In the Fresh Food Business, a Middleman Can Be a Good Thing
May 23rd, 2022 Portfolio News
The Korean start-up Tridge is working to create a network for buyers and sellers, collecting valuable data in the process.
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The last year has provided a number of reminders that the connections that create the global economy can be tenuous. In March 2021, high winds from a sandstorm blew a container ship sideways in the Suez Canal, blocking about 12 percent of global trade for nearly a week. And this February, trade sanctions over the war in Ukraine stopped many shipments of fresh produce to Russia.
In both cases, the customers of a Korean start-up called Tridge were quickly able to find alternate buyers for their perishable products, sometimes redirecting them when they were already en route by sea.
Traditionally, the fresh produce business has been conducted in a relatively binary way between buyers and sellers. A seller might sell to a variety of buyers, and a buyer might buy from a variety of suppliers, but the global trade in fruits and vegetables was never truly networked — at least, until Tridge came along.
Hoshik Shin, formerly a private equity fund manager at Korea Investment Corporation, Korea’s $200 billion sovereign wealth fund, is building such a network, with a presence in nearly 100 countries so far. His company works directly with farmers and grocery stores, often buying from one and selling to the other to remove the lack of transparency and trust that permeates the global trade in fresh food.
And when something interrupts that trade, Tridge can quickly find new buyers in other countries before the produce goes bad — much like the internet redirects traffic when one server in a network goes down.
What’s remarkable is that Tridge — the name is a portmanteau of transaction and bridge — works at low margins, slight enough that it doesn’t interfere with the flow of trade. It can do this because its operations generate a valuable byproduct: data. Tridge records the price, quality and volume of every item it handles, and sells that data to both sellers and buyers, offsetting all the other costs.
Mr. Shin’s ambition is to aggregate that data into a massive, moving, real-time image of fresh produce on the planet. Anyone can subscribe to Tridge’s intelligence platform and watch the world grow, harvest, pack and ship everything from Indonesian mangosteens to American lemons.
Can you tell us what you’re trying to do with Tridge?
Our vision is to create a fully consolidated supply chain management system for the global food and agriculture industry.
This market has been frustrated by a lack of transparency. There’s mistrust between even big buyers and big vendors who have been building relationships for decades. When there’s a distribution problem, vendors don’t get fully paid, and when the market is good, buyers feel that they overpay.
Tridge plays the role of a very transparent intermediary, trusted by both sides.
Why more trusted than conventional methods?
Farmers can move to better grading systems and value-added products, and increase their income, as happened with beef. Forty years ago, there wasn’t such a sophisticated grading system for beef.
Users can check the market research they need. If there are products they want to source, they can check the prices and availability from all geographic regions and they can easily place an order.
Suppliers can diversify their sales channels and buyers can secure more stable supply chains. They can easily switch from country to country or region to region.
Everything from research to supplying the physical goods can be done at one stop.
Can you give an example?
When the sanctions against Russia hit, we had 100 containers of oranges heading to Russia from Egypt. We sent them to other regions, to the United Arab Emirates, the Netherlands and China. Otherwise, we might not have gotten paid, or the fruit could have perished.
We just don’t suddenly redirect shipments of that size to one country because the sudden supply can affect pricing in that region. We divide it up at one of our warehouses and then distribute it across several markets.
It seems like a huge task to build a global network.
It hasn’t been easy. Building our data platform was the biggest challenge, because we are dealing with so many different products. It took five years of intense work to put it together and map the data on a global scale.
And food and agriculture is a very conservative industry. It’s a relationship business. Who you know at a retail chain matters. So, our lack of historical presence in a rather conservative industry has been a challenge, one that we continue to work on.
To build trust and profile, Tridge implements tougher verification standards than is the industry norm. We assume responsibility for logistics, payments, deliveries and claims, acting as market maker for more than 15,000 agricultural products.
And it hasn’t been easy to learn the trade processes of different countries, the legal issues and logistics. It may seem easy now that we have it all figured out, but there were nights when we stayed awake wondering whether our shipments would reach their destination.
How did this start?
I was working for the private equity investment arm of Korea’s sovereign wealth fund, running a $2 billion fund solely dedicated to commodity investing. I was writing checks for $100 million to $200 million for commodity related companies. So, I got to know the commodity space.
Then I built a platform for a kind of expert network for professionals who could help source commodities for a finder’s fee — a company like Nestlé looking for a key ingredient in a certain country, or is there somebody I can talk to in France about grapes? We gathered almost 40,000 people around the world, each representing their market, and we compensated people for their connections.
Through that process, we extracted a lot of intelligence.
Energy and chemical deals were quite big, the frequency was lower, and the deals were dominated by a few big players, whose influence is huge. So, 70 to 80 percent of the expert network queries came from agriculture and we realized that market is fully fragmented. Nobody is dominant.
With produce there are thousands of products and varieties that were never standardized. So, in the beginning, we put resources into building a data architecture to structure the scientific varieties, cultivation types, packaging and gradings. Without such a structure, you can never pile up this type of data.
So, we became a kind of center point of gravity. And once our mass was large enough, we could standardize it.
Can you talk about the role of market intelligence on your platform?
We compile the data, and the data becomes intelligence, and the intelligence attracts users, and many of them turn into premium users, becoming our buyers, our suppliers. They start doing transactions with us, and those transactions create more data and feed back to our data intelligence. So, there’s a flywheel effect that actually gets stronger with time.
Our suppliers, when they deal with Tridge, can deal with many buyers simultaneously without deploying salesmen to many countries. And that aggregated demand gives us better bargaining power.
Craig S. Smith
