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Daily news and analysis about the food tech revolution

Industry Perspectives

SKS 2019: For Gen Z, Eating is all about “Access, Portability, and Fluidity”

When you hear about new trends in the food and CPG space — plant-based, sustainable, snackable, etc. — they’re usually credited to younger generations: specifically millennials and Gen Z. But what exactly are younger eaters looking for, both in and out of the kitchen? And what will they demand next?

That’s exactly what Michael Wolf asked two analysts, Susan Schwallie and Joe Derochowski, from the market research firm the NPD Group at SKS 2019 last week. Schwallie looks into where, why, and how consumers are preparing food and eating at restaurants, and Derochowski focuses on kitchen space — and its appliances.

If you’re at all curious about how younger generations are reshaping dining habits, it’s worth watching the whole video below. But here’s a quick rundown on what millennials and Gen Z are looking for:

Schwallie said that millennials prioritize experiential eating — they want to cook or eat something Instagrammable that will give them what she called ‘The Betty Crocker effect.” Gen Z has some similarities, but above all they prioritize “access, portability, and fluidity.” In short, they want to get exactly the food they want, where and when they want it — be it getting a Domino’s pizza delivered to their park bench or having groceries sent to their doorstep to make a recipe they discovered just an hour before.

Generations may have different dining habits, but Derochowski pointed there are some unifying factors that all groups share — like prioritizing health and wellness and the desire to entertain more at home. These “consistencies between generations,” as he put it, are exactly what kitchen appliance makers are trying to target with convenience products like slow cookers.

Watch the full video below to hear what younger generations are eating, and how companies are hustling to figure out how to capitalize off of changing dining habits. Then keep an eye out for more content from SKS 2019 coming your way!

SKS 2019: Eaters of the Future: A Look at Millennials, Gen Z & Food

Sorry TechCrunch, Cloud Kitchens Aren’t an Oxymoron

With its hot take-y headline, the TechCrunch blog post “Cloud kitchens is an oxymoron,” buzzed around my Twitter timeline yesterday. In the article, author Danny Crichton sets out to burst the bubble, or at least bubble thinking around the growing phenomenon of cloud (or ghost, or virtual) kitchens.

We’ll just call them cloud kitchens here for the sake of simplicity and quickly explain that they are centralized facilities where restaurants can rent out commercial kitchen space to open up either new concepts or expand delivery options without needing to build out a full-on restaurant. Players in the space include former Uber CEO Travis Kalanick’s CloudKitchens and Kitchen United.

While it’s healthy to be skeptical about the quick rise of any trend, I’m not convinced by Crichton’s analysis.

Crichton opens by comparing cloud kitchens to WeWork (disclosure: The Spoon and the Smart Kitchen Summit have partnered with WeWork Food Labs), the once-hot office space startup which has quite publicly fallen on hard times as of late, delaying its IPO and reportedly laying off thousands of employees.

While both cloud kitchens and WeWork are in the business of renting out physical infrastructure, WeWork’s precipitous drop seems to have more to do with, you know, a shocking series of financial disclosures that included an allegedly self-dealing (now ex) CEO who may have transported marijuana internationally on a chartered jet, rather than the validity of the business itself.

To be honest, I find a lot of Crichton’s thinking on this topic muddled. First, it ignores that 60 percent of restaurant orders are now for off-premise (which includes delivery, takeout and drive-thru). There is a growing demand to eat restaurant food outside of the restaurant. As people want more delivery, the actual in-dining experience doesn’t matter, so why not rent out kitchen space rather than build out a full-on restaurant?

Additionally, Crichton posits that owning a cloud kitchen is bad business because of churn, writing:

…but if consumers don’t know where these restaurants physically are, what is stopping an owner from switching its kitchen to another “cloud”? In fact, why not just switch regularly and force a constant bidding war between different clouds? Unlike actual cloud infrastructure, where switching costs are often extremely prohibitive, the switching costs in kitchens seems rather minimal, perhaps as simple as packing up a box or two of ingredients and walking down the street.

This presumes that cloud kitchens are all being built in a cluster in the same neighborhood, and that restaurants don’t put more thought into the cloud kitchens they choose. A restaurant could rent out cloud kitchen space because of its location. A restaurant in LA’s Santa Monica could expand delivery across town to Pasadena by choosing a cloud kitchen there.

Crichton also seems to be lumping in standalone cloud kitchens like Kitchen United (though they aren’t mentioned in the piece) with those being built by third-party services like Uber, DoorDash and Deliveroo. But those are two entirely different models. Uber wants exclusive virtual restaurants so that you stay within the Uber app. Kitchen United just wants to fill up its space, it doesn’t care how you get your order.

This is important because one part of Crichton’s argument that I think is spot on is the reliance on third-parties for traffic. Part of the allure for hooking up with a DoorDash or an Uber is that a restaurant gets access to those apps’ massive audiences. We’ve seen this before as Crichton rightly points out:

Let me tell you from the world of media: Relying on other platforms to own your customers on your behalf and wait for “traffic” is a losing proposition, and one that I expect the vast majority of restaurant entrepreneurs to grok pretty quickly.

But restaurants are getting hip to this, and already we see brands like Wendys, Outback Steakhouse and Sweetgreen making moves to bring mobile ordering and delivery in-house. These internal systems can be integrated with a cloud kitchen as well and the future for restaurants is probably more of a hybrid mixture of first and third-party delivery.

Crichton closes by saying:

All of which takes us back to those misplaced investor expectations. Cloud kitchens is an interesting concept, and I have no doubt that we will see these sorts of business models for kitchens sprout up across urban cities as an option for some restaurant owners…

…But the reality is that none of the players here — not the cloud kitchen owners themselves, not the restaurant owners and not the meal delivery platforms — are going to transform their margin structures with this approach.

