to agricultural practices for the improved nutrition of plants, animals and consumers. We thank you for joining us, Nikki.

Nikki:                   Thanks for having me.

Tom:                    So, what role do you play in the chain of events that happen from farm to table?

Nikki:                   I have a really interesting role within Alltech. I actually came from a larger supermarket chain based out of the Midwest. And what I was doing there was acting as a health and wellness spokesperson, helping consumers to understand a bit more about what was in their food, where their food was coming from and what types of food they should be purchasing for prevention of chronic disease or specific diets like food allergies.

                    So, what I’m doing is bringing that to Alltech now and helping our producers explain to consumers, explain to retailers what they’re doing on-farm and how they’re using feeds to improve the nutrition of their animals to then improve the nutrition of that food product they’re bringing to the consumer and to the retailer.

Tom:                    I think we all watch trends in our respective fields. How about you? What noteworthy trends are you keeping an eye on?

Nikki:                   A few things that I think have been really popular as of late is what I like to call the “free-from” diets — gluten-free, dairy-free, soy-free.

                    Also, paying more attention — consumers are paying more attention to food sensitivities. Are they reacting to certain types of foods? Is it an actual allergy? Is it an intolerance? Or is it maybe just more of a preference?

Tom:                    What about consumer perceptions? Let’s start with “free-from.” Is it recognized on the consumer end, and are sales of “free-from” items on the rise?

Nikki:                   I think a lot of consumers are starting to look for these types of products. They’ve been out for quite some time. I mentioned gluten-free, dairy-free, soy-free were available for people who had legitimate allergies to these products. Now, more consumers are looking for these products on supermarket shelves, and, yes, I think that specialty category is continuing to grow. We’re seeing more of that in the supermarkets, and more consumers are looking for it just to feel better. Maybe they don’t have an allergy, but they are looking for new things to help them feel better and improve their well-being.

Tom:                    And what about paying attention to the number of ingredients? Does that seem to have an impact on the consumer end?

Nikki:                   I think those two things tie in together very well. A lot of consumers are perceiving these free-from products as healthier, mainly because they contain fewer ingredients. Many of those products that are included in that specialty format or specialty aisle in the supermarket have fewer ingredients than those that may have included the gluten, the soy, the dairy, etc. 

Tom:                    Would you consider these diets something of a disruptor?

Nikki:                   Absolutely. I think it’s changing the food industry. I think it’s changing the way that producers of food, food companies, the big food industry and retailers are starting to talk to consumers, the way that they’re marketing the products. They’re also changing a lot of product lines to be able to reach these consumers looking for specialty products.

Tom:                    Anything coming along that might disrupt the disruptor?

Nikki:                   Yes, I think so. I think right now the consumers are considered the disruptor, if you will. They’re the ones demanding these different types of food products and asking for things that producers and retailers aren’t offering yet, but we’re seeing producers and retailers really catch up. They’re the ones trying to get ahead of the curve now. We’re seeing a lot of them going out and taking new leaps and forays into different types of products and specialty goods. So, they might be the next disruptor.

Tom:                    So, the potential is definitely there. What are some good ways to get involved?

Nikki:                   A good way to get involved from the producer side is really listening to the consumer. I think this has been something we’ve talked about time and time again over the years at many different events and meetings. I’ve spoken with producers about getting involved or listening to the consumer. What do they want from us? They are out there telling us specifically what they want to buy on supermarket shelves. Whether or not you can meet that exact need that they’re asking for, listen to what’s behind that exact demand. Are they asking for less processed products? Are they asking for more sustainable products? Are they asking for functional foods, maybe added selenium or DHA? They’re telling us what they want.

Tom:                    Are food allergies on the rise? You mentioned sensitivities a few minutes ago, but are we becoming increasingly food sensitive? And if we are, what’s going on?

Nikki:                   I’m not sure that we’re becoming increasingly food sensitive. I think our awareness of food sensitivities, intolerances and allergies is growing. Only about 4 to 6 percent of the population has an actual food allergy. A larger number has intolerances and an even larger number has what we call a “food sensitivity.” So, this is something that an estimated 30 to 40 percent of the population is dealing with. It might be even coming from seemingly healthy foods like whole wheat toast or broccoli.

Tom:                                   Is it often surprising to find out that a rash or some sort of physical response that you might have attributed to any number of other things turns out to be a response to food?

Nikki:                   Yes. I think it’s often very surprising to consumers and patients alike when they find out that something they thought was very healthy like a piece of salmon or an apple is actually causing a negative reaction in their body. Everyone’s bodies are different. So, it’s very difficult for us to give a blanket “these foods are healthy” statement when we don’t know exactly how that person’s body is reacting.

Tom:                    We’ve heard throughout our lives that “we are what we eat.” What’s that implying for human health and for the way the food industry should respond?

Nikki:                   I think we’re going to see some big changes in human health. We’ve been hearing for years about eating for prevention of chronic disease and improving our health and well-being through food. I think we’re going to see this increase even more as we find out more about what foods are specifically good for each individual person. I think we might see some diets evolve into more specific programmed nutrition for each person rather than, like I mentioned before, these blanket healthy food diets.

Tom:                    Would it be a stretch to call food the new medicine?

Nikki:                   Absolutely not. I think food is definitely something we can use for preventative care. You know, Hippocrates said, “Let food be thy medicine.” That’s becoming truer day in and day out.

Tom:                    What are some autoimmune diseases that respond well to nutritional solutions?

Nikki:                   A couple of the autoimmune diseases that we’re finding more of, not necessarily because there are increased incidents, but because, again, our awareness of these diseases is increasing — celiac disease and irritable bowel syndrome are two autoimmune diseases or conditions that are greatly affected by nutrition.

Tom:                    When you think about it, how do free-from diets and attention to food sensitivities, in the end, affect the average consumer’s dinner table?

Nikki:                   I think we’re going to see more changes on the dinner table. We’re seeing more foods that have less processing. People are going back to freshness again. They’re looking for less packaged foods. Or, if they’re eating packaged foods, they’re eating them with the lowest number of ingredients they can find.

Tom:                    Nikki, what about your work do you like the most? What’s the most fun?

Nikki:                   The most fun I have with my job is meeting the farmers and producers. I’m an Iowa girl. I grew up in Iowa. I’m living in Texas now. I’ve always been interested in human nutrition, but I’ve had a soft spot in my heart for agriculture. The best part about my job at Alltech is I get to marry those two things together.

Tom:                    Nikki Putnam is a registered dietitian/nutritionist and a nutrition solution specialist at Alltech. Thank you for being with us.

Nikki:                   Thanks so much.

Nikki Putnam spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech  Idea Lab. For access, click on the button below.

Tom: We’re talking with Michael Woolsey, senior strategic manager for Alltech China. He oversees regulatory affairs and strategic initiatives in Alltech’s largest overseas market. Mr. Woolsey also manages market development activities in Mongolia and Myanmar. We thank you for joining us.

Michael: Good to be here.

Tom: You described China as the ultimate disruptor. Can you elaborate?

Michael: China is the largest overseas market for Alltech, and the pig industry is our biggest customer. Our nutrition solutions for pig farmers account for more than half our sales in China. So, we obviously follow this industry very closely. It’s a massive industry. The revenues of the China pig industry were $160 billion last year. If the China pig industry was a company, it would be number seven on the Fortune 500 — larger than Ford, larger than GM, larger than AT&T.

If you look at the grain that goes into pig farming in China, the amount of farmland is equivalent to the state of California. So, if you take every acre in California to provide grain for China’s pig industry, it still wouldn’t be enough.

There are some really exciting developments going on right now in the China pig industry. Mainly, there’s a massive shift going on. It started about 15 years ago from backyard and small-scale farmers. These farms are being replaced by modern large-scale operations, and this is creating opportunities for a range of businesses that sell to modern pig farms. Everything from equipment, farm building, manufacturers, to genetics, animal nutrition (where we are), to veterinary drugs. Small backyard operations don’t purchase these things and large modern operations do. So, it’s a pretty exciting development right now.

Tom: Smithfield Foods was acquired by a Chinese firm, WH Group. Smithfield accounts for 25 percent of the American pork industry. So, it’s a pretty huge acquisition. What’s the significance for China?

Michael: Yeah. This is a controversial deal both in the U.S. and in China. It was the largest purchase in global animal agriculture history — $7.1 billion, that was the value of the deal.

