CIBC Innovation Banking Podcast

Michael Hainsworth [00:00:01] On this episode, we discuss an issue that affects every one of us to one degree or another, food security. Or perhaps more accurately, food insecurity. 

Sylvain: [00:00:11] Accessibility, access to food is very important. That was the one thing that really got a little compromised in March and April in Canada, or people felt it was compromised. 

Michael Gilbert: [00:00:22] Understanding when things are happening and where they're going to happen is absolutely critical for a farmer to be successful. And what we do is we actually monitor for those conditions and predict within hours when a risk event is likely to occur. 

Michael Hainsworth [00:00:38] Hello, I'm Michael Hainsworth. The CIBC Innovation Banking Podcast explores the world of startups, growth stage companies and late stage companies that have made a big splash in their industries around the world. We talk to the entrepreneurs who made their mark, thanks to a fearless passion for what they do and through the lessons they've learned, we learn how to be better at running our own businesses, engaging our own clients and exploring new ways of thinking about the innovation economy. 

Michael Hainsworth [00:00:50] COVID-19 has shown us that the weakest links in the food supply chain that existed long before a global pandemic closed our borders, are getting weaker, but there are solutions. And for the innovation economy, those solutions are often technical. After all, if you can quantify a problem, you can solve it. But sometimes a problem can't be solved just by throwing tech at it. It takes people, people engaged to solve a problem that seems insurmountable on the surface. Joining us now is Dr. Sylvain Charlebois, affectionately known on social media as the food professor. He's from the University of Dalhousie. Dr. Charlebois has spent much of his career fighting for the local farmer. The need for a made in Canada solution to our food security problems and talking about the role capitalism plays in achieving those solutions. And because many of those solutions are technical, Dr. Michael Gilbert, the CEO of Semios joins us to discuss the role of the Internet of Things in solving this crisis that predates the worst pandemic in 100 years. We began our conversation by defining food security. So to discuss food security, let's define it first and I suppose its corollary term, food insecurity. 

Sylvain [00:02:35] Absolutely. We've been talking a lot about food security over the last 10 months or so. As a result of COVID, people felt food insecure, even though they weren't. They felt it as they saw empty shelves and we saw the panic buying going on. So there's an acute understanding of what food security feels like. But what it means, really, I would say that there are a couple of aspects of food security that we need to keep in mind. One, of course, accessibility, access to food is very important. That was the one thing that really got a little compromised in March and April in Canada or people felt it was compromised. I don't think it was, but people felt it. So that's a big difference. Secondly, affordability. So we talk often about food prices, whether or not a market can afford the food being sold. And inflation obviously is a big driver there. If inflation is at 10 percent, obviously you're leaving a lot of people behind. And finally, safety, food safety, the food that you offer to a population has to be safe to eat. And so those are the three aspects of food security that are very important. 

Michael Hainsworth [00:03:44] The food price inflation element is something that I wasn't really anticipating. But what, one in 10 Canadian households are food insecure, and only six out of 10 don't consider access to food, an issue that's down from seven in 10. So we've got four point one million more Canadians who see access to affordable food for survival as a challenge. 

Sylvain [00:04:06] Hunger is a silent state, really. You can't really see it, but it's out there. We see it on university campuses. Really, a lot of students actually go to school hungry because, of course, they have to pay their tuition. They have to pay for different things. And food often doesn't fit in their budget at all unfortunately. We see it in many different places we wouldn't expect, so. And traffic at food banks is increasing as a result of COVID, which is why as a lab, we've been actually generating a lot of gifts and donations to food banks. I guess in 2020 we gave as a lab because of the honorariums given to us for conferences and speeches and things like that. We don't have to travel. We've asked all of the organizations to give back to food banks and the value was worth about twenty five thousand dollars in the last year. So they need all the help they can get. 