Crichton’s right! Kinda. Because the whole idea of a cloud kitchen and virtual restaurants is brand new, we don’t know how it will shake out. My colleague, Jenn Marston, believes that cloud kitchens are table stakes for restaurant chains any more, so we’ll undoubtedly see a lot of new models spring up as more restaurants get into the game.

More importantly, the idea of cloud kitchens is already evolving right before our eyes, including margin structures. Last month, Zume announced a new mobile cloud kitchen, wherein restaurants can have a full restaurant on wheels parked closer to people to facilitate faster delivery. And this week, Ono Food launched its robotic restaurant platform that fits inside a van. These mobile options make cloud kitchens even less capital intensive, and their reliance on data (moving to where the customers are) could help them become more efficient and profitable.

Having said all that, I think Crichton is sparking a real and valid discussion about cloud kitchens. It’s pretty easy for a trend to slip and become a caricature of itself. Taking these moments to reflect early on can help make sure we aren’t building another bubble.

SKS 2019: Naveen Jain Thinks We’re 5 Years Away from Making Sickness Optional

Back in 2010, entrepreneur Naveen Jain co-founded Moon Express, a privately held company gunning for the Moon. “When you have literally taken the moon shot, what do you do for an encore?” he asked the audience at the Smart Kitchen Summit 2019.

For Jain, the answer was, tackle healthcare. (No big, right?) To do so, he started personalized nutrition company Viome in 2016. Last week Jain told SKS attendees that he believes we’re just five years away from making sickness “optional.”

If you want to hear Jain’s vision for curing some of society’s most persistent diseases, you can watch the video of his conversation with moderator Brian Frank at SKS 2019 below. But for you impatient folks out there, the (very) short solution to curing chronic disease is to eat better.

Easier said than done, of course. You may think you know what “eating healthy” means — greens, lean proteins, etc. — but as Jain says, “What is healthy for one person is actually maybe toxic for someone else.”

Jain gives an inspiring argument for why we should all take a much closer look at what’s going on in our gut, and why personalized nutrition could help make disease a thing of the past. Check out the video below to hear why and keep an eye out for more content from SKS 2019 coming your way!

SKS 2019: The Power of Personalized Nutrition

SKS Hot Seat: WPC’s David Baarman Says the Future of The Kitchen is All About Simplification

As kitchens get smarter, they also tend to get more cluttered and complicated, especially if the various connected devices involved don’t communicate with each other. Wouldn’t it be nice if there was some sort of universal standard that allowed all smart appliances to be interoperable?

That’s exactly what the Wireless Power Consortium (WPC) is trying to achieve with its new Ki wireless power standard. The consortium works with over 600 companies to simplify the smart kitchen, making various connected devices simpler to use in tandem — and, of course, wireless.

We sat down with David Baarman, Co-Chairman of the Kitchen Application & Promotions Group at WPC, at SKS 2019 last week to ask a few questions about how his company is working to make the kitchen not only smart, but also simple to navigate. Check out the video below and be on the lookout for more videos from SKS 2019 to hit The Spoon soon!

SKS Hot Seat Interview: David Baarman, Wireless Power Consortium

SKS Hot Seat: Millo’s Aivaras Bakanas on The Ripple Effect of Smart, Silent Kitchen Appliances

I always feel a little guilty because I wake up a good hour before my roommates and one of the first things I do is make my morning smoothie. And our blender is loud.

Maybe I should think about investing in a Millo. The startup makes a platform with a powerful motor run by magnets, which is much quieter than a traditional motor. Their first product is a cordless, stylish blender, which impressed folks at SKS 2019 so much that Millo ended up winning the Innovation Award for the SKS Startup Showcase.

After collecting their award, we invited Aivaras Bakanas, co-founder and COO of Millo, to our SKS hot seat to answer a few questions about the company’s technology and what kitchen appliances they’ll be tackling next (hint: coffee grinders). Check out the video below and be on the lookout for more videos from SKS 2019 to hit The Spoon soon!

SKS Hot Seat Interview: Aivaras Bakanas of Millo

SKS Hot Seat: CocoTerra’s CEO on Why You (Yes, You) Should Make Chocolate From Scratch At Home

When you think about things you can make at home — bread, pasta, juice — chocolate is probably not something that jumps to mind. It’s a complicated, time-intensive process that takes skill and special equipment to master.

But what if there was a machine that could do it all for you? CocoTerra is a new startup lowering the barrier to entry to home chocolate making with the world’s first countertop chocolate-making machine. The device lets even the most basic home cooks create their own bespoke chocolate in just two hours.

We were so intrigued by this idea that we chose CocoTerra as one of the finalists for the SKS 2019 Startup Showcase, which just happened this week. In between giving out (very tasty) samples of chocolate, CocoTerra CEO Nate Saal sat down in the SKS Hot Seat to answer a few rapid-fire questions on his device, the potential of personalization, and how he envisions the future of the food ecosystem.

Check out the video below! And keep your eyes peeled for more videos from SKS 2019 coming your way soon.

SKS Hot Seat Interview: Nate Saal of CocoTerra

Calculating Lifetime Value to Disrupt the Kitchen Appliance Industry

Periodically the Spoon publishes guest posts from those in the industries we cover. This post is from Zvi Frank, the Co-CEO and founder of Copilot (www.copilot.cx). Frank describes Copilot as “the first automated customer experience management platform for consumer electronics.”

Lifetime Value (LTV) matters to every business, but in one-time transactional businesses like the kitchen appliance industry, calculating that value can be very difficult. Historically, brands have been reliant on warranty cards, service calls, third-party surveys and, more recently, social media to get a view on the likelihood that a one-time customer might become a repeat customer. All of this can be summed up in one word: reactive. But what if you could forge a more direct relationship with your existing customers and calculate an increased LTV?

