Back in 2020, we forecasted that there would be a War for the Consumer Relationship. Our hypothesis was that different parts of food and ag supply chains would increasingly look to own customer relationships as a way to capture value and data.
When it came specifically to how this might play out from the farm perspective, we thought:
“Producers may find that organizing into cooperative, “digital guild” structures may be an effective way to build strong regional brands and share the costs of developing essential marketing and brand capabilities. These organizational models won’t be based on shared ownership of physical assets as they were in the past, but rather on building and maintaining direct-to-consumer channels and trusted brands that can effectively compete in new, digital marketplaces.”
In our latest podcast episode, we sat down with Michael Bosworth, a California-rice grower—who, it turns out, also happens to be a pioneer in the very concept of building a “digital guild.”
An ag marketing class in college helped Michael realize that there was an opportunity for his family’s farm business to capture more of the value stream by moving up the supply chain and directly marketing to customers. Michael started by building a farm brand, but this quickly evolved into setting up a food distribution company. As Michael put it:
“We spent a lot of time building our farm brand, but at the same time, it doesn’t allow you to scale and it doesn’t allow you to offer really cool products from other growers.”
By building out a distribution company that supplies from a range of local farms, Michael has been able to scalably service customer demand, while also reducing the costs and friction for other farms to participate in higher value supply chains.
Still, Michael’s costs of doing business are higher than that of large distribution companies. Which is why he believes its critical to focus only where there’s scope for differentiation:
“Any premium products that have an opportunity for differentiation, we handle those, all the way through the supply chain. If it’s a homogenous product and there’s no opportunity to differentiate, it gets traditionally marketed”
Michael’s laser focus on differentiation stood out to us—as it’s a lesson that applies to businesses of all sizes and types. To succeed, you have to double down on what sets you apart. There’s TONS out there on differentiation, we loved this short read by Packy McCormick.
Our reflections on the quest to capture more value in the supply chain and the importance of differentiation also had us thinking about whether we’re more likely to see farms vertically integrating up into the supply chain, versus food companies and distributors integrating down into the supply chain.
Maybe it’s both?
One thing will remain certain: consumer is king– and we’ll continue to see all kinds of strategies fighting to win the war for their attention.
Tenacious Ventures Management Pty Ltd (CAR 001275760), Tenacious Ventures Management Partnership, LP (CAR 001298484), Tenacious Ventures Fund II Management Partnership, LP (CAR 001298483), and Tenacious Ventures Fund II Staple Co Pty Ltd (CAR 001298487) are Corporate Authorised Representatives of Sandford Capital Pty Ltd (ABN 82 600 590 887), Australian Financial Services Licence No 461981, and are authorised to provide advisory and dealing in connection with investments to wholesale clients only.