Michael Hainsworth [00:05:00] I was fascinated to learn that the average size of a farm in the United States is the smallest it's been in more than 20 years. When we're talking about those more traditional wheat and corn type crop based farms, is technology playing a role in helping deal with this as an issue? 

Sylvain [00:05:19] Oh, absolutely. Farm sizes are changing. What's ironic with technology, when you look at the entire supply chain, both ends of the food continuum, we have seen actually more innovation at Farm Gate than we've seen in food retailing. Really, when you think about it, on farms, salaries have gone up. There are fewer workers there. Robotics have actually come a long way. Farmers are using more technology and automation than ever before, depending of the crops of course, some crops like strawberries, berries, you really still need that labor. It's very labor intensive, but really, robots, automation are playing a much larger role at farm gate, at retail. I mean, most grocery stores still operate the same way they did 30 years ago. And that's why salaries haven't moved all that much. A lot of people actually are earning thirteen, fourteen, fifteen dollars an hour. And that issue came up during COVID. People just realizing that some people are not necessarily earning a whole lot. They can't pay them more because the model hasn't changed at all. 

Michael Hainsworth [00:06:30] Ultimately, though, it sounds like the biggest issue surrounding food security is climate change. 

Sylvain [00:06:36] I would say that it is the number one issue. What's interesting right now, of course, with the carbon tax coming into play and in December, we heard the prime minister announcing that Ottawa's intent is to raise that carbon tax to one hundred seventy dollars per metric ton by 2030. That's a significant jump. So farmers who are really probably one of the best environmental stewards, we have the entire supply chain, do recognize that climate change is a huge, huge issue. How to resolve that issue? People don't necessarily agree. The carbon tax to me is the quick and dirty way of dealing with polluters. It is a simple concept. But farmers are really stuck right now because to dry grains at harvest, for example, you need propane. There are no other technologies out there. So technology wise, they're at the mercy of what's out there and so they have to pay a carbon tax and the average farmer right now, or grain farmer would probably pay anywhere between twenty five to fifty thousand dollars in carbon tax right now. That's cost that they need to absorb. They can't really pass it on because they're price takers. That's the big challenge right now with climate change. And how do you mitigate that change over time? That seems to be a big debate right now in the farming community. 

Michael Hainsworth [00:07:58] Well, it must be a global debate as well, because the global food supply chain is perhaps the world's largest and the most interconnected market as well. So what's happening halfway around the world definitely has an impact here at home. 

Sylvain [00:08:13] We're somewhat concerned about some policies that are being implemented in Canada. Sometimes countries tend to believe that their own state is in isolation from everyone else. But in food, it's not the case at all. If you actually impose a carbon tax onto our farmers, well, they become less competitive, and therefore you're likely going to import more food from abroad. And that's not necessarily what Canadians want. They actually want more local foods and they want that local food to be more affordable as well. The arrival of the Biden Harris administration is actually good news from an environmental perspective because you'll see America join the Paris agreement again. And I suspect that the Biden Harris administration will look into specific measures like a carbon tax in the US, which could actually create a level playing field for everyone in North America. That's going to help Canada. 

Michael Hainsworth [00:09:05] To Dr. Charlebois, with Dr. Gilbert going into Europe and Asia, what are some of the food security issues on the continent and further abroad that need to be considered? 

Sylvain [00:09:15] This whole issue of food autonomy has become a priority for many Western governments. COVID really kind of changed everything in terms of not only how people see food systems, but how governments see food systems as well. And what we've done as a lab over the last six months is to work with four different provinces: New Brunswick, Quebec, Ontario and Alberta. All of them were focused on food security one way or another, but most of them had a controlled environment agriculture component. Producing more food all year round, especially produce. Technology or access to technology, is making a case for these provinces to grow more all year round. In fact, in Ontario now we are growing bananas. I mean, why couldn't we grow bananas in Ontario? Why not? The cost, though, is very high. That's why it's still cheaper to import bananas from abroad, because right now the price on world markets is very, very low because of this technology I could see Canada produce one day coffee, cocoa, vanilla, bananas. Sky's the limit, really. But it boils down to technology and how you can build economies of scale. And that's really the key there. 

