Monthly Archives: February 2016

Sizzling Steaks May Soon Be Lab-Grown

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WSJ
By JACOB BUNGE
Feb. 1, 2016

Several startups are racing to be the first to fill U.S. consumers’ plates with laboratory-developed hamburgers and sausages that taste just as good as the kind from cattle and pigs.

Memphis Meats Inc., a San Francisco company founded by three scientists, aims in three to four years to be the first to sell meat grown from animal cells in steel tanks. Rivals including Mosa Meat and Modern Meadow Inc. also aim to bring such “cultured meat” to market in the next several years.

The competition highlights how these efforts have expanded since the 2013 taste test of a burger grown in a lab through a multiyear, $330,000 project funded by Google Inc. co-founder Sergey Brin and spearheaded by physiologist Mark Post . Reviews of the patty were mixed, but encouraged Mr. Post, who co-founded Netherlands-based Mosa Meat, to press on.

The startups’ lofty goal is to remake modern animal agriculture, which the United Nations estimates consumes one-third of the world’s grains, with about a quarter of all land used for grazing. The companies say that growing meat with cells and bioreactors—similar to fermentors used to brew beer—consumes a fraction of the nutrients, creates far less waste and avoids the need for antibiotics and additives commonly used in meat production.

“The meat industry knows their products aren’t sustainable,” said Memphis Meats Chief Executive Uma Valeti, a cardiologist and medical professor at the University of Minnesota. “We believe that in 20 years, a majority of meat sold in stores will be cultured.”

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A meatball from another startup, Memphis Meats. PHOTO: MEMPHIS MEATS

The potential payoff could be enormous—American spent $186 billion on meat and poultry in 2014—and this month, Memphis Meats plans to announce its strategy and about $2 million in funding from venture-capital firms including SOSV LLC and New Crop Capital.

Some in the meat industry are skeptical that consumers, many of whom are demanding “natural” or organic food made without additives or genetically modified ingredients, will embrace meat grown from animal cells. Representatives for major meat suppliers Tyson Foods Inc., Hormel Foods Corp. and Perdue Farms Inc. declined to comment, saying the technology was still too new.

But enthusiasm for new technology to satisfy consumers’ hunger for meat is high among venture-capital firms and Silicon Valley investors. Microsoft Corp. co-founder Bill Gates and Twitter co-founders Biz Stone and Evan Williams have invested in plant-based protein companies Beyond Meat and Impossible Foods Inc.

Memphis Meats grows meat by isolating cow and pig cells that have the capacity to renew themselves, and providing the cells with oxygen and nutrients such as sugars and minerals. These cells develop inside bioreactor tanks into skeletal muscle that can be harvested in between nine and 21 days, Mr. Valeti said.

While the source cells can be collected from animals without slaughtering them, Memphis Meats and others have relied on fetal bovine serum, drawn from unborn calves’ blood, to help start the process. Mr. Valeti said Memphis Meats will be able to replace the serum with a plant-based alternative in the near future, and Mr. Post says he also expects to be able to eliminate its use. Without the serum, there will be no need for antibiotics, according to the researchers.
Mosa Meat, which Mr. Post started with Maastricht University food technician Peter Verstrate, aims to sell cultured ground beef to high-end restaurants and specialty stores in four to five years, and is fielding interest from potential investors, Mr. Post said. Though the method’s efficiency and environmental aspects strike a chord with some consumers, “it will take time and early adopters” to catch on, he said.

Modern Meadow is working on cultured leather, which could be for sale in two to three years, according to Sarah Sclarsic, business director for the Brooklyn, N.Y., company. Meat, she said, “is a longer-term mission for us.”

The meat startups say their main challenge will be scaling up production while keeping costs low enough that cultured meat costs—and tastes—about the same as meat sliced from animals. Currently it costs about $18,000 to produce a pound of Memphis Meats’ ground beef, compared with about $4 a pound in U.S. grocery stores, according to the U.S. Department of Agriculture. Eventually Memphis Meats and Mosa Meat aspire to sell more-complex products like steak, and make meat healthier by growing cells that contain less saturated fat.

Memphis Meats officials say they have had discussions with the U.S. Department of Agriculture and the Food and Drug Administration on how their food will be regulated. The FDA would likely review the cultured meat before the USDA Food Safety & Inspection Service would begin regulating the product and how it is processed, a USDA spokesman said.

Memphis Meats plans to eventually unveil its meat at restaurants and retailers, including several Memphis-area barbecue restaurants that are co-owned by William Clem, a tissue scientist who teamed up with Mr. Valeti and Nick Genovese, a stem cell biologist, to start the company.