The advent of Internet of Things (IoT) for Consumer Electronics and the wave of connected products hitting the market offer a ready-made solution for the historically one-time transaction business. The very nature of connected products puts kitchen appliances manufacturers in direct contact with their user base. By capturing data about your users, you have more insight than ever before. What’s more, you now have the ability to respond to user actions and behaviors in real-time, opening the door for an LTV approach to your revenue stream. This trend enables you to more effectively calculate the LTV for your smart kitchen appliances.

What is LTV for kitchen appliances?

In general, LTV is the net revenue expected from a customer over an expected lifetime. Note that customer profitability is a metric looking back (historic view) and LTV is a forward-looking model based on current available parameters. One of the basic adjustments required when applying LTV to kitchen appliances is the need to deal with net contribution of every device sold, which basically means product billed price less variable costs. These costs include the Bill of Material (BOM), retail margin and any other costs incurred per appliance sold.

Why do I need to measure LTV?

Well, if you are going to be investing in customer satisfaction, you will want to see the monetary return of longer customer lifetime as well as happier consumers. That’s obvious. However, beyond a benchmark to measure change over time and assess progress, LTV will also give you a good sense of what Customer Acquisition Cost (CAC) you can afford in your marketing plans and what kind of retention plans to employ since retention changes impact LTV directly.

How do I measure LTV?

LTV calculation should take many pieces of information into account to make it fully accurate, but for most companies, this exercise may prove too complicated and requires data that is not readily available. The formulas presented below are a simplified version of the complete model that essentially requires the net contribution of a device sold (price less variable costs) with all other parameters that can be automatically extracted from a customer experience platform or database of user information.

Note that consumer electronics companies all have an initial purchase but then vary in the ways they can see further revenue from a customer. The most basic LTV available to all products-–even those without any recurring replenishment, accessory sales or line of product sales–is Refer a Friend (RAF). At the very core, each of your users can and, if addressed properly, will refer a friend for a discount and some personal incentive. The formulas below start with this most basic scenario and add other revenue streams incrementally.

* Be aware that this kind of LTV modeling does serve the purpose of LTV calculation as presented above, but will not stand the sanity check of dividing overall revenue contribution by number of products sold.

LTV Formula

The simplest case for LTV calculates the contribution of customer referrals only. The second most frequent source of incremental LTV revenue comes from accessories and/or other lines of products sales. Products that also have consumables will obviously be able to add that to the mix, as well as any subscription service sold on top of the device, if one exists.

We start with the most basic formula for the most basic products and start adding from there:

LTV = Initial Purchase Contribution 

LTV = IPC 

With refer a friend program:

LTV = Initial Contribution + Recurring  contribution from Referees

LTV = IPC  + IPC * RAF(m) * LT  

Up Sell – For companies with a recurring revenue stream such as replenishment and/or accessory sales, basic LTV will be:

LTV = Initial Contribution + Recurring Profit 

LTV = IPC + RRC(m) * LT 

With refer a friend program:

LTV = Initial Contribution + Initial Contribution from Referees + Recurring Contribution + Recurring Contribution from Referees

LTV = IPC + LT * ( RRC(m) + RAF(m) * ( IPC + RRC(m) ))

Let’s have a look with some real-life numbers:

Retail price – $144.00

IPC – $71.00

LT – 12 months

RRC(m) – $2.00

RAF(m) – 1%

71+ 12*(2+0.01*(71+2)) = $156.32

LTV = $156.32

Legend:

IPC – Initial Purchase Contribution

RRC(m) – Recurring Revenue contribution, monthly

LT – Lifetime (months)

RAF(m) – Refer a Friend  Rate, how many users on average an active user brings in a month

To summarize, in a world of ever-diminishing margins, companies who are quick to adapt their business model and introduce Lifetime Value into their metrics and efforts will have a better chance of surviving the rapid transformation the Kitchen Appliances industry is going through. Accurately measuring LTV is a great place to start, but embracing tools and processes will enable you to act on and improve the LTV (and customer experience) are critical to the success of those products.

Your Turn:
Have you calculated the LTV for your customers?  What opportunities do you see for brands to increase LTV? Let us know in the comments.

Burden of Proof Makes Cocktails with All the Pizzazz, None of the Booze

It used to be, if you wanted a non-alcoholic drink you were basically stuck with water, soda, or maybe a virgin pina colada. Now, spurred by younger generations’ embrace of wellness, ‘mocktails’ are becoming a craft area all their own.

Burden of Proof, a finalist of our Future Food competition for the Smart Kitchen Summit {SKS}, is trying to cash in on this new trend in non-alcoholic beverages that excite just as much as their boozy counterparts. They’ll be pitching onstage at SKS next week, but we spoke with Zain Tarawneh, founder of Burden of Proof, to get a sneak peek into how their company hopes to turn the social beverage game upside down. Check out the Q&A below then grab your ticket to SKS!

This interview has been slightly edited and condensed for clarity.

First thing’s first: give us your 15-second elevator pitch.
Burden of Proof makes culinary-inspired sparkling cocktails, 0% ABV, packaged in aluminum cans. Crafted from a range of ingredients like cold-pressed citrus, purées, cold brew herbal teas with l-theanine and spices/herbs, our priority is to the retain the fresh, nutritious and functional elements of the ingredients we mindfully choose. Our elevated beverages provide healthy alternatives in social settings while promoting social inclusivity.

What inspired you to start your company?
As someone who prioritizes health and wellness, I questioned why functional wellness beverages were sold everywhere except in social settings. It was frustrating that water was my only healthy option at restaurants, bars, networking happy hours, live sporting events and concerts. With attention to health and wellness at an all time high, I was even more baffled that sugar-loaded mocktails were classified as the healthy alternatives.