Michael Hainsworth [00:10:35] And Dr. Charlebois, where do you see food security technology going next? 

Sylvain [00:10:38] There's a greater recognition that capital is key. Agrifood will always remain a high volume, low margin business, which really is scary for venture capitalists. They don't like to hear that at all. Venture capitalists or people who want to invest aren't necessarily that patient. But in agrifood, you need to be patient. And because there's a greater focus on food security in Canada in particular, I would say that probably investors could actually look at agrifood differently. Being patient would be key, of course, for the sector itself. The role of the state shouldn't be denied either. I actually do think that provinces and the federal government have a role to play in agrifood to provide seed money, for example, for some of these projects. For the longer term, the protein industry, Canada, Supercluster out West is a good example of that, though the federal government actually has invested one hundred twenty million dollars in pick on proteins research and that actually got companies like Nestlé, Merit Foods, AGT, Roquette from Denmark. They've all invested in the prairies to produce more proteins or plant based products in that area and that generated maybe three hundred fifty million dollars, which is impressive. That's the kind of thing we're seeing more and more because there is this recognition of local food systems being important. As a result of COVID, we're seeing more near shoring and on shoring. Labatt is reinvesting in London, Ontario. Kraft Heinz is reinvesting in Montreal, building a new ketchup plant. You're seeing more of these things happening that really, to me, brings hope for entrepreneurs and investors. 

Michael Hainsworth [00:12:28] Much is being made of the next industrial revolution, we've already had three. The first began with farmers moving to the cities to work in factories powered by gas lamps and steam engines. The second industrial revolution was triggered by three key inventions: the combustion engine, the airplane and a new technology called chemical fertilizer. It's what gave society a massive leap forward in distances travelled and the quality of food consumed. It increased our lifespans by decades. You lived through the third industrial revolution. It was the first digital one in which integrated circuits and microcomputers gave us the ability to crunch numbers and communicate at the speed of electricity and light. But Dr. Gilbert is at the forefront of the fourth industrial revolution, the Internet of Things. His devices are scattered throughout farmer's fields, keeping constant watch over an environment that's rapidly evolving thanks to climate change. But instead of spraying crops with pesticides, that is a very Industrial Revolution 2.0 approach. His devices spray chemicals that trick the pests out of their reproduction cycles, the ones that are so damaging to crops today. 

Michael Hainsworth [00:13:46] Dr. Gilbert, give us a sense as to what role technology plays in keeping food inflation at the typical one and a half to two and a half percent level, not the four and a half or four we're seeing today. 

Michael Gilbert [00:13:58] Farming's always been tough and today this constant pressure of increasing costs of production and a lot of regulatory burden. And this, of course, has a huge impact on the cost of consumers, but it also profoundly affects the profitability of the farmer. So our tools help them adapt to increasing costs of production and the need for more sustainable farming practices. 

Michael Hainsworth [00:14:21] It's amazing to me. Semios supports, what, five hundred farms in the United States? 

Michael Gilbert [00:14:27] Yeah, over. Yeah, it's been growing ever since. 

Michael Hainsworth [00:14:29] And the farmer is outstanding in his field, as we already know. But on a scale of technological adoption, that kind of surprises me. One might think farmers will be the last to be tech geeks, but not true. 

Michael Gilbert [00:14:41] No, I mean, what we find is farmers are huge believers of science and they believe that science, rightfully so, can solve a lot of problems in a complex system like a farm where technology comes in is technology enables science. And what we found is by introducing farmers to new technologies like the Internet of Things or big data machine learning actually enables better science to come into the hands of the farmers. I think what they understand is that farms are complex and every farm is different and every season is different. And what we explain to them is, when you start tracking all the different farms versus all the different seasons, you start seeing trends. And science is about trends and understanding what happens. And that's something that we can sell to farmers. 

