Building a moat is the only way to escape the tyranny of commodity markets, and in this podcast interview David Newman explains why Newman Farm began building a moat, and what they learned along the way.
This isn’t mom & pop stuff, this is business model innovation at scale.
20 years ago Newman Farm made the initial leap from a typical commodity hog operation using scale to manage costs, and began looking for value added opportunities. They ultimately found success selling a premium product directly to white table cloth restaurants. Then as restaurant sales slowed down due to COVID, Newman Farm flipped a switch and entered the direct to consumer business.
What’s clear from David is that making the shift from commodity to value added requires a transformation of every element of the business model:
- Production decisions: Manage costs —> Increase value proposition
- Commercialization: Manage commodity market volatility —> Create demand for a unique offering through a sales & marketing capability
- Ecosystem: I am an independent operation —> I work with high quality partners, we all win and grow together
- Capabilities: I can figure it out —> Identify & hire critical capabilities to grow
This conversation is for the packer considering the Direct to Consumer sales channel, the producer looking to margin up, or anyone interested in the clever evolution of business models.
Oh, and at the end of the podcast you’ll hear a short interview with the founder of Barn2Door, a software company enabling producers to quickly establish D2C sales capabilities. IMO this is such a smart tech play, it’s basically Shopify for producers.
Thanks to Tim Hammerich, host of Future of Agriculture, for sharing the mic for this episode!
I shared recently that I’m writing a book for investors & innovators about the challenges and opportunities for tech within animal agriculture and that I’m interested in talking with 25 investors and 25 producers in the process. Thanks to so many of you who already reached out to share your insights!
This week I spoke with Luis Azevedo, The Yield Lab partner and former Novus executive, and here are a few interesting quotes:
“There’s a vicious cycle because you have investors who only want to see animal health & nutrition or only want to see technologies for row crops so you miss the technologies or business models that could converge across both. So then the size of the market is smaller and no one is excited as they could be.”
“In the end there is more risk in animal ag because of complexity in scaling those businesses.”
“Animal health & nutrition business models are mostly transactional models. They develop a product, they promote it, they sell it. Meanwhile crop science companies not only develop and commercialize products, they are adding precision services that are changing the business models. More robust business models creates broader connection with producer and the belief that the program is the product.”
(Shoot me a message here if you are interested in sharing your view on animal ag innovation.)