DM's Profile

One of my biggest concerns for Walmart is how protectionist policies will impact their fresh food department at both Walmart and Sam’s Club stores. Fresh food has been a growth category for Walmart and other retailers in the US at a time when many retail categories have been declining. There is also an increasing trend in shelf space for fresh food versus processed foods. Much of this fresh food (especially produce) is imported. Based on USDA data (https://www.ers.usda.gov/topics/international-markets-trade/us-agricultural-trade/outlook-for-us-agricultural-trade/), the US is expected to import $116 billion of agricultural products in 2017. Of this amount, 70% of vegetable imports and 40% of fruit imports currently come from Mexico. Since Walmart is by far the nation’s largest retailer, I imagine that Walmart probably has similar dynamics at play for its fresh food section. Protectionist policies (especially ones aimed at Mexico) could severely impact the price of food at Walmart and other retailers around the country, which in the end really only hurts the American consumer as food prices increase.

Great article! I was wondering if you had any perspective on smaller construction companies and whether they are able to incorporate some of this technology into their operating systems. I imagine if companies like CCC are just scratching the surface in terms of technological and productivity advancements, then smaller developers all over the world are still living in the stone age. One roadblock I see to widespread adoption of more advanced technology in construction is the old school nature of the general contractors. In a booming construction market, these contractors are very much in demand and don’t necessarily need to change their ways – they are still getting all the business they can handle. What is the incentive for general contractors to adopt these technologies? Are there realizable cost savings that can make their bids more competitive? Is it worth it for contractors to go through the trouble of implementing the technology if they are doing fine as is?

Some tough questions for Nespresso! To address the question as to whether customers would pay for the increase, I think Nespresso capsules are still way cheaper than buying coffee from outside, and way better quality. From a quick Amazon search, it looks like Nespresso capsules are about $0.50 each. I would compare this to many “3rd wave” specialty coffee shops sell premium espresso drinks for ~$5 a cup (10x the price!) and are rapidly growing in popularity. If Nespresso presses on the sustainability angle with its customers as well, it may not lose much volume with customers. Nespresso has a structural advantage over specialty coffee shops in that it is able to produce a similar quality product in the home instead of in a retail store, thus at a fraction of the cost to the consumer. Yin also raises a good point above with the technology angle – these sustainable coffee beans may cost 30-40% more today, but with advances in agritech, high quality coffee bean costs will likely come down in the future.

Interesting piece! To address your first question, I actually would have thought that Sysco would have very high barriers to entry due to its scale. National food retailers often require their distributors to have similar scale to reliable deliver product on time to their various distribution centers. As an example, Walmart has recently put in an initiative to cut down the numbers of suppliers it uses, seeking to consolidate to only its largest suppliers in an effort to decrease costs. This may be why Sysco seems to be in such a comfortable position and not worried about investing in future technologies, leaving the company vulnerable. I would be curious to see if more technologically advanced food start ups do enter the scene, whether Sysco will even try to compete organically or just use its scale to acquire the start ups and gain the technology quickly, as they will likely be far behind in developing their own systems.

Great article Rob! From an American perspective, it was interesting to see how “America first” policies can actually hurt American business more than helping it. My initial reaction would have been that the tariff would be great for Boeing. Based on your article though, it seems as though partnerships between other international competitors can provide competitive advantages that overcome the tariffs. This concerns me in other industries as well. For example, isolationist policies aimed at promoting domestic goods and reducing imports could hurt relationships with many American trade partners. This would allow countries such as China to form powerful trade agreements (a new TPP) that China takes the lead on, while the US sits on the sidelines, resulting in less favorable economic conditions for the US.

Great article Jared. I don’t necessarily agree with the comment above. On one hand, as FD points out, the acquisition of Beyond Meat and the remainder of the $150 million venture capital fund may not be in the best interests of Tyson Foods’ shareholders. From a capital allocation perspective, the $150 million VC fund has a completely different risk/reward profile than the rest of the company. On the other hand though, a comparison can be made to traditional oil and gas companies such as Exxon Mobil investing in renewable energy projects. Exxon currently spends over $1 billion per year in renewable energy projects, such as the development of an algae that can be used as biofuel. Traditional companies like Tyson and Exxon have the resources available to make great progress in their fields, and investments in these technologies today could transform their companies in years to come.