Having trouble selling food safety solutions? Read this — it will help.

Western Growers had an AgTechX event in King City last year that focused on food safety. The keynote speaker was Craig Wilson, Vice President of Quality Control & Food Safety at Costco Wholesale. Craig did a great job in providing an overview of the food safety testing, inspection, and audit processes his team has implemented for Costco. Costco focuses on making their food products trackable from field to fork, and two processes start as soon as there is a potential problem identified with a Costco product:

(1) find and test the supply chain components back to the specific grower and field; and

(2) notify the customers that purchased the product as quickly and efficiently as possible and inform them that their product may be impacted and that they should destroy it or return it to a store location.

Grocery stores and restaurants invest heavily in food safety. Keeping the entire food supply chain safe for 100% of food across millions of acres during the entire growing season while the food is being touched by thousands of pieces of agriculture equipment and dozens of inputs aimed at keeping pests off the plants and weeds out of the fields is a big challenge. Combine that with the challenges at large agriculture processing centers across thousands of trucks moving product to stores and restaurants where customers purchase it directly or indirectly through menu items and you get a feel for the scope of the problem.

How complex is the food supply chain? This is the simple version.

As you consider the challenges, it becomes apparent that there are two impacts from any food safety outbreak. First, the product grower(s) that are impacted have a major loss of revenue from the product recall. All of the impacted product ends up being thrown away and the grower bears the financial burden of the risk in most cases. Depending on the size and scope of the recall and the grower involved, this can be a major financial impact.

Second, the company that interfaces with the customer for the recall can end up with a large negative brand impact. In general, these are two types of organizations — retailers like Costco and restaurants like Chipotle. Consider Chipotle, which built it’s brand promise on the freshest products for their restaurants. When they got a food safety impact in their stores, it struck right at their heart of the commitment they made that got customers into the stores in the first place. The market value of Chipotle took a major hit because they failed to live up to their commitment to customers by not providing safe and healthy food to customers at every store on every visit.

Chipotle has made changes and recovered much of its’ market value, but one lesson from the Chipotle situation is that the brand impact seems likely to be larger in many cases for the customer-facing brand than for the growers and farmers that provide the products. Combine this reality with the fact that both sides of the food supply chain suffer revenue losses and it’s a fair argument that Chipotle has a much larger negative impact from food safety than their suppliers. Both lose revenue, but Chipotle has a brand impact as well that translates into lost future store visits from customer concerns about food quality.

Chipotle (still one of my regular lunch stops)

The same is true for Costco. Yes, the farmers lose crop revenue and Costco provides refunds, but Costco’s brand is the one that’s associated with the outbreak and recall in media reports. The actual grower is rarely mentioned. So the brand impact is clear on the customer touchpoint whether the sale to the customer is through a store or a restaurant. It is this brand impact and their market power that leads me to believe that the larger innovations in food safety are going to be driven by the Costcos and Chipotles of the world. They will work with the growers and producers on the details, but they will drive the conversation and in the end the growers will need to accommodate the new requirements and changes driven by large grocery stores and restaurants.

So what does this mean for AgTech startups selling food safety solutions? I think there are a couple of rules to help startups be successful:

1. Rule 1: The sales team must know — and sell only to — your customers. The food safety sales cycle is complex, and in many cases extends from the last-mile retail touch point all the way back to the grower in the field. AgTech startups need to have a very clear understanding of both the target customer and the exact problem they are solving for them. Founders need to understand whether they are selling to Chipotle, Chipotle growers, or other players in the food supply chain from the field on the way to the customer. Understanding this allows you to focus sales efforts on exactly the right organizations and prospective customers inside those organizations. More importantly, it allows you to avoid spending time with non-customers. The opportunity cost of that saved time is huge for startups with limited resources. The customer is the person that will write you a check for your solution.
2. Rule 2: The marketing team should identify influencers and become part of the discussion. Who are the large producers and food sellers that are working on policies. Knowing these key influencers allows you to become part of the conversation. Craig Wilson at Costco is one of them. As always, don’t just walk in selling a solution — listen and figure out what the potential directions are for industry to take and inject your opinion from a “things we see in the industry” mindset to increase your credibility. Bringing a co-founder with industry experience into these discussions can help the community see your startup as valuable part of the community (while raising awareness of your solution).
3. Rule 3: The product team needs to find the exact pain your solution solves. It can be hard for startups to figure out what to prioritize on the product roadmap. Always start by identifying the pain you solve, and be as specific as you can. Ask a lot of questions. Who in your customer’s organization (individual or group) bears the risk of a food safety outbreak? Who owns the part of the organization that manages the process, and who owns the budget to get the process improved and keep it performing at a high level? Ideally, the process and budget owner are the same person, or at least work in the same part of the organization. The closer your solution is to the pain the customer feels, the more the customer is motivated to engage with you to learn more.

Executive Summary

Food safety is a complex ecosystem. Companies that deliver the food the last mile to customers such as Costco and Chipotle face brand and revenue risk every time there is an outbreak and/or recall. They use their market power and brand power to work with growers and help drive industry rules and regulatory changes.

Food safety startup teams need to stay focused on the right items: (1) sales team — focus only on your customers and don’t waste time on non-customers; (2) marketing team — focus on becoming part of the industry discussion on food safety; and (3) product team — identify the exact problem you solve (and how much the problem costs them). Focusing on these will help your startup increase credibility (#2) while identifying opportunities to start discussions that can help generate sales (#1) that solve real pain for your customers (#3).