Four years later, I think there’s evidence that there have been real benefits on both sides. I think for the U.S. pig farmers, they have access to Shuanghui’s impressive distribution network in China. Shuanghui is the biggest meat processor in China. This is access we didn’t have before. And Shuanghui is using their leverage with Chinese retailers to promote American-style pork in a way that’s never happened before in China — hams, bacon, sausages in some exciting and creative ways. And, as a result, we’re seeing record sales of U.S. pork to China right now. Last year’s sales were over $1 billion, up 50 percent from the year before. Nearly all this gain is from Smithfield.

Tom: There’s been some speculation out there that the firm that purchased Smithfield is actually acting on behalf of the government, if not being the government itself. Are you familiar with that speculation? What do you think of it?

Michael: Well, the CEO, Wan Long, he’s actually a member of the National Congress of the Communist Party of China. And he’s the CEO of the largest meat processor and a member of the Party Congress. He’s definitely following guidance from the party.

My first position in China was with the U.S. Embassy back in 2008. Wan Long, the CEO of Shuanghui, invited me to his facility for the weekend. We talked about some of his challenges, and it was interesting. He said he was concerned about the pigs that he was buying in the open market. Shuanghui does not own pig farms, and he was concerned about the inconsistent sizing, the variants, the yields and the carcasses.

He was also really concerned about safety issues, veterinary drug residues and steroids, so he was looking for a safe stream of pork. He asked me, “Would the U.S. government be opposed to my buying a U.S. pig farm?” And I reported the policy that “No, pig farming is not considered a matter of national security and that would be approved.”

I had no idea he was thinking of buying Smithfield at that time. And, four years later, he purchased Smithfield.

But no, there is direction from the party, and all large-scale firms in China are going in this direction. They’re creating global brands.

China has a long history of manufacturing, but they understand that there are more returns in branding and in R&D, that that’s where the real value is. So, the purchase of Smithfield by Shuanghui is an attempt by the largest pork processor in China to capture some added value of a global brand, and there are more purchases on the way.

Tom: China is already the number one animal feed producer, according to the annual Alltech Global Feed Survey, yet much more production is going to be required with the growing middle class. How will they accomplish that?

Michael: Going back to pig farming, there’s a massive shift away from backyard farming to modern scale operations. It’s a development that China has to do. As you mentioned, their farmland is limited, and they’ve got productivity issues. Throughout Chinese agriculture, their yields and productivity are half, or even less, of what you see in the West. The average number of piglets per sow per year is 15. In the West, you see upward of 30 or more.

Their corn yields are half what you see in the U.S. And so, there’s a lot of effort, a lot of policies directed to modernizing Chinese agriculture, bringing in best practices to make sure there’s a reliable supply of safe food for the Chinese. They feel very strongly about self-sufficiency. They feel uncomfortable relying on foreign countries for too much of their food. There are a lot of soybeans coming in, quite a bit of pork. But again, they feel more comfortable if the vast majority of the food that’s consumed in China is produced in China, and they’re taking steps to make sure that happens.

Tom: I think when we think about China, we think about manufacturing, but where in the general scheme of things — the top priorities with the Chinese government — does agriculture figure?

Michael: Agriculture is a critical industry for the party leadership. Again, self-sufficiency is critical. They want to ensure a stable supply of particularly staple products — rice, wheat, corn, and pork is another staple.

When pork prices go up, people notice. It’s the largest meat by far — 63 pounds per person. Number two in China would be chicken at 12 pounds per person per year. And so, ensuring a stable supply of product is really important.

Tom: What is the No. 1 document?

Michael: Every year, the party leadership issues policy documents. The first one they issue every year — the No. 1 document — outlines their work plan for agriculture. It’s indicative of the importance of agriculture to the party, but I have found in my observations of Chinese agriculture policymaking that it’s more of a blueprint. The real work is in other regulatory initiatives, not the No. 1 document. It’s a broad blueprint.

Tom: What importance do environmental and sustainability efforts have in China today? Is there a green revolution of sorts in food?

Michael: It’s a very interesting development the last couple of years. This is an initiative of the administration under Xi Jinping. It started in 2013. They’ve introduced new aggressive measures for water emissions for livestock farming.

They’ve created large zones, particularly in South China, that ban pig farming near sensitive wetlands, the Chinese watershed, also pig farms near residential areas. These are being closed down, and it’s accelerating the trend that I referred to earlier, the smaller farms being closed down, being replaced by bigger farms. The new ones that are opening up are inland. They’re mostly, again, large-scale modern operations, truly massive operations. Some of these are a million pigs and more. So, again, the environmental measures are tough. There are tough standards for minerals, copper and zinc. And a lot of operators are turning to Alltech for our organic minerals to help them cope with these tough emission standards.

Tom: What you just described is the very definition of disruption, I would say.

Michael: That’s right, and Alltech is right in the middle of it, working with our customers to help them meet these requirements.

Tom: There’s been a significant focus by the Chinese government on mineral waste from animal feed. Can you tell us a little bit more about that?

Michael: Again, it’s a part of these new environmental initiatives, where there are some new standards for mineral content and emissions from livestock operations. If an auditor comes out and finds that the mineral levels are above the standard, they don’t issue an environmental permit. They can’t operate. We’re seeing a real spike in our organic mineral sales largely due to these environmental initiatives.

The Chinese — they’re taking additional steps. There’s a draft measure to reduce the amount of minerals allowed in finished feed — copper and zinc. They’re bringing their levels down to what we see in the European Union (EU). For copper, for instance, it’s 25 ppm, which is a significant reduction from where they are today at 150.

Tom: Are Chinese producers facing an increasingly regulated sector, and how are they dealing with that if they are?

Michael: Chinese agriculture has always been heavily regulated, but in China, oftentimes the key is what regulations are implemented. You have lots of regulations, and some are implemented and some are not. The environmental rules are being implemented in a way they weren’t before. It’s a tough environment for Chinese operations.

Tom: And how about representing an American company within that regulatory environment? Does that have its challenges as well?

Michael: For operations in China, we are held to a higher standard on average. When regulations come out, they tend to enforce those on foreign operations before local operations, and it’s a bilateral issue between the U.S. and China. This is in tandem with a new “made in China” initiative. In some sectors, it hasn’t impacted agriculture yet, but in other areas like semiconductors, telecoms, equipment services — they’re introducing policies to make it difficult for multinationals to operate and to make sure that the Chinese companies win out. It’s a warring trend for foreign operations in China.

Tom: This burgeoning middle class, with its burgeoning demand, is that creating opportunities for exports from other countries, including the United States?

Michael: Oh, absolutely. The middle class in China continues to boom. When people are in the middle class, the first thing they do is improve their diet — more meat and other protein, more calories. So, we are seeing in animal agriculture a real spike in the importance of beef, where China is less competitive.

It takes, on average, 8 kilos of grain to raise 1 kilo of beef. Grain prices are higher in China than in other countries.

The U.S. has been blocked from entering China through official channels because of bovine spongiform encephalopathy (BSE), and there’s some movement very recently. We’ll have official access this summer. A lot of beef is coming in from Australia and from the U.S., after they open the market.

Dairy is another big item — a lot of dairy products coming in from New Zealand, Australia, the EU. Infant formula is a $4 billion market for overseas operations. And so, yes, the growing middle class is creating opportunities for countries around the world.

Tom: The Chinese leadership has to think about domestic issues first, but does China have a future larger role in the global food market?

Michael: China is an export powerhouse in a number of sectors, but agriculture is not one of them. It’s not really a focus right now because they’re mostly concerned about ensuring, again, a sufficient supply of food for Chinese people. They’ve actually had export restraints on their ag products in the past. It’s not really a focus to export, but there are some exceptions. They want to make sure they have enough for Chinese consumers.

Tom: China first.

Michael: China first.

Tom: You also focus on the emerging markets of East Asia — Mongolia, Myanmar. What can we expect to see happening in those countries?

Michael: These are the two newest markets for Alltech, and they’re very different. Mongolia, it’s a small market. There are only 3 million consumers. The middle class has only less than a million, but there’s a small, emerging, modern layer in the pig sector that’s creating some opportunities for us. Long term, I think what’s really exciting potentially for Mongolia is exporting beef to the 1.5 billion consumers in East Asia. Right now, they’re prohibited from exporting because of animal disease concerns. They have foot-and-mouth disease, but Mongolia sees the opportunities, and they’ve created a plan that was accepted by the World Organisation for Animal Health. The plan was accepted. They just need to implement it. It takes resources, but maybe in two to three years, they’ll have their beef approved. It could be a billion-dollar item for them in the first year. They have some natural advantages, a lot of grassland for raising beef animals. So, I think long term, that’s probably the most exciting potential opportunity.

