Telus: From Phones to Farms
By: Cindy Wang & Yashika Sharma
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
The Telecom Industry
In recent years, financial and innovative turbulence has rocked the “Big Three” dominating the Canadian Telecom industry. In search of stability, Telus — one of such incumbents capturing roughly a third of the market — has begun diversifying into alternative sectors such as healthcare and agriculture. Telus has enlisted this diversification strategy to mitigate the looming consequences of stagnant industry growth, a trend likely to continue with connectivity commoditization, innovation, and monopolization.
TELUS Agriculture Enters the Chat
TELUS Agriculture (TAG) aims to provide digital solutions to support better food outcomes while building sustainable agricultural infrastructure. Employing data insights and digital solutions, TAG seeks to connect and optimize how food is grown by creating a trustworthy and unified value chain. As a global market leader in agriculture technology (ag-tech), TAG has made significant strides in improving waste diversion, reducing water use, increasing quality food production, and improving other key environmental metrics. Drawing from its parent’s telecommunications experience, TAG positions itself as an ideal synergy between physical architecture and data capability.
TAG’s services touch nearly every part of the value chain; from farmers and manufacturers to retailers and grocery distributors, TAG’s services and consultants generate the insights vital to their success. For example, TAG’s proprietary weather station solution employs custom hardware and an integrated mobile application to provide farmers with real-time weather and water usage predictions. However, there is one notable opportunity for growth in TAG’s end-to-end solutions: reaching end-consumers of agriculture products.
Health Consciousness is Calling
The onset of COVID-19 shifted consumer preferences in favour of organic and sustainable foods, leading to a significant surge in demand. This change is attributable to increased consumer concern over nutrition, leading to rising demand for healthy products like fruits, vegetables, and functional food products. Research has shown temporary health scares such as the COVID-19 pandemic can permanently shape consumer perception of organic foods, which consumers tend to perceive as “safer” and “healthier” than traditional options. Industry trends reflect this changing perception, with a projected 10-year annualized growth rate of 3.5 percent for the industry which is over 1.0 percent greater than the expected US GDP growth. Though the organic foods industry is entering the growth phase of its life cycle, a lack of technological innovation and an inability to penetrate new markets and product segments is limiting this growth. Evidently, demand for healthier products is strong and fuelled by an emotional desire for healthier, more connected lifestyles; however, the hurdle of winning consumers’ trust and their wallets still remains.
What’s Holding Consumers Back?
Given the average Canadian consumer over-indexes on natural and organic-branded goods purchases compared to US consumers, the Canadian market should be an ideal place to build trust and grow in the organics segment. With the complementary effects of the pandemic, this trend has been amplified: over a third of Canadians now attest they have been “stricter about making healthy eating choices for themselves”.
That being said, these strengths are not sufficient for overcoming the largest deterrent to sustainable purchasing: an education gap exacerbated by a lack of consumer-company trust. Many Canadian consumers do not understand what terms like “all-natural” truly mean, evidenced by the fact that only 57 percent of Canadians trust that products labelled as organic are actually organic. This level of distrust similarly extends to organic certifications.
Such a disconnect between demand and perception threatens to limit industry growth. Therefore, a solution providing transparency into the organic origins of goods is critical in reinvigorating the industry’s prospects.
Whole Foods Enters the Chat
Whole Foods (WF), a disruptive new entrant in the grocery industry a decade ago, has seen recent slowing sales growth. The grocer has a unique position as the one-stop shop for premium, organic and natural food, targeting high-income families. The grocery giant retains a high share of 18 to 29 year old shoppers, with 68 percent of its target customer base being health and fitness enthusiasts. WF entered the Canadian market in 2002 and currently operates only 13 locations across Canada, mainly in metropolitan areas. Aggressive Canadian expansion plans slowed in 2017 as the organic retailer suffered from substantial organizational changes due to its acquisition by Amazon. As such, it is imperative that WF establishes a competitive advantage over newer organic retailers like Farm Boy.