Michael Hainsworth [00:15:31] Now, the farmers that you're talking to, these aren't row crop farmers. We're not talking about wheat. We're not talking about corn. These are higher value crops, correct? 

Michael Gilbert [00:15:40] Correct. Yes. We focus a lot on what we call specialty or permanent crops. But typically, if it's grown on a tree or bush or vine, those are the types of crops we target. So we look at things like apples and cherries or walnuts and pistachios and almonds and citrus. 

Michael Hainsworth [00:15:59] So your solutions involve data processing, analytics, modeling and ultimately A.I. for the kinds of things that are really susceptible to, I can imagine, droughts, but also pestilence. 

Michael Gilbert [00:16:13] What we do is we monitor what's happening in the field in real time. And when it comes to farming, unlike medical or banking, you know, every 10 minutes is real time. So we monitor what are the conditions within the canopy of the tree every 10 minutes, things like, what is the temperature, what's the humidity, what's the barometer of pressure? How many insects are present? And in doing so, we're able to really accurately predict when things are about to happen and when it comes to farming, especially at these farms, some of them getting bigger and bigger and bigger. It's really a question of logistics and managing risk. So if you want to, for example, spray against a certain insect and you have five thousand acres, you can't just decide that overnight. That's going to take you a week to do. So understanding when things are happening and where they're going to happen is absolutely critical for a farmer to be successful. And what we do is we actually monitor for those conditions and predict within hours when a risk event is likely to occur. 

Michael Hainsworth [00:17:18] And when a risk of event is likely to occur, how does the farmer respond? 

Michael Gilbert [00:17:20] They have several options. And for farmers who use our complete package, this would include a remotely controlled delivery of a biological called a pheromone. Pheromones are a new class of crop protection ingredients that are organic and biological. And what they do is they actually control the behavior of the insect without killing it. So you're not introducing any kind of toxic chemical into that environment. But to use pheromones effectively, they can only be delivered when needed. And so what we do is when we see this risk come up, the growth can then decide to spray X amount of pheromones on that field for X amount of hours, and our network remotely deliver that pheromone on demand for the farmer. 

Michael Hainsworth [00:18:07] That's fascinating. So you don't need to worry about pesticides or anything like that because you're using the insect's own body to tell it to go away? 

Michael Gilbert [00:18:16] Yeah, we're a little bit cheating the system. I'd say there are several types of pheromones out there that potentially trigger mating. And when it comes to insect damage, usually all the damage comes from the young. If we can stop insects from mating, we can stop the entire process. And so what we do is we actually go in and interfere with that mating attraction behavior that's required. And in doing so, negate the need to spray toxic pesticides on those crops. 

Michael Hainsworth [00:18:45] The USDA estimates 90 percent of crop losses are because of extreme weather. And it strikes me that extreme weather, climate change and pest control are all tied in together. 

Michael Gilbert [00:18:58] When it comes to understanding how a farm works, basically everything on the farm is being driven by some combination of heat and water. Heat and water drive almost every biological process, whether it's an apple growing, a flower blooming, an insect developing, or disease, they're all driven by those two metrics. And so by measuring heat and water every acre, every 10 minutes, we can understand how these things are connected. It's really important for the farmer to manage all those different risks from one place. Because, for example, you can't simply irrigate your farm if you're going to need to spray pesticides or biological the next day, then you can enter the field. So you need to understand how are all these different risks building up relative to each other as well as relative to other fields to make critical time saving, money saving and sustainable decision? 

Michael Hainsworth [00:19:56] You launched this company, what, more than 10 years ago, and you were very pest oriented, very specifically targeting that issue for the farmer. How has the company evolved over the last little while? 

