What ag should take away from McDonald’s

A family-owned business wants to create a franchise model in dairy farming that it hopes to export overseas. A recipe for success?

“We provide food that customers love, day after day after day. People just want more of it.”

Search for quotes by Ray Kroc, a former chief executive of McDonald’s largely held responsible for the chain’s success, and you’ll find plenty of advice on how to seek personal satisfaction not money, the dividends of hard work and the importance of hiring well. Some may ignore this as cliché, but the one above encapsulates what made McDonald’s the global institution it is today – a system thought through in minute detail to deliver consistency, day after day.

Sustainable Agriculture Systems, a UK-based company founded by a family from New Zealand in 2010, wants to apply a similar model to beef and dairy farming. The idea is simple: devise a modular agricultural system that keeps costs down, allows farms to be close to customer markets and ensures consistency in all climates; then license this “turnkey” model around the world, while retaining a contract with farm owners to run the facilities.

The model relies on five separate modules: the self-supply of cattle feed through hydroponic agriculture; dual-purpose Fleckvieh cattle, capable of producing both high-quality milk and male calves; robotics and automation technology, to improve performance and skirt potential labor shortages; modern, comfortable cattle housing to minimize disease transmission and maximize welfare; and 100-percent manure recycling, used to make renewable energy, clean water and nutrient-rich compost.

Edward Talbot, a director at the company, says all these modules have been tried and tested in many different contexts around the world, but argues SAS is the first venture seeking to combine them. SAS is now looking to raise £9.1 million ($12 million; €10.2 million) to build a demonstration unit in the UK. Investors in this first round will also own shares in the business, which will likely be structured as a holding.

“Once the demonstration unit is complete, we would actually sell the model to individual investors – institutions, governments, the military, high-net-worth individuals or corporations. We would sell them the turnkey system solution, so they would be the owner of it and we would run the system for a management contract or a share of the profit. So, we don’t have any issues with share dilution,” Talbot told us this week.

The model relies on a controlled environment, which is why the company’s founders think it can be exported easily in all climates (Talbot sees Asia as a first port of call). It can help countries improve their trade balance by cutting imports, while ensuring fresh delivery of products to consumers in a traceable, trustable manner, he says. It is also very efficient. “The SAS System enables sovereign states to increase domestic food self-sufficiency without compromising their precious soil and water resources,” the company argues.

Yet, Talbot confesses SAS’s discussions with private equity firms, at least initially, have failed to generate the commitments he hoped. “Ag funds are more interested in established companies than start-ups, while venture capital firms look more at agtech than new businesses like ours. Plus, they want to invest more capital than we actually require.” He says family offices may be more promising partners, owing to their more flexible approach. He already has a couple of names in mind.

The Talbot family faces obvious hurdles. SAS has no track record yet. It is also unclear where the model will sell, making it hard to put a firm business model on paper. But the technologies its model relies on are less fanciful than drones and autonomous tractors, which “will not restore depleted ground water or bring back eroded soil,” SAS says. And it’s not just about sustainability: the company promises 15 percent total returns to investors (including 10 percent on exports of the turnkey model). Here’s something they would certainly love, day after day. 

Write to the author at matthieu.f@peimedia.com