Mr. Clem said he has been pitching the cultured meat idea to regular guests of his chain, Baby Jack’s BBQ, some of whom are skeptical and others interested.

‘We’ve got a road map to start small and introduce it to people…’
—William Clem, Baby Jack’s BBQ and Memphis Meats
“This is probably the toughest market you can imagine for something like this. It’s Memphis, Tenn., it’s all about tradition,” Mr. Clem said. “We’ve got a road map to start small and introduce it to people and get some feedback.” Memphis Meats has discussed its product with food service distributors U.S. Foods Inc. and Sysco Corp., he added.

Steve Lieber, global brand head of BurgerFi, a Florida-based chain that serves burgers from grass-fed beef on tables made from recycled milk jugs, said his company would consider using cultured beef for a seasonal special if it tasted as good as BurgerFi’s current meat.

“We do want to be a cutting-edge company in everything we do,” he said. But “right now for millennials, the tendency toward natural is ingrained.”

The Robotics Revolution: The Next Great Leap in Manufacturing

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SEPTEMBER 23, 2015
Boston Consulting Group. By Harold L. Sirkin, Michael Zinser, and Justin Rose
IN THIS ARTICLE
  • By 2025, the share of tasks performed by robots will rise from a global average of around 10 percent to about 25 percent across all manufacturing industries.
  • Wider robotics adoption will boost manufacturing productivity by up to 30 percent.
  • As a result of higher robotics use, average manufacturing labor costs are projected to be 33 percent lower in South Korea and 18 to 25 percent lower in China, Germany, the US, and Japan than they otherwise would have been.

It has been roughly four decades since industrial robots—with mechanical arms that can be programmed to weld, paint, and pick up and place objects with monotonous regularity—first began to transform assembly lines in Europe, Japan, and the U.S. Yet walk the floor of any manufacturer, from metal shops to electronics factories, and you might be surprised by how many tasks are still performed by human hands—even some that could be done by machines. The reasons are simple: economics and capabilities. It is still less expensive to use manual labor than it is to own, operate, and maintain a robotics system, given the tasks that robots can perform. But this is about to change.

The real robotics revolution is ready to begin. Many industries are reaching an inflection point at which, for the first time, an attractive return on investment is possible for replacing manual labor with machines on a wide scale. We project that growth in the global installed base of advanced robotics will accelerate from around 2 to 3 percent annually today to around 10 percent annually during the next decade as companies begin to see the economic benefits of robotics. In some industries, more than 40 percent of manufacturing tasks will be done by robots. This development will power dramatic gains in labor productivity in many industries around the world and lead to shifts in competitiveness among manufacturing economies as fast adopters reap significant gains.

A confluence of forces will power the robotics takeoff. The prices of hardware and enabling software are projected to drop by more than 20 percent over the next decade. At the same time, the performance of robotics systems will improve by around 5 percent each year. As robots become more affordable and easier to program, a greater number of small manufacturers will be able to deploy them and integrate them more deeply into industrial supply chains. Advances in vision sensors, gripping systems, and information technology, meanwhile, are making robots smarter, more highly networked, and immensely more useful for a wider range of applications. All of these trends are occurring at a time when manufacturers in developed and developing nations alike are under mounting pressure to improve productivity in the face of rising labor costs and aging workforces.

To assess the potential impact of the coming robotics revolution on industries and national competitiveness, The Boston Consulting Group conducted an extensive analysis of 21 industries in the world’s 25 leading manufacturing export economies, which account for more than 90 percent of global trade in goods. We analyzed five common robot setups to understand the investment, cost, and performance of each. We examined every task in each of those industries to determine whether it could be replaced or augmented by advanced robotics or whether it would likely remain unchanged. After accounting for differences in labor costs, productivity, and mix by industry in each country, we developed a robust view of more than 2,600 robot-
industry-country combinations and the likely rate of adoption in each.

The Global Impact of the Robotics Takeoff

The following are some of the key findings of this research:

