On April 5, Husch Blackwell’s Food & Agribusiness industry team presented a seminar in Milwaukee, WI spotlighting industry finance and investment trends and regulatory developments. More than 75 professionals attended the seminar, representing ag processing, food distribution, wholesale baking companies and industry-focused lenders and investors. The morning started off with Jim Ash, Husch Blackwell’s Food & Agribusiness industry team leader, moderating a panel focused on industry trends. The panelists included –
- David Asmann – Triton Capital Partners
- John Barrymore – Duff & Phelps
- Jim Greufe – Farm Credit System
- Ben Holbrook – Mason Wells
- Erica Kuhlmann – BMO Harris
The panel addressed economic trends that are currently and will continue to impact the industry, including the uncertainty of commodity prices, labor challenges particularly in the protein sector, and continued consolidation. The importance of an effective risk management program to mitigate fluctuating commodity prices was noted. Some companies are addressing labor challenges with creative retention and incentive programs. Regarding consolidation, the panel agreed there is significant opportunity for smaller companies and that consolidation will not slow in the foreseeable future. Large food processing companies will likely continue to enter consumer-driven niche markets with acquisitions instead of developing such products internally.
Capital raising was also discussed by the panel. There was agreement that capital is currently abundant. For entrepreneurial companies, it is critically important when raising capital that the company choose a partner with a good fit. This means having a well-defined business plan, with a clearly defined point of differentiation and long-term vision. A somewhat newer phenomenon is for larger companies to form their own venture capital funds as a way to enter the developing niche markets to follow consumer trends.
Current consumer trends include locally and sustainably grown, clean labeling, non-GMO, gluten-free, diverse ethnic flavorings, and convenience packaging. But the point was made food still has to taste good and be offered at an affordable price for the targeted market. An additional point made was that consumer’s preferences change quickly and companies must be nimble to thrive. There was consensus across the panel that food and beverage companies have generally done a poor job of educating their consumers.
Following the morning panel, Kyle Gilster, the managing partner of Husch Blackwell’s Washington D.C. office, spoke for a few minutes regarding federal food and agribusiness policy under the new administration. Kyle said to expect significant funding cuts to the USDA and FDA and a new Farm Bill in 2018. The US withdrawal from the TPP trade deal and potential changes to NAFTA will impact agricultural trade, likely hurting agricultural exports. Another area to watch is immigration. Kyle doesn’t expect congress will take up immigration policy soon, so likely the labor challenges in the industry will continue or worsen. Lastly, Kyle expects changes to Dodd Frank and a reduction in the corporate imcome tax.
Following Kyle’s presentation, a panel of Husch Blackwell attorneys discussed regulatory developments in the industry. The panelists included –
- Joan Archer, a partner in the Kansas City office practicing in the area of IP and commercial litigation and leader of the Firm’s food safety & labeling team
- Mark Grider, a partner in the DC office practicing in the area of government compliance, investigations & litigation and formerly with the Department of Justice
- Marnie Jensen, a partner in the Omaha office practicing in the area of litigation and leader of the Firm’s organic and sustainable team
- James Mathis, a partner in the St. Louis office practicing in the area of corporate, M&A and commercial contracting and leader of the Firm’s alcohol & beverage practice
Jim Ash moderated this panel as well. The panel discussed trends in 3rd party claims, which included mislabeling and slack fill assertions. James suggested that co-packing companies and those that engage co-packers need to be aware of the impact of these claims to ensure the potential risk is addressed in the co-packing contracts. With respect to organic certification, Marnie pointed out that the USDA authorizes third party organic certifying agencies and that the expected cuts to USDA funding would likely have an impact on the certification process. Joan covered various aspects of the Food Safety Modernization Act (FSMA) and the importance of an effective compliance program. Mark echoed the importance of a compliance program and addressed how a company should go about dealing with an enforcement agency when they come knocking to minimize penalties and the possibility of criminal prosecution. Mark’s opinion is that we will not see de-regulation in the food industry to the same extent as we are seeing de-regulation in other areas.
The seminar ended with a networking lunch that gave the attendees and the panelists a chance to converse informally about industry issues. The Firm is planning additional similar seminars in other locations.