Ted

Ted

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Ted

Thanks a lot for your essay!

Trying to answer on your “new regions” question I have found some statistics on Cocoa beans production (http://www.fao.org/faostat/en/#data/QC) and prepared the table of key regions (https://docs.google.com/spreadsheets/d/1XUfXFSxrSQ5qdmhBDix5TWBv-SOnmzMW7gJKllyIpuw/edit?usp=sharing).

6 countries covers 80%, 9 countries cover 90% of production. Even Ghana (#1) and Cote d’Ivoire (#3) have positive trend I completely agree that climatic threats you have highlighted in your work are extremely dangerous. We can see negative trend for Indonesia (#2) which has huge issues on deforestation and Nigeria (#6) which is pretty close to our region. The same time Cameroon which is closer to 0 degrees is much more stable and Peru (#8) is even positive.
My proposal here might be geographically diversified Cargill impact (this 5 pillars approach) to stop further decline for some of top-9 countries as well as start business at Latin America (e.g. Peru, Colombia) which are not so big but closer to USA.
Additional source of cocoa beans might be greenhouses which become more and more digital during last decade. While Cargill builds cooperation and systemises best practices they can as well do these experiments for new agriculture technologies – they still have 10-20 years in front.

For new crops – there are some trees/beans which are already used as alternatives to chocolate raw material. Cupuaçu (https://en.wikipedia.org/wiki/Cupuaçu) is one of them. Taking into account similarity of regions cultivation of Cupuaçu might be one more branch for Cargill in Latin America.

Ted

Lexie, thank you for the structured essay observing 3 very complex but synergetic directions of Amazon development.

Answering on your astonishment about non-local brands I would like to assume that they try to achieve 3 effects through working with global brands: A. broader geographical scale + following unified assortment for different locations; B. mutually beneficial higher profits; C. lower inventory by using existing global player’s supply chain.
Point A at the very beginning leads to simple client customer analytics and higher level of prediction quality (what also affect on point C as well). Point B takes into account initial higher profits/revenues of global players as well as sufficient number of higher-profit-channels for local players (while preparing my essay I have some calls with HBS alumni and they mentioned that Amazon Fresh has requested up to 50% markup). Point C is pretty straight forward – levels of goods which can be written off are higher for bigger players and that’s why they can afford keep it on the balance at their facilities till the last moment with further selling to any small retailer with 30%-50% discount.

Thinking on seamless experience – I sure that it is one of the biggest head aches for offline retailers right now. They try to introduce “know your client” programs using customer cards/memberships but most of these technologies are already outdated and not for millennials. I see one more direction for Amazon in providing this data for third party retailers for some fee as well as providing this data for initial manufacturer on win-win basis.

Ted
On November 27, 2017, Ted commented on Economic Isolationism and America’s Biggest Rival: Canada :

Mark, thanks a lot for your essay – I have never heard about this type of USA-Canada tensions and for me it is very interesting case.

I would like to share my opinion on your open questions:
1) Is Cayuga right to publicly pressure the Canadian government to remove supply management instead of focusing on less politically sensitive expansion?
I think it is important to keep both lines of their business on this step. “Canadian question” is good direction to develop while they can get support on USA level but the same time it is important to prepare back up as, of course, for USA government milk industry will be lower priority than general relationships with Canada. Other options might be direct partnerships with local Canadian farms (e.g. supply of sub-products at lower prices). Selling to other countries is also very good idea especially because of current i. weather ii. politic conditions which significantly affects on milk volume in some regions (e.g Finland – Russia case for Valio). The main risk here might be low scale and following it high cost of entrance. Cooperation with non-profit USA based funds can be a good opportunity to enter some of emerging markets.

2) When global milk supply can fluctuate at such a large scale, is Canada right to protect a small industry that they believe preserves cultural value?
I think the main factor should be taken into account to answer on this question is an equilibrium between local milk producers revenue and Canadians milk costs. My opinion here that different rules should be applied for “mass market” and “small producers” but to be protected by Canada “supply management” only if they show high level of sustainability (example is renewable energy at the beginning of cost curve despite its relatively higher price). In this case all customers will have alternatives of different milk options at good “money for value” levels.

