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

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Luke SaundersLuke Saunders’s Story of Salads, Supply Chains, and Smart Fridges
Selling salads in jars from vending machines wasn’t necessarily what Farmer’s Fridge founder and CEO Luke Saunders had in mind when he first started thinking about making healthy food more accessible. It was several years ago, and Saunders, now 31, was working in commercial sales, logging 1,000-plus miles a week driving from one industrial setting to another. He discovered that it wasn’t easy to find something healthy to eat while he was on the road. His travels took him to some large food manufacturing facilities, and Saunders started wondering why the principles of processed food production couldn’t be applied to fresh food.

“During my time as a traveling salesman, I realized there was a supply chain issue of getting fresh product from the place where you make it to the consumer fast enough to keep it at a quality level that consumers will actually pay for,” says Saunders. “Once I had identified that as the issue, I essentially worked backward from there to determine how we’re going to sell that product. And that’s where the idea for the fridge was born. It was never about I’m going to start a vending machine salad company.”

Farmer’s Fridge saladsNonetheless, that’s exactly what Saunders wound up doing, installing the first Farmer’s Fridge unit in a food court late in 2013. The company now operates about 75 salad-dispensing vending machines in Chicago office buildings, hospitals, and even O’Hare International Airport and has a staff of 65 people. Expansion into the Milwaukee market is imminent thanks to a recent successful financing round. The company produces the salads fresh daily in a commissary in Chicago and delivers them in refrigerated vans every weekday morning. Each refrigerated unit or “fridge” is stocked with a selection of salads in recyclable jars as well as an assortment of taste-tempting side offerings. Most salads are priced at about $8 and can be ordered via an attractive touchscreen. A recently unveiled app allows salad lovers to check the inventory in nearby fridges if a favorite salad isn’t available at their first stop.

Profitably operating a refrigerated distribution network wouldn’t be possible without the sophisticated cloud-based platform the Farmer’s Fridge team, led by technology head Raj Karmani, has put in place. “The way that the process works,” Saunders says, “is every day, the fridge actually sends a report to the kitchen: here’s exactly what I need for tomorrow. It’s based on a predictive algorithm that is monitoring sales data and weather and purchase patterns. We make that food to order. We pre-kit it and load it up for the drivers, who then take it to the fridges, and they physically load it [into the vending unit]. And then they have to physically reconcile that with the inventory at the local level—at the fridge. And then all of that gets synced with the cloud-based portion of our platform so that we can do things like [monitor] inventory in real time.”

Saunders estimates that 80% of Farmer’s Fridge salads are sold within 24 hours of preparation; anything that doesn’t sell within a 48-hour window is brought back to the commissary and donated although the salads are safe to eat for four to five days from the time they are prepared.

Farmer’s Fridge vending machineThe company adheres to strict cold-chain standards and food safety protocols. “We actually have a PhD food scientist with a background in large CPG companies [on staff],” says Saunders. “He did his PhD thesis on microbe growth in cut lettuce and spinach.” The Farmer’s Fridge software has been designed to ensure that food “auto expires” and cannot be dispensed from a fridge once it reaches that expiration date. Each fridge has a slot where salad purchasers can deposit the salad jars for recycling although many customers elect to keep and reuse them.

A commitment to avoiding food waste has always been part of Saunders’s vision for Farmer’s Fridge. He and Karmani first teamed up several years ago when Karmani’s entrepreneurial venture, Zero Percent, began handling the donation of leftover salads for Farmer’s Fridge. Zero Percent uses an app Karmani created to help restaurants and supermarkets arrange for efficient pickup and distribution of food that would otherwise be wasted.

The Farmer’s Fridge salad menu has evolved over time. A year or two into the business, Saunders surveyed his customers to get some feedback on the salad assortment. “We found that with the menu I had designed, we had a high satisfaction rate—80% to 90% of the customers loved Farmer’s Fridge, [but] only 40% or 50% actually liked the food. They liked the brand and what we stood for, but they weren’t really thrilled about what they were eating,” he says with a laugh.

“So, I went out and hired a culinary person, and we spent the next two years learning what that meant in terms of product innovation, refining the existing menu,” Saunders continues. “And about a year ago, when we did a survey, we were at 90-plus percent in terms of people liking the food.”

The menu currently includes salad varieties such as Strawberry Rhubarb, Crunchy Thai With Coconut Chicken, and Shrimp & Succotash. Sides like Pineapple Coconut Chia Pudding and a Chocolate Trail Mix that features dark chocolate, roasted cashews, almonds, and dried cherries are offered as well. More new salads are in the works, and Farmer’s Fridge is committed to delivering assortments optimized to meet the needs of customers at each fridge location.

Saunders doesn’t disclose Farmer’s Fridge sales, but he says the company is profitable. Thanks to the recent investment round, Farmer’s Fridge is solidly in growth mode.

“We definitely have aspirations to be a national and international brand,” says Saunders. “We have doubled the size of the business in the last six months, and we plan to do that again in the next six.” Clearly, this cold-chain business looks pretty hot.

Essential Entrepreneurial Skill: “You’ve got to be able to articulate the vision of the company to key audiences … what it is you’re trying to do, what the impact or economic value of that is, and what you need from your employees or investors … in order to get there.”

Surprising Realization: “Overall, my biggest surprise was how complicated the business would have to be—how many people we would need to get to critical mass to actually make this really successful.”

Given the Chance for a Do Over: “I would have given myself more time to really plan at the beginning and not be in such a rush to launch. (He did it in about six months.) I just didn’t realize that once you go from the planning/prelaunch stage to the launch, your time completely flips. So instead of spending 80% to 90% of my time thinking about the business, I was spending 80% to 90% of the time working on the business. And it’s been a steady process since that point in time to get more and more time freed up to go back to thinking about the business.”