Myanmar is a very different market. Much larger — 50 million consumers. Of course, the political reforms in the last year have been a real catalyst for us. U.S. trade sanctions were lifted last year due to the election of Ms. Aung San Suu Kyi. It’s an exciting time to be in Myanmar right now. They had 40 years of military rule. Suu Kyi won with 98 percent support. Imagine what the U.S. could do with 98 percent support for the president. It’s an exciting time in Myanmar. Real opportunities, short term, I think, in layers and broilers and longer-term opportunities in pigs.

Tom: What in your view, Michael, does it take to make wise, successful investments in these East Asia markets?

Michael: I think, first, you have to listen.

Alltech has always been a company that likes to go in first when we see opportunities. And I tell you, the reception that we’re getting in both places — operations are eager to talk with us. They’ve got challenges. They want to hear about best practices from overseas. And so, listening to their challenges and building relationships for the long term, I think that’s what’s key — not expecting the quick return, but being there for the long term. People appreciate that.

Tom: How does China’s disruption and these emerging Asian markets, how does all that affect the average consumer’s dinner table?

Michael: There’s an exciting development related to the Shuanghui purchase of Smithfield.

Shuanghui, their objective, their goal is to increase the amount of chilled meats that they’re selling. Right now, only 30 percent of Shuanghui’s meat sales are chilled. The 70 percent — it’s the traditional marketing channels of warm carcass that’s cut up and sold in wet markets. The margins are obviously a lot lower. And so, one of their strategies for increasing their chilled meat segment — they’ve partnered with an e-commerce company called JD.com. This company is doing some exciting things. They’re creating a cold chain system, a warehouse and distribution cold chain system from the warehouse to the customer, selling fresh chilled foods, including packaged meats. Smithfield, Shuanghui, they have a strategic cooperation agreement to sell packaged Smithfield meats through jd.com. So, if a customer in the morning decides they want to have hot dogs from Smithfield for dinner that night, they bring out their cellphone, dial up JD.com, order the hot dogs, and the truck shows up later that afternoon. Chilled distribution the entire way to the consumer’s door. So, it’s a superior product. It’s what consumers want. It’s an exciting development.

Tom: It’s pretty amazing. I guess it’s not beyond imagination that someday a drone will show up. What about your work do you enjoy the most?

Michael: Well, in China, every day there’s a new challenge.

My last tour in the foreign service was Beijing. And when that tour was over in 2011, I had a choice to return to Washington or retire from the foreign service and do something else and stay in China. That was an easy decision. And so, I stayed in China. There’s just so much going on in agriculture in China. It’s a challenging market, but, again, a lot of opportunities. And at Alltech, we’re a part of this revolution in animal agriculture in China. And so, it’s very exciting.

Tom: Michael Woolsey, senior strategic manager for Alltech China. We thank you for joining us.

Michael Woolsey spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab. For access, click on the button below.

To listen to our entire conversation with Matthew, click on the player.

Tom:                      Where is the world’s most exciting animal nutrition market? Matthew Smith is here to tell us about that. Hint: Matthew is Alltech vice president of Asia-Pacific. Thank you for being with us, Matthew.

Matthew:                It’s a great pleasure.

Tom:                      Let’s go to that question. What country is home to the most exciting nutrition market?

Matthew:                One word: Vietnam.

Tom:                      And why is that?  

Matthew:                I would describe Vietnam as the most dynamic marketplace for agribusiness and agri-food currently within the Southeast Asian region. It’s probably best to put Vietnam in context with the Asian countries: It has the second-highest population density of the Asian countries. Of course, number one is Singapore. Singapore is a completely different model. Food security is the main concern in Singapore. But in Vietnam, we have many hidden treasures that are yet to be discovered globally, which are making a big difference in the industry in Vietnam. They have the potential to change the way in which other countries produce protein by adopting the right technology and the right platforms to get to the consumer.

Tom:                      What are the dynamics in Vietnam? What’s driving this?

Matthew:                The consumer. It’s very much a move toward growth in the middle-income bracket and the desire to westernize. Food is very much about culture in Asia, and culture is about food. The two are inseparable.

                              We do see a significant shift toward well-being and wellness and a more informed choice about food, maybe food with a story.

                                Clearly, the dominant segment of the industry — the highest consumption — is pork. When we look at that as a metric in the feed industry, pork or swine feed would account for about 64 to 65 percent of the 19 million tons of feed consumed annually in Vietnam. The majority of the remainder is poultry feed, so it’s really very conventional.  

                               However, we’re seeing big growth now in the move toward packaged and processed food. And, ironically, the biggest segment of the packaged food market is milk. I would describe milk as probably the real disruptor at the moment within the Vietnamese industry.

Tom:                      Can you elaborate on that?

Matthew:                I say the biggest disruptor because, where is the largest centralized dairy in the world?

Tom:                      Vietnam?

Matthew:                Good answer. That wouldn’t be apparent to most people. When we say centralized dairy, there is a business in the central part of Northern Vietnam that was originally a joint venture with an Israeli conglomerate and the Vietnamese government. They decided that they were going to produce milk in what effectively is a desert. And they now milk 42,000 cows on one farm, with the majority of the feed being produced on the farm in terms of total mixed rations.

                              The business is called TH Milk. It’s a fully integrated operation, a runaway success story in terms of the utilization of technology, whether it be milking technology or feeding technology or technology that they use to purify the water for the cows to drink. Also, the way in which they process all of the effluent and waste from the dairy farm so that you will have an entirely sustainable unit.

                               But, when we talk about disruption, it’s the way in which that milk is sold. Milk is very much seen as a premium drink. Domestically, the dairy industry within Vietnam only produces about 28 percent of demand. So, that creates a huge opportunity. The business, TH Milk, and other businesses that operate in a similar fashion have really made the purchase of milk into a consumer experience. 

Tom:                      Is dairy a relative newcomer to the Vietnamese diet?

Matthew:                No. There would have been a lot of what we would describe, maybe, as backyard farming in terms of dairy production. So, it would have been sustenance. We would have two, three cows, and we would produce for the family and the neighbor. We would share the milk. However, given this huge increase in demand for the consumption of milk, that’s prompted much more cohesive dairy farming and has attracted a huge amount of investment. That sums up Vietnam’s move away in the 1990s from a centralized approach to agriculture and food production and much more toward primary production and integration.

Tom:                      What are the opportunities for emerging technologies, innovation in the Vietnamese market?

Matthew:                One of the biggest trends that we see within the Vietnamese market is the use of technology on the horticulture side. There is a lot of investment from engineering industries, from car manufacturers, from businesses that would not historically have been related to agriculture in terms of them utilizing distribution mechanics.

                               We’re talking about growing vegetables in an enclosed environment: hydroponics, etcetera. And those other industries see a lot of overlap with their technologies in terms of assisting in a huge increase in vegetables, which would be grown very close to the cities, which obviously are the primary markets.

Tom:                      I’ve read that Vietnam’s aquaculture market has nearly doubled in only a few years. If that’s true, what’s driving it?

Matthew:                One of the most recognized brands in the U.S. and Europe would be barramundi. Barramundi would be the Asian sea bass equivalent. The brand is actually called Australis. Most consumers would buy that to fillet. Very nicely packaged and very heavily branded, believing that it’s come from Australia. But it hasn’t. It’s from a very progressive operation, which grows the barramundi offshore in cages, in an extremely isolated environment that has incredible water quality, which is what’s needed for sustainability and to grow the fish and have a good feed conversion rate.

                              That’s just one example of people using a brand that doesn’t necessarily present itself as coming from Vietnam, but that is utilizing the environmental assets Vietnam has. You do have to contrast that with some of the challenges that Vietnam has in terms of the environment, the recycling of waste, areas the industry is attempting to tackle. That’s another opportunity for technology.

Tom:                      We’ve been focusing on Vietnam, but what about other countries in the region such as Myanmar, Cambodia, Mongolia?

Matthew:                All of those countries represent a huge opportunity for technology for a number of different reasons. Cambodia is wedged between Vietnam and Thailand, two countries that have much greater recognition in terms of the food chain and primary production. But Cambodia itself is a natural resource, a very clean environment where crops can be grown, particularly in the south. As you move up to the north, you start to see the opportunity for fruits and vegetables to be grown. Cambodia is the world’s largest exporter of mangoes, a fact that is not necessarily at the forefront of people’s minds when they consume a mango.

                               We have to embrace the local regulations, which, until recently, has been a challenge for businesses going into those countries to set up operations. But there is a growing industry in Cambodia on the aqua side, a growing industry on the poultry side.

                               Myanmar, for many, many years was a closed market, but now government policy is changing. Myanmar is dominated by the poultry industry. And that poultry industry has the potential to grow with technology, to scale up and be in a stronger position to supply the export markets.

Tom:                      What disruptors do you expect to see in this emerging market?