Ted
On November 27, 2017, Ted commented on Is insurance against natural catastrophes sustainable? :

Thank you for the interesting essay! Previously in my life I have been working with reinsurance companies for shipping but never have heard about “natural disasters” products.
I see here 2 key steps for Munich RE:
1. Continuous improvement of data quality while increasing data quantity. Insurance is pretty low marginal business and increasing the number of observations can increase forecast accuracy while eliminating type I and type II mistakes in the situation of not completely independent random events.
2. Adding additional products to their portfolio. Industry of insurance (in terms of data and mathematics, e.g. credibility models) is very close to options calculations at exchanges. Weather derivatives usual cover “low-risk, high-probability events” (https://www.investopedia.com/articles/optioninvestor/05/052505.asp) and are simple version of this instruments but allow to get additional revenue not only at the critical situation (e.g. CME Group Weather products: http://www.cmegroup.com/trading/weather/). More exotic variants of weather options can become new product as well for Munich RE as they have a lot of data what is their competitive advantage at critical situations. The same time with market weather options Munich RE can even reinsure itself.

Ted
On November 27, 2017, Ted commented on How Google Can Rebuild Trust in EMEA :

Thanks for your essay! I think it is very good observation on EU part and it might interesting as well try to understand Google actions for “MEA” from “EMEA” – Middle East and Africa or even Eastern Europe from wider EEMEA.

For Middle Asia increasing tension with USA can easily lead for sanctions against American based tech companies and transliteration search engines are already become more popular in region mostly because of “domestic feeling of trust”.

Similar situation has already happened in Eastern Europe where Russia, Belarus and some other countries strongly support Yandex (“Russian Google”). Results of this support are the law on collecting VAT from foreign e-companies (http://tass.com/economy/923601) and the law to store all data of Russian citizens within Russian borders what caused the block of LinkedIn and some messengers (http://www.bbc.com/news/technology-38014501). Of course, the reason for that was also driven by political side (for example mentioned by @Katharine).

I think that good tactics for Google might be cooperation with local players (like Uber case in different countries) – nowadays this is the region you cannot speak not from the power side but can be very efficient on cooperation side. I agree that current initiatives are good as first steps but further “localisation” can provide greater opportunities for Google and other Tech companies.

Ted
On November 27, 2017, Ted commented on Gotham Greens: Transforming the Produce Supply Chain :

Ryu, thanks for your essay – it was very insightful! I see grate potential for companies like Gotham Greens join “organic” trend but there are also three points I would like to share my opinion on as open questions for further success:
1. Using of other startups as a competitive advantage
There are a lot of potential for Gotham Greens in using cutting edge technologies (like Rhonda’s idea on on delivery payment what is great) but I have a strong feeling that large corporation can currently leverage these technologies more efficient and become even more powerful even without mentioning possibility for acquisition for these startups. For example, some ex-Googlees from Russia once have tried to use basic maps for satellite imagery technology you have mentioned. Even it was somehow successful the real efficient technology has requested HQ images from professional space cameras what is very expensive (advantage for big corporations) and limited for some geographies (question of further movement to the new markets).

2. Potential of DTC model
You have mentioned that current buyers of Gotham Greens are mostly B2B (HoReCa and I assume small local retailers) with some level of forecasting. Pace of growth has declined (17% and 5,5%), so movement to B2C is extremely critical what might be inventory risky on small scales. As at the first question I see also a potential for large companies to grab this market. Kellogg or Gillette already provides DTC model and for agriculture sector it is only the question of time and GM decisions. There are also some startups which consolidate volumes from different large manufacturers to achieve logistic synergies and a cooperation with widely spread famous brands is much easier and efficient at the beginning. One of the parallel effect will be increasing cost of customer acquisition what might be tough for small companies.

3. Synergy with non-core business (such as packaged pesto)
Even wider assortment supports DTC model it still requires a lot of CAPEX what consequently limits production synergy only for big Gotham Greens facilities. The same time the sustainability of greenhouses and plants for packaged goods is very different exercises what can be critical for Gotham Greens brand.