This article appears as the feature story in the spring 2018 issue of Smith Business magazine.
Nobody likes to see food go to waste. But economists who study agriculture understand that proper stewardship of our natural resources requires a certain amount of postharvest loss.
“If you want 100 bushels of corn to get to the hogs or to the elevator, you’re going to have to produce more than 100,” says Steve Sonka, an affiliated researcher at the Smith School’s Ed Snider Center for Enterprise and Markets. “That’s the reality of biology and economics.”
Sonka says “zero waste” makes a good slogan. But public, private and social sector organizations that want to maximize their environmental and food security impact should remember that going after the low-hanging fruit is more than a metaphor in agriculture.
Plucking the first fruits from a fully laden tree is easier than gleaning leftovers, and there comes a point when rescuing the last bits of produce no longer represents the best use of economic and environmental resources. “To capture those last bits is not just economically expensive,” Sonka says. “Zero waste would be less environmentally friendly.”
Society really needs to focus on finding and eliminating “excess loss,” Sonka says. “That’s the amount that could be prevented through education and proper application of existing technology.”
Despite advances in technology, excess loss remains a problem at every node along global supply chains from farm to fork, even while hunger persists in all regions.
Sonka, the founding director of the ADM Institute for the Prevention of Postharvest Loss at the University of Illinois, is currently working with Snider Center colleagues and students to reduce waste in Africa through a multiyear grant from the Rockefeller Foundation.
Entrepreneur Evan Lutz ’14, CEO and co-founder of Hungry Harvest,is fighting postharvest loss closer to the University of Maryland.
His company, launched from his dorm basement in College Park, already has spread from Philadelphia to South Florida — while the waitlist of potential new customers has swelled into the 10s of thousands in other parts of the country.
The business model is simple. Agents purchase fresh produce that otherwise would be thrown away at farms and packing houses due to imperfections in appearance or fluctuations in demand. The food is then boxed and delivered to subscribers once a week at discount prices. For every box sold, Hungry Harvest also helps feed someone who is food insecure.
When it comes to excess loss, Lutz says the main challenge in the United States is abundance.
Food has never been cheaper relative to income, which invites carelessness. Although one-in-six Americans remains food insecure, the Natural Resources Defense Council estimates that the country wastes about 40 percent of its agricultural supply.
Zero waste might not be feasible, but 40 percent is certainly too much. “People value food based on price,” Lutz says. “What people don’t see is the energy and effort and resources that go into making that food.”
Ultimately, he says, Hungry Harvest is about education. “In the United States we have to have an attitude shift about food,” he says. “We need to consider where it comes from and what it’s value is — not just its abundance and price.”
Increased focus on postharvest loss will change the way you think about and consume food in the coming years. Here are more hot trends from Smith alumni and other school affiliates.
Change has come fast in the food and beverage industry since Jeff Knabe, MBA ’02, retired as a drummer with alternative rock band Burst of Silence and enrolled in business school. During his post-MBA career at PepsiCo, Campbell Soup and now McCormick and Co., Knabe has guided major consumer brands through multiple marketplace disruptions.
“The marketplace keeps changing, so it’s always fresh,” says Knabe, a senior marketing manager who oversees the Grill Mates and Lawry’s brands at McCormick. “That’s what’s kept me so engaged in food and beverage, and that’s why I’ve done it for 15 years.”
The emergence of alternate channels like club, supercenters, ecommerce, dollar and limited assortment retailers has caused shifts in consumer shopping behavior. Regional chains like Giant and Winn-Dixie remain popular, but Knabe has seen significant consolidation.
The implications are huge for a spice, condiment and flavor manufacturer like McCormick, which relies on retailers to reach consumers. “Retailers have gotten more powerful, more sophisticated and more strategic,” says Knabe, who grew up 5 minutes from McCormick headquarters in Hunt Valley, Md. “That means that we need to understand consumer preferences and behavior, and the needs of our customers, so that we can grow our brands and the category across a broad range of channel partners.”
The latest shift, Knabe says, is toward e-commerce sales and home delivery. Amazon, which acquired Whole Foods in 2017, already offers same-day or next-morning grocery service.
“The whole e-commerce space is exploding,” Knabe says. “That’s causing traditional retailers to behave in different ways than they have before because they have to adapt to change, which means we have to be agile and adapt to change.”
One way is through increased online advertising, which is more surgical and customized than traditional advertising. “We have made significant progress in this area, but there is still huge upside to market effectively in the digital space,” Knabe says. “Marketers never had the ability to reach a consumer the way we do now.”
Sharing, Pinning and Tagging
Along with e-commerce comes social media, which has opened the world for Mimi Cheng’s Dumplings.
Facebook and Twitter drive traffic to the Taiwanese fast-casual restaurant, which serves organic fare at two Manhattan locations. But cofounder Marian Cheng ’10 prefers the visual format of Instagram.
“It allows people to see the restaurant and explore it and imagine that they’re here,” she says. “People are visual eaters first, and having a way to share our beautiful food definitely helps someone come into the restaurant.”