A Mutually Beneficial Partnership
To deliver transparency to Canadian consumers, Telus Agriculture should look to partner with Whole Foods to create a data-driven insight tool for consumers to verify the sustainability of their organic purchases — a radically transparent innovation to build trust with consumers. As both companies are facing stagnant growth, the partnership can help both parties accelerate their revenue while making a positive environmental impact.
Using TAG’s existing data tools, infrastructure, and network, TAG can onboard WF suppliers and farmers into their customer base. TAG can then use the data it collects through the services it provides to WF suppliers and farmers to create a transparency tool available to WF customers. This tool would take the shape of scannable codes on signage throughout WF’s stores, providing insights into the supply chains of WF’s various grocery items. This innovative collaboration would not only benefit the companies involved but also send a signal to the broader agriculture industry to promote sourcing transparency.
Canadian consumers would also benefit from a tapering education gap, in turn stimulating the purchases of organic and sustainable consumer goods as they would be better educated and able to recognize industry jargon. Being able to directly trace where products come from and what processes they go through will ultimately enhance the lack of consumer trust. WF customers largely consist of high-income individuals willing to spend more on products that are good for their health and the environment, which this tool would promote. Especially with rising grocery prices, the application would reassure consumers that their money is going towards products that share their values.
What's in it for Telus?
One of Telus’ core goals is to “make the future friendly” by bringing greater transparency and simplicity to its customers. Therefore, this opportunity gives Canadian consumers more visibility into the agriculture value chain while incentivizing other supply chain members to participate and authorize the use of their data. TAG also reaps the benefits of acquiring several new organic food-focused customers throughout the value chain, like farmers and distributors specializing in sustainable sourcing and organic food production. They also gain a pivotal partner through Whole Foods Market and Amazon, which opens possibilities for future collaborations seeing that Amazon specializes in data analytics.
What’s in it for Whole Foods?
As for Whole Foods Market, they no longer benefit from a first-mover advantage in organic grocery because of the recent influx of competition and widespread organic product offerings through established grocery retailers. TAG can provide WF with the competitive edge of transparency within the agriculture value chain, as sustainable sourcing is highly important to the new generation of conscious consumers.
Implementation
The partnership will come to fruition through a QR code printed on the signage at WF stores. WF shoppers can scan the QR code of a product and trace it to its Ontario farm, the name of the farmer, and what chemicals the farm used. WF can integrate this new feature into its existing mobile app. Furthermore, WF can embed product filtering functions to allow consumers to customize their experience; for example, consumers can elect to only view local or non-GMO products on the app. Telus should fund the initial costs for the project as it creates opportunities to cross-sell to farmers, adds new capabilities to its existing services, and will require teaching farmers how to use the new capabilities.
After half a year of test-running the partnership, TAG can begin monetizing the service through a revenue-sharing model for two reasons. Firstly, monetization would motivate all parties to drive mutually beneficial growth; secondly, it would provide TAG with a return on the upfront cost for the development of the data systems and recruitment of stakeholders. By tracking how many times consumers scan particular QR codes and purchase online, TAG could receive a portion of sales based on the number of scans multiplied by the average basket size for fresh produce. Monetary motivation pushes WF to invest in the program through its promotional materials and enhance the shopper’s experience by incorporating the QR codes. It also allows TAG to redistribute a part of their profits to farmers, which will incentivize more farmers to join, creating positive network effects.
By increasing transparency, Telus Agriculture and Whole Foods have a unique opportunity to digitize and disrupt consumer expectations in the agriculture industry. Despite rising food prices, younger consumers are not willing to oppose their values of health consciousness and sustainability. Whole Foods’ need for differentiation combined with Telus Agriculture’s digital capabilities positions these companies well to forge an industry precedent for transparent value chains. That being the case, the future most definitely seems friendly.