Matthew:                I guess the implementation of a more cohesive food chain, more cohesive supply chain and retail outlets.

                                Thailand and Vietnam are not well-known for having big supermarkets, but they have an increasing number of smaller retail outlets, which are generally owned as part of integrated operations. So, whilst we still have a big wet market where food is bought on a daily basis and consumed that day, there is a much greater move toward processed and packaged food, and that has big implications. It requires a supply chain. It requires refrigeration. It requires speed. But with growing affluence in that middle class, the opportunity for the consumer to purchase packaged food is a clear opportunity and will be a disruptor moving forward.

Tom:                      How is Alltech fitting into the Vietnamese market? What’s going on there?

Matthew:                We opened our Vietnamese office in 1993. So, we’ve been there for some time now. As with all of the Alltech businesses, we really look to localize our approach in terms of the makeup of the team from a production point of view, from sales, from a marketing perspective. People who really know and understand the industry.

                              Vietnam has been a very successful marketplace for us in the past 24 years, and we just see our business going from strength to strength as we are now in the position to offer more feed solutions to a growing feed industry.

                               Across the Asian countries, we’ve had a presence for a minimum of 20 years. Myanmar is new. Cambodia is new, and Mongolia will be very new for us. A very small market, but it represents the opportunity for us to localize our business and takes us into more of those countries. 

Tom:                      Matthew Smith is Alltech vice president of Asia-Pacific. Thank you so much for joining us.

Matthew Smith spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab. 

Luther:                        I’m joined by Dr. Mark Lyons, global vice presid ent and head of Greater China at Alltech. He received his master’s degree in brewing and distilling and a Ph.D. in solid state fermentation at Heriot-Watt University in Edinburgh, Scotland. Thank you for joining us.

Mark:                          Thank you.

Luther:                        What are your thoughts on the rising billion?

Mark:                          I think it’s really the “rising billions” because, as we delved into this, we really started to see what is transpiring in the world and how, from my perspective living in China for the last five years, we’re only at the start of a major change.

                                    We think about the transformation of China in the last 30 years, and what’s taking place is that only 10 percent of the Chinese population has about $10,000 of disposable income in their pocket. By 2030, that will increase to 35 percent of the population. That 25 percent increase is bigger than the American population. So, if we think about that and then we think about India, we think about many other developing nations, we think about the continent of Africa, and to a certain degree we even think about the transformation through technology of our own population and millennial spending and the next generation coming after them — there’s an absolute transformation in terms of the way our economy is going to work and the way our companies need to respond.

Luther:                        How do you define the rising billions in terms of that group of people?

Mark:                          By 2022, there will actually be more people in the middle class than the poor class. So, I think we’re starting to see that there’s a group of people who have money to spend and who are interested in different types of products. Their access to technology and the transparency that that brings is extraordinary, and some of the platforms they’re using, particularly “fintech,” or financial technology, are really transforming these individuals. So, these are people for whom there’s an aspirational element. There’s a yearning to have certain types of products. And so, I think we need to market to these individuals in a different way than we traditionally do and realize that the market is much, much bigger than our traditional market or our domestic market. This is going to take different types of thinking. It’s also going to take different ways of transacting.

Luther:                        So, how are we going to connect these people to the internet? What technologies are going to be used?

Mark:                          Yes, there are some really exciting projects. There’s Project Loon, which is essentially launching a bunch of mini satellites and ways for people to be connected. Just the emergence of accessible smartphones, so people are able to get access to the internet. Some of the estimates are that by 2030 we’ll have about 50 percent of the global population connected to the internet. I think that’s probably conservative. I think this is all going to happen a lot faster.

                                    Some of the projects that people are looking at — you’ll virtually be able to access the internet anywhere in the world at low cost. Already in China we’re using social media to pay, so Alipay, or a lot of other pay programs through WeChat, through social media. That’s transforming things, because people who don’t even have a computer are accessing information, but they’re also paying for products. In Africa, we’re already seeing that just through text messages people are paying for products, and that’s been in place for over five years.

Luther:                        How will the rising billions disrupt the global economy?

Mark:                          Look at the approximately 325 million Americans and the position of the number one economy globally. I think we have to accept the fact that there are countries that obviously have much bigger populations than us that are going to be — even if they’re half as affluent — their economies are going to be bigger. Obviously, there’s a lot of focus on China — but all the ASEAN countries, India, again Africa as a region — you’re talking about populations that dwarf ours. So, we have to start to switch our mindset from being so focused on our domestic market to start to think like these more nimble, smaller countries that are really export-focused.

                                    We’re originally from Ireland. Everything is about export. Everything is about the global network and being connected. I think, as a country, America needs to reposition itself to being a leader in technology, perhaps being a leader in innovations, and that those are the types of things that we’re going to lead the way in.

Luther:                        What should businesses be doing to prepare for the arrival of these additional billions of people coming online?

Mark:                          I think it’s really a way of seeing these as market opportunities and getting out there, visiting. Educate yourself, educate your people, start to think globally, and not in the closed mindset that we have.

                                    Unfortunately, I think politically and globally right now, there’s a lot of pullback. There are a lot of people pushing against globalization, but I think it’s just something that’s inevitable. Once that door opens, and how connected people are, if we don’t get involved in that, we’re going to be sitting on the sidelines.  As a very global company operating in almost 130 countries, we can’t think any other way. I always encourage people: Get out there. See what these markets are like. Find the ones that you think fit you, and your business, and your culture, and go there and make it happen.

Luther:                        What about in a local economy? You’re a global company. What about for a business that may be more local? Do you see an effect on that from the billions coming online? Is there something they should be doing?

Mark:                          I think the other aspect of it is that you see some of these markets, and you see similar challenges that they’re going through. I think there’s often a lot that can be learned.

                                    It really is incredible to see in China people going to Starbucks with no money — they get 10 people in line and no money changing hands. Isn’t that amazing? China’s probably going to be the first cashless society and also the largest country in the world.

                                    Are there things like that that maybe we could bring back here and we could innovate? Are there new technologies? Are there new ways that we could do things? I think that’s probably one of the parts that we find most interesting traveling around the world. You see something in some place, and you see applications for it in another.

                                    I think the local part is going to be critical because people are searching for — Europeans call it “provenance.” We call it “origin” or “traceability.” People want authentic products. They want local products. So, all of that is very, very important.

                                    Yesterday, we had a beer festival. Five thousand people came through. More than 5,000 people. What were they looking for? They were looking for beers that were local. They were looking for products that were local. That’s the real draw. The story…and that traceability is something that local companies will have as an advantage over global big brands, and that’s something they need to exploit.

Luther:                        You addressed the fact that in China they are exchanging currencies cashless. In what ways are the rising billions coming online that are different than the Western world?

Mark:                          I think that there’s obviously this whole discussion around leapfrogging, and the fact that they’re not having to go through all the steps. So many countries have just forgone having phone lines and all these networks that are very expensive and expensive to maintain. They’re skipping a lot of those infrastructure steps because they’re just able to go straight to cellular. Leapfrogging brings a certain expectation of speed, an expectation of change.

                                    The biggest difference is that they’re so much more open to change and anticipating change, whereas we’re often pushing back against change and wanting to have things stay the same. That’s something that concerns me, because I think that if you’re anticipating change, then you’re much more innovative. You’re much more likely to come up with new ideas. That’s something that I think we need to be aware of — that change is a good thing. Change is something that we should want, and we should be driving it forward.

Luther:                        Are there potential negative consequences to the rising billions coming online?

Mark:                          I think that geopolitical shifts and power shifts in the economy will cause eruptions. They’ll cause confusion. I think there’s a big feeling in this country of people who feel like America is number one. Wait a minute, what if we’re number two?

                                    Number one in what, and what is it that we’re really after here? I think repositioning America as a leader is really important. Are there negatives? I think that’s going to be down to how we handle the situation. There are incredible positives. The number of people that are going to be lifted out of poverty, and poverty being something that is of the past is very much an idea that we can be thinking about and realize is going to happen. That’s a tremendous positive; that can’t be a negative.

Luther:                        How will the rise in billions affect the average consumer?

Mark:                          I think that we’re going to see a total transformation in terms of the number of people in this middle class. In Asia today, about half a billion people would be considered in the middle class. By 2030, we’re talking about 3.2 billion.

                                    For the average consumer, I think that just transforms everything. We’re going to live in a world that’s totally different. The communication we’re going to have with these individuals around the world is going to be extraordinary. And so, I think for the average consumer, and we’re definitely going to see it in the next generations coming through, they’re going to grow up with a totally different mindset. I think that’s supposed to be the exciting part for us, but also maybe one of the challenges.

