We’re excited to introduce you to our speakers for the 2016 Change Food Fest through a series of personal Q&A’s. Today we are talking with Tera Johnson, founder of Food Finance Institute at UW Extension.
Tera Johnson is a serial entrepreneur whose mission is to create the next generation of environmentally and economically regenerative food and farming businesses. The founder of teraswhey, Tera participated in the full arc of creating a successful investor-financed company. Now the founder of the Food Finance Institute at UW Extension, Tera is a frequent speaker, teacher, and financial consultant to sustainable food and farming businesses, social venture funds, and investors. Her Food Finance Institute is currently launching Edible-Alpha, a curated open-source food business consultant community.
teraswhey® products are ethically sourced, fair trade, from Wisconsin, produced in a green factory – tell us what inspired you to create this company.
I was inspired to create teraswhey by my previous work in the cheese industry. Prior to starting teraswhey I ran a cheese company that made 20 million pounds of cheese a year and made animal feed from whey. When we started making organic cheese, we discovered that there was no place where we could add value by processing organic whey protein. The same was true for goat whey. Consumers wanted both products, and they wanted a whey protein product that wasn’t loaded with additives, preservatives, fillers, and carbohydrates. They also wanted to know that these products were responsibly sourced from sustainable farms. So I knew there was an opportunity in the marketplace to create a new company that would bring specialty whey products to health conscious consumers. Despite launching in the pit of the great recession, teraswhey proved to be a tremendous success. More value has been added to sustainably raised, locally produced milk, high tech manufacturing jobs continue to be created, and consumers all over the country can now buy cleanly formulated organic, goat, and grass-fed whey products.
Because teraswhey® became so successful, it inspired you to help others create financially successful sustainable food businesses. Your newest endeavor is Edible-Alpha. Share with us how you envision helping food entrepreneurs, investors, consultants and other stakeholders to build their businesses.
Edible-Alpha® is a digital learning community dedicated to accelerating the creation and growth of more successful food and value-added farm enterprises that make money and make a difference. Housed in the Food Finance Institute at UW Extension, Edible-Alpha® grew out of my work with food and value-added farm clients as a consultant at the University. Over the past 5 years, I’ve personally helped a wide range of companies and value-added farm enterprises reposition themselves to become profitable and raise the money they need to grow. I know how big national and regional brands and need to be to become profitable, and what they need to do to get there. I know how to manage building food and beverage processing operations, how to effectively blend social media with traditional promotions to get products on self, consumer trial, and brand loyalty. I know what it takes for food hubs or dairy and beef grazing operation to become profitable. I also know how to buy and sell businesses and farms. All of these things need money to succeed, and I know what kinds of money are best used for what kind of deals, and I know the people who are actively doing these things. This is exactly the kind of pragmatic technical assistance we need to accelerate the creation of another generation of environmentally and financially sustainable businesses and farms.
People working in this field know this – entrepreneurs, lenders, investors, the USDA, foundations. Everyone who is a stakeholder in this movement is coming to the place where we realize that our work achieves its most lasting impact when it is financially sustainable. Edible-Alpha® is therefore meant to be a learning community for food and value added farm business model optimization and finance. For the last year, I’ve been developing and delivering consultant training and tools for consultants to help them in their work with clients. I’ve starting interviewing entrepreneurs who have successfully transitioned their businesses to profitability and growth and am developing a podcast series on the topic of making money and making a difference. Over the next year, I will be making this content available through Edible-Alpha®. I will also be curating content from other consultants so that, over time, Edible-Alpha® will become the best source of pragmatic business technical assistance for sustainable food and value-added agriculture enterprises.
You talk about how food business investors are now coming to the market looking for high tech investments – apps to make shopping easier, drones for fertilizing, test-tube meats, etc. Do you think they are heading in the right direction? What would be your ideal business to invest in right now?