Michael Gilbert [00:20:08] It was a number one seller for many years. It's an area that we have significant advantage. It's still our core product. A lot of our customers, we're seeing the connections between the datasets we used for pest control versus the other risk to try to manage. And so over time, our customers have asked us to develop or partner with other companies to deliver more risk assessments on different parts of the farm. And so over the years, we've started in insect management and now we do things like frost management, we do irrigation control, irrigation management, yield timing, tree health and nutrient delivery times. 

Michael Hainsworth [00:20:48] Now, is that because the data that's required to understand pests is essentially the same as you would look for for disease, frost or even harvest timing? 

Michael Gilbert [00:20:57] Exactly. That common data set what we call ground truthing. So when you know what is the heat and water incremental data, you basically understand everything about that farm. And so as we continue to build on our platform, we're going to leverage these datasets to help the farmer manage other parts of their operation. I think that's the most exciting thing about our business, is that we have that ground truth data. We have over two million sensors in the field today talking to our network every 10 minutes and we manage billions of dollars of the crops. That data is going to help make all of that crop production be much more sustainable. 

Michael Hainsworth [00:21:33] Because it's a case of you can't solve a problem if you can't quantify it. 

Michael Gilbert [00:21:37] Correct. It's a bit of a game of whack a mole. If you're out there trying to solve these problems without having a common dataset, whack a mole will work for a while, but eventually that becomes hard and it becomes not very cost effective. So when you have a common strategy and a common data set that helps you streamline decisions and be much more effective in the end. 

Michael Hainsworth [00:21:59] Just imagine small devices dotting an apple orchard, protecting the trees, not by spraying them with a chemical that can harm you by simply biting into that red delicious, but by working with the microscopic brains of the pests themselves. Meantime, building a company from the ground up, the way Dr. Gilbert has at Semios is a team effort, and the Vancouver based team behind Gilbert gives the man at the top high marks for his ability to lead. 

Michael Hainsworth [00:22:32] I think we can quantify both Semios, as well as you, I'm on Glassdoor. I'm looking at the ratings on the company, it has a 100 percent approval rating for the CEO. What is it you think you're doing right? 

Michael Gilbert [00:22:46] For us, as the company has grown, we've had to really focus on communication, frequent communications. It's actually imperative to having a company be all rowing in the same direction. So what are we doing? Why are we doing things, which helps people understand what their contribution is, why they're here and how they can be more effective. And that, to me, is the key to a company that's growing this fast where we seem to be going in many directions. But this frequent communication helps drive everyone in that direction. 

Michael Hainsworth [00:23:13] And I can imagine that helps you, particularly when you're up against some of the biggest players in agriculture today,  

Michael Gilbert [00:23:19] They're going to have their own set of problems. For us when we're competing against a large company. Our biggest advantage is that we're nimble and we can take risks. And typically those larger companies aren't as likely to take risks. For me as a CEO, if I going to ask my team to take risks and be nimble, I have to make sure that I create a culture that rewards the right behavior. So I have to make sure that in Semios we embrace risk, we take initiative and there's a team spirit, because  you can't ask people to take risks and then blame them when they fail, you have to encourage failure. You have to celebrate all those losses so that we can actually get to a bigger win. That culture is very difficult to maintain as you grow, and especially as you bring in people who came from companies where maybe that wasn't the culture. Having that clear where you reward failure so that you can then actually strive for bigger wins is actually imperative for a company's success. 

Michael Hainsworth [00:24:17] The employee reviews here site the ability to take on new projects with passionate people as pros and the growth pain of a startup is listed in the con column. What is the biggest growth pain you've had to endure? 

Michael Gilbert [00:24:31] Yeah, I'd say the biggest growth pain has been trying to keep up with that culture, you know when we were 10 employees, it was pretty easy to encourage risk taking and be nimble and take chances. Now that we're over two hundred, that becomes more of a challenge. It's even more challenging when everyone's working remotely. For us to take that on emphasizing our core values and why it is that we need to be taking risks, why that makes us different and why that helps our customers. 

