Key success factors to build a successful food company
The secret recipe taken from five of the biggest US food success stories of the past decade
Food no longer appeals to consumers only, it has also become a new hot space for entrepreneurs and investors. In 2017, more than one billion dollars were invested in the food sector in the US alone.
There are many drivers for entrepreneurs to start a food company. First it’s a sexy topic (honestly, who doesn’t like food?), markets are huge, there’s plenty of room for innovation and there are many political, environmental and sociological issues to address such as obesity, hunger and sustainable production. But there’s also a long list of reasons why not to build a food company, with at the top of the list one crucial question: how to differentiate yourself from the thousands of new products that launch every year.
In the last decade, five companies have managed to successfully stand out. If you’re not familiar with them, allow me to introduce you to Chobani, Halo Top, RXBar, Impossible Food and Daily Harvest.
Chobani is a Greek Yogurt company that launched in 2005 and hit $1.5 billion in sales in less than 10 years (without outside capital). Halo Top, the non-fat ice cream brand that launched in 2013 is said to have reached $400 million in revenues in 2017 and their founders are said to have turned down a $2 billion buy-out offer from Unilever at the beginning of the year. RXbar makes protein bars and was bought by Kellogs for $600 million 4 years after it launched. At the time, it was making $200 million in sales and again, they achieved this without any private investor onboard. Impossible foods makes vegetarian meat alternatives. The company raised $200 million from Khosla Ventures and Bill Gates before even having a product. And last but not least, Daily Harvest brings superfood straight to your door since 2016. They reportedly make $12 million in sales every month and have raised more than $50 million since inception.
While I don’t think there is one recipe for success, I do believe there’s a few things we can learn from these companies. Here are five main takeaways:
1. Bring something REALLY new on the market
“Many innovation leaders myopically convince themselves that their creations are revolutions, when actually they are just low-impact evolutions… at best.” (Woolverton, Halo Top Founder)
Chobani: the Greek yogurt that created its market
When Hamdi Ulukaya, a Turkish immigrant, created Chobani in 2005, its idea was simple: he believed yogurts in the United States were not as good as in the rest of the world. Choices were limited to artificial flavors, lots of sugar and water. So he jumped on the opportunity to buy an empty factory previously owned by Kraft. At the time, Greek yogurt represtented 0.2% of the yogurt market but today, it represents 50% of the market and Chobani is leading on it.
Halo Top: the healthy, tasty and natural ice-cream
Everyone agrees that the ice-cream market is saturated. Back in 2013, when Halo Top launched, a few brands were already trying to sell “healthy” ice creams (Enlighted, Artic Zero to name a few). How did Halo Top’s products make a difference? They made ice-cream with a perfect nutritional profile: low in calories (240 calories a pint vs. 1000 for best-selling brands Häagen Dazs or Ben & Jerry’s), low in fat and sugar and high in protein. They used simple ingredients to offer dozens of flavors with great tastes. As easy as it seems, this combination was unique on the market.
Impossible Foods: the non-meat that tastes just like meat
People are becoming more and more aware of the importance of reducing their meat consumption. For years now, vegan food brands have emerged trying to replace our beef burgers with soy, saïtan or cereal ones but they were not very successful in convincing meat lovers to change their habits. In 2016, Impossible Foods made the impossible possible: providing bloody vegan steaks which not only look like beef but taste like it too (no kidding, they really do!). And suddenly, the traditional meat market opened to them.
RXbar: the no bull-shit protein bar
The snack market has always been a thriving one in the US. Yet, with obesity becoming a national health issue, and with most brands providing products with everything but natural ingredients in a transparent way, it became a necessity to offer healthy products while satisfying the snacking habits of consumers.
It is what Peter Rahal and Jared Smith did when they launched RXbar in 2013. They spent hours elaborating the recipes with one clear focus in mind: no B.S. It might seem like an obvious statement, but it was actually radically innovative for the industry back in 2013.
