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Ag forum: Industry faces too much capital, not enough water

By   /   Friday, March 6th, 2015  /   Comments Off on Ag forum: Industry faces too much capital, not enough water

Industry insiders shed light on the evolution of the food industry in the midst of a record-setting drought, labor issues related to the Affordable Care Act and a need for fresher, faster food access.

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Technology will increasingly play a crucial role in developing more efficient means of food packaging and shipping, as the business of food and agriculture adapts to globalization and a more socially conscious post-recession consumer.

That was the focus of a discussion among food and agriculture industry executives at a panel event hosted by the Association for Corporate Growth on March 4. At “California’s Food and Agriculture Sector: The Bumpy Trip from Field to Fork,” industry insiders shed light on the evolution of the food industry in the midst of a record-setting statewide drought, labor issues related to the Affordable Care Act and the need for fresher, faster food access.

“There is a massive wave of money coming into food and technology businesses right now,” said Michael Lippold, co-founder and CEO of Ventura-based FreshRealm, a startup that produces fresh food distribution tools. “It kind of feels like the Internet craze of ’97 and ’98 when money was just flowing in.”

Lippold said the industry is seeing a growing trend of food technology startups that are seeking to revolutionize the packaging, preservation and transportation of food. He said a number of these companies have had capital raises and valuations extending far beyond their most recent annual revenues.

One example, he said, is Instacart, a San Francisco-based grocery delivery service. “In December, they raised money at a $2 billion valuation after just doing north of $100 million in 2014,” he said.

Another growing trend in food has been the growth of a more careful, health-conscious consumer. Ric Alvarez, president of Vernon-based frozen food manufacturer Overhill Farms, said the face of the American food shopper has changed considerably since the dawn of the 2008 economic recession.

“We have a consumer that has become significantly more frugal, and they’re a lot pickier with what they buy and how they buy that product,” he said.

Some new tastes in consumers, Alvarez said, include a growing preference for Asian foods and high-protein products as well as more health-conscious selections.

“We had to adapt to that change in consumers…and anything related to health and wellness — it’s more than a trend,” he said, noting that gluten-free and organic offerings have been on the rise for a few years. “Food service retailers are asking for more of those foods, but their volume is still smaller than it is for traditional items.”

As for the area’s agriculture industry, the statewide drought has left a significant impact on growers with quickly depleting or already tapped groundwater supply.

While the panel did not feature any small growers impacted, Santa Paula-based Limoneira, a publicly traded grower of citrus and avocadoes, said it has felt some effects from the water shortage.

Joe Rumley, chief financial officer for Limoneira, said the company’s extensive water rights have mitigated the drought’s effects, as Limoneira currently has secure water supplies in all of its cropland. The costs of well-drilling and maintenance have been the most significant impacts the company has felt as a result of the drought, he said.

“We are seeing some cost pressures there, but so far, it hasn’t had a significant impact on business other than that,” he said.

The company is currently focusing on its real estate development projects for growth, he said, as it kicked off its multimillion-dollar, 500-acre housing development in Santa Paula in February.

“Limoneira has quite a bit on its plate beside agriculture,” he said, later saying of the company’s agriculture operations, “A lot of the capital from that will go toward our real estate development projects.”

In planning for growth, Lippold said FreshRealm is trying to differentiate itself from competitors such as Amazon Fresh, using its technology-based systems for freshness such as the FreshRealm vessel.

“There’s a lot going on in food and technology, and a lot of these businesses are trying to re-build the industry, and our belief is that if we add technology and add a little innovation, we can connect the current industry more efficiently,” he said.  “So technology, thermal shipping and collaboration are the three innovation things we’re most focused on.”

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