  • Robotics use is reaching the takeoff point in many sectors. The share of tasks that are performed by robots will rise from a global average of around 10 percent across all manufacturing industries today to around 25 percent by 2025. Big improvements in the cost and performance of robotics systems will be the catalysts. In several industries, the cost and capabilities of advanced robots have already launched rapid adoption.
  • Adoption will vary by industry and economy. Among high-cost nations, Canada, Japan, South Korea, the UK, and the U.S. currently are in the vanguard of those deploying robots; Austria, Belgium, France, Italy, and Spain are among the laggards. Some economies, such as Thailand and China, are adopting robots more aggressively than one might expect given their labor costs. Four industrial groupings—computers and electronic products; electrical equipment, appliances, and components; transportation equipment; and machinery—will account for around 75 percent of robotics installations during the next decade.
  • Manufacturing productivity will surge. Wider adoption of robots, in part driven by a newfound accessibility by smaller manufacturers, will boost output per worker up to 30 percent over the medium term. These gains will be in addition to improvement from other productivity-enhancing measures, such as the implementation of lean practices.
  • Savings in labor costs will be substantial. As a result of higher robotics use, the average manufacturing labor costs in 2025—when adjusted for inflation and other costs and productivity-enhancing measures—are expected to be 33 percent lower in South Korea and 18 to 25 percent lower in, for example, China, Germany, the U.S., and Japan than they otherwise would have been.
  • Robots will influence national cost competitiveness. Countries that lead in the adoption of robotics will see their manufacturing cost competitiveness improve when compared with the rest of the world. South Korea, for example, is projected to improve its manufacturing cost competitiveness by 6 percentage points relative to the U.S. by 2025, assuming that all other cost factors remain unchanged. High-cost nations—such as Austria, Brazil, Russia, and Spain—that lag behind will see their relative cost competitiveness erode.
  • Advanced manufacturing skills will be in very high demand. As robots become more widespread, the manufacturing tasks performed by humans will become more complex. The capacity of local workers to master new skills and the availability of programming and automation talent will replace low-cost labor as key drivers of manufacturing competitiveness in more industries. There will be a fundamental shift in the skills that workers will need in order to succeed in advanced-manufacturing plants.

Few manufacturing companies will be left untouched by the new robotics revolution. But getting the timing, cost, and location right will be critical. Investing in expensive robotics systems too early, too late, or in the wrong location could put manufacturers at a serious cost disadvantage against global competitors.

Preparing for the Robotics Revolution

The right time for making the transition to advanced robotics will vary by industry and location. But even if that time is several years away, companies need to prepare now.

To gain competitive advantage, companies need to adopt a holistic approach to the robotics transition. We recommend that companies take the following actions:

  • Understand the global landscape. First, companies need a clear picture of the trends in robot adoption around the world and in their industries. They need to know how the price and performance of robots are likely to change in comparison with the total cost of labor in each economy where they manufacture—and how this comparison is likely to change in the years ahead. They must also factor in other considerations, such as the flexibility of labor rules and the future availability of workers, that support or hinder wider robotics adoption in a given economy. It is important to keep in mind that these are moving targets.
  • Benchmark the competition. Companies need to be well aware of what their competitors are currently doing and understand what they will do in the future. If robotics adoption is expected to rapidly increase in their industry, they should assume that the total cost of systems will fall. This knowledge will help companies more accurately estimate the cost and timing of investments as well as make decisions about where to locate new capacity.
  • Stay technologically current. Rapid advances in technology mean that companies must stay abreast of the evolving capabilities of advanced robotics systems. They should have a clear view of whether and how quickly innovation is resolving technical barriers that so far have inhibited the use of robots, such as the ability to manipulate flexible or oddly shaped materials or to operate safely alongside workers. Just as important, when will these new applications be cost-effective? As they take stock of the new capabilities and the improvements in price and performance, many companies—even small and midsize manufacturers—may discover that installing robotics is more cost-effective than they once thought. In some cases, having a view on the evolution of robotics and automation can help a company determine whether it is better to wait for a better technology to emerge or to implement a new process that allows them to upgrade technology without having to duplicate what they have already done. In many ways, timing is crucial.
  • Prepare the workforce. As more factories convert to robotics, the availability of skilled labor will become a more important factor in the decision about where to locate production. Tasks that still require manual labor will become more complex, and the ability of local workforces to master new skills will become more critical. The availability of programming and automation talent will also grow in importance. Companies and economies must prepare their workforces for the robotics revolution and should work with schools and governments to expand training in such high-compensation professions as mechanical engineering and computer programming.
  • Prepare the organization. Even if the economics don’t yet favor major capital investment, companies should start preparing their global manufacturing operations now for the age of robotics. They should make sure that their networks are flexible enough to realize the benefits of robotics as installations become economically justified in different economies and as suppliers automate. They should get themselves up to speed on new advanced-manufacturing technologies and think about how they will transform their current production processes so that these technologies can achieve their potential. For many manufacturers, adapting to the age of robotics will require a transformation of their operations.

Manufacturers do not have the luxury of waiting to act until the economic conditions for robotics adoption are ripe. Our projections show that when the cost inflection point arrives, robotics installation rates are likely to accelerate rapidly. This will provide the opportunity to create a substantial competitive advantage. Companies and economies that are ready to capitalize on the opportunity will be in a position to seize global advantage in manufacturing.