After researching non-drinkers and drinkers choices in social settings, I found they shared the same problem: the lack of healthy beverage options was pigeonholing them into mindless, unhealthy choices. So we took the fresh elements that people love in mocktails like fresh-squeezed citrus, purees, teas, herbs and spices and prioritized retaining their functional properties like nutrients and antioxidants. We then added l-theanine, an amino acid found in green tea known for counteracting cortisol (the stress hormone), benefiting mood and alertness and promoting a calm, focused relaxation. Finally, we made it sophisticated in taste and elevated in style so it would fit into social settings. It was also important that we make it sustainable in practice so we planned to can it into recyclable aluminum cans. With that, Burden of Proof was born.

What’s the most challenging part of getting a food startup off the ground?
The food and beverage space is a real science and with that comes a huge learning curve. I constantly have to research and learn new things. That can be daunting, but it helps having people you can go to who have successfully launched and currently sell in the food and beverage space.

Creating a clean, functional and transparent product is also more challenging than creating an industry standard beverage that contains things like artificial sweeteners or preservatives. Most of these beverages position themselves on flavorings versus function. For example, many co-packers heat pasteurize which leads to changes in flavor and degrades nutrients. Because our brand is built on retaining the freshness and nutritional qualities of our ingredients, popular manufacturing practices are limiting. Going completely against that is challenging. Although it can feel like you are trying to solve problems that are unsolvable, part of being a creative is creating a way out of your circumstances when there isn’t one.”

How will your company change the day-to-day life of consumers and the food space as a whole?
Burden of Proof is built on the belief that you shouldn’t have to carry the burden of providing proof or reason for your positive choices. Similar to drinking, both eating and smoking are also considered social activities but here is where they differ: if you are a vegan, there is no social expectation to explain why you arn’t eating a cheeseburger if everyone else is. Mainstream society accepts and promotes healthy eating options. If you don’t smoke, it’s socially acceptably to just say no. That is because there was a rise in public awareness surrounding the ill effects of cigarettes.

But if you aren’t drinking because you work early the next day, you are allergic, it gives you headaches, you are on medication, you are expecting, you abstain for spiritual reasons, or you just don’t feel like it (the list goes on), there is social pressure to provide your reason. We want to lift that burden so there’s freedom to make positive decisions without having to explain yourself. By working to provide alcohol-free but sophisticated beverage options, we can help carve social change with regards to normalizing healthy lifestyle choices.

Whether it’s at a company happy hour, on a night out with friends or enjoying your own company at home, we want our consumers to not only have healthy alternatives but also feel free, confident and socially included irrespective of their beverage choices.

Millo Is Reinventing the Blender to Make it Quieter, Sleeker and Smarter

You probably have a blender in your house. It’s probably… fine. But what if your blender could not only make you a really good smoothie, but do it silently — and look pretty dang cool in the process?

That’s exactly what Millo, a new startup reinventing the blender, is trying to do. They’re one of the finalists in the Startup Showcase at our Smart Kitchen Summit {SKS} food tech conference. We spoke with Ruslanas Adam Trakšelis, the co-founder and Chief Commercial Officer of Millo, to learn more about how the company is improving upon one of the most common household staples. Check out the Q&A below then grab a ticket to watch him and the other Startup Showcase finalists pitch live next week! We only have a few left (seriously), so get on it if you’re interested.

This interview has been lightly edited for clarity.

First thing’s first: give us your 15-second elevator pitch.
MILLO is the blender reinvented as a smart gadget. Using unparalleled magnetic clutch and a brushless motor called AirDrive, the MILLO has no bulky-looking mechanical parts and stands out by its sleek Scandinavian premium/minimalist design. MILLO is cordless, buttonless and fully portable. Its smart electronics, together with firmware, enable real-time tracking of changes in liquid consistency, which allows extreme precision and creates a new dimension in recipes that are conveniently shared within the Millo app.

What inspired you to start your company?
MILLO was born out of the frustration experienced by everyone who makes smoothies. Usual blenders are noisy, messy and hard to wash. After a number of occasions in which I woke up my newly-born daughter while making my post-workout morning smoothie, I decided to reinvent the blender.

The moment of inspiration came when I was watching my daughter playing with a toy which rotated two dancing figures with magnets. That inspired me to develop AirDrive, a motor based on the magnetic coupling. The AirDrive technology eliminates mechanical friction of engine parts, thus the noise level is reduced significantly and I don’t disturb my family’s sleep.

What’s the most challenging part of getting a food tech startup off the ground?
I believe this is not related to food tech startups in particular, but startups in general — the main challenge is to find the right people who believe in the project the same way as you do, or close to it. Not only co-workers, but also investors, advisers, etc.

How will your company change the day-to-day life of consumers and the food space as a whole?
Today’s lifestyles have us more overworked and time-poor than ever, with our bodies and our well-being suffering as a consequence. Obesity, heart disease, and stress-related illnesses are some of the greatest threats to our health today. But we don’t need devices telling us to break our bad habits — we need technology to help us to leave them behind.

MILLO is not just an improved blender, but a true gadget specifically designed to help us integrate a better diet and nutrition to our modern, busy lifestyles. It takes the noise, mess, and hassle out of blending, making it easier than ever to make the right choices

Get one of the last remaining tickets to SKS to watch Trakšelis pitch onstage with the other Startup Showcase finalists! We’ll see you there.

Naveen Jain Says for Perfectly Personalized Food, Trust Your Gut. Literally

What if the food you ate could not only help you feel better and lose (or gain) weight, but also cure chronic health conditions, make you more alert, or even clear up your skin?

That’s exactly what personalized nutrition company Viome is trying to do. Viome’s CEO Naveen Jain will be onstage at the Smart Kitchen Summit {SKS} next week to talk about biomapping your menu and the power of personalized diets.

We spoke with Jain recently to learn more about how he’s trying to reinvent individual nutrition, starting with the gut. Read a little teaser about our conversation on Viome’s capabilities below, and be sure to get your tickets to SKS (there’s only a few left!) to hear him talk about the future of nutrition and personalization onstage.

