Welcome to our debut edition of Food Insider. If you're interested in what's trending in the retail food world and influencing future demand and consumer taste, you're in the right place. We plan to provide fresh insights on the entire food supply chain and how it is being radically changed by technology and social media. If you like what you see here, please subscribe and tell others about it. We also welcome feedback. Please email us with tips on food tech startups or local trends which you think others should know about.
THE BIG DEAL
JAB Holdings' big play for Panera Bread is a payday for founder Ron Shaich and confirms his strategy of bridging the gap between traditional fast food and sit-down casual dining. As Starbucks, the trendsetter in coffee coolness, treads water, JAB needed to do something to diversify beyond its coffee core. It clearly thinks that there's more potential growth and long-term margin in a business built around quality food and good marketing/branding.
Despite their remarkable rise to retail power (more on that below), Amazon still has a lot to learn about the food business. Word is that Amazon Fresh, the Seattle ecommerce giant's ill-fated foray into grocery/produce, has lost money on spoilage at more than twice the rate of traditional supermarkets. Logistics genius does not overcome fundamental truths about customer sensitivity to food presentation. Any worker in the produce aisle at Krogers or Safeway can tell you that.
German chemical concern Evonik is trying to leap ahead in the race to find the best products to manage gut health with the development of a sophisticated gut simulation model which can be used in conjunction with actual animal performance on farms. As more and more meat is produced without the aid of antibiotics, the big players with deep pockets like Evonik are competing with scrappy startups to find the right magic balance in the gut in constantly changing environments and sub-clinical health challenges. We like Evonik's graphic representation below of how a healthy gut should work. Oh, were it that simple...
Jack in the Box and Qdoba are the latest restaurant chains requiring all their chicken suppliers to comply with new animal welfare standards by 2024, including:
- Switching to broiler breeds approved by Global Animal Partnership (GAP) as having higher welfare outcomes;
- Reducing stocking density in barns, per GAP standards;
- Enhancing the birds’ living environments, including improved litter, lighting and enrichment, per GAP standards;
- Switching to a multi-step controlled-atmospheric stunning that will help ensure that birds are rendered unconscious before processing.
All of these measures will increase producer costs and will need to be passed on to the consumer. We expect the industry to desegregate on welfare lines and offer a choice: cheap chicken raised in the most efficient way or expensive chicken raised in the way you prefer.
BY THE NUMBERS
Market cap history is a good measure of the sea change that has occurred in retail over the past five years. This is the triumph of digitization. While the big established players have been mired in the costly analog world of brick and mortar and physical inventory, Amazon has mastered the art of selling stuff without needing to own it first. They have also created the world's most efficient system for predicting consumer demand and delivering the goods in a timely fashion. The trajectory is clear: while groups like Target languish in the cellar, AMZN is headed for the stratosphere. Some are even predicting a trillion-dollar valuation.
Market Cap of Retail Giants
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