The top 10 branded processed food companies have lost 4% of market share in past 5 years.

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Food Industry & Consumer Trends

By Elaine Watson

Jan 27, 2016

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Picture: ©Istockphoto, anyakerbut

The top 10 branded processed food companies in the US have lost 4% of their market share in the past five years as smaller, more innovative brands have seized the initiative, says Rabobank.

 “Small and emerging brands are stealing market share because they are winning at innovation, have appealing brands, are social media savvy, and have a better awareness and ability to take advantage of market opportunities,” argues executive director, food & consumer trends, Nick Fereday in a note exploring the challenges facing ‘big food’ in 2016.

Big food manufacturers are also sitting on outdated assets optimized to produce a small number of products at huge volumes, at a time when consumers are shunning ‘mass produced’ goods in favor of personalized, artisanal and local products, he points out.

“Some companies have already begun to shed assets, including Kraft Heinz, General Mills, Mondelez and Kellogg…. Yet probably more could be done as they reassess the risks of owning the means of production in a market where consumers are becoming increasingly needy and fickle…

“The idea that one size no longer fits all is a fundamental challenge to their business model and is being felt across the food chain… Flexibility is the future.”

Cleaning up labels, acquiring sexier brands

So what’s to be done?

When it comes to ingredients, big food companies have already made significant steps to ditch artificial colors, flavors and preservatives, embrace cage-free eggs and even label GMOs in 2016, says Fereday.

We can expect more fast-growing, entrepreneurial brands such as EPIC to get snapped up by strategic investors in 2016, says Rabobank

The problem is that consumers, particularly Millennials, don’t always give big corporations credit for such moves, so it’s not always clear what the ROI is, he observes.

“Our big fail for food companies around this strategy lies with their marketing, and how they have struggled to find their voice and target audience in the age of multimedia.”

As smaller, more entrepreneurial and mission-driven brands are seen to be more ‘authentic’ by many consumers, they will also be snapped up at an earlier stage by large CPG companies in 2016, he predicts.

“Some of these smaller companies become attractive targets surprisingly quickly.”

IRI: Categories offering quick, healthier solutions for on-the-go consumers are driving growth

His comments came as Chicago-based market researcher IRI published its latest ‘Times and Trends ‘ report observing that the US consumer packaged goods (CPG) market is characterized by declining volumes (-1.7% in 2015), and very modest dollar growth (+0.6% in 2015) that is driven largely by inflation.

However, some food and beverage categories are growing, says IRI, notably in “categories that provide quick and healthier solutions for on the go consumers”.

The top performers in terms of unit sales growth in the year to Nov 1, 2015, were refrigerated lunches (+14.2%), refrigerated tea/coffee (+10.5%), ready-to-drink tea/coffee (+10.3%), spirits/liquor (+8.3%), energy drinks (+8.1%), refrigerated salads/coleslaw (+7.8%), bottled water (+7.1%), sports drinks (+7%), other sauces (+6.8%), and bakery/snacks (+6.1%).

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Which food and beverage categories are growing? Source: IRI Times and Trends report, Jan 2016

Healthy eating and easy-preparation trends are helping to support growth across a number of categories

It adds: “Within edibles, refrigerated lunches posted the strongest unit sales growth for the year, up 14.2%, versus overall refrigerated department sales increases of 1.1%.

“Unit sales growth came despite significant price increases, which were spurred by inflationary prices …and only minimal increases in merchandising activity.

Unit sales of bottled water surged 7.1% in US retail outlets in the 52 weeks to November 1, 2015, says IRI

“The bottled water category saw volume sales increase 7.8% during the past year, amid relatively flat (+0.5%) prices and the proliferation of enhanced bottled waters. Healthy eating and easy-preparation trends are helping to support growth across a number of categories, including refrigerated salad/coleslaw, which saw unit sales increase 7.8% for the year.”

Performance was weakest in the frozen foods sector, where unit sales declined 1.5%, and strongest in beverages, where unit sales increased 2.9%, adds the report: “Frozen dinners/entrees and frozen pizza saw sharp unit sales declines during the past year (4.6% and 3.6%, respectively).”

‘Explosive’ online sales growth

While online sales of consumer packaged goods account for less than 2% of overall industry sales, growth has been “explosive”, notes IRI.

“In fact, average annual growth of online CPG spending has topped 15% since 2010. Between 2013 and the end of 2018, the Internet will account for about 50% of industry growth, or $28bn.”