Luther:                        Amazon is always referenced for having taken advantage of the long tail effect. Do you see the rising billions as a similar effect to the long tail, maybe not as high in income, but because of the quantity that are coming online, the opportunity there for disruption and for profitability and companies that take advantage of it?

Mark:                          Absolutely. I think we’ve seen this now with companies that are operating in these very large markets. The population is so big that you can come up with something, make not that much money on it, and you’ve got such a scale that once you start to get out of your own country, your competitiveness is just off the charts. Certainly we’re seeing that in China. I think we’re already seeing that in India with some of the domestic companies. Once they start to step out of their own markets, they can really take a dominant position. That’s going to be something to keep an eye on.

                                    Already we’re facing a situation that seems like we don’t have that many companies that are really dominating the space, and that may even become fewer when we look at it globally. So, I think that’s something that many, many companies are seeing as a big opportunity.

                                    On the other side, I think back to the local idea, how do we come up with ways that we can play in those niche spaces that could be much more profitable? So, I think that in certain regards there are going to be dominant players, but sometimes those spaces are not that profitable. We’ve seen in many cases that, in certain niche areas that are very specialized, you can be making far less revenue and similar profits.

Luther:                        What other facts about the rising billions do you find surprising or intriguing or that you’re seeing that the average person in America or in the Western world may not realize?

Mark:                          I think the big message is that these individuals have the same types of desires and interests and want experiences and products that are probably not dissimilar to what we would want.

                                    I think their spending patterns are quite different than ours. I’m amazed in China. Beijing is such an expensive city. I look at the salaries that my colleagues make and the salaries that friends make, thinking, “How are people living on this?” You realize it’s because they’re not buying a lot of the types of things we’re buying. They don’t have two, three, four cars. They don’t have a television in every room. They think of debt in a very different way. And so, there’s a whole array of surprising things about these individuals and their spending patterns, but I think there’s opportunities within that.

                                    At the end of the day, I think our similarities are much greater than people anticipate. People care about the same types of things. Their family, certain interests, feeling important, feeling recognized. Those things are fairly universal.

Luther:                        Dr. Mark Lyons is the global vice president and head of Greater China at Alltech. Thank you for joining us.

Dr. Mark Lyons spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech  Idea Lab. For access, click on the button below.

To listen to our entire conversation with Mary, click on the player.

Luther:                        Mary Shelman is the former director and is currently an advisor to the agribusiness program at Harvard Business School. She is an internationally recognized thought leader on the future of the global agri-food industry. A native of Kentucky, where she still owns a farm, Shelman received her bachelor’s degree in chemical engineering from the University of Kentucky and her master’s degree in business administration from Harvard Business School. Thank you for joining us.

Mary:                          Thank you.

Luther:                        Do millennials really see the supermarket as a daycare center for the elderly?

Mary:                          You know, that’s a great introduction, isn’t it? It really gets people’s attention.

                                    If you stop the millennial walking down the street — and for those who might not know, a millennial is someone born between 1980 and 2000 —that’s not the answer they give to you, but the idea came from my good friend, Aidan Connolly of Alltech. He was running a training program in Lexington with a group of young people from all over the world in their early twenties, and he took them out on this visit to a number of supermarkets here in town. They went to Kroger, and Whole Foods, and I’m sure some others. And he came back and was doing a debrief with them. He said, “Well, what did you think?” “Oh, yeah, those were great. Those were really, really nice.” And then he asked, “Would you shop there?” “Oh, no, we’d never go there.” “Well, why not?” “Well, that’s not the way we would expect to get our food. We’re going to order it online. Somebody is going to bring it to our house, you know.”

                                    So, that led him to the question, “Well, then, there’s no future for supermarkets, right?” And they said, “No, no, we didn’t say that at all.” “Well, what is it then?” “Well, supermarkets are really important because, you know, old people need some place to go, and to get some exercise, and to have some interactions, and be able to get out of the house and move around.”

                                    Aidan just paused and said, “Oh, wow, it’s like a daycare for the elderly.” And that’s where that idea came from. This thing that we’ve been used to all of our lives might not be relevant for this next generation of consumers.

Luther:                        Speaking of consumers, those aged 18–34 are the largest buyers of organics, and they’re the most likely to consider themselves knowledgeable about their food. Is this the newly engaged and empowered food consumer you’re referring to?

Mary:                          Well, they do consider themselves very food aware. They are very interested in cooking and sharing what they eat.

                                    It’s also an incredibly large demographic group. It’s the largest demographic group now in the United States. There are 83 million millennials. There are only 77 million of us baby boomers.

                                    So, when you think about this millennial group, now they’re having families, they’re moving into some portion of their earning power. It’s a very compelling-sized group for the food industry to look at.

                                    However, that’s not the only thing that’s behind this engaged and empowered consumer. I think, overall, the whole country, and perhaps the whole world, is in the midst of this food movement. People want to know more. They care more about their food. They want to know where it comes from. They want to know where it’s produced. And the availability now of information and where they can get that from and how quickly they can get it has really changed their behaviors. I was just looking up the numbers before I came down here to do this with you. There are almost 4 billion internet users in the world now. There are almost 2 billion Facebook users in the world. So, information travels radically (fast).

                                    I was teaching in a program yesterday, and we were having this conversation about this one group that was having a lot of influence, and it sounds like a very rich population, but someone from Honduras was there. He spoke up and said, “No, no, no. In our country (which has very different socio-demographics in terms of economics), people get information very quickly now.” He talked about this idea of engaged eating. So, this consciousness is not just here in this young person group, but that is a group that’s very important because of their purchasing power.

Luther:                        So, we’re talking about millennials and how they’re rejecting the typical grocery store. Can you give us maybe just a summary of why they’re rejecting the grocery store?

Mary:                          I think it’s very simple. It just doesn’t meet their needs, or it doesn’t meet their expectations. I mean, how do they get their food? They order it online. They have it show up to their house. It’s the same way they get their music. It’s the same way you get your taxi now to go to the airport. You call Uber.

                                    They have grown up in a different world, and they don’t understand why they should have to go and wait in line to pay for something, to wade through a store that has aisles and aisles of things that they don’t need.

Luther:                        I think many people view millennials as this enigma, right? “They’re demanding; they’re lazy” are a number of terms. I wonder if that’s your view or more the fact, as you said, the way they grew up is different than the way that you and I grew up. It’s really a generational difference, and the fact is that change is happening faster; it’s just that that change has happened faster than it has in the past.

Mary:                          I think that’s very true. What they have grown up with has been different. Maybe not the way they’ve grown up, but what they’ve grown up with.

                                    The Apple iPhone was introduced in 2007. So, think about how fast that’s changed our behaviors. They’ve just had access to this, a part of this digital economy there.

                                    My son, who is 25, so clearly in this group, is much more vocal in his beliefs, and his friends are as well. But I think what’s interesting is that there are some very good aspects about them. You use the term “kind of lazy,” and I don’t think that’s true at all. I think they just have a different idea about what’s important compared to maybe what you and I grew up with.

                                    Many of them seem to be much more interested in health than other generations. They’re very conscious of their diet and that link between diet and health. They’re much more likely to exercise. So, they’re making food choices based on what they perceive as being healthy, fresh, clean, “free from” these different ingredients. We’d like to go to farmer’s markets where we can see things and engage with farmers.

                                    I think they see food as adventure as well. I grew up in Elizabethtown here in Kentucky and in, basically, a very traditional family. My dad liked beef. So, we’d have beef four or five nights a week and then maybe have a couple of other things. But, you think about the diets now and the diversity that shows up, so one night it’s Chinese, the next night it’s Thai, the next night is sushi. I think these millennials would eat sushi five, six, seven, eight times a week if they could. You know, it’s Italian, it’s Ethiopian, it’s Moroccan. So, that’s just a fundamental change in what they consider as part of their eating habits. They’ve been described as “food thrill seekers.” Maybe you’re at a stage that you can’t travel because of family economics, but you can get some thrill out of your food, and you can share this thrill with your friends.

                                    Seventy percent of this age group takes pictures of their food before they eat it, and many of them put that on Facebook. They share it on Instagram. So, food has become part of their identity, well beyond just fuel for the body and something that’s linked to health. It’s actually part of who they are. And because of that, they want the food they eat to have the values that they have themselves.

                                    They want to be individuals. Think about the craft food movement, the craft beer movement, which was one of the first harbingers of this, how successful that’s been because, hey, if I can have on my iPhone exactly the music that I like, why can’t I have exactly the same kind of curation of food that I like?

