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Daily news and analysis about the food tech revolution

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Can Blue Apron Succeed? Five Questions With A Data Scientist Ahead of The IPO

In some ways, the meal delivery kit craze was one of the ways people started to notice major disruption happening in our food system. Technology and connectivity are finally starting to penetrate the ways we grow, cook, manage, order and think about our food – so it is fitting that one of the major IPOs of 2017 will also be the first meal kit startup IPO. Blue Apron is just a day away from being a publicly traded company on the NYSE where it will trade under the symbol $APRN. The company has already slashed its valuation ahead of the event, estimating stock prices will open between $10-$11 a share.

There’s been a great deal of speculation about the company’s S-1 filing and what their disclosures about revenue, customer acquisition costs and overall company health mean for interested investors.

We sat down with Daniel McCarthy, co-founder and Chief Statistician at Zodiac, a predictive analytics firm and data scientist at Wharton (aka he’s way smarter than us) to talk about the analysis he’s done on Blue Apron’s filing. He’s about to transition into a new role as a professor at Emory University. Daniel has written several interesting takes about the Blue Apron IPO looking deep into their disclosures and extrapolating additional info using data modelling and we wanted to ask him his thoughts about the company’s path to profitability on the eve of the IPO.

The Spoon: Given the challenge Blue Apron has with customer retention and your finding that retention actually gets worse with customer age, does the company have a path to profitability with the current model?
 

McCarthy: No, I don’t see a path to profitability if future customers are similar in retention and spend to the customers that Blue Apron has acquired in the past, especially those acquired over the last twelve months. At the same time, Blue Apron is a high-quality business. I would be optimistic that they could be profitable if they adopted a more LTV-centric way of doing business.

In particular, they should refocus and rationalize their customer acquisition spend around prospects similar to their high-value customers. This could (1) substantially reduce their CAC, which has moved up considerably over the past year, and (2) increase the quality of their subscriber base from a retention and spend standpoint. The downside to this strategy is that it will naturally be smaller, so there is less of a “sky is the limit” growth story to tell. Still, that seems better than being structurally unprofitable.

The Spoon: Blue Apron is reporting “active customers” in their filling as opposed to their subscriber base numbers, which you’ve noted is an unusual way for a subscription service to report their users. Do you have a sense of why?

McCarthy: I think they are reporting active customers instead of subscribers for two reasons.

  1. Active customers will always be a bigger number than total subscribers, so it makes them look bigger. Who doesn’t like to look bigger?
  2. I think that a part of them likes to think of themselves as more like a retailer than a subscription offering. If their customers come in and out periodically over time, they could argue that churn doesn’t matter as much, because the churners will come back at some point.There are a few issues with this line of reasoning. For one, churn matters at retailers too, even though we do not get to observe exactly when customers churn. For two, I think many of their periodic customers are strategic, only showing up when they are able to get a new promo discount. Finally, Blue Apron doesn’t provide us with meaningful data points about how periodic behavior (if there is any) affects the unit economics of their business.

The Spoon: You’ve reported that the revenue that Blue Apron is generating from more recently-acquired customers is less than from customers acquired in the past. Why is this?

McCarthy: They introduced the family plan in 2015, which has a lower price point ($8.99/serving versus $9.99/serving). It could be that we saw a mix shift in 2016 towards people with this plan, and that people on family plans are simply not generating as much revenue than the rest of the subscriber base.

The Spoon: Blue Apron turns a profit on 30% of its customers but their break-even point is moving farther away with each cohort due to declining revenue and growing customer aquisition costs (CAC) for newer customers according to your analysis. Can you tell how fast that percentage is declining?

McCarthy: It’s a great question, and it would be pretty risky to do a simple extrapolation off what we’ve seen over the past twelve months, especially since the rise in CAC has been very dramatic lately.

The Spoon: Subscription services for goods is a popular trend right now, both in the food market and outside. Is there an example of another subscription startup that’s getting customer acquisition right?

McCarthy: Dollar Shave Club has wonderful customer retention. While I generally am leery of relying on business intelligence firms to make absolute statements about retention, I think they are a very helpful tool for making relative comparisons across firms. This chart was very striking in that regard. It really highlights how much better customer retention is at DSC relative to Blue Apron. And that Blue Apron’s retention, while not good, is nevertheless better than their competitor, Hello Fresh.

We’re interested to see what happens to the Blue Apron stock tomorrow as it hits NYSE and how the first meal kit delivery IPO will shift the still growing market. Stay tuned.

Blue Apron’s Biggest Problem Pre-IPO? Finding Loyal Customers

Blue Apron’s impending IPO has been the subject of much speculation and anticipation in the recent months, especially as the meal kit delivery market has experienced great fluctuation in the past few years.