“Our growth is a reflection of the size of the problem we solved with our product. The size of the growth reflects how many people actually wanted a natural protein bar … a brand that was real and upfront.” (Rahal, RXBar co-founder)
Daily Harvest: forget everything you knew about frozen food
When you think about frozen food (especially in the US), you easily picture pizzas, ice-creams or fried chicken. Not the hottest trends. Rachel Drori, Daily Harvest CEO, saw how frozen food could actually be the best answer to today consumer needs: it can be super healthy, full of nutrients (frozen food actually preserves nutrients better than fresh grocery food) and definitely super convenient (especially if they are delivered right to your door).
2. Blow your customers with your packaging
“If a CPG company’s packaging doesn’t clearly communicate the unique value propositions that matter to the consumer, then the consumer isn’t clear why they should buy the product.”(Ryan Caldbeck, Circle Up)
RXbar: how the new packaging helped the brand gain national exposure
When Rahal and Smith launched RXbar, they created their first packaging on Powerpoint. Two years after, they hired the Chicago-based agency Scott & Victor to give their packaging a radical overhaul bringing a strong focus to ingredients and flavors which were their main value proposition. This fast tracked RXBar onto the shelves of large national retailers’ like Whole Foods and Trader Joes.
Halo Top: simplify your packaging to focus on what matters
Like many founders, when Woolverton and Bouton first launched their Halo Top ice creams they tried to say everything on the packs: that ingredients are natural, light, rich in protein, low in calories, net in carbs. Often, writing down all the attributes is counter-productive because consumers won’t read long labels. In 2015, they redesigned the packs to focus on three attributes: flavor, calories and protein. Not only was it simpler for consumers to understand the value proposition but it also made the product much sexier for Instagram. These two factors combined were key drivers of sales.
Daily Harvest: make Instagram-worthy packaging
Considering the number of “food porn” addicts on Instagram, the social network has quickly become one of the most powerful marketing tools for food companies. For Daily Harvest, it’s the biggest driver of growth.
Daily Harvest focused on creating the most beautiful and sharable pictures of their smoothies and breakfast bowls. Having bright and colorful boxes, generally set up against a white backdrop for colors to pop, helped them gain visibility and increase customer engagement.
Chobani: show through the outside that the inside is different
Back in 2005, when Ulukaya launched Chobani, Instagram was not out. Still, Ulukaya’s second investment after his factory, was his products’ packaging. He wanted the packaging to tell the story of the product so that from the outside you could tell that the taste was radically new and different.
“This was a big expense — about $250,000. American yogurt has always been sold in containers with relatively narrow openings. In Europe yogurt containers are wider and squatter, and that’s what I wanted for Chobani — I wanted the package to signal that the product inside was very different.” (Ulukaya)
Impossible Food: branding, branding, branding
As they sell mostly through food services or caterers, you may think that Impossible Food does not need to worry about its packaging or branding. Yet, they succeeded in building a strong brand by providing personalized marketing tools to restaurants they partner with: stickers for the front doors, flyers, personalized menus etc. This tactic helped keep the brand at the top of customers’ mind so that they would think of them each time they go to the restaurant.
3. Be smart on your distribution
Chobani: be accessible to everyone
Ulukaya says that the most crucial business decision he made when launching Chobani was to choose to be sold in mainstream stores rather than in specialty stores. He insisted in having his products in the dairy aisle, facing competition from big players, rather than in the gourmet or natural food aisles. At the time, their only direct competitor made the exact opposite choice: he only focused on specialty stores and never managed to scale. A couple of weeks after Chobani hit the shelves of ShopRite, they started getting orders for 5,000 cases a week. In 2009, less than two years later, they were selling 200,000 cases a week and in 2013, they reached 2 million cases sold per week.