                                    The other thing is, they want to buy products that share these values. They believe in the purpose of these companies. So, something like 37 percent of millennials buy products for a cause, so something like Rainforest Alliance. Even if they have to pay more money for that, that’s important to them.

                                    Forty-two percent of this group say that they don’t trust “big food” companies. They feel like those companies, even kind of “big farming” as well, have violated their trust, that they haven’t made good responsible choices, and they push products onto consumers that really have ended up not being good for them. Too much sugar, too much fat, too many unnatural ingredients in there.

Luther:                        So, hitting on that point, it sounds like there are some big implications for the food industry, as you said, that perhaps some of the power is moving to the consumer, where before it was in the producer’s hands.

Mary:                          Right. I’m not sure it’s ever been — So, a producer in the sense of a manufacturer, a big food company.  It’s never been in the farmer’s hands.

Luther:                        I think that’s important to clarify.

Mary:                          Exactly. The big food companies: the Nestlés, the Krafts, the General Mills.                                  

                                    This is creating tremendous uncertainty for them, these changes in the consumers. The models they have used in the past — putting it on product shelves, getting distribution in every store, advertising on mass media, big promotions at the supermarket — they just don’t work anymore in order to drive sales. Those old models are broken, and they’re really struggling to find out what the new models are and what the new products are that satisfy this group.

                                    Just to give you some idea of how serious this is, in the last 10 years, big brands have lost share in 42 out of 54 product categories. Between 2005 and 2015, the top 25 firms have lost $18 billion in market share.

                                    It’s extremely difficult now for these firms to find growth. And so, what they typically do, the first thing they say is, “Oh, you know, our products don’t meet consumer expectations anymore, so let’s reformulate. Let’s take out the sugar. Let’s take out the salt. Let’s make them healthier.” Well, that’s great, but it doesn’t increase sales. It might stop a decline, but it’s not increasing sales.

                                    They say, “Well, let’s introduce our own version of organic, or GMO-free, or gluten-free.” But it’s not getting back to sales growth because when you look underneath, it gets back into this distrust of these companies. And so, that’s forcing them to look at who is being able to grow.

                                    The opportunities that these changes have created are actually for the younger and the smaller companies. These big companies are needing to look to them and say, “Well, I can’t do this myself, I’m going to go out and buy somebody.” So, General Mills bought Annie’s, the maker of all-natural mac and cheese. Perdue bought Niman Ranch. Campbell’s bought Bolthouse Farms just in order to get there.

                                    But think about the disruption that’s being created. Go back in your mind to the yogurt category in 2008. You had products like Trix yogurt and Dannon yogurt, and they were basically all of it. It’s either targeted at women on a diet or kids. The products, honestly, they were disgusting. I just thought they were either too sweet, or they had all these artificial sweeteners and artificial things.

                                    We’ve got this Turkish immigrant who comes in. Hamdi Ulukaya bought this old yogurt plant in upstate New York and introduced this product to the market after spending like two years working on packaging and product quality, but introduced Chobani and basically said, “Hey, we want this product. It’s going to be a great product. It’s going to be great-tasting. It’s going to be this Greek yogurt style. And I don’t want to have it as a special product. I want to make it very accessible to the masses.” So, he was on the protein trend. He was on natural even though it wasn’t organic. It wasn’t non-GMO, but it was natural ingredients. He was riding the social side of it, using social media. He didn’t have any money to advertise. And five years later, that company, Chobani, had $1 billion dollars in sales. In 2012, it was a sponsor of the U.S. Olympic team at the London Olympics. Now, Greek yogurt has gone from nothing to 36 percent of the yogurt category. Walk in the store, it’s almost all Greek yogurt. That category has doubled in size because you’ve got this better product quality there.

Luther:                        Well, I think that fits really well into another news item I saw that Whole Foods has had six straight declining quarters of revenue. In response, they created what they’re calling a 2.0 version: 365 by Whole Foods. They’re actually targeting it at younger, budget-conscious consumers. They claim that it provides easier use, a better grocery experience through a blend of design, technology and experience. Do you think there’s going to be some success out of that? 

Mary:                          I haven’t been in a 365. I’m really anxious to. But, just from what I’ve read about it and what I have read of other people assessing it, I don’t think they have the answer yet. I think they’re just reshaping.

                                    I think getting the size down is good. They can put it in more urban settings.

                                    We have young people now, they want to live back in urban areas again, where they can walk. A lot of them don’t even want cars anymore. So, it’s important that it’s some place that they can get to and shop easily and then get back again.

                                    The format that I think is much more interesting to watch is what Amazon is experimenting with out in Seattle. They started it just after the first of this year, a store called Amazon Go. Basically, it’s a store without lines. The worst thing about going to the grocery store is waiting in line to check out. The way that Amazon Go works is, you walk in, and you scan your phone over a reader. Then, you walk around and you put whatever you want into your basket, and you walk out of the store and go home. They send you a receipt afterward showing everything that you purchased. And there’s also a lot more prepared foods there, which is another aspect of what I think everybody is looking for now. It’s like we need help with thinking about what to eat. So, that’s a more evolved concept of 365.

                                    I think that it’s really hard if you’re an established player in an industry to disrupt yourself. When Whole Foods came in, they came in from outside the industry, brought in something new. What they brought in were all these natural, specialty and organic products. Those have all rolled out into Kroger. You can buy almost the same product quality there, but Kroger wasn’t the one to introduce that to start with. So, I think the format’s like that.

Luther:                        So, what about ClickList? Do you think that’s enough to appease the millennial?

Mary:                          I think it’s definitely a piece of it, online shopping, being able to pick it up. I think that’s helpful, but I think that evolves.

                                    With ClickList, I still have to go to the store to get it. If I click AmazonFresh, it shows up at my house.

Luther:                        I probably should have specified. Kroger ClickList allows you to shop online and then go and pick the groceries up. They’re ready for you.

Mary:                          That’s right. So, you order online and then you make the trip there, and they put it in your car. That’s been successful.

                                    Again, that next evolution of it that’s playing out is where it comes to your house. In this case, it could be Kroger making that delivery, even though I think they’ve chosen not to, but in the Northeast, it’s Stop & Shop, and Peapod is part of a division of Stop & Shop that makes the delivery.

                                    Or is it Amazon? I mean, everybody’s very comfortable now with Amazon. So, do you trust Amazon more to bring you fresh produce than you trust Stop & Shop?

                                    If you look overseas, if you look to the U.K., there’s a supermarket company called Ocado that you buy from online. It shows up at your house. It’s the largest online grocery company. They have no stores at all. So, it’s basically the supermarket without the store. And because of that, they can manage their inventory better because the products make one stop.

                                    Think about fresh foods. They come into the Ocado warehouse. Or you think about fresh foods coming to Kroger. Often they come into the Kroger distribution center. They get split again, and they go out to the different Kroger stores. You go in as a consumer and maybe it’s been sitting there for a few days, but you buy it and take it home. It spends another few days in your refrigerator and then maybe the quality is not so great. With Ocado, it comes into their distribution center. You order it. It immediately comes to your house. So, it’s bypassing that trip to the supermarket plus sitting on that supermarket shelf. So, Ocado says we actually have a higher purchase of fresh products even though here we typically think, “Oh, I’ll never buy a fresh product from an online experience because I can’t see it myself.”

Luther:                        So, continuing the theme of convenience, the millennial doesn’t look at food the same way we do where you go to a grocery store, you buy the parts, you go home and then you have these variable parts that you can assemble via a recipe into X, Y or Z. Are the millennials actually also potentially looking at just skipping that part and going straight to, “I just want a meal sent to me and I’ll choose what meal I want and it’s already assembled, or maybe all the ingredients are there and I just put it all together at that point?”

Mary:                          I think there are a couple of different cuts at that that are very interesting right now.

                                    First, we see the rise of these meal kits that you can order online, and it shows up at your door. And, in many cases, it shows up at your doorstep, and what you’re getting in that box is exactly the amount of ingredients that it takes to prepare the meals. So, if you have a recipe that calls for two stalks of celery, you don’t have to buy the bunch of celery and then have the other six stalks rot in your refrigerator until you throw it away because you have no idea what to do with it.

                                    One in four households in the U.S. have tried meal kits now. There’s like 150 companies operating in this space. Unilever just made a $9 million investment into one of these companies earlier this month. So, they’re getting some serious traction. The retention rate is very high once you try because it turns out the product qualities are good.

                                    You think, “Well, wait a minute, this seems all very expensive to have this come to your house,” but the cost of that meal that they’re sending you is $10–$12. It’s not really that much. Maybe if you have a family of six or eight or 10, that’s too high, but certainly there’s a lot of one- and two-person households out there. So, you get the convenience that it shows up at your house.