Once people visit, they tend to return. Cheng, who owns and operates both dumpling shops with her sister, Hannah, says customers appreciate the warm atmosphere and authentic family recipes they learned from their mother, Mimi.
Traditional media channels like The Washington Post, New York Times, Vogue, Cosmopolitan and Wall Street Journal have all taken notice. Cheng also appears on the Forbes 30 Under 30 list for 2018 and the Zagat 30 Under 30 list for 2015.
“The décor, design and vibe of the restaurant all speak to who we are,” Cheng says. “The menu is full of things that we would want to eat ourselves. It’s an extension of our dining room.”
She says the payoff comes when customers give “that silent head nod” of approval after their first bite. “It’s very gratifying when we have guests come in and tell us our food reminds them of home, whether that’s near or far, and that they find it comforting,” Cheng says.
Another payoff comes when Instagram bloggers share positive experiences online. “We have people from out of town who come back every time,” Cheng says. “Instagram expands awareness around the world.”
Local, Local, Local
The Internet is global, and so are supply chains. But a growing niche of U.S. consumers want locally sourced options. Adam Benesch ’98 has seen the trend at Union Craft Brewing, which he operates in Baltimore as owner, co-founder and CEO.
He and his partners open their taproom every Thursday, Friday and Saturday to let customers inspect the facilities close up. “They ask about the ingredients that we use in our beer, where they come from, and what type of processes we use to make our beer,” Benesch says. “We love sharing all that and showing them around the brewery.”
The ultimate goal is connecting with consumers in a way that national brands can’t match. Benesch says Whole Foods and farm-to-table restaurants tap into the same appetite for local sourcing and preparation.
“There’s been a real shift over the past five or 10-plus years,” he says.
Restaurateur Katie Cerrone, MBA ’12, benefited from the shift toward local brands when she launched KC’s Classic Burger Bar in North Attleboro, Mass., near the Rhode Island state line. Simultaneously, she tapped into a companion trend toward family-owned establishments.
A 2017 report from marketing research firms Pentallect and Critical Mix shows that independent and family-owned restaurants have passed U.S. chains in both traffic and revenue growth.
Cerrone says the reason relates to atmosphere. Diners who come to her place get more than tasty food at great prices.
“It’s a place where customers come in and feel like they’re family, even on their first visit,” she says. “And they come back, and they bring their friends.”
The classic car-themed restaurant features spiked milkshakes, homemade appetizers and never-frozen chuck-sirloin burgers topped with original sauces like maple bacon mayonnaise. The Hot Rod sauce is also popular, but Cerrone says the real secret sauce is happy employees.
“When people come in and they sit down and they’re greeted with a smile every single time, and employees are walking around smiling — and not walking around miserable — and they’re laughing with each other, and look like they enjoy their work, then people enjoy eating there,” she says.
Having a trusted name also helps. Before moving into the restaurant business, the Cerrone family owned and operated a local car dealership for four generations until its sale in 2014.
“My dad, who was on TV for 40 years, does my commercials,” Cerrone says. “People come in and they say, ‘My father bought cars from your grandfather and your great-grandfather.’”
Moving from cars to burgers might seem like a leap, but Cerrone says business fundamentals stay the same. “It doesn’t matter what you sell,” she says. “You can sell hamburgers or cars or widgets. If you have a good product and good service, then people are going to come back.”
Success has led to plans for a second KC’s location in Seekonk, Mass., followed by a third location in a converted food truck. Cerrone says customers at each location will find the same commitment to quality and service.
“Our customers will know when they come in, by the way we treat them, that we are family owned,” she says.
Multinational corporations in agricultural chemicals, seeds and fertilizers are seeing a boom, following a recent wave of megamergers.
For example, ChemChina completed a $43 billion takeover of Swiss pesticides and seeds maker Syngenta in 2017. And Dow Chemical merged with DuPont, forming DowDuPont. More recently, Bayer and Monsanto have been working through regulatory hurdles to complete a deal that could create the world’s largest global agriculture conglomerate.
“If the Bayer-Monsanto merger is approved, one gigantic company would supply one-quarter of the entire world’s seeds and pesticides,” says U.S. Sen. Elizabeth Warren, D-Mass. She opposes the deal, although most of the regulatory hurdles remain in the European Union.
Mahka Moeen, PhD ’13, an entrepreneurship professor at The University of North Carolina, wrote her dissertation on the emergence of the agricultural biotechnology industry. She understands the nuances underlying these trends.
Moeen sees potential for a company like Bayer-Monsanto to drive away smaller players and charge monopoly prices. But she also sees potential upsides for growers and consumers.
“On the one hand, this deal is a competitive response to the announced acquisitions involving DuPont, Dow and Syngenta,” she says. “On the other hand, Monsanto and Bayer have a lot to offer each other, and their combined knowledge portfolio would open many new opportunities for them and their customers.”
For better or worse, the mergers will affect the price and selection of nearly every product that reaches your table, Moen says.
People on the go don’t always have time to sit at a table for meals, but they still want healthy options. Serial entrepreneur and investor Jason Cohen ’96 moved quickly to fill this gap in 2005 with the launch of World Gourmet Marketing.