Michael Hainsworth [00:24:58] What about expanding the team? I am looking here and it seems that most of the revenue you've got coming in the door is from the Pacific Northwest. What about going further afield? No pun intended. 

Michael Gilbert [00:25:09] We intended on launching in northern Italy, right in Trento, which was the epicenter of the COVID outbreak in twenty twenty in Europe. And that happened to be the exact area we intended on launching. So that was not without its challenges. But we are definitely going abroad. We now have sites in Germany, in Spain, in Italy. We've hired staff there. We have now sites in Latin America, in Chile. And so one of the nice things about our business is that the crops we manage say an apple orchard, there are lots of appearances around the world and most of the time they have the exact same problems, the exact same insects, the exact same disease, the exact same irrigation problems. And so we can pretty much transplant our solution from one part of the world to another within that same crop and be very successful. 

Michael Hainsworth [00:26:00] When we think about food security, is there a part of the world specifically where this technology is needed most? 

Michael Gilbert [00:26:05] Food and farming is obviously highly regulated. One of the areas that is being the most progressive to date is actually the European Union. They have twenty eight countries and they've now embarked on this New Green Deal. And as part of their mandate, they've mandated that in Europe, every farmer must reduce the amount of pesticides being used by at least 50 percent. That's five zero. And I can tell you right now it is impossible to reduce the amount of pesticide you spray while still delivering the high quality products that consumers desire without some combination of a biological like a pheromone and data to make decisions more effective. And so, thankfully for us, we deliver both. Data and pheromones. And I think our solution will be instrumental in helping European growers meet this deadline of 50 percent reduction of pesticides. 

Michael Hainsworth [00:27:00] So where does food security technology go next? 

Michael Gilbert [00:27:04] There will be a time and we're probably already there where the consumers are going to want to understand how their food is produced and where it was produced, how was produced and how it was transported. And we're starting to see that today. I think that's where we're going. I think there's going to be a demand for increased transparency and transmitting that data from the farm all the way to the consumer. And so we'll see how fast that happens. But I can certainly see a time where some of those QR codes on foods, when you put your phone to it, you'll be able to see exactly how and where that food is produced. And you will have a say in terms of favoring growers who use data for decisions and who prioritize sustainability. 

Michael Hainsworth [00:27:46] Dr. Gilbert, I can't help but to look over your shoulder there on our video conversation here and see what appears to be a farmer's hat hanging in the background there. Do you find yourself in the field very much?  

Michael Gilbert [00:27:58] I spend a lot of time traveling up and down the coast and meeting our customers, understanding what their pain points are and how we can help. Now, there's been a lot of technology being sold in those markets. But I tell you, the truth is that our customers are the salt of the earth. They're highly focused on sustainability. They live and breathe in that environment. They're on that soil and within the trees. The last thing they want to be doing is spraying or being inefficient. And so we're here to help and get them where they ultimately want to be. 

Michael Hainsworth [00:28:29] Dr. Gilbert, thank you very much for your time and insight. 

Michael Gilbert [00:28:31] Oh, no problem. Thanks for having me. 

Michael Hainsworth [00:28:34] And Dr. Charlebois, thank you for your time. 

Sylvain [00:28:33] My pleasure. 

Michael Hainsworth [00:28:40] For more information on Semios and its Internet of Things technology, visit Semios.com Or ask your local Johnny Appleseed about the role tech plays in keeping our food secure. Dr. Sylvain Charlebois is the senior director of the Agrifood Analytics Lab at Dalhousie University. Follow him on Twitter @FoodProfessor. This has been the CBC Innovation Banking podcast where we learn the secrets to innovation economy success from the entrepreneurs who are paving the way for the future. If you haven't already subscribe, on Apple Podcasts, rate the show and tell us what you think with a review. I'm Michael Hainsworth. Thanks for listening.