The Rise of Food Renegades David Despain | February 2016, Volume 70, No.2

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Funding Future Change
With plenty of investors ready, willing and able to take a risk, the business climate is very favorable to food entrepreneurs. “We’ve been fortunate to have a great set of visionary investors who see the tremendous potential in our products,” says Arturo Elizondo, cofounder of Clara Foods, San Francisco. “Their investment has allowed Clara to hire an amazing team of scientists and innovators to ultimately accelerate our process and have that impact we seek.”

Funded by biotech accelerator IndieBio, also based in San Francisco, Clara Foods doesn’t have a product yet. But their marketing campaign is already set. In the case of Clara Foods, it’s about disrupting how consumers use eggs. Their future product is egg whites produced via yeast technology in the lab; no chickens are required. “With our products, we can not only match, but enhance an egg whites’ unparalleled functionalities, enabling the creation of new kinds of foods. Imagine the fluffiest and lightest meringues and angel food cakes you’ve ever had,” Elizondo explains.

But it’s not just eggs; it’s about “reimagining the kitchen’s most critical ingredients” in a way that will be better for people, animals, and the planet, he says. “We all want authenticity. More and more, consumers want to use their dollars to contribute to a mission. They want a company to stand for something more than just profits. Whether it’s fair-trade coffee, vegan cookies, or environmentally friendly palm oil, people are realizing that our everyday choices have consequences that extend far beyond what we imagined––especially in food,” he says.

FaB Wisconsin, Milwaukee, has been focused on securing funding to accelerate growth for new food and beverage manufacturers since 2002. FaB works in collaboration with the Food Finance Institute at the University of Wisconsin Extension and the Wisconsin Economic Development Corp. Their FaBcap program is designed to help build the capacity and capitalization for up to 10 food and beverage companies annually through training, mentoring by other food companies, and $10,000 in funding.

Another support organization is Good Food Business Accelerator, part Chicago’s innovation hub 1871, which is dedicated to connecting farm and food businesses with investors and industry leaders for scaling up production. Applicants that are accepted by Good Food Business Accelerator are given mentoring, strategic support, and access to capital for the sake of building “a supply chain for sustainable local food.” The accelerator is owned by FamilyFarmed, which is a nonprofit organization that has a strong relationship with Whole Foods and UNFI, as well as Chipotle Mexican Grill, and other companies.

San Francisco-based CircleUp’s crowdfunding platform attracts accredited investors by allowing them multiple investment opportunities at a lower investment minimum. The investors have access to CircleUp’s community by joining a “Circle.” Circles may be led by individual members of the CircleUp community with industry experience or by a lead investor. Last November, The Wall Street Journal reported that CircleUp had raised $30 million for funding food startups specifically. “We exist as a marketplace that connects high-growth consumer goods and retail brands with capital and a lot of that is driven by a fundamental market shift in those categories,” says Grannis.

CircleUp has invested in companies that include SmartyPants Vitamins, Venice, Calif., a natural supplement company that capitalizes on a close relationship with Amazon.com; Artís Coffee, San Francisco, a coffee company that gives consumers the experience of seeing coffee beans roasted right in front of their eyes in their cafés; and Rhythm SuperFoods, Austin, Texas, a maker of nutrient-dense plant-based snacks that feature kale and broccoli.

Recently, General Mills, Minneapolis, took a lead investor role in Rhythm Superfoods through its venture capital arm 301 INC. General Mills launched 301 INC to focus on building partnerships with emerging, disruptive brands. Notably, 301 INC has invested in Beyond Meat, El Segundo, Calif., to develop plant-based proteins that have the taste and texture of real meat. In January, General Mills acquired EPIC Provisions, LLC, Austin, Texas, a maker of meat-based protein bars. The new addition will now operate as part of the company’s Annie’s business, which Generals Mills purchased for $820 million in 2014.

A New Renegade Culture
In an era where traditional food brands are being challenged by these renegades, “consumers are becoming more engaged and more powerful in the ‘World of Food.’ Foods and beverages are content—cultural products to be shared, discovered, made, and traded,” says Laurie Demeritt, CEO, The Hartman Group. “We’re living in an era defined by a cultural redefinition of food quality. Fresh, real, and less processed are the new symbols of food quality today.” Millennials are seeking out foods made with premium distinctions including natural ingredients, non-GMO, organic, allergen-free, and locally grown or manufactured, says Demeritt.

According to the Culture of Food 2015 report from The Hartman Group (2015), consumers are increasingly trading out mass food brands and chains for unique, local, and fresh food experiences. They expect higher quality and want to be closer to their food—knowing where it comes from and who made it.

Small food startups are in tune with this new food culture, telling engaging stories about their products, their ingredients, and how they’re made. These renegades, which are disrupting the food system, all share a few distinct qualities, says Grannis. “They have a differentiated product with a founder’s story that is clearly positioned, often with a social impact, and they have a business that’s uniquely positioned with a supply chain that makes them able to compete with the big guys,” he says.

 

David Despain, a member of IFT, is a freelance writer and nutritionist based in Gilbert, Ariz. (daviddespain@gmail.com).

References

FAO UN. 2013. “Edible insects: Future prospects for food and feed security.” Food and Agricultural Organization of the United Nations, Rome. http://www.fao.org/docrep/018/i3253e/i3253e.pdf

Hartman Group. 2015. Culture of Food 2015. The Hartman Group, Bellevue, Wash. hartman-group.com.

Kowitt, B. 2015. “Special Report: The war on big food.” Fortune. Time Inc., New York City. May 21. fortune.com.

Mintel. 2015a. The Millennial Impact: Food Shopping Decisions - US - September 2015. Mintel, Chicago. mintel.com.

Mintel. 2015b. The Ethical Consumer - US - July 2015.

Technomic. 2016. Understanding Fresh Food Subscription. Technomic, Chicago. technomic.com.