Even as companies become increasingly global, a reverse trend is happening that is worth paying attention to. In an intriguing feature story in Madison, Wisconsin’s alternative newspaper, The Isthmus, journalist Phil Busse argues that Madison is at the forefront of a revolutionary approach to agriculture – Slow Money, an offshoot of the local food movement, that holds the potential to disrupt the food industry.
Revolutionary suggests something outside normal business. Actually, it’s business at its best. Slow Money is an innovative business model ecosystem for building local employment, reducing carbon footprints and enhancing the nutritional value of locally available food.
Back to the story – A small group of Southeastern Wisconsin agricultural innovators are seeking to build a more robust growing and food-processing infrastructure. The problem they aim to solve is the fact that the average American meal is estimated to travel 1500 miles before landing on the family’s dinner plates. Slow Money’s solution is to keep raw food products in a region for processing by creating new firms that add either processing or growing capacity.
New additions to the region’s food sector infrastructure will be financed by investors who do not measure return solely in financial terms. The Slow Money movement, as these investors are called, has a goal that is “nothing if not ambitious: to radically shift how we invest our money, what food we eat and how we support our communities,” according to Busse. The Slow Money movement has chapters in some of America’s magnets for young people like Austin, Seattle and now Madison, Wisconsin. It’s aim is for one-million people to spend 1% of their paychecks buying from local food companies.
Please note: I am not writing about a 1960’s hippy-movement on the sidelines of the economy. I am writing about a potential transformation of the food industry that will place the processed food companies in between lowest-priced mass market store brands and really healthy, truly local food offering the most nutrition, least carbon impact and most local employment. I, for one, would not want to be a marketing manager caught in the middle. According to Busse, “Business Week called it (slow money) a ‘big idea for 2010,’ and Time Magazine asked whether ‘slow investing’ could ‘remake America’s food system’.”
An example of the kind of investment the Slow Money movement will advance is Black Earth Meats. This Southeastern Wisconsin organic meat processing company adds value to the local ranchers supplying many of Madison’s higher end restaurants. “Without Black Earth Meats, it is likely that small-scale ranching would vanish from southern Wisconsin in the near future,” writes Busse. Black Earth Meats makes the overall food system more efficient as ranchers now specialize in ranching while Black Earth Meats specializes in butchering; together they provide restaurants with better quality at lower prices than if ranchers tried to both ranch and butcher.
Milk processing is an area where I’d like to see more local production. It makes no sense that Wisconsin ships bulk milk outside our state, only to have it return to be sold. This kind of light manufacturing would advance needed manufacturing employment opportunities. A Badger milk brand – good for the environment and good for local employment – would be worth a price premium to a growing set of consumers. Proactive economic development groups will think more and more along these lines.
Economic theory advises regions to specialize production as open economies with trading between specialized regions are the best for meeting society’s needs. The theoretical conclusion assumes that prices reflect true costs. In the real world, prices rarely take into account what economists call externalities, e.g., the environmental costs of transit or the increasing value of jobs to a community. In these cases, the predictions of theory should be ignored.
A new group of consumers and investors is incorporating an understanding of externalities into their purchasing and investing decisions. This change holds the opportunity and risk of market transformation, even if the environmental impact of transportation is never reflected in prices through a carbon tax.
If transportation is a key part of your industry’s ecosystem, starting thinking strategically about how your industry might change. Business model innovation opportunities exist in more than food.