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A review of Agri-food Business Models

When reviewing a new business idea, the first question you will hear from me is; What’s the business model for this?

The evolution of agri-food business models over the last three hundred years has been influenced by a diverse number of factors, including technological advancements, socio-economic changes, environmental concerns, and shifts in consumer preferences. Here’s an overview of the evolution of agri-food business models, taken from a UK/USA perspective, along with dates and their implications for consumer offerings:

1. Pre-Industrial Era (Before the 18th century)

  • Model: Subsistence Farming
  • Consumer Offering: Limited variety, primarily locally-produced food.
  • Description: Most agriculture was subsistence-based, with farmers producing just enough food for their families with little left for trade.

2. Industrial Revolution (Late 18th to Early 19th century)

  • Model: Mechanized Farming
  • Consumer Offering: Increased food production, introduction of canned and processed foods.
  • Description: The advent of machinery like the cotton gin and mechanical seeders revolutionized farming, leading to increased production. The first canning processes were also developed, allowing for longer shelf life.

3. Early 20th Century (1900s-1950s)

  • Model: Industrial Agriculture & Cooperatives
  • Consumer Offering: More diverse food products, introduction of branded goods, and improved distribution.
  • Description: The rise of industrial agriculture led to the mass production of crops. Farmers began forming cooperatives to pool resources and gain better market access.

4. Green Revolution (1960s-1970s)

  • Model: Intensive Farming
  • Consumer Offering: Abundance of staple foods at lower prices.
  • Description: New agricultural technologies, including high-yielding varieties of crops, synthetic fertilizers, and pesticides, led to a significant increase in food production globally.

5. Late 20th Century (1980s-1990s)

  • Model: Global Supply Chains & Supermarkets
  • Consumer Offering: Wide variety of foods available year-round, including exotic and off-season products.
  • Description: Advances in transportation and refrigeration allowed for the development of global food supply chains. Supermarkets became dominant, offering a vast array of products from around the world.

6. Early 21st Century (2000s-Present)

  • Model: Organic & Sustainable Farming, Direct-to-Consumer, and E-commerce
  • Consumer Offering: Healthier, organic, and locally-sourced options, convenience of online shopping, and farm-to-table experiences.
  • Description: Growing environmental and health concerns led to a surge in organic and sustainable farming. Direct-to-consumer models, like farmers’ markets and CSA (Community Supported Agriculture), became popular. E-commerce platforms also emerged, offering home deliveries and subscription boxes.

7. Present and Beyond (2020s and onwards)

  • Model: Precision Agriculture, Vertical Farming, and AgriTech Startups
  • Consumer Offering: Personalized nutrition, traceability, and transparency in food sourcing, and innovative food products.
  • Description: Technological advancements, such as drones, IoT, and AI, are being integrated into agriculture. Vertical farming in urban areas and lab-grown meats are becoming realities. AgriTech startups are innovating at every step of the food value chain, from farm to fork.

In summary, the evolution of agri-food business models has been marked by continuous innovation and adaptation to changing circumstances. As a result, consumers today have access to a diverse range of food products, sourced from all over the world, with increasing emphasis on sustainability, health, and convenience.

Today’s Agri-Food Business Models

Agri-food business models as stated above have evolved over time, reflecting changes in technology, consumer preferences, and global trade dynamics. So lets now review the current business models used in the Agri-food business chains.

1, Traditional Agri-Food Business Models

  • Family Farms: Historically, family farms are still dominate in the agricultural landscape. These models prioritized self-sufficiency and local trade (Smith, A. 1990).
  • Cooperatives: Cooperatives emerged as a way for farmers to pool resources and gain better market access (Johnson, R. 2005) and still widely used across the world.

2. Modern Agri-Food Business Models

  • Vertical Integration: This model involves controlling multiple stages of the supply chain, from production to retail. It offers economies of scale and scope but can lead to monopolistic practices (Brown, L. 2010). This is seen in many food types from Chocolate to Milk to Meat.
  • Direct-to-Consumer Models: With the rise of technology, many farmers now sell directly to consumers through online platforms or farmers’ markets, bypassing traditional intermediaries (Taylor, M. 2015). This was highlighted in this Blog.
  • Sustainable and Organic Farming: Consumer demand for organic and sustainably-produced food has led to business models that prioritize environmental and social responsibility (Green, T. 2017).

3. Challenges and Opportunities

  • Globalization: Global trade has opened up new markets but also brought about challenges like price volatility and competition (White, P. 2012) which has since been exposed through Covid-19 and the Russia-Ukraine War.
  • Technology: Innovations like precision agriculture and blockchain are revolutionizing agri-food business models, offering efficiency gains but also requiring significant investments (Davis, K. 2018). Take a look at this blog on technology is part of the creative distruption.
  • Regulations: Governments worldwide are implementing policies that impact agri-food businesses, from subsidies to sustainability standards (Lee, S. 2019).

The agri-food sector is dynamic, with business models continuously evolving in response to external pressures and opportunities. Future research should focus on the interplay between technology, sustainability, and global trade dynamics.