Impossible Food: the Tesla choice
As we said, there is no single recipe to success. Impossible Foods has the exact opposite distribution strategy of Chobani. They launched in July 2016 in the trendy Momofuku Nishi restaurant in Manhattan and found their path to growth through restaurant chains serving gourmet burgers (FatBurger, Umami Burger and Hopdoddy to name a few). The Impossible Burger is now selling in more than 1,000 restaurants around the US, driving massive traffic and sales to these hot spots (Umami Burger saw a 38% increase in traffic since launch leading to 18% in sales growth). While some say that the price of the meatless burger, $13, will prevent it from going big, Brown, the founder of Impossible foods says this is part of his positioning and a higher price will subsidize volumes. This is also Elon Musk’s strategy with Tesla: to first convince higher-end customers, keeping in mind that at scale, economics will become favorable and they will be able to sell products at a lower price point.
RXbar: starts online and then expand offline
RX bar launched in a crowded market (which more than quadrupled in size between 2005 and 2015), making it harder for the founders to convince brick-and-mortar grocery stores to sell their products. They started with gyms and fitness clubs, where their core audience was, and set up an online shop to sell directly to consumers. With a targeted acquisition strategy, a focus on the consumer journey from beginning to end and a relevant subscription program, they managed to hit two million in sales in their first year of business. While e-commerce remains a major distribution channel, they then expanded to more traditional retail distribution outlets and are now distributed nationally at Whole Foods, Target and other major retailers.
Daily Harvest: your fruit dose delivered straight to your door
Meat-kit delivery service has become a growing habit for American consumers looking for convenience over the last years (about 19% of them have already tried one) but many are still complaining about the lack of healthy options. Daily Harvest seized this opportunity and decided to sell its product through a subscription program: every week or month, you get pre-portioned cups of superfood at your door steps that require little preparation.
4. Work hard on your recipes
Although taste is the subjective sense, having an excellent recipe, built from expertise and personal know-how is the very first asset every food company should have, spend time on and protect.
Chobani: a know-how that came directly from Turkey
The first move Ulukaya made, after buying his factory, was to hire Mustafa Dogan, a yogurt master he had known for years from his Turkish family. For nearly two years, they worked on their recipe to get to the perfect product. They ended up with Chobani pint: a strained yogurt (often referred to as “Greek yogurt”) that is richer than regular yogurts, while also being lower in sodium, sugar and higher in protein. Their recipe is now proprietary.
Daily Harvest: a very personal production technique
Early on, Daily Harvest partnered with a Michelin-trained chef and certified nutritionist to develop its offer. Their unique differentiation point came in the “farm-freezing” technique the company developed, which consists in picking organic produce at their peak ripeness and immediately freezing them at the farm. This preserves nutrients over time and helps make delicious food that is also full of vitamins.
“Our nutritionists and chefs do the research to include superfoods that give our customers optimal benefits of consuming our food. Tasting good is always important, but having the added benefit of your food doing good as well is where our selected superfoods come into play. “ (Dori)
Impossible Food: the secret recipe for non-meat that tastes just like it
In 2011, the founder of Impossible Foods had gone on a mission of making a plant-based burger unmistakably meaty. It took them years of research to identify all the ingredients that, when separated at a molecular level and mixed together could replicate the smell, texture and taste of meat. Heme, a molecule that you can also find in soybean roots replicates the flavor you can find in meat as well as the color of blood. It is the most famous molecule they use, along with wheat protein, baked potato, coconut oil, fat, salt, sugar, and other additives (you can read the full story on their production process here)
RXbar: the complicated simplicity of making protein bars
Snacking is a highly competitive market (especially in the United States). To differentiate themselves, Rahal and Smith wanted to get rid of all the weak ingredients you usually find in protein bars and came up with their “no bullshit recipe”. The idea was simple: to formulate a bar with less than 6 ingredients, 12 grams of protein, no gluten, soy, dairy or added sugar. They didn’t stop iterating until the product was perfect and this was the key to their success.