Ag tech and food tech are all the range at the moment. Tech investors are investing in companies that are trying to disrupt an antiquated food system with disintermediating apps. Biotech investors are funding opportunities in genetics, cloning, and other technologies related to food production system innovation. Green energy investors who have max’d out on biofuels and solar are turning to agriculture for investment opportunities. On the one hand, this is a good thing. Because of climate change, we are on the cusp of a massive need to build a more resilient food system. On the other hand, when we do these things without understanding the problems the food system has evolved to address, we are wasting precious time and financial capital throwing spaghetti against the wall to see what sticks when we could be innovating way more efficiently.
For example, take disintermediating apps. Taking a page out of the tech playbook, their goal is to make it easier to connect farmers to consumers, take out the greedy middlemen, and help consumers avoid shopping. Sounds admirable, but there are two fundamental business model problems with these deals. The first is operational. Apps move information, they don’t physically move food. Every city has it’s own version of the farmer to consumer app. They all seem to attract investor capital, and they all fail when the founders realize they are actually a logistics company. It turns out that distributors serve a real function, one that it is very hard to change: they physically consolidate food from multiple sources and get it to consumers fairly cost effectively. This is proving to be very difficult to replicate using an Uber model. The second business model problem is related to the consumer. If you read studies in cognitive neuroscience, you’ll learn that the pleasure centers of our brain light up when we eat. What might be more surprising is they also light up when we shop. It turns out that people actually like to pick out their own tomato. If you think about it, back in the days where we lived in caves and hunted woolly mammoths, something was needed to get us to leave the safety of our caves to get food. The process of hunting and gathering itself brings pleasure. This means that, on an unconscious level, people actually don’t want to be disintermediated from gathering food the way they do their dry cleaning, and they can’t even tell you why. It’s not a rational thing. This doesn’t mean we shouldn’t be doing apps, it just means that we may need to rethink what we’re trying to do with them.
As a social impact investor, my favorite investment opportunities tend to not be very glamorous. They are in businesses that clearly understand how the food industry works, how to make money in it, and that are making choices each day that make a positive difference in this world. Because of my background, that tends to relate to agriculture. For example, I like financing aging cheese inventory for cheeses made from grass-fed milk, because that helps the cheesemaker add value to his business by aging cheeses, and it helps grow the market for the milk from a grazing dairy farm whose husbandry practices produce healthier cows and milk, all without degrading and often enhancing the natural environment on the farm.
What will you be talking about at The Change Food Fest?
In my talk at Change Food Fest, I will be talking about what it takes to make money and make a difference in food. I know from my own company, and from the work I do with a wide range of other food enterprises, that it is possible, though far from easy, to do both. We can learn a lot from people who are already doing this successfully.
What’s one thing individuals can do to contribute to a better food system?
Individuals have tremendous power, even though we may not realize it. For example, in the dairy industry, consumers voted with their pocketbooks and purchased dairy products that were rGBH (recombinant bovine growth hormone) – free, even though the regulators backed the big industry players and required products that were labeled as rGBH-free to include a statement on the label that there is no scientific evidence that there is rGBH is any different than a naturally occurring hormone in cows. Just try fitting all of that language on a little piece of cheese…. Fast forward 10 years, because enough people voted with their purchases, there is now virtually no milk produced in Wisconsin that has rGBH in it. This was not a regulatory change, or a new standard like organic, it was simply the consumer saying they didn’t want hormones in their milk and buying products accordingly.
The Change Food Fest “Growing the Good Food Movement” will take place in New York City on November 12th and 13th, 2016. We will explore and celebrate change happening in the food system. Rather than simply talk about problems, we will actively look at solutions that are leading us to the sustainable food system we wish to see. Our focus will be on both real and visionary change and will include an exploration into seafood, plant based vs meat diets, possible impacts of new businesses and investment money coming into the food space – and much more. You can purchase a ticket or host a viewing party of the live webcast in your local community. Follow the action at #CFFest2016!