                                    You get the fact that you’ve really cut down on food waste, both on the ingredient side, but also you don’t have all these leftovers that then you have to throw away.

                                    The other thing it cuts down on is choice. We always think choice is good. But if you’re pressed for time or if you don’t know how to cook and you’re looking maybe to learn, then you want a recipe already there rather than having to look to a cookbook, right? Everybody says, “Oh, we’re offering all these recipe solutions.” Well, I don’t want to have to look through those recipes and decide. Here, it just shows up, and you’re getting your cooking lesson on top of it. So, I think there’s a lot of interest in that space.

                                    Blue Apron, the biggest player, is now delivering 1 million meals a month. It’s a big number, right? At $10 a meal, it’s about a $1 billion-dollar business. Valuation is probably $2 billion. And they work directly with the farmers. So, an interesting piece of their model is how they decide what recipes to offer. Some of it is based on what consumers want, but some of it is based on what’s available. They can find out from their farmers what’s in season right now and what the prices are at different times of the year. They basically come up with what they’re going to offer based on being able to meet their price points.

Luther:                        Very interesting. So, to bring this back home to supermarkets, how do they meet the expectations? How do they have authenticity, and transparency, and traceability from the producers, holding manufacturers accountable, and at the same time maintaining the convenience at a price point and profitability through all of this?

Mary:                          It’s a huge challenge, isn’t it, especially if you already have a big business model and a big footprint that operates in a certain way. It’s just like death by a thousand cuts.

                                    Think about the impact of, you know, certain categories moving online. So now people buy their diapers online. So now your supermarket is too big because you don’t need to have as big of a diaper stock anymore. Well, you have supermarkets that are too big, but yet you can’t lop off a supermarket because it still means that the supermarkets that you have left are still too big. So, how do you repurpose that space? I think it’s a real challenge.

                                    But, some of the things that I think that really need to be done are — one of them is a mindset shift. We see some of this going on. I think for a number of years, supermarkets really considered themselves as, basically, “Our role is to rent real estate to manufacturers of food products. We just display it. You work on your products and bring it in, and we’ll display it. If it happens to sell, that’s great. And if it doesn’t, we’ll kick you off the shelf. And by the way, you’re going pay us for the right to be on that shelf because we’re taking a risk putting you there because we’ve had to take something else off.” That mind shift has to shift back to, “As a supermarket, my role should be as a gatekeeper to this set of products that my customers really want. And not only am I giving them the products that fit their needs, but I’m also working in that store to create experiences for them,” because this young group now — and many of us, right? — we have too much stuff. So now we’d rather invest in experiences than we would products. So, how do you make food an experience? How do we make sure in that supermarket it is going to have to tell a story of the food product? That’s the important piece of it.

                                    In Milan, a couple of years ago, there was the World Food Expo, and there was a supermarket of the future there. And, basically, you walked around the store and you had augmented reality where every time you looked at a category, you could see visually the product information and where it came from, who grew it, whatever. I don’t think shoppers want to see that every time. To me, I’m not sure that’s the supermarket of the future. I do think people will want the experiences, the authenticity, the stories, the engagement, but at the same time, this convenience piece is really important. So, supermarkets are going to have to be omnichannel. So, you’ve got a store that has some elements of this, but it also has to come to the house. And analytics. Data analytics. You know, being able to really dig in and understand what sells, what doesn’t sell, what price points.

Luther:                        Mary Shelman is former director and is currently an adviser to the agribusiness program at Harvard Business School. Thank you for joining us.

Mary:                          Thank you.

Mary Shelman spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab. For access, click on the button below.

To listen to our entire conversation with Emmet, click on the player.

Tom:                           Emmet Savage is co-founder of Moocall, one of the 10 finalists in The Pearse Lyons Accelerator program and one of two out of Ireland. He has founded numerous companies in the construction, demolition and fashion sectors. Moocall, however, is quite different from all those. And, under Savage’s leadership, the Moocall team has expanded into 38 countries in 28 months. Thanks for being with us, Emmet.

Emmet:                       Thank you. Nice to be here, Tom.

Tom:                           So, what inspired this technology?

Emmet:                       It all came about when a guy who used to work with me on the demolition side came to me with an idea. He was a farmer’s son, and they lost a heifer and a calf, which was really a huge loss to the family both emotionally and financially. So, he had an idea that there was really something specific in the movement of the cow’s tail when she’s close to giving birth. He had done some really early stage testing on it, and then he brought it to me. I was able to put some seed capital behind it, and we proved the concept really quick. So, it was that original loss that spurred the thought process around how we could solve this problem, and Moocall was born.

Tom:                           Is this “tail switching” something that’s commonly known in the cattle industry?

Emmet:                       It would definitely be commonly known by the farmers that a tail moves in a specific way. No one had actually gone into scientifically looking at what those specific movements were. But, when we started to research the tail movements, we realized very quickly a contraction makes the tail move a specific way. So, our device measures contractions and can then accurately give a farmer an hour’s notice as to when the calf is going to be born.

Tom:                           Your website says, “Enjoy healthier cows and calves, more sleep and increased profits.” What is Moocall, and how does it deliver healthier cows, more profit and, above all, more sleep?

Emmet:                       Sure. Obviously, healthier calves are a direct result of the farmer being there when the birthing process is happening. In a lot of cases in calving, there are problems with getting the calf out, or there could be a leg back. There are all sorts of problems. At that point, if the farmer is there, he can then make a decision to intervene himself or to call the vet. So, in doing that, we’re increasing profits on farms, delivering healthier calves and helping the farmer.

                                       And sleepless nights are something a lot of farmers will understand. They set alarm clocks every few hours to check on their herd. Most times when you’re walking down to check on the herd, there’s nothing happening. So, it’s a wasted trip, and sleep deprivation happens. With Moocall, you have it on the cow’s tail. You go to sleep soundly with the knowledge that Moocall will wake you when you need to be awakened and not unnecessarily.

Tom:                           Could you describe exactly what the device looks like? It slips onto the tail, correct?

Emmet:                       It doesn’t actually slip on. What we have is a ratchet system that you’re going to open up. You wrap it around the cow’s tail. You put the strap back through the ratchet. We put it in what we call “hand tight,” which is basically pushing the strap in, and then you give it two or three clicks of a ratchet, which tightens it onto the tail just enough to hold it in place. It’s like a turtle shell, and it’s actually designed on the concept of a turtle shell because there are no hard edges for the sensor to catch when it’s on a cow’s tail. So, it’s a turtle shell-shaped green sensor that has a little ratchet strap for attachment.

Tom:                           And so, it sends data to a smart device — a cellphone, an iPhone or whatever, right?  

Emmet:                       Yeah. It sends to any phone that can receive a text message. That’s good enough to operate our device.

Tom:                           What if the farm is located in a weak area for cell service?

Emmet:                       Yeah. We’ve pretty much got around that as well. We have a roaming agreement with Vodafone, our connectivity supplier. These big telcos have lots of tier partners around the world. So, for example, in America, AT&T and a lot of other cellphone providers work with Vodafone and allow Vodafone’s internet of things (IoT) service to roam on to their services. So, in most cases, our device will roam on to another network provider because of a deal done higher up the chain with Vodafone themselves.

                                    We’re also sending a very small piece of data. It’s not really like a text message. We gather all the data. We send it to a server in the cloud and that then sends the text message. So, when it’s a smaller piece of data, it’s easier to get out. In nearly all cases, our devices will work even with the lowest cellphone signal.

Tom:                           Electronics are not known to be very moisture-friendly. What if it rains?

Emmet:                       We have a fully watertight product. We conformal coat all our electronics inside the device, and then we have an ingress protection rating on the device as well. So, it’s fully waterproof. It can even be washed in a bucket of water. There are no problems with moisture or rain.

Tom:                           Can more than one of these sensors be used at the same time?

Emmet:                       Oh, absolutely. The unit itself is fully transferrable. We recommend one unit for every 30–40 head of cattle depending on your calving pattern. If you’re calving year-round, it might go as high as one to 60 or 70 cattle. But if you’re compact calving or really tight calving, it might go as low as one to 20. So, what we ask our farmers to do is go out, have a look at what one or two sensors will do for them, and then they make the decision themselves how many they need.

Tom:                           And how about accuracy?

Emmet:                       We’re at 95 percent accuracy across all commercial and pedigree breeds. So, it’s only that 5 percent we miss that are the really easy calvers. So, if you can imagine a really old mature cow putting out a really small heifer calf, her contractions don’t hit the levels that would be required to trigger the device. So, in that case, that’s the 5 percent, and nearly always that calf will be born quite easily without stress, anyway.

