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‘Understand the customer’
It’s the first step in adapting to traditional ag’s disruptors, Dongoski says at Tennessee Agricultural Leadership Forum
| Story and photos by: Glen Liford |
12/3/2019 |
Rob Dongoski, a Partner at Ernst & Young LLP and leader of the company’s Global Agribusiness Sector told participants at the Tennessee Agricultural Forum how mega trends are transforming agriculture due to changing customer demand.
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As changes in agriculture accelerate, keep your eyes on the customer.
That’s the message Rob Dongoski, a Partner at Ernst & Young LLP and agribusiness leader, brought to the Tennessee Agricultural Leadership Forum held on Oct. 25 at the Embassy Suites in Franklin.
Sponsored by Farm Credit Mid-America, CoBank, and the Tennessee Department of Agriculture, this year’s forum theme was “The Future of Agriculture is Today.” The event attracted members from throughout the ag community who came to take part in thought-provoking sessions, discuss the latest trends and topics, and enjoy networking opportunities.
As the keynote speaker, Dongoski brought an informed perspective to the event as he leads Ernst & Young’s Global Agribusiness Sector, which advises agribusinesses on strategy and innovation and helps them develop effective business structures. He also works with Ernst & Young’s Next Way Platform that analyzes megatrends influencing the future of multiple industries, including agriculture.
As these megatrends displace traditional behavior and attitudes, they will reshape agriculture and force it to adapt to new customer demands, Dongoski said, adding that people should expect this transition to occur “super fast.”
The first megatrend he asked the group to consider is the move toward urbanization. The population of larger cities continues to increase.
“It’s not just New York, Chicago, L.A.,” said Dongoski. “It’s the resurgence of places like Des Moines and Omaha. Clearly, in Nashville, we see that as well.”
The second megatrend is “We live in a world where everything is connected.” This, he said, will become more critical as technology continues to evolve and become even more widespread and the lack of broadband access in rural areas will have to be addressed.
Today’s leading businesses have one thing in common, he explained, and that’s a focus on technology and innovation. The top companies — Apple, Amazon, Google, Microsoft, Facebook — all rely on technology and embrace change.
“These companies now have a very distinct focus on agriculture and food,” Dongoski said. “[They] are all trying to chase this ecosystem around the agriculture and food world.”
As the population continues to increase, those people will require more food. Some estimates suggest there may be 11 billion people in the world in the next few decades. Statistics also say it will take 70 percent more food raised on maybe only 10 percent more land. Maybe those projections are slightly high, he said.
“We’re also in a world where 30 percent of food is wasted,” he said. “Whether that is post-harvest or post-meal, it’s a daunting number when you think about it.”
Protein consumption is up and will continue to rise as living standards increase.
“Once you get a certain level of income in your pocket, you start to upgrade,” he said. “For people on a rice and grain diet, they upgrade their food. We’re seeing that, and there are challenges that come with it.”
The percentage of income spent on food is decreasing. In the U.S., consumers spend roughly 8 percent of income on food. In some countries, many spend as much as 70 to 80 percent, he explained. Reducing that amount to only 50 percent could open up the potential for economic growth.
“Affordable ag and food in these countries becomes the greatest economic liberator,” said Dongoski.
Agriculture is attracting investors who have contributed $17 billion in assets that are being used to bring innovations to market in agriculture and food technologies around the world. Those innovations can be broken down to four areas: science, mechanical/robotics, technology/data, and business models.
“In the science area, for example, a lot of pure biological development is occurring around seed innovation and animal genetics,” he said. “We need to keep the engine running, and we have to invest in a new grocery system. Companies are coming up with interesting ways to apply treatments without chemicals. There are lots of biologics that can be applied.”
Another exciting development called CRISPR, which stands for “clusters of regularly interspaced short palindromic repeats,” is more simply explained as a technology that can be used to edit genes.
“It’s probably the No. 1 thing to watch in this particular space of innovation,” said Dongoski. “ It has potential in plant, animal, and human health. If it gets told as GMO 2.0, we lose. It’s that simple.”
Moving on to the tech and mechanical data world, Dongoski said three areas are at the forefront: imagery, robotics, and sensors/wearables.
“Drones were the coolest thing ever 10 years ago,” he said. “Now they’re just devices. They’re data collectors. Imagery is going to be really important as a data collection engine. Robotics — whether on a row crop farm or in a dairy — will continue to advance. Not just because it is cool or easier for labor, but because there is a lack of labor.”
From those relatively tame developments, it’s only a short jump to augmented reality, artificial intelligence, machine learning, and advanced analytics, he said. It’s exciting ideas like these that are drawing the incredible investment to the industry.
Finally, business models continue to evolve and transform traditional models. Consolidation, he says, is the big thing. His team was involved in high-profile mergers like the Bayer-Monsanto agreement, and the Dow and DuPont consolidation, which created Corteva, among others.
“We’re seeing consolidation across the value chain,” he said. “Big food manufacturers are buying small companies.”
Farms, too, are getting bigger. The average age of farmers continues to rise — it’s now around 60 years old, and many are getting out of the business.
Ag retailers are another area where consolidation is occurring, he said, noting that these businesses typically do three things: distribute, divide buys, and provide in-field services.
“If the big cropping suppliers can go direct, [retailers] have to express value differently,” he explained.
Dongoski left his strongest piece of advice for the ag leaders until the end: always know your customer. He emphasized that understanding the customer is key as agricultural leaders consider how to adapt to the change occurring in the production cycle.
“How do you leverage technology and innovations?” he asked. “Where do you invest? Investing right can make or break you. We all recognize you have to be smart.
“Be active. Talk to your neighbor, your farm credit, your Extension office, your universities, even a consultant. Do extra diligence before you invest. It is make or break. Long term, I am extremely bullish on the industry. I think there are a lot of things we have yet to tap into.”
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