You might not know it, but there are over 40 trillion microbes currently living in our gut. These microbes help us break down food and absorb nutrition, but, as living organisms, they differ person to person. So why isn’t the food we eat attuned to our specific gut microbe breakdown?

Jain thinks it should be. “We understand the human body at a biochemical level,” Jain told me. “Everything in your body is so personalized. That’s why we should change healthcare from the ‘one size fits all’ model.”

That’s why he created Viome, which uses an individual’s stool sample to check out what the microbes in their gut are doing. Based off of that data, the company can tell them which foods are good for them (and why)‚ which ones are not so good, and can also recommend dietary enzymes to help stabilize your gut or facilitate weight loss.

Viome used to be limited to analysis and supplements, but a few months ago the company acquired personalized nutrition company Habit. Jain said that they’re using Habit to add integrated recipes and meal planning into the Viome platform. Though it’s added new services, Viome has also gotten a lot more affordable. When it first launched in 2016 its test cost $400 — now it’s under half that.

All of this goes to show that personalized nutrition is getting more accessible, relevant, and better about pinpointing exactly how individuals should eat to meet their health goals. Is it the future of eating? It very well could be. The best way to find out is to join us at SKS as Jain and others do a deep dive into the potential power of personalized eating. We’ll see you there!

From Voicebots and Loyalty to Data and Delivery: What Are the Next Big Hits (and Misses) in Food Tech?

This is a guest post written by Brita Rosenheim, Partner at Better Food Ventures. This Food Tech Industry Landscape and state-of-the-industry analysis are intended to help operators, entrepreneurs and investors in the food system to understand the quickly evolving themes and trends currently impacting the food tech industry. You can meet Brita at Smart Kitchen Summit on Oct 7-8th.

I have been tracking the food tech ecosystem for the past decade, and along the way have seen many business models and fads come and go, from daily deals and local loyalty schemes, to meal kits and the on-demand convenience economy, to the ever elusive promise of personalization via some version of “Pandora for Food”. 

Reflecting on the profound changes and growth that have occurred within the ecosystem over that time frame, I’ve decided to make significant adjustments to the annual Food Tech & Media Landscape to reflect today’s new realities. In the most recent year we have seen previously hot sectors cool (like e-commerce meal delivery and guided cooking); new sectors take shape (like personalized nutrition and voice-driven platforms); and many B2B platforms that are leading to, among other things, new cross-sector “enabling technology” plays. 

Here’s a brief primer on the latest Food Tech & Media Landscape before I dig into my key takeaways below:

  • This is a heatmap, not a comprehensive catalog: While clearly not exhaustive, this map is meant to illustrate the layers and variety of technology solutions, early stage to mature, both consumer-facing and B2B technologies. Food tech is a tremendous global opportunity, however in order to narrow the perspective (and eyestrain!) I have only included technologies with a US customer/user-base.
  • “Food Tech” here means food distribution through end consumption: Depending on which hat you wear, and where you sit within the ecosystem, “Food Tech” can mean many things. Whereas my colleague Seana Day publishes an AgTech Landscape, which maps seed through supply chain technologies, this landscape meets her in the “Messy Middle” with traceability/sustainability platforms, and then moves further downstream to food/bev product innovation, media, marketing, and the many varied paths towards end consumption.
  • Focus is on IT-driven, primarily VC-funded technologies: While VC funding is not a requirement to scale, it is often an enabler of growth, and this Landscape primarily highlights innovative startups and higher-growth companies that are enabling the food ecosystem via technology. Which means, although still part of the Landscape’s title and framework, there is a significant decrease of media categories versus previous versions of the map, reflecting the broader shift and struggles of the media industry with few avenues for content monetization. Separately, given that food ecommerce is no longer niche and is now integral to the strategy of most brands, the ecommerce lens has been shifted to focus on technology solutions and platforms within fresh/grocery and meal delivery.
  • The new doubledecker format helps to simultaneously frame the evolution of the consumer consumption journey from in-home to out-of-home, while also highlighting enabling B2B technologies that span multiple sectors and/or categories: The top portion of the Landscape is organized left to right by a customer’s final location of engagement/consumption in an effort to categorize the variety of technology and media players shaping how consumers discover, cook, order, consume, and enjoy food experiences today. The horizontal band at the bottom breaks out a number of “Enabling Technologies”, recognizing that a growing number of B2B food tech companies are connecting multiple partners to create a more robust food system.
  • Hardware is (mostly) unplugged from this landscape:  You will note this Landscape does not carve out dedicated categories focused on robotics, automation and IoT devices, despite the recent momentum. This is intentional, as the increasingly crowded food-related hardware space warrants its own dizzying landscape analysis. For example, The Spoon recently created a thoughtful Food Robotics Market Map that addresses a number of hardware-driven sectors. I will say that, in general, many of the VC-backed hardware devices have not really scaled to success and we should expect more downround financings, consolidations and acquisitions in the near term. 

And now, onto my thoughts and analysis on the recent shifts in the food tech ecosystem:

IS CONNECTED CONTENT PANNING OUT? 

Alongside next-gen IoT cooking innovations, over the past couple of years we have seen a number of tech-savvy recipe content publishers leveraging technology platforms in order to transform content into guided and conversational cooking offerings.

However, despite the tremendous breakthroughs entrepreneurs have made to augment an in-home cooking experience that is more convenient, enjoyable, personalized or nutritious,  this “connected content” category has largely remained in the “nice to have” business model stage (versus “need to have”).  To date, neither corporations nor consumers have been willing to foot the bill for recurring revenue around additional capabilities and insights.

As of yet, the connected kitchen ecosystem that was supposed to be a bridge to new business models like product/content subscriptions, ecommerce, advertising or SaaS data plays, has simply not yet panned out the way most entrepreneurs had hoped.

