- There’s a lot more pain coming for the food retail—and related—industry.
- Amazon’s story is still at the beginning.
- Farmland might also be hit by the Dutch disruption.
I had to go to the grocery store yesterday, which meant I had to lose 20 minutes of my day to something that, let’s be honest, doesn’t really enrich my life.
As the current economy and consumer demand is focused on receiving value by saving time, while I was shopping I started to think about how this industry could be disrupted in the medium to long term. I went deeper and got to some interesting conclusions that might have severe repercussions on a lot of things in the future as well as our investment portfolios.
Let’s discuss the potential disruption in retail, food, and land and how that could impact investments.
Disruption In Retail
Two of the technologies that are most expected to change the way we live are virtual reality and autonomous driving, or automation in general for that matter. So how could someone help me save 20 minutes a day by using those technologies for grocery shopping?
I googled it and found that the technology is already here which means that in 5 to 10 years, it will reach a quality level high enough that I won’t have to go grocery shopping anymore.
Given this, there will be much less retail space necessary which will heavily weigh on real estate and retail real estate investments. Most companies will simply have one huge facility in a certain geographical area.
The next step is the delivery of the items and the automated sorting from my purchase input. That technology is also already here as Amazon Robotics uses more and more automated robots in their inventory management.
When you add autonomous driving and delivery to that, and the world will look much different. There will be opposition as always, but as soon as some countries adopt the new ways, the rest of the world will follow.
This will impact the investing world in multiple ways. There will be much less need for retail space, much less need for the labor intensive delivery system we have in place now, and there will be huge price competition in these industries. All of that means that we will have bubbles, busts, and all the other things that go along with it.
What it also means is that it will be a very different world out there tomorrow and it will be very difficult to know which of the companies existing today will win that race and which will go bust, or whether there will be a new market entrant that disrupts the environment. Amazon has a head start and with the acquisition of Whole Foods it entered the field of groceries, and now with the acquisition of Ring, it will cover that last yard where it will deliver groceries right into your fridge.
To sum things up, old fashioned companies will continue to go down in an already difficult environment for them while new disruptive companies will fight for survival and dominance. This will create a very different investing environment than most people are used to where the long term investing story becomes dangerous. But there’s so much more to talk about.
Food & Land
The main premise of food producers and fertilizer companies is that the population is growing while the arable land isn’t which will lead to higher demand for fertilizers, higher food prices, and there is also the premise that land values will continue to go up as has been the case in the last 30 years.
Here I have some good and bad disruption news from the Netherlands.
A recent National Geographic article discussed how going Dutch might be the future for food production.
The country has managed to reduce dependence on water by 90%, almost completely eliminate the use of pesticides, and cut the use of antibiotics on livestock and poultry by 60%. Further, the Netherlands is as big as Maryland but is the second largest global exporter of food behind the U.S.
What will the world food industry look like when the Dutch technology spreads? There will be much less need for food transport, water usage, and every city will be able to produce food around the clock no matter the weather and minimize the impact on the ecosystem.
This could lead to disruption in the value of land which is something nobody is expecting. Higher interest rates might further exasperate this process. I would be very careful when approaching such investments.
The investment environment of the future will be disruptive in one way or another, be sure to look forward and not backward when investing.