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Feeling the impact of eggflation? As egg prices have soared, and the avian flu continues to wipe out millions of birds, many egg producers are struggling, but Vital Farms has managed to keep growing. CEO Russell Diez-Canseco shares how the brands relationship with farmers and transparency with customers have allowed the company to turn crisis into opportunity. This is an abridged transcript of an interview from Rapid Response, hosted by Robert Safian, former editor-in-chief of Fast Company. From the team behind the Masters of Scale podcast, Rapid Response features candid conversations with todays top business leaders navigating real-time challenges. Subscribe to Rapid Response wherever you get your podcasts to ensure you never miss an episode. The price of eggs is up like 50% over the past year, and in some places, more. I know there’s talk about bird flu impacting supply and hens lost. What’s going on? There’s a fair bit of conjecture about what’s going on in the market. The headline is, yes, a lot of birds have been destroyed over the last couple of years and even more recently in the last few months as a result of avian influenza, and that has resulted in a supply contraction in the market. Russell Diez-Canseco [Photo: Vital Farms] Some would say the price impact has been outsized relative to the amount of that enduring supply contraction. Almost all of those birds that have been, they call it depopulated, have been on really large farms, farms with a million or more birds, in cages, some outside of cages, but all in these big buildings with a lot of birds. That has resulted in more than 12% of the bird population in the United States being killed over the last year. On our network of small family farms, it’s been less than one-half of one percent. And I can’t prove to you exactly why we’ve been so lucky to avoid this issue, but we’ve been a lot luckier than many. Vital Farms eggs are particularly expensive, premium eggs. What makes an egg worth paying extra for, especially when eggs are already more expensive? Matt O’Hayer, our founder, is a serial entrepreneur with a big heart around animal welfare. When we first started this business, more than 95% of the laying hens were in cages, and he wanted to create a business that could liberate some of them. And that’s exactly what he ended up doing. So in those early days, we were the only nationally distributed brand of pasture-raised eggsa new kind of egg that we were trying to popularize. In the ensuing years, starting as far back as when I joined the company in 2014, there have been lots of options besides Vital Farms to buy pasture-raised eggs. Yet over the years, ours has been the most expensive version of that commodity. We’ve been growing rapidly with healthy margins. We had an IPO in 2020. It’s more than just the features and benefits. They are buying our purpose and how we do what we do in addition to this certain kind of egg. We operate with a lot of transparency. For example, our egg cartons have the name of the farm from which those eggs came on them, and you can see a video of that farm on our website. When we go to a retailer, were not just trying to transact with them. Were trying to help them plan their business to achieve their goals. Right now, its no secret that were not filling orders in full. A lot of egg companies aren’t, but we’ve developed a powerful brand, and demand, especially since we havent raised prices in over a year, is outstripping our supply of eggs. Were pretty transparent about what we commit to with those retailers. It’s a rare thing in this world and certainly in the food system. That’s appealing to some. And if you haven’t had to raise prices over the last year when prices of other eggs have gone up, that means that premium is narrower than it used to be, right? How do you maintain that? There is some balance to the way we think about the choices we make around pricing. We might have built a strong brand that we could command an even higher price at some point in the future. We also have a commitment to improving the lives of people, animals, and the planet through food. And we might price ourselves out of some growth that leaves some chickens in cages and leaves some people stuck with an egg that may not be as good for all of our stakeholders. So, we take all that into account when we set pricing. But the truth is that our cost structure has faced some inflation over the last few years, but nothing that would inspire us or force us to double pricing the way we’ve seen it in the market over the last year. And that it sounds like is you’re using more smaller farms as opposed to these bigger industrial farms? Input costs are what they are. It takes a certain amount of feed, space in a barn, heat in the winter, and veterinary care to produce an egg. These are measurable commodities. We feed our birds corn and soy in addition to what they find out on the pasture, for example. Those have not doubled in the last six months. There is a pricing discovery mechanism for commodity eggs in this market, driven in part by spot pricing of eggs. When there’s a dislocation of supply, that number can jump up and suddenly find its way into production, pricing to retailers, and pricing on the shelf. We price as a branded CPG company. I don’t look at that index. We price based on what we think is right as part of the marketing mix, like any other branded company. https://www.youtube.com/watch?v=Xm0CFIKPEBY What’s at stake for Vital Farms right now? Our goal is to build America’s most trusted food brand. The way we build this company is by operating in a certain waya values and purpose-driven way. So from that sense, what’s really important and whats at stake is how do we continue to scale a world-class organization with a strong culture in a remote environment? We went remote in 2020. We’re still remote-first. Some crew members packing eggs or servicing farms needto be in a specific location, but a lot of us work from home. That is top of mind for me because, long before it shows up in any performance indicator, there’s always a risk of losing trust or upsetting the culture you’ve built. So that’s a primary focus for me. For all the chickens, it’s about the people. It’s an interesting but appropriate way to put it. Again, we focus significantly on treating chickens well and preventing them from getting sick from avian influenza. It’s working, but it requires vigilance, ownership from farmers and crew members who support them, and great execution. Those qualities are hard to come by in many respects, so we work hard to maintain that level of commitment.