While everyone believes there is value in the data from smart devices, to date not many have been willing to pay for it. That said, a recent announcement by Discovery (via The Food Network) and Amazon (via Alexa) shows that the dream is still alive, as the two companies plan to launch a live action subscription service (at $7/month) to provide cooking instructions, recipes and connected grocery services (via Amazon, Instacart and Peapod) in select markets this October.

‘PERSONALIZED NUTRITION’ SHOULDN’T REQUIRE PRECISION OUTCOMES

While “personalized nutrition” is a big buzzword these days with CPGs (including Mars, Kraft Heinz, and Nestle) using the term to boost their innovation cred, a bulk of the funding and acquisition activity in the space has actually been around nutraceutical/vitamin companies (likely due to healthy ecommerce recurring revenue models) rather than diet/food-driven technology platforms. 

One issue which has hindered many startups in this category is that there are currently few straightforward business models outside of ecommerce or subscriptions, and retention has proved to be quite challenging. The B2B SaaS market has recently begun to develop and remains promising, however to date, many of the technology platforms, whether direct to consumer or B2B, just haven’t scaled.

Beyond business model challenges, I believe a key issue within this sector is that many companies are trying to personalize with the goal of chasing a precision outcome that is just not possible. Normalized human behavior, especially when it comes to food, is simply not precise. Many companies have built technologies that require 1) an engaged user base, 2) active tracking of specific food/health behavior, and/or 3) accurate self-reporting – which, respectfully, are often fleeting, imprecise and inaccurate.

There are absolutely times that a prescriptive approach is helpful in order to keep health goals on track, or to manage chronic illnesses, but much like the many, many (many) “Pandora for food” concepts I have seen over the past 10 years – all of which promised to tell me precisely which recipe, dish, restaurant, drink or product I would undoubtedly love – I believe it is a mistake to build upon the premise that there is one (or few) right answers, when in reality, there are countless iterations of success. 

Thus, the next generation of personalized nutrition platforms should 1) be versatile, adaptable and seamless enough to only warrant passive engagement; nudging the consumer towards healthier decisions, 2) re-envision how to minimize inputs (if any) of food/health behavior (outside of on-boarding and updates), and 3) eliminate the need for self-reporting. 

On this front, in the near term, we are seeing an uptick of momentum in B2B platforms that are setting a data foundation and/or nutritional lens in order to enable various players throughout the food ecosystem to provide enhanced and personalized health experiences. For example, Diet ID has partnered with SunBasket to gather insights on customers’ dietary patterns and seamlessly help recommend meals that align with their goals. Edamam recently partnered with restaurant/catering companies like Juice Generation and ZeroCater to easily integrate nutrition and dietary info across all menus and dishes. Lighter Nutrition, has recently partnered with Mass General Hospital (among others) to provide an enterprise platform for health care providers to be able to customize meal plans and grocery shopping for their patients. 

As I mentioned during a talk at Groceryshop 2019, I think food retailers/grocers are in a particularly unique position to impact healthy choices. Wellness is a clear strategy as grocers look to differentiate in an increasingly commoditized sector, and thus while the national chains have more budget for these initiatives, it is all the more important for small/midsize grocers to compete. Regional grocer Heinen’s is ahead of the game, as they hired a chief medical officer and chief dietitian years ago, but they recently kicked it up a notch with the recent announcement highlighting their own Fx platform for personalized diet plans. For grocers without their own chief medical officer, there are startups like FoodMaestro and Spoon Guru, which partner with grocers to layer health data into the shopping experience. 

In summary, the personalized nutrition technology space shows huge potential in the long-run and while it is showing some momentum in the short-term, there are still fundamental challenges to “personalized nutrition” platforms that will likely take this sector more time to mature.   

VOICE AND BOTS OFFER A NEW AVENUE OF ENGAGEMENT

Restaurants, brands, retailers and advertisers have increasingly started to think in terms of conversations (rather than one-time transactions or ad placements) in order to maintain consumer engagement and engender lifetime value. 

In addition to McDonald’s recent acquisition of drive thru AI-voice platform, Apprente, the last couple of years have been witness to a surge of AI-driven conversational platforms for the food industry. From automated brand communication to voice-driven platforms focused on nutrition, grocery, coffee, online ordering, drive thrus, and even Back-of-House solutions focused on restaurant bar inventory, there are numerous use cases to ditch the typing (or phone, pen and paper!) and streamline via conversational technologies.

THE PRIMACY OF FIRST-PARTY DATA: DATA ANALYTICS COMPANIES ARE GETTING BOUGHT BY THEIR WOULD-BE CLIENTS

Counter to the more traditional network effect approach where clients of software companies benefit from leveraging their data by blending it with that of their competitors, an interesting recent trend has emerged where a handful of early stage AI-and data-analytics startups within the food, retail and restaurant sectors were acquired early on by a customer in order to bring data and insights in-house. 

This highlights the ever increasing primacy of first-party data as a competitive differentiator. Recent examples include McDonald’s purchases of Dynamic Yield, Walmart’s acquisition of Aspectiva and even Instacart’s acquisition of MightySignal.

THE CONVERGENCE OF “OMNI-CHANNEL MEALS” 

There has been an overall convergence of in-home food channels that one might call “omni-channel” consumer food delivery as consumers are making less of a distinction between delivery of groceries, prepared meals, meal kits, e-commerce CPG purchases and restaurant delivery.  

When Amazon acquired Whole Foods two years ago, I hypothesized that the Amazon/Whole Foods combination would be a threat to both brands and local restaurants. I believed that the competition from a more streamlined grocery category capable of delivering its own in-store prepared food, private branded products and meal kits ( a “grocerant” platform) combined with Amazon’s logistics, would be a threat to local restaurants. However, to date, it has not played out that way – which in part shows how hard it really is to execute on a successful food program.  

