Food Start-Up’s a Crowd Favorite

Dec. 3, 2014

San Francisco entrepreneur taps into Kickstarter to underwrite product launch.

Virtual panhandling is producing a windfall of free capital for movie producers, charitable groups and others. Hundreds of crowd-funding platforms have sprung up in recent years, with tens of millions of site visitors pledging billions of dollars to support featured causes and new businesses.

One of 2013’s most successful campaigns involved a metalwork craftsman who sought $30,000 to pay for the initial production run of Omnivore Salt, a blend of sea salt and spices. Angelo Garro’s Kickstarter campaign had 40 days to go big or go home. When time expired Sept. 7, more than 3,000 individuals had pledged $141,467 to fund the launch.

A food production neophyte, Garro operates a 200-year-old forge in the City by the Bay called, appropriately, the Forge. He’s also a self-proclaimed slow-food evangelist and minor celebrity who was featured in "The Omnivore's Dilemma," Michael Pollan's 2006 best seller on the food chain. Grassroots support from social media encouraged Garro to line up a copacker to blend and package a family recipe for seasoned salt, and video footage was shot to accompany the Kickstarter initiative.

That’s when serendipity and celebrity raised their lovely heads. Garro numbers film director Werner Herzog among his friends and acquaintances. Herzog edited the footage down to 2 minutes and added a voice over. “It was totally unplanned,” swears Beth Malik, Omnivore’s business manager. The overwhelming Kickstarter response allowed the salt start-up to increase the initial production run, upgrade the packaging and distribute bags as thank-yous to the 3,057 contributors by Thanksgiving 2013.

Few entrepreneurs can count on help from famous friends for funding, but the locavore movement is creating fertile ground for small-scale food and beverage companies. Whether it’s gluten-free baked goods or specialty coffee, micro manufacturing facilities are being built throughout the country. This cottage industry of processors is finding an enthusiastic welcome from individuals suspicious of Big Food and enthralled with the idea of consuming food processed by someone they know.

Some of the most successful firms to tap into the small-is-better sentiment can be found in the craft beer business. The category barely existed 30 years ago. By 1995, there were 600 craft breweries. Today, the count has topped 3,200, according to the Brewers Association. As popularity has grown, the trade group has ratcheted up the volume limits that define the category. It sets 15,000 bbls. annually as the line dividing microbreweries from regional craft breweries, the latter group numbering a little over 100.

Brewpubs also are part of the mix. The distinction with microbreweries is food and on-premise beer sales, explains Bart Watson, the association’s chief economist. “Basically, where there are people, there are breweries today,” says Watson, with almost three quarters of American adults living within 10 miles of a brewing facility.

More remarkable than the growth in numbers is the success rate. Brewpubs are essentially restaurants, a volatile business with a high mortality rate. Of all the brewpubs that have opened since 1975, 51.5 percent are still in business, according to Watson. Among microbreweries and other production facilities, the survival rate is 76 percent.

Market saturation is becoming a concern, an issue he dismisses as overblown. More than 4,500 federal permits for breweries have been issued by the Alcohol and Tobacco Tax and Trade Bureau, which suggests another 1,000-plus breweries could open in the short term. But on a per capita basis, the U.S. “is pretty much in the middle of the pack” compared to European countries, so more growth can be accommodated, Watson believes.

The number of liquor permits may overstate the brick-and-mortar reality. Those permits are for tax purposes, and contract brewing is booming. Watson refers to this subset as “the Facebook breweries”—entrepreneurs and home brewers who create their own recipes and then find a contract brewer to produce it (not unlike Angelo Garro’s Omnivore Salt). And that business model is getting easier to execute. Pecatonica Brewing Co., a southern Wisconsin enterprise founded in spring 2013 by a biochemist, a chemist and others, shifted production from Minhas Micro Brewery in Monroe, Wis., to Point Brewery in Stevens Point because Point could accommodate production runs of only 100 barrels. A 20,000 sq. ft. brewery planned for the Madison area will contract brew batches as small as 50 bbl—689 cases of finished goods.

Since its high-profile launch, Omnivore Salt predictably has been besieged by other would-be start-ups for advice (“Have your network in place before you have your campaign,” Malik recommends). Repeat sales are crucial for business sustainability, and loyal customers and an expanding distribution network have justified two more production runs and the introduction of an Italian sauce copacked by Preserve Sonoma, an organic certified kitchen in Marin County.

Omnivore is hitting many of today’s hot buttons—gluten and GMO free, vegan, organic. Abstract qualities may be the most important, however. “We believe in wholesome,” says Malik. It may cost more—a 6 oz. bag sells for $10 on line—but there’s “a segment of the population that wants to go back to a time when things weren’t controlled by Monsanto and Cargill,” she says.

There was a time when England was described as a nation of shop keepers. There may come a time when America is known as a country of micro food processors.