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E-Commerce
Quantum researchers are in a race for qubits, and Microsoft is in the thick of the competition. Microsoft has spent the last 20 years pursuing a topological approach to quantum development. Last week, they had a breakthrough: The company counted eight topological qubits on their Majorana 1 chip. They published a paper in Nature, got a glowing New York Times piece about a new state of matter, and buoyed quantum stocks across the market. Eight qubits isnt anywhere near what would be needed to reach full-scale quantum computing. That number is in the millions, and they would need to be error-corrected. Other companies, like IBM and Google, are much further ahead on thatjust with different models. Microsoft finally proved that the topological approach could work; now, theyve got to catch up. (Think of it like discovering a new way to build a car engine: Microsoft just got theirs to start, while others are already racing down the track.) There are reasons to be excitednamely, that a topological approach could be less susceptible to noisebut theyre still vastly behind in scale. If anybody believes this means that Microsoft is close to a commercial quantum computer, they’re missing the point, says Alan Baratz, CEO of D-Wave Quantum, a rival quantum company. It’s a validation that [topological] is a viable approach. Will it be a better approach than superconducting or trapped ion or photonic or neutral atom? That remains to be seen. The many paths to quantum computing All of our computers operate using bits, the smallest unit of digital information. This bit can be either a zero or a one. Quantum researchers are now developing bits that can be both zero and one at the same timesomething that would dramatically speed up computations. These qubits are difficult to develop, even harder to scale, and almost impossible to correct for errors. Still, researchers at major companies have made significant progress. But theres not one singular way to build a qubit. The most prominent approach to making a qubit relies on superconducting circuitsGoogle, IBM, and Amazon Web Services have all bet big on that. Another is the photonic technique, which uses light particles as qubits; thats being developed domestically by PsiQuantum and Xanadu, and overseas by Chinese researcher Jian-Wei Pan. Each has shown promise, but most still face major hurdles, keeping large-scale, error-corrected quantum computing years away. Microsoft has added a topological approach to the rat race. [For other modalities], we’ve demonstrated the physics as a community. Now it’s about scale, says Jack Hidary, CEO of AI company SandboxAQ. In the case of topological, it’s the one modality that needed a fundamental science breakthrough. But, while Microsoft has reached their science breakthrough, other companies have pushed further. Both Hidary and Baratz reference Googles Willow chip, which employs the superconducting approach. Not only did Willow employ significantly more qubits, but it also proved that error-correction was scalable. The more qubits, Google found, the more they reduced error. They were able to show partial error correction on gate model qubits for the first time, and that’s critically important, Baratz says. That’s a true advance. I think [Majorana 1] is just a proof of concept widening. Baratz is, like a number of physicists, generally skeptical of the Microsoft announcement. He references Microsofts previous failure in the arena: After publishing a 2018 paper in Nature claiming a Majorana discovery, quantum researchers began to question their findings. Microsofts scientists admitted insufficient scientific rigour in 2021, and Nature retracted the paper. Baratz also notes that the paper ignored qubit or gate fidelity, both measures of accuracy. It leads you to wonder, what is this chip actually capable of doing, and to what extent is it actually a process? he asks. For their part, Microsoft is embracing the spirit of competition. Others are working to bring this same vision to life, but with different approaches, a Microsoft spokesperson wrote in an email to Fast Company. This is what makes science fun. Some in the field believe an alternative approach is the right one to take and have invested significant time and resources into their methods. We understand why they would want to advocate for their approach. Discourse and skepticism are all part of the scientific process. Still, theres a reason scientists continue to call Microsofts paper a breakthrough. While the company may not have anything close to a quantum computeror even a lead in the race to get theretheyve pulled off something thought previously unimaginable. Most had simply given up on the topological approach. The topological approach is the most scientifically daunting approach to building a quantum computer, and that’s why Microsoft deserves credit, Hidary says. Kudos. How far are we from full-scale, marketable quantum computing? Thats still unknown. But experts like Karthee Madasmy, who was an early investor in PsiQuantum, thinks the Microsoft news is yet another good sign. The timeline has shrunk, he says. Its not multiple decades away, Madasmy says. Its actually a few years away.