PRIVATE EQUITY’S GAZE SHIFTS FROM RESTAURANTS TO RESTAURANT TECH 

As private equity activity continues to sizzle in the restaurant sector, we are seeing private equity players begin to enter the restaurant tech category via rollups and mergers of incumbents. That said, while you would think some of these investors are looking for synergies or operational efficiencies among their restaurant portfolio, there is actually little overlap between the restaurant and restaurant tech private equity investors stepping into the space (save for Danny Meyer’s Enlightened Hospitality).   

Some recent private equity entrants to the space include Marlin’s merger of Fourth and HotSchedules, Vista Equity Partners and Enlightened Hospitality Investments cash infusion into Gather, and Great Hill’s $65 million investment into Paytronix last year. 

The food tech and restaurant tech sectors haven’t quite caught up to the broader financing ecosystem, however, as Pitchbook notes that PE-led acquisitions accounted for almost 40% of North American M&A volume in 1H 2019 (up from a historical average of <30%). 

RESTAURANT DELIVERY CONTINUES USING “GO BIG OR GO HOME” PLAYBOOK

We continue to see a huge wave of continued consolidation in regional restaurant delivery networks as the national players need to keep scaling in order to lower per- customer costs in the technology, marketing, infrastructure and customer support realms. Nationally, Caviar’s recent $410 million acquisition by DoorDash was notable given there were no buyers when it was being shopped three years ago (reportedly they were asking for $100 million), but fast forward to 2019 and Square was able to sell it for a significant premium. 

Softbank, a major investor in DoorDash, is famously known to be a believer in the market-grab (i.e. “go big or go home”) philosophy and likely used that as justification for paying the premium over Square’s acquisition price. It is questionable whether Caviar’s business performance alone could have justified paying that premium. Time will tell whether the combination of DoorDash and Caviar will provide enough market momentum to get both companies to stop bleeding cash.   

FOOD TECH SERVES LUNCH FOR CORPORATES

The convenience economy is no passing fad. And while we have seen many food delivery companies unable to “go big” already “go home” through shutdowns and firesales, it has also paved the way for new, and capital efficient approaches to personalized food distribution. Within this, corporate meals have been a particularly bright spot.   

The fundamental challenge of most food delivery companies has been to make the economics work to deliver one meal to one person/family across different places and times. In contrast, as the entrepreneurs behind the 40+ venture-funded corporate lunch startups have figured out, group dining can actually deliver profitable margins. As such, there have been new crops of competitors entering the fray on a regular basis; 35% of these VC-funded concepts were founded in only the past 5 years. 

But as we discussed on the “Future of Corporate Lunch” panel at SKS 2018, there are actually a plethora of tech-enabled competitors vying for the business opportunity of the lunchtime worker – ranging from quick service brands like Sweetgreen, who is using the recent cash infusion to support corporate delivery platform Outpost, to last mile delivery services from restaurants and dark kitchens, to pre-made meal solutions from retailers, grocers and D2C ecommerce players. And don’t rule out in-office smart vending, IoT, robots, or of course, the incumbent institutional dining providers.

As an aside, the same volume-driven economic motivator is also bolstering an increased focus on college towns and campuses, especially since they can deliver population density outside of major markets. Besides college food marketplace Tapingo, which was acquired by Grubhub in 2018 $150 million, you will find a number of other college-focused food platforms in the Landscape including Kiwi Campus, Snackpass, and Hooked. Even Sally the salad-making robot is heading off to college!

While the economics of corporate lunch delivery can be solid, we have not yet seen even the beginning of the national rollups in this space. As most corporate and catering startups are still regional (even if the regions are large or span multiple parts of the country), I predict this will be a compelling area of consolidation in short time.

WITH THIRD-PARTY TECH “PARTNERS” LIKE THESE DO RESTAURANTS NEED ENEMIES?  

As we initially discussed in our 2018 Restaurant Tech Ecosystem report, it’s tough to be a restaurant or hospitality operator today. We’ve increasingly seen a myriad of issues cannibalizing operators’ margins, including rising rents and labor costs, as well as the onslaught of third-party ordering/delivery services. And simultaneously, operators are being bombarded by a nonstop offering of emerging technologies which are promising front-of-house (FOH) and back-on-house (BOH) efficiencies.

Currently, one of the most talked about threats to restaurants’ income statements are from third-party ordering/delivery technology “partners” that are skimming significant margins from restaurant operators for off-premise orders (both take-out and delivery). 

These third-party marketplace partners are selling restaurants the chance to increase reach and volume through delivery and larger platforms, arguing that the additional incremental sales volume is pure margin due to significant fixed costs in the restaurant model. But that lens is too simplistic, as off-premise sales include additional indirect and hard to measure costs, and many operators are actually reporting negative margins on third-party delivery (“3PD”). For more depth on this topic you should read the medium post by the CEO of customer engagement platform Thanx, in his comprehensive takedown on the massive disruption facing restaurants today.

Beyond P&L implications, there is also a data gap with many third-party marketplaces, as many of these partners are looking to capture the customer data for their own platform’s success. When they are unwilling to share even basic data on the restaurant’s own customers, the 3PDs are showing their hand in that they view these restaurant customers as their own customer base.  

THE BIFURCATION OF RESTAURANT CUSTOMER LOYALTY: THIRD-PARTY ORDERING/DELIVERY MARKETPLACES ARE POISED TO TAKE OVER AS UNIVERSAL LOYALTY PLATFORMS

One of the early trends I tracked in local tech was the digital reinvention of the punch/stamp loyalty card – with startups promising one universal loyalty account to replace them all, by using gamification, check-ins, push notifications, digital wallets and the lure of a network of deals at a consumer’s fingertips. 

Many startups built a business plan around becoming the universal loyalty network, spending time (and capital) to build a consumer-facing brand in order to simultaneously woo local merchants with their impressive user base. In years past this was an overflowing category in the Landscape, however the logos have dramatically slimmed as most of those startups have since either been acqui-hired, pivoted out of the food/restaurant sector or simply failed. Escaping the deadpool, Fivestars is a notable exception, having continued to successfully scale via numerous merchant verticals and geographies.

