Small Food Comes of Age Mary Ellen Kuhn | September 2017, Volume 71, No.9

Enterprising entrepreneurs are carving out niches as aging megabrands lose momentum in the marketplace. Here’s a look at some rising stars who are challenging the status quo and the reasons why their timing couldn’t be better.

  • Creative New Concepts From Start-Ups

    Creative New Concepts From Start-Ups

  • Farmer’s Fridge salads

    Peach Caprese Salad is a brand-new seasonal salad from Farmer’s Fridge.

  • Nima Labs portable peanut detection sensor

    The next innovation from Nima Labs will be a portable peanut detection sensor due out this fall.

  • Jar Goods

    Jar Goods will introduce Vegan Vodka tomato sauce, a Black Tapenade, and a Purple Pesto sauce later this year.

  • Upton’s Naturals

    New Ch’eesy Mac from Upton’s Naturals is the first precooked vegan mac and cheese product on the market, the company says.

In an era in which Big Food is eyed with suspicion by an evolving breed of savvy, sometimes cynical consumers looking to eat more transparently, healthfully, and naturally, the opportunities for small start-up ventures have never been greater. It’s not an exaggeration to call this the age of the entrepreneur. A broad array of resources—ranging from shared kitchens to food incubators to business accelerators—is available to support entrepreneurs, and venture capital is flowing freely in the direction of start-up companies with bright ideas and viable business plans. Since 2012, private consumer packaged goods companies have raised more than $8 billion from investors, according to data from research and strategy firm CB Insights (Caldbeck 2017).

“There’s so much activity. There’s such a rapid evolution in the food industry in terms of technology, in terms of brands. There’s never been a more exciting time,” says Lou Cooperhouse, executive director of the Rutgers Food Innovation Center, an incubator for food start-ups. A recent list of culinary incubators and accelerators includes nearly three dozen such operations scattered across the country (Lenhardt 2017). Certainly, Big Food has jumped on the Small Food bandwagon. Every week seems to bring news of another major food company unveiling a competition for start-ups or setting up a venture arm to invest in small companies with big potential.

Financing a fledgling food company with someone else’s money is much easier than it was a decade or so ago, says Dan Staackmann, founder and CEO of Upton’s Naturals, a fast-growing maker of vegan meat substitutes that has been in business since 2005. “At this point, [potential investors] have been coming out of the woodwork,” says Staackmann. “We get one or two a week, calling or emailing. Everybody wants to know: are you looking for money?” At the Natural Products Expo this past spring, “we probably had 40 people trying to get our attention, looking for the next [big] thing,” he adds.

Three or four years ago it was rare to find a venture capital fund dedicated to food, but that has changed, says Erin Lenhardt, founder and CEO of The Food Mint, a consulting company for start-ups. “More and more people are approaching us to say [they] started a food-specific venture capital fund,” she notes.

“Now all of a sudden, we’re seeing investors that are investing in the food industry in a major way like we’ve never seen before,” Cooperhouse agrees. “The venture community and the corporate venture community are both paying a lot of attention to food entrepreneurship.”

Good for You in the Driver’s Seat
Driven by consumer interest, the lion’s share of entrepreneurial activity is focused on good-for-you premium products. Lenny Lebovich, who two years ago founded PRE Brands to bring a line of grass-fed meat products to market, likes to call it “food 2.0,” which he describes as “next generation” products and brands targeted to consumers who care deeply about what they’re putting into their bodies.

Lenhardt, who cofounded a start-up called Norm’s Farms that markets a variety of elderberry products, said she was drawn to the business because of her interest in eating more healthfully. “Good food is becoming an incredible trend,” she says. “Conditions are right for venture capitalists to make money in this space.”

Venture capital firm Obvious Ventures, for example, has identified healthy living as one of three focus areas, and within that framework, it has invested in plant-based food companies such as Beyond Meat and Miyoko’s Kitchen. “In the last 50 years, industrial Big Food has created success by optimizing for shelf life, by adding salt and sugar and preservatives,” says Obvious Ventures cofounder and managing director Vishal Vasishth. “We believe that the next 50 years is going to be a transformation from that kind of an approach to an approach which optimizes for nutrition.”

Members of the first class of Chobani Food IncubatorAn incubator program introduced last year by yogurt maker Chobani is dedicated to helping start-ups that share Chobani’s vision of DNNA (delicious, nutritious, natural, and accessible) food. The Chobani incubator program offers a $25,000 no-strings-attached (i.e., equity-free) grant and a comprehensive curriculum that covers sales, marketing, finance, and operations.

Navigating the Path to Success
Even with a growing network of resources available to support food start-ups, the path to successful entrepreneurship is not an easy one. Just getting chosen to participate in an incubator or accelerator program can be intensely competitive. Chobani’s food incubator program drew 450 applicants for the six spots in last year’s class, and this year, there were more than 500 applicants for the program.