The startup’s flagship brand, Sensible Portions, rode the wave of demand for all-natural, low-calorie snacks with options such as Veggie Straws, Pita Bites and Multigrain Crisps.
Revenue climbed to $100 million within five years, earning a sale price of $110 million in 2010. More recent multimillion-dollar successes for Cohen have included Rickland Orchards yogurt, SkinnyPop popcorn, Dippin’ Chips party snacks and Mrs. Thinsters cookies.
Rather than starting healthy food brands from scratch, Cohen now focuses on identifying high-potential startups that need capital and expertise to grow. Investments have included Core Hydration nutrient-enhanced water and Chefs Cut Beef Jerky.
“I want to create healthy foods,” he says. “I also want to give back to people.”
Smith School roommates Eric Golman ’15 and Ryan Schueler ’14 found their own niche in the natural foods market with JavaZen. Their company started with a quest to find healthy, balanced coffee blends that could provide a lift during late-night study sessions without the jitters that come with drinking too much caffeine.
When they started testing coffee mixed with teas and other superfoods like dark chocolate, their market research showed huge potential. “That’s when I knew we were onto something,” Golman says. “By mixing coffee with things that your body and mind need to have a great day, you will go out and crush it.”
The partners introduced JavaZen prototypes at farmers markets and local grocery stores. Then they went national after winning the 2016 Cupid's Cup entrepreneurship competition hosted by Kevin Plank ’96, founder and CEO of Under Armour.
“As you build up a following, you can go into some of the bigger chains, where existing customers are going to start finding your products in those stores,” Golman says.
Another trend is just beginning in agricultural production, where robots are replacing humans on farms and ranches. Already, commercial drones are doing more than surveillance, photography and video.
“As of last year, about 5 percent of all new unmanned aerial systems sales were for the ag market,” says Matt Scassero, director of the University of Maryland Unmanned Aircraft Systems Test Site.
Japanese farmers have crop-dusted with drones for three decades. Now, their counterparts worldwide are sending drones to monitor crops and collect soil data. Drones also can find and herd cattle. And, within the next decade, higher-value crops such as tree nuts, vineyards and fresh produce will be further impacted by autonomous hauling.
“We are at the beginning of a technology ‘bow wave’ driven by a linkup among agronomists, software coders, algorithm writers and sensor engineers,” Scassero says. Looming are “software applications that will enable farmers to make decisions on the fly that will directly affect production and efficiency.”
A byproduct will be environmental protection. “We will see a reduction in both runoff and cost per application due to the precision nature of data leading to a tailored application of chemicals,” Scassero says. “The big dividends are still coming.”
Appetite for Data
Running a restaurant requires food knowledge. But it also requires business sense. Increasingly that means data analytics — the ability to read spreadsheets, recognize patterns and make predictions.
Restaurateur Robert Hallback III, MBA ’15, got his food education at home. He comes from a family of caterers known in Plant City, Fla., for Southern staples like fried shrimp, hushpuppies and barbecued pulled pork. Satisfied customers include the Tampa Bay Buccaneers in the NFL.
Hallback came to the Smith School for the business part of his education. During the first year of his MBA program, he teamed with family members back home to open Hallback’s Bar & Grill at Lakeland Linder Regional Airport.
Smith School classmates and professors quickly adopted the venture like a live case study. Along the way, Hallback learned to rely on big data in ways not possible for his father and grandfather.
“It worked out so well for me,” Hallback says. “The regressions we ran in our data analytics class were based on my restaurant. And when we developed a strategic marketing plan, my classmates again chose to use my restaurant as the basis for the project.”
Diners who come to Hallback’s Bar & Grill don’t usually care about things like marketing analytics and inventory controls. But they ultimately benefit from the improved products, prices and services that result.
Willy Wonka’s Chocolate Factory had the idea first. Dylan’s Candy Bar simply took the concept of a confectionery wonderland and brought it to a real city near you.
“People come for the experience,” says Tushar Adya, MBA ’03, president and chief operating officer of the New York-based chain. “Everything in this world now, consumers are gravitating toward experiences.”
Movie theaters, restaurants, fitness centers, airlines and universities all sell experiences. So do big stores like Costco and little stores like Wawa. Dylan’s Candy Bar pushes the trend even further.
The stores lack chocolate rivers and Oompa Loompas. But they have just about everything else — from whimsical displays and creative packaging to candy-inspired lifestyle products like stationery, scented lotions and handbags.
The vision of founder Dylan Lauren, daughter of fashion designer Ralph Lauren, is to merge the worlds of fashion, art and pop culture with candy. “We run more as a fashion company than a candy company,” Adya says. “It’s a lifestyle brand.”
Since Adya arrived in 2013, the chain has expanded from five stores to nearly two dozen across the United States. Global expansion also started in 2017 with the first international outlet in the Bahamas. Next will come stores in Canada and the Middle East, followed by the United Kingdom and Japan.
“The experience translates across the globe,” says Adya, who grew up in India and traveled the world as a McKinsey & Co. consultant after finishing his Smith MBA. “There’s an inner child in everyone, no matter where you live.” /DJ and GM/
Download the spring 2018 issue of Smith Business magazine (PDF).