That doesn’t mean loyalty schemes have disappeared, in fact, white label (i.e. merchant-branded, not tech-company-branded) solutions are thriving, and you will see that the Landscape category focused on B2B restaurant solutions for CX (Customer Experience), Marketing and CRM (Customer Relationship Management) is bursting at the seams. I predict this category will continue to grow in next year’s iteration of the Landscape.

A key reason for the struggles of the first crop of loyalty startups was that a many of the founders and technologists lacked local merchant/restaurant experience, and struggled to create compelling win-win solutions as they tried to solve for the operational complexities related to running a long-tail, two-sided marketplace. It is a hard business to scale, and ultimately, without the network effect, the value exchange was simply not compelling enough for users (or merchants) to remain engaged. 

However, there is another lesson to be learned here that can be applied to how we think about the third-party ordering/delivery scene. Many of the loyalty startups were ultimately competing against their own customers (the merchants) for branding and mind share, which by default did not create a win-win model to best serve the interests and priorities of restaurants/merchants. This tension is again showing up with third-party ordering/delivery marketplaces, but rather than just competing for mind share, the leading third-party partners seem to be increasingly setting their sights on owning the customer’s entire journey. Grubhub’s recent launch of a loyalty program supports this thesis.

In a relatively short time, due to the ease, variety and scale offered via marketplace apps, the customer’s loyalty journey has transformed, now bifurcating to either: 1) direct ordering from the restaurant (online or in-person), or 2) loyalty to one or many ordering/delivery platforms. Thus the future success of many restaurants depends on handing power back to the operators, which is why there is such a healthy market for white-label ordering & delivery, and automated customer engagement platforms.

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I’ve enjoyed watching the Food Tech sector grow over the last decade, but am certain we will see even more meaningful growth in the decade to come. At Better Food Ventures, we believe technology will prove to be the single biggest catalyst to solving critical problems across the global food ecosystem, and we are particularly encouraged by the continued growth of tech-driven innovations and frameworks across the food sector.

The Food Tech & Media Landscape will continue to change as the industry matures, and as such, we depend on the wisdom of the participants in the space. I welcome your thoughts and reactions and look forward to following this sector together in the coming years. You can download the map here.

Perumal Gandhi of Perfect Day Thinks that Yeast and Bacteria Can Help Feed the Planet

The temptation of ice cream can be a killer for even the most devout dairy-abstainers and flexitarians. So much so that Perumal Gandhi and Ryan Pandya were motivated to create Perfect Day, a company that makes animal-free dairy products with the exact same proteins as the real thing, thanks to fermentation. Their debut product, a suite of ice creams, disappeared as soon as they were released (I can personally attest that they were very, very delicious).

We reached out to Perumal Gandhi to learn more about his motivation behind co-founding a company that makes dairy from microbes. It’s just a snippet of what he will discuss onstage at the Smart Kitchen Summit {SKS} on October 7 & 8 in Seattle, so get your tickets now!

This interview has been lightly edited for clarity. 

What inspired you to create Perfect Day, a company that makes dairy without the cows?
For me it all comes back to the animals and the environment. My entire life, I’ve always been a nature lover and been conscious about humanity’s impact on the world. Although I was raised eating meat, dairy, and eggs, I decided to go vegetarian when I was young. This first transition was pretty easy, I just ate more dairy and eggs to compensate. Fast forward to grad school, I learned that dairy and eggs are part of the same problematic system of industrial farming, so I changed to a 100% plant-based vegan diet.

This second transition was far from easy — I found that I really missed cheese and dairy products. Given my scientific background, I knew that there had to be a way to make real milk in an environmentally friendly way, so I looked into it. Then, thanks to a coincidental twist of fate, I got connected with Ryan Pandya through our mutual friend, Isha Datar of New Harvest. New Harvest is a nonprofit research institution dedicated to funding cellular agriculture research. Isha told Ryan and I that we were the only two people who had ever approached her with the idea to make dairy without animals.

Ryan, like me, had a background in biomedicine, loved the natural world, and had struggled to completely give up dairy foods. We started trading our ideas for making dairy using well-known fermentation techniques. The rest is history! Five years later, we now lead a team of nearly 70 people, have begun to commercialize and scale our technology, and we plan on working with food companies around the world to help evolve what is possible for dairy foods and beyond.

You call your animal-free dairy “flora-based,” instead of plant-based or cell-based. Why is that?
Microflora refers to microorganisms collectively. We use flora as a shorthand way to refer to the fungi, yeast, algae, bacteria and other organisms commonly used across the world to produce ingredients via fermentation.

Not only can fermentation using microflora address the world’s nutrition needs — and our demand for animal products — without the significant environmental and climate impacts caused by animal agriculture, it can also allow for a climate- and geography-agnostic way to produce nutritious food.

Protein made using our flora-based approach is identical to that from animals, but also fundamentally and functionally different than plant-based proteins. We use the term “flora-based” rather than plant- or cell-based because it’s the most scientifically accurate term. We’ve found that it differentiates us from both plant and animal products and describes the origin of our protein in a concrete way.

Perfect Day recently launched its first product: flora-based ice cream (which was delicious). Where is it available now/when will it be on grocery shelves?
We’re so glad you liked the ice cream! This launch was very limited and was only available for purchase through our website. However, we’re working hard to get products made with our protein into stores in the near future. For now we’re directing people to sign up for our newsletter at our website — subscribers will be the first to know when, where, and what the next product will be!

What other products can we expect to see from Perfect Day?
It’s too early for us to share any details about future product launches – but we can say that we’ll have another announcement before the end of this year. Stay tuned!

What a tease! Come see Perumal speak about next-gen protein at SKS on October 7th and maybe you can get some more details out of him. Get your tickets here!