“What we can produce can be challenging at times. I would say the development process for us takes about a year from conception to market, and there’s a lot of trial and error. Each ingredient has to be relevant.”(Rahal)
Halo Top: a homemade recipe served to copackers
Woolverton, though not a chef, elaborated the Halo Top recipe in his kitchen with his own ice-cream maker. The challenge for him was to create a recipe that combined great taste, a proper texture and low-calorie nutritional profile. It took him more than a year and many trials before getting to the right combination: a balance of gums, fibers, milk proteins and stevia, pumped with air to reduce the calorie content of a pint. Scaling was the second issue for the brand. To stay flexible and reduce investments, they decided to work with a co-packer. By 2016 and after some inventories issues, they decided to build their own production lines but still partner with co-packers.
5. Make some noise around your brand
This one may not be the easiest tip to replicate. Yet, it definitely explains part of the success of these five brands.
Daily Harvest: bring well-known investors
Having Gwyneth Paltrow and Serena Williams sitting on your board doesn’t hurt when you’re a young brand. Even at a later stage, having the Olympic gold medalist Shaun White and celebrity chef Bobby Flay, join the $43m second round of funding can always help. Be aware however that unless you have an incredible value proposition, it is very hard to convince these people to bet on you!
“Gwyneth Paltrow is an authority on health and wellness. (…) the reason we are so excited to partner with her is she is somebody who people will listen to and (then) take a second look at frozen food” (Drori)
Halo Top: look for virality
Halo Top success really started after a review published on GQ magazine. A little over a month later, BuzzFeed published another article emphasizing “I tried (Halo Top) and OMG. LIFE-CHANGING”. Those two stories generated millions of impressions and were a true game changer for the young company.
The company invested massively at the start on influencers, from designers to professional athletes, offering them free ice cream in exchange for nice pictures of them featuring the product.
Impossible Food: tease your audience
Impossible Food is a PR phenomenon. The most severe critics will say their success is due only to PR.
Nevertheless, anyone interested in the meat alternative market has heard about them — about the $400 million raised from notable investors like Bill Gates and Google Ventures and the Michelin-starred restaurant they partnered with. When their products were just entering restaurants for the first time, they already had a community of thousands of consumers willing to try them. They use the same strategy every time they open a new location, and every time it works.
RXbar: start with your best ambassadors
Rahal and Smith launched RXBar as a solution to the very opaque and unhealthy snacking market. Though it was a concern for everyone, they soon realized that there was this growing interest for fitness and special regimes and that no protein bars had the same quality and nutritional facts as RXBar. When they realized sporty people could be a good target to start with, they went door-to-door to sell homemade protein bars to local gyms until they succeeded in securing a partnership with CrossFit, a passionate, performance-minded exercise community with locations around the world. They also turned to influencers to help spread awareness of their “no B.S.” bars which helped propel them to becoming a company worth $600 million.
The intent of this article is not to describe a unique path to success for food startups but rather to show common attributes of 5 successful examples. I hope this list will inspire a few entrepreneurs and help other startups grow.
Want to share your tips ? Interested in discussing your new project to nice investors ?
Drop us a line : otiumbrands@otiumcapital.com !
Special thanks to chloe cabantous for proof reading the article.
Contributors to this piece of writing :
http://www.businessinsider.com/the-success-story-of-chobani-yogurt-2013-5?IR=T
https://medium.com/@ryancaldbeck/how-halo-top-became-a-consumer-sensation-23ca9315662f
https://www.inc.com/magazine/201802/burt-helm/halo-top-healthy-ice-cream.html
https://nypost.com/2018/01/18/unilever-backs-out-of-buying-halo-top-ice-cream/
https://www.inc.com/magazine/201706/stephanie-schomer/rxbar-protein-bar-design-awards-2017.html
https://hbr.org/2013/10/chobanis-founder-on-growing-a-start-up-without-outside-investors
http://www.chicagotribune.com/business/ct-biz-kellogg-buys-rxbar-20171006-story.html
http://www.newsweek.com/2013/06/12/its-all-greek-him-chobanis-unlikely-success-story-237526.html
https://www.foodbusinessnews.net/articles/8655-the-complicated-simplicity-of-rxbar
https://www.inc.com/magazine/201802/burt-helm/halo-top-healthy-ice-cream.html
