Sep 10, 2017

Taking on Big Grocery, one head of lettuce at a time

Boston lettuce grown in a 5,000-square-foot warehouse in Silicon Valley. (Iron Ox)

As a first order of business, the new Amazon-owned Whole Foods late last month slashed the prices of a few items, mainly avocados, apples and other fresh produce. That led to a lot of relief in the grocery industry: unlike its scorched-earth decimation of book-selling, electronics and apparel, Amazon did not seem, at least for now, to be seeking conquest of groceries.

But Brandon Alexander, a robotics specialist formerly of Google X, wasn't among those sighing. As he saw it, Amazon was declaring war on the grocery industry's underbelly: consumers would willingly shop on-line for almost every other product sold by Safeway and Kroger's, but not their head of lettuce, their ear of corn, their peaches or tomatoes.

Why it matters: Competing grocery companies and farmers are in trouble, says Alexander, co-founder of a robotics farming startup called Iron Ox. By cutting produce prices by 43% in at least one case, Amazon is actually taking the fight to these grocers. "It was considered a safe activity," he tells Axios, "but now the battle has been brought to them."

Enter the automated farm: According to Alexander, Amazon will keep the pressure on fresh produce, and by extension competing grocers and farmers, who simply won't be able to earn a profit at such prices. But robotics combined with hydroponics are a way for farmers to grow the equivalent of 30 acres of vegetables on a one-acre plot, and sell them at the same cut-rate prices at which Whole Foods is currently marketing some of its produce. "This is a perfect space for robotics," he said. "Here we can compete on quality and price."

Thus far, robots haven't really infiltrated farming because consumers demand fruit and vegetables that look good — robots bruise them up. In addition, as John Deere has discovered, automated farming is extremely hard because of obstacles in fields that often only a farmer with a trained eye can discern.

That's why Iron Ox, which Alexander and his co-founder Jon Binney started in 2015, doesn't work on outdoor plots, but out of a 5,000-square-foot warehouse in San Carlos, CA., in Silicon Valley. It is outfitted with a hydroponic system, using no soil, and a set of robots, producing Boston and Red Oakleaf lettuce, in addition to Genovese basil and kale, in six-week cycles. When one lettuce head is ready for picking, the robot puts the seedling of another in the same spot. His goal is fully automated crop production.

Such warehouses can be built on the outskirts of any city, and thus provide year-round, same-day produce, he said. By the end of the year, Alexander aims to be selling his produce commercially.

But if his idea works at scale, won't Amazon — or Walmart, or Costco — simply seek to buy him out? Alexander laughed. That is something to contemplate later.

Go deeper

HBCUs are missing from the discussion on venture capital's diversity

Illustration: Eniola Odetunde/Axios

Venture capital is beginning a belated conversation about its dearth of black investors and support of black founders, but hasn't yet turned its attention to the trivial participation of historically black colleges and universities (HBCUs) as limited partners in funds.

Why it matters: This increases educational and economic inequality, as the vast majority of VC profits go to limited partners.

Unemployment rate falls to 13.3% in May

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. unemployment rate fell to 13.3% in May, with 2.5 million jobs gained, the government said on Friday.

Why it matters: The far better-than-expected numbers show a surprising improvement in the job market, which has been devastated by the coronavirus pandemic.

The difficulty of calculating the real unemployment rate

Data: U.S. Department of Labor; Note: Initial traditional state claims from the weeks of May 23 and 30, continuing traditional claims from May 23. Initial PUA claims from May 16, 23, and 30, continuing PUA and other programs from May 16; Chart: Andrew Witherspoon/Axios

The shocking May jobs report — with a decline in the unemployment rate to 13.3% and more than 2 million jobs added — destroyed expectations of a much worse economic picture.

Why it matters: Traditional economic reports have failed to keep up with the devastation of the coronavirus pandemic and have made it nearly impossible for researchers to determine the state of the U.S. labor market or the economy.