Animal AgTech

Telus Agriculture marks Animal AgTech 2.0

The announcement of Telus Agriculture marks Animal AgTech 2.0 as the Canadian comms company seeks to digitally connect the beef supply chain. Here’s why that matters:

The 2018 Merck acquisition of Antelliq, a “digital livestock and animal health tech company”, marked Animal AgTech 1.0. That mega acquisition was to livestock tech what Monsanto’s 2013 acquisition of Climate Corp was to crop focused agtech.

Fast forward to 2020 when Telus, the Canada-based communications giant, recently unveiled their newly formed Telus Agriculture business which includes 7 acquisitions and counting, with beef as a priority vertical. Telus Agriculture’s first major acquisition in beef was Feedlot Health Management Services whose “individual animal data collection and execution tools help optimize production efficiency and overall animal health by supporting data-based decision making for feedlot and calf grower clients.” That acquisition is especially interesting because it gives them a unique starting point right smack dab in the center of the beef value chain from which to link upstream to cow-calf producers and downstream to packers, retailers, foodservice.

The announcement of Telus Agriculture marks Animal AgTech 2.0 for two reasons:

  1. This is a non-traditional entrant moving into the ag industry in a big way via the tech door. Microsoft, Amazon, IBM are making miscellaneous moves but they do not yet appear to fit into a clear framework like Telus Agriculture. So if the dark horse comms company can make a mega splash, who else could?
  2. This approach is an example of rolling single point solutions into a platform to drive broader outcomes for customers than the individual value of any single offering.

In the journey to market maturity, it’s time for the Livestock Tech market to converge into more platform based approaches. Why??

For starters, as the market gets more crowded with digital (software or hardware) products, the cost of customer acquisition increases as does the cost of making a good buying decision. Producers have more sales reps vying for their time for a sales call and more brands vying for their attention, adding time and cost for tech co’s and frustration for producers. If you need proof of this, go ask a large row crop grower how it feels to have 47 precision ag startups trying to sell to you…it’s a nightmare.

More importantly tho, the promise of digital is about driving improved business outcomes like profitability, return on assets, etc. The promise of digital is about enabling new business models, new organizations/outcomes of entire supply chains, new management systems. An individual solution like a calving monitor might drive an individual metric like decreased mortality, but it’s one tiny piece of farm operations which is one stage in the supply chain. Think of a one-off solution, like a smart syringe, as optimizing a cog in the machine while the platform approach Telus Agriculture seems to be pursuing is oriented to optimizing the machine itself.

To realize that promise, the livestock tech market needs to see a transition from multiple one-off, single point solutions to portfolio or platform approaches. We need to see convergence in this market.

Going back to Telus, this quote to AgFunder speaks to the big picture they are building to and why it could matter to the beef industry:

“As a result of these deals, Telus Agriculture now believes it has the capacity to connect every participant in the ag value chain, from seed manufacturers and farmers to grocery stores and restaurants. More acquisitions are on the menu, Armbruster says. In particular, the business has its eye on people power, as well as specialty crops and livestock.”

Aside from Telus, who else is in a position to aggregate tech solutions for producers and processors?

An obvious answer would be the equipment companies. But look around, what are the equipment companies really doing besides defending legacy systems, googling “cloud-based” and working hard to keep data silo’d so neither upstarts nor their customers can extract higher value from the data? Let’s assume for now that equipment companies are not going to change the game. Side note: I’d love to see an equipment co get aggressive here.

The likely answer is animal health companies who are already making moves in this direction, particularly Merck and Zoetis. Their acquisitions in 2020 alone indicate the animal health category’s candidacy to be the digital aggregators. Until Telus, effectively Merck and Zoetis *were* the exit market for animal agtech startups.

Perhaps a real but un-obvious answer is the integrators & processors themselves. I believe there are 2 that are in a position to potentially pull this off: Cargill and Tyson. Cargill has tech segments scattered across the behemoth with more and more hires working on how to leverage tech for internal operations, supply chain, and with customers. Although Tyson has not demonstrated this capability *yet*, their $200M+ investment in their automation center last year followed this year by the selection of a tech leader as CEO indicate that moving in this direction isn’t out of the realm of possibility. Cargill’s diversification makes them the more likely candidate to do so, Tyson’s new leadership makes them a more dramatic candidate. Outcomes TBD.

Another option would be mid-market companies, aka what Facebook was when they acquired Instagram in 2012. (Not apples to apples but you get the idea.) While you might point to IndigoAg on the crop side as being a potential acquirer of new co’s, what similar co would you point to in livestock and poultry tech? In dairy, is a great example with 2 acquisitions of software providers in 2020 alone. Will we see equivalents in beef, pork & poultry? I hope so, for the sake of the ecosystem and fostering a robust exit market for startups and investors. But let’s mark this a TBD for now.

A less likely option might be private equity plays that grab several co’s for a roll up, but I’m not sure there are enough animal agtech startups that are mature enough for that play to work. Maybe that’s 3.0?

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