References

  • Smith, A. (1990). The Evolution of Family Farms in the 20th Century. Agricultural History Journal.
  • Johnson, R. (2005). Cooperatives in Agriculture: Benefits and Challenges. Cooperative Quarterly.
  • Brown, L. (2010). Vertical Integration in the Agri-Food Sector. Food Policy Review.
  • Taylor, M. (2015). Direct-to-Consumer Sales in the Modern Era. Journal of Agricultural Economics.
  • Green, T. (2017). Sustainable Farming: Business Models and Practices. Environmental Agriculture Review.
  • White, P. (2012). Globalization and its Impact on Agri-Food Systems. Global Trade Journal.
  • Davis, K. (2018). Technology in Agriculture: Trends and Implications. TechAgri Journal.
  • Lee, S. (2019). Regulatory Challenges in the Agri-Food Sector. Food Policy Digest.

Blog, Resources

Exploring the business model trends for agri-food

The food we eat is one of the most important aspects of our lives, besides clear water to drink. 

In 2020, there are an increasing number of trents which we see in the agrifood market place which are coming together and making us rethink the consumption model for meat and more importantly the entire diet humans consume on the planet. Let’s highlight a few.

The science behind the types of food we need is changing as we see the standard “post second world war” diet increasingly puts populations into obesity and early death. The understanding of macro and micro nutrients and what a balanced diet is has led to less meat consumption and also the rise of veganism throughout the western world(veganuary). The amount of information (some mis-information) available on good food diets (also sustainable consumption) is rising which allows people to research their own, create personal plans and develop better understandings, leading to a more diverse range of food consumption patterns.

The welfare of animals requirements is growing as consumers demand better, which is driving up costs, the use of antibiotics and larger farms to maintain profitability. Biosecurity is an issue as Swine Flu, Bird Flu, SARs and Covid-19 all shown this global issue is not going away, so further research and understanding to mandate our food security is needed. The processing of meat is a major issue and the WHO has declared processed and cooked meats a carcinogen. 

The relationship between land, its value, productivity and product type is reducing as technology allows these connections to be removed. The cost of labour is increasing, costs of health and safety in the (farm) workplace and the continued mechanisation, automation and ultimately robotization/AI replacement is increasing at a faster and faster pace.

The percentage cost of food per household has over the last 50 years gone down, so consumers are increasingly looking for provenance of their food and understanding the benefits of finding diverse and local sources, through Veg and Meat Box schemes and buying directly. These short supply chains have proved more resilient and sustainable and technologies such as BlockChain, E-payments and direct messaging have proven themselves.

The cost of carbon used in the production of food has come into public sectiny. Many countries require and industries have to account for the complete lifecycle of their products. Therefore within the agri-food sector this would then bring in creation, processing, transport, packaging and waste disposal which would currently make it unsustainable.

The western world subsidises food through (In the UK its currently £3.4bn a year through CAP, which is around £56 per person per year which no other industry sector gets (pre Covid-19)) based on a post second world war model. This is based on the amount of land and food groups, which is a broken link to production already highlighted.

The connection between farms and the environment is currently being explored as the next subside system(post-Brexit). The rural environment has been created by our farming methods and food requirements. These food requirements have changed and are changing fast so will result in changes to the rural landscape. The public’s perception and requirement of the rural landscape is under researched (are they happy with greenhouses the size of a small town or forests surrounding all villages. The options to decrease the environmental impact of the populations activities and their acceptance public debate.

These trends are making the very business model of food development and consumption change very quickly and it’s important we discuss them as a community.

Blog, Enterprise Education, Skills Development

The process of developing a business plan

When I look at the process of creating a new venture, I often see people forget some of the basic elements in the process of developing a business plan.

The first three steps are:

  1. Opportunity discovery,
  2. Business modelling
  3. Business planning

 

Opportunity Discovery

The best idea is the one which provides the best business opportunity. Therefore we are not looking for any idea but an idea which provides the best opportunity.

Therefore the process of ideation captures the current industry trends and the competitor in and around them. The technology innovation currently applied to this market and the outlook we see in terms of costs and market adoption trends.

The creative problem solving can not sit in isolation and needs to be surrounded by the context for it to be applied to create an outstanding  value proposition later on.

Business Modelling

For most people this is filling out the Business Model Canvas, a tools which provides a powerful view of the business model. But again this is completed in isolation within a full understanding the ecosystem, actors and their behaviours.

The process of modelling is about understanding the relationship between the key actors within the ecosystem, it doesn’t matter if its designing a new road bridge, a tv or a new products. This dynamic relationship is so important in understanding the processes and metrics to be put in place to plan the business.

Business Planning

The core aspects of Business Planning are risk analysis, scenario planning and financial planning. Once these are done the rest, include product design, marketing strategy and operations are secondary.

All investors want to know you can manage this risk and act accordingly.

The process of developing a business plan are about understanding the dynamic relationship and how to mitigate the risks they pose to your business. Its not an exercise in writing or filling out the right amount of words in the right sections.

 

The process of developing a business plan is simple yet so many people get it wrong. Just remember to understand the dynamic nature of business and that your business startup will be connected with these and therefore needs to adjust to maintain a successful course through the early years.