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In 2034, Salt Lake City will join a short list of cities that have hosted a Winter Olympic Games twice, joining the likes of Turin and Innsbruck. But unlike in any Olympics of the past, skiers and bobsledders may glimpse a surreal sight overhead as they competeflying air taxis. Though still nine years away from the Opening Ceremony, aviation company Beta Technologies sees the state of Utah as a proving ground for its electric planes. As competitors focus on major cities like New York and Los Angeles, Beta has inked a deal with Utah to start exploring transportation solutions across the very rural state. The Beehive State had a confluence of benefits for Beta, including a varied geography, well-distributed airports, expansive land for testing, and a foot already in aviation. In our space, everybody (municipalities and states) wants to raise their hand, says Kyle Clark, Betas founder and CEO. But it’s only a few who step up and [allocate] the right money, the right political resources, the right regulatory support, the right businesses. If Beta can create a functioning network of electric planes to connect the remotest parts of Utah, initially focusing on cargo and logistics, then it should be able to streamline naturally into carrying passengers for the 2034 Olympics. Connecting Utahs remote areas Utah has created a coalition designed to support companies like Beta comprises the governors office, the state Department of Transportation, and public-private aerospace partnership, 47G (named for 1847, the year the first Mormons reached the Salt Lake Valley, and for a number close to the most G-force ever experienced, 46.2). 47G is focused on growing aerospace and defense in the state, industries that already represent 20% of Utahs economy. The organization helps 200 aerospace-adjacent companiesfrom startups, to contractors, to Delta Air Linesto source capital, build infrastructures, and incubate. Beta was a welcome addition. We want to move people and packages, and we want Utah to lead out on this space, says Aaron Starks, 47Gs president and CEO. We wanted to bring a partner in and not just sell us aircraft, but build the ecosystem with us. One significant hurdle is FAA certifications, which Beta will need to progress. It has three certifications pending: It expects the first, for its pusher motorthe propulsion device that pushes the craft forwardto be completed this year, followed by those for its eCTOL (conventional take-off and landing) and eVTOL (vertical take-off and landing) models. If they come through, Utah will be an inviting market. Utah was the fastest-growing state by population between 2010 and 2020, and is due to welcome 500,000 new residents by 2033. Thatll increase demand for cargo, medical, and logisticsall of which Beta wants to operate in, having already secured partners that include Amazon, UPS, and United Health Therapeutics. Utahs unique geography suits Betas goals. Of its 29 counties, only four are not considered rural, and a third of the state is desert. That allows the possibility for aircraft to improve rural routes that are otherwise inefficient to traverse. Clark says the minor roads that connect eastern and western Utah slow down transport, which is precarious when it involves goods like emergency medical supplies. Its a state actively seeking out faster and cheaper options. Carbon emissions from vehicles also contribute to poor air quality, as the mountainous topography leads to a phenomenon called inversion, whereby cold air and pollutants, including carbon, get trapped under a layer of warmer air, resulting in thick smog. As a state, we are very much on board with decreasing the emissions footprint through clean technologies, Starks says. Making it happen The coalitions first order of business will be developing airport infrastructure to accommodate Betas vehicles across Utah, where 94% of the population lives within a 30-minute drive of an airport. They have started identifying five initial existing airports that could serve as bases for both of Betas aircraft offerings: eCTOLs and eVTOLs. The latter, which rise upward like helicopters instead of accelerating along a runway and taking off, need slightly different sites known as vertiportswhich could easily be added to existing airports. Vertiport sounds big and scary, Clark says, [but] weve built vertiports that are de-iced landing pads with lights on them. These are pretty simple things. Beta and the coalition have also begun an assessment of optimal sites for a charging network, with the help of Betas algorithm, which its used to place 60 of its charge cubes across the U.S., mainly concentrated in the Northeast and South. The fast chargers are multi-modal, meaning they can accommodate EV road fleets like trucks and delivery vans. So, once Betas FAA certifications come through, both the planes and networks will be ready to go for their partners. UPS loves the fact that we’re putting in a bunch of charging network nodes throughout Utah, Clark says. For Clark, the ability to validate the entire system holistically within a single state makes Utah a better market entry point than major metropolitan areas, where its competitors, including Archer Aviation and Joby Aviation, have focused on passenger air taxis. Archer has announced Newark-to-Manhattan and OHare-to-Chicago routes with United Airlines, which has conditionally approved $1.5 billion of investment; and Joby has partnered with Delta, with up to $200 million. But cities pose complicated regulatory hurdles from municipalities and communities, Clark says, as well as the need for intricate power and flight infrastructures. And for such a new offering, the size of demand from would-be passengers is yet unknown. It’s going to happen, he says. But you have to ask the question: Is that the right entry point? Archer and Joby, both public companies, are reportedly both planning to use the 2028 Los Angeles Olympics as the milestone event for proving out their air taxis. But caution lingers from the Paris Olympics, where grand promises of air taxis by European companies fell flat. Clark believes the L.A. Games are too soon to do this effectively, and it would merely be a bit of a stunt to show the world flying taxis without providing any real use. Conversely, he says the plan in Utah gives them time to rehearse with cargo and logistics for almost a decade, so that by 2034 they can meaningfully taxi Winter Olympics visitors across the skies. Clark insists hes unfazed by his competitors, but still slams what he views as their superficial strategies. We are aquiet, private company, and we have been crushing the technology, he says. You may not see us out there making fancy videos of the future, because we’re building the real stuff here.
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