In simpler times, it wasn’t uncommon for start-up food companies to launch from a restaurant kitchen or even a garage — literally — with distribution from a borrowed truck or a van.
Today’s business environment is more complex and the barriers to entry are higher. There’s no lack of entrepreneurial spirit — new entrants to the marketplace have reached unprecedented levels in recent years—but the odds of success may be getting longer.
Fortunately, an ecosystem of new and repurposed incubators can nurse early-stage enterprises through initial growth pains and position them to thrive – or at least compete – in the market. At the same time, financiers are ponying up the lifeblood of any organization. While the rush of venture capital that occurred in 2015 has slackened, there’s no shortage of alternative financing, from private equity to quasi-governmental funds.
When Campbell Soup Co. announced its venture capital fund last year, CEO Denise Morrison said 400 food start-ups received more than $6 billion in the prior five years. That doesn’t include more recent seed sources like the $30 million Michigan Good Food Fund, backed by Michigan State University, W.K. Kellogg Foundation and others, or the Purdue Ag-Celerator Fund, which shepherds university intellectual property to commercialization.
Another example of the expanding support infrastructure is the Chobani Food Incubator. More than 400 start-ups vied for the half-dozen seats in Chobani’s first class of entrepreneurs, who benefited from four weeks of intense tutorials from corporate mentors representing a wide spectrum of disciplines essential for operating a successful food enterprise. Incubator director Jackie Miller is in the midst of an outreach effort to recruit candidates for the next class, partnering with groups in New York, San Francisco and Boulder, Colo., that advocate healthier eating.
Spurred by evolving eating habits and criticism of industrial-scale food production, entrepreneurs are launching a wave of new firms with a better-for-you message. Many of these are headed by people with no prior food experience or understanding of the challenges in delivering affordable food to hundreds of millions of geographically dispersed urbanites. Rather than compromise on the ideal of minimally processed food, some of their offerings come at, to be blunt, elite price points.
Case in point: Zupa Noma is one-upping cold-pressed juices with HPP-processed soups made from so-called superfoods. Costing as much as $16.37 (including shipping) on Amazon for a 12 oz. bottle, it’s enough to make a middle-income American blanche. On the other hand, it’s backed by Sonoma Brands, an equity-plus-management-expertise incubator created last year by Jon Sebastiani, who hit a home run with upscale beef jerky (Krave Pure Foods, sold to Hershey).
Can Americans have affordably priced processed foods that deliver uncompromised quality? Can the organizations that make that promise move into the mainstream?
We’re about to find out.
At the tender age of 21, Luke Sellers has received the kind of assistance food entrepreneurs of the past could only dream of. He attended the Yale Entrepreneurial Institute’s summer 2016 bootcamp, a 10-week program that gives budding entrepreneurs start-up education, pitching experience and $15,000 in seed money to give them a leg up on creating a scalable business venture. Soon after, Sellers’ Chops Snacks venture was plucked from more than 400 applicants to join Chobani’s first incubator class.
The Chobani program comes with a $25,000 no-strings grant, a welcome gift for any start-up but not the biggest benefit, according to Sellers, who graduated in May with a degree in medieval European history (his partner, Aaron Jones, majored in neuroscience). Corporate specialists in marketing, manufacturing, supply chain management, product development and other disciplines essential for long-term success taught and mentored the class. “The biggest takeaway was learning how to manage the team and the corporate culture,” he reports.
“We’ve applied everything,” adds Sellers. “Our growth and transformation since the April 2016 soft launch on the web has been radical. A lot of it is due to the Chobani program.”
Copackers produce the premium beef jerky sold under the Chops Snacks brand, starting with beef brisket and natural spices and a promise of no MSG, nitrites or gluten. The formulation was created by Dusty Jaquins, Sellers’ father-in-law and Chops’ third principal. Jaquins is an alumnus of Coca-Cola; Sellers’ grandfather was an engineer with Kraft in Atlanta. “They’re Big Food, and we’re not,” Sellers pointedly notes.
Premium ingredients and manufacturing costs aren’t reflected in price points, which he describes as competitive with “quality jerkies.” A retail price that put the product in the luxury category would have precluded Chops’ acceptance into the Chobani incubator.
“Great food shouldn’t be for just the elite few,” Chobani’s Miller insists. “We’re looking for companies that share Chobani’s DNNA—delicious, nutritious, natural and accessible food—and can help us accomplish our mission of better food for more people.”