Tom:                           Do you consider Moocall technology an industry disruptor, and in what way?

Emmet:                       I think it’s a huge disruptor. When we started to research what was available to farmers in calving detection, there was very little. There were very expensive inserted probes that use a base station. These were generally $4,000–$5,000.

                                    Then there were the old-fashion cameras, which are very expensive and only will work if the cow is facing in the right direction. They’ll never pick up an internal problem in the cow. And, obviously, the alarm clocks we mentioned earlier!

                                       Moocall retails at $299. So, that’s very disruptive against an offering that’s more than 15 times more expensive. And we’re accurate, easy to use. People understand what we’re doing very, very quickly. So, hugely disruptive. The internal probe company that had been operating in Ireland had literally moved out within a year of us launching, and we haven’t seen them since. So, we’re obviously disrupting a little bit!

Tom:                           Do you have other devices under development, ready to roll out?

Emmet:                       We sure do. What I’m really, really excited about is, we have a product going to launch in September. It’s an IoT device again, and it will be in the heat detection and breeding management space. This device will quite simply text you when a certain cow enters her standing heat. That is hugely valuable to any farmer. Once he knows she’s in heat, he can then get his artificial insemination guy or a bull. When the cow doesn’t cycle again three weeks later, we know that she’s pregnant and the exact due date of the calf she’s having. So, all that information will be available.

                                      The sensor is going to auto-populate the breeding management system as well, which is key for all the farmers. You will have a smartphone in your hand with all of your breeding information on it. You will have inputted none of the data. It’s all auto-populated by the sensor. We spoke about disruption a minute ago. This is equally as disruptive. The offering at the moment out there for heat detection again is base station-related and is in the region of $10,000–$15,000 for a system for 50 head of cattle. We’re going to come in one-tenth of that. And, it’s fully mobile.

                                       So now the beef guys have a full solution. Today, they’re using tail paint and very primitive ways of measuring heat. We will give them an option to adopt high-accuracy technology at a very affordable price.

Tom:                           It sounds to me as though there is just a wave of technology entering the agricultural realm. Big changes.

Emmet:                       Huge changes. I see a lot of changes in what I call our area of expertise, IoT, the ability to use the cell phone network to transfer data back to the farmer’s phone so he can act on making informed decisions. I see it in the accelerator that I’m involved in, such as magnetic spraying that reduces drift. You magnetize the water. You break up the particles much smaller. They stick to the plants you’re trying to spray and reduce chemicals and reduce drift.

                                       What you see in the accelerator is probably cutting-edge for what is happening, but there’s so much happening. It’s all about data. It’s all about recurring revenue. And it’s all about making the farmers’ lives easy.

Tom:                           And what about your work do you enjoy most?

Emmet:                       I just love the fact that I’m in a startup. Nothing ever goes as planned. There are so many highs and lows. You’ve got financial concerns and you’ve got staffing concerns. All these problems pop up at a minute’s notice. It’s never, you go in and you think, “Today is going to be clear. I’m going to get loads done.” But it’s that unpredictability of a startup that I love and the challenge of getting over these problems that arise on a daily basis. Keeps you on your toes!

Tom:                           Moocall co-founder Emmet Savage. Thank you so much for joining us.

Emmet Savage spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab. For access, click on the button below.

To listen to our entire conversation with John, click on the player.

Tom:                           John Fargher is chief operations officer for Australia-based AgriWebb. The company is among 10 startups selected from a field of more than 180 applicants to take part in The Pearse Lyons Accelerator program. We thank you for joining us, John.

John:                           Thank you for having us.

Tom:                           What is AgriWebb? How did it get started?

John:                           AgriWebb is a farm management and herd management software. We’re specifically focusing on the livestock industry, particularly red meats, so sheep and cattle producers, based down in Australia.

                                    I’m originally a fifth generation livestock producer myself, so I identified the problem on our own family farm, which is a simple one: farmers and ranchers running their businesses off pencil and paper. They’re recording their data down in that notepad. So, we built an app to digitize those farm records. We can now track all the inputs and all the outputs across that business and then facilitate data-driven decisions through reports and insights.

Tom:                           Does this enable you to carry a device throughout the operations and record data and so forth?

John:                           That’s absolutely right. We’ve built an app that you can run on your mobile device. It works right in your pasture, in the field. You can be recording all of your business information. And then when it hits that connection, it’s going to sync to the cloud. And through the portal, you can actually then start doing some insights and some reporting. We present that data back to make those data-driven decisions, increase the efficiency and productivity of that business.

Tom:                           You know, a number of the folks who have come in for an interview for these podcasts have mentioned in one way or another how important data has become in farming. And it seems to me as though you’re catering to that interest.

John:                           Yeah. That’s right. We’re looking at these businesses, some of them multimillion dollar businesses. And they are run through archaic methods. You know, “Why are you making these decisions? Well, ‘cause dad and grandpa did it that way.” And now, there’s a desire and a need for these businesses to do more with less, increase those efficiencies and start making data-driven decisions to really refine the process, track those performances and then make decisions based on what’s performing. We look at all other industries that have benefited from the use of data and through the use of these process improvements. And that’s what we’re doing in this space.

Tom:                           A number of the people who we have spoken with have mentioned the rise of “big data” and how it has become so important in agriculture. Would you agree with that, and is that really what AgriWebb addresses?

John:                           Yeah. Absolutely. For us, there are two aspects to that. The first one is the data collection and management at the farm level to help that producer manage their business, make those data-driven decisions, track inputs and outputs, and drive their business forward with software results.

                                    The second component is across the supply chain. The data now shows that the consumer is driving a lot more demand for traceability in their food for security, health reasons, health risks. So, this information we’re collecting, sure, it’s useful for a farmer to help their business, but it’s also useful because it’s been collected on-farm. That data can then go through the supply chain into the processing so the meat processors can really secure that traceable supply chain.

Tom:                           Will that information in some way be made available on the consumer end?

John:                           I think in time there’s a huge opportunity for that. We’ve got to get through a few stages. But it’s about linking it from farm to that next stage and then really having that end-to-end solution, which may be made up of other products and solutions along the way. But I think that’s where the industry is going to go. And I think that that’s what the consumer is going to demand.

Tom:                           How does this systematic collection of data change a farm’s operation?

John:                           It’s all traditional decision-making, typically. It’s decisions made because that’s the way dad it or that’s the way grandpa did it. So, what we’re doing is decisions made off what’s performing and what’s not: the inputs, the outputs, looking at yields, looking at cost. The decisions now are run purely on what the data is telling them. It’s a big shift from the day-to-day activities to actually relying on these tools and then having trust in these tools to deliver a better result.

Tom:                           So, it really tightens the efficiency?

John:                           Absolutely.

Tom:                           How is the industry responding to your product?

John:                           It’s a very, very exciting time to be in the ag-tech space. There’s a shift in demand, and people are starting to look for tools that can help their businesses. There’s also a shift from these younger generations coming back in. They may have had other careers in other areas, and they’re now driven back to agriculture. So, they’re looking for tools that exist in other industries to help with their businesses.

                                    We see a huge increase in awareness of the technology, and a prime example is, our best ROI on our marketing and sales is through digital and social media. So, people are looking for it. It’s a perfect age bracket between the sort of 30- to 50-year-old. So, I think the timing is perfect for these solutions.

Tom:                           What was it like for you to learn that AgriWebb is one of only 10 out of 180 finalists in The Pearse Lyons Accelerator program?

John:                           Well, we’re obviously very, very excited to be a part of this program. You know, we’re the only company out of Australia to be selected. On a global stage, it gives us great awareness. It opens up opportunities to look at new territories, look at what’s happening out there in the market, understand how other producers are running their business. So, for us, it’s going to be a big step in helping us shift, and develop, and really look to expand.

Tom:                           Since you grew up in the business looking at the need for this data and now your own company is producing it, that must be enormously satisfying.

John:                           Yeah, it is. It’s very, very exciting to see our own family business developing and evolving and also now to see some of our customers that have been with us for 12 or so months and the results that I’m seeing. They’re getting an increase in productivity by up to 18 percent. To see those results and deliver those results for our customers is very rewarding.

                                    We’re all about trust and building relationships with our customers. That’s proven by the fact that we haven’t had any customers leave us through the journey. And so, I think it’s about building trust and lasting relationships and showing that we can deliver some good results for them.

Tom:                           John Fargher is chief operations officer for Australia-based AgriWebb. We thank you for joining us.

John:                           Thank you so much.

John Fargher spoke at ONE: The Alltech Ideas Conference (ONE17). To hear more talks from the conference, sign up for the Alltech Idea Lab. For access, click on the button below.