The S-1 filing has been analyzed by hordes of financial analysts, but perhaps the most important deep dive into Blue Apron’s documents was around its customer acquisition costs and ongoing challenge to retain a core customer base.

Daniel McCarthy, a professor of marketing at Emory University, conducted an analysis of Blue Apron’s subscriber retention and churn rates using data found in the S-1 and financial modeling. The S-1 itself leaves out the raw data on the company’s retention and churn rates, but what McCarthy found using marketing costs and costs per customer, he could determine the number of customers they acquired in any given period.

So what did he find?

Blue Apron likely acquired around 2.9MM subscribers over its life and then lost 1.9MM subscribers to finish Q1 of this year with 1MM total. Using a customer-based corporate valuation model, McCarthy plugged in the customer numbers and found that close to two-thirds of Blue Apron’s customers leave within 6 months. The meal kit startup spends, on average $94 to acquire new customers but only makes $25 per month in gross profit off of that new customer – meaning it takes about four and a half months to break even. A problem when many new customers aren’t sticking around for that long.

Does Blue Apron have a problem, or does the problem lie with meal kit delivery in general?

It’s hard to say that the problem is inherently Blue Apron’s but rather that they have struggled with being an early leader in the market and enjoyed success before competition flooded the space. With an array of meal kit options to choose from and dozens of offers for a box of free meals to try new services, customers are harder to lure and even harder to keep. Marketing and customer acquisition is going to keep getting more expensive as more companies try to compete for dollars and as the novelty of meal kits begins to wear off.

“Blue Apron isn’t getting nearly as much out of its marketing spend as it once did. The company’s marketing expense more than doubled in the first quarter.”
– The Motley Fool

The other challenge that the entire meal kit industry faces is the stickiness of their basic product. Meal kits are often easy for consumers to try – companies make it simple to sign up and offer quick delivery and attractive new customer promotions. But they are a huge departure from the way we have been taught to shop for and purchase our food – and while they might be more convenient in some ways, they are inconvenient in others. If the kit doesn’t come in time, a last minute trip the grocery store is needed. Or if the meals that come all seem too complicated or involved, it might sit in the fridge and spoil while the customer picks up quick take-out. As much as we want to believe we’ll eat healthy and cook gourmet, fresh meals every day of the week, life often gets in the way.

Eating meal kit style is a behavior change. Some find it enjoyable and enlightening, introducing new flavors and methods of cooking in foolproof ways with ready to cut and cook ingredients. But ask anyone if they’ve tried Blue Apron or any of their competitors, and you’re likely to find many of them will say yes, but are no longer an active customer.

How might Blue Apron and the rest of the industry change this? The move to put meal kits into grocery stores for pickup is certainly one way, getting rid of the timing and delivery piece that may deter some from continuing with the service. It also fundamentally changes the subscription mode and doesn’t solve for that business model much except to change it entirely.

There’s no question that Blue Apron’s IPO will be watched by many and read as a sign of the future of meal kits as the convenient and healthy future of cooking.

Kickstarter Entrepreneurs Ride the Popularity Wave of Probiotic Foods

Probiotics are a budding segment of the food part of the crowdsourcing world. While most new efforts are focused on pickles, fermented sodas and kombucha, a team of Slovenian Kickstarter veterans are showcasing the wonders of probiotic cheese.

Kefirko Cheese Maker comes on the heels of the successful 2015 launch of Kefirko, a device that makes homemade kefir. Kefir is a fermented milk drink made with special grains that act as a fermenter/starter. The process can be laborious done in a traditional manner. The kefir is extracted from the grains by hanging a cheesecloth-like bag over a shallow bowl, allowing the liquid to separate from the starter. In recent years, this fermented beverage, which originated in the Caucasus Mountains, has grown in popularity with a renewed focus on healthy eating and the role of probiotics.

The team of Marko Borko and Andrej Glažar, with backgrounds in engineering and design, have extended the value of their kefir maker with their new probiotic cheese maker. The new appliance makes probiotic cheese from the kefir created by the Kefiroko or any other store-bought or homemade kefir. Beyond probiotic cheese, consumers can use the cheese maker to create mozzarella, mascarpone other non-probiotic varieties using milk that has been which has to be curdled with rennet or lemon juice.

There is no waste in the process which starts with pouring the kefir into the cheese maker and allowing it to strain into the attached glass bowl. The company says the whey liquid that results from the kefir-to-cheese process I is very rich with proteins, primarily of α-lactalbumin and β-lactoglobulin, bovine serum albumin and immunoglobine. It also contains vitamins and minerals and a very low level of fat. When whey is derived from kefir, it does not contain lactose, because it is already gone (99 %) during fermentation of kefir.

The length of the fermentation process determines the type of resulting cheese. The company says that fermenting overnight will result in a creamy style cheese while allowing the fermentation to go for one to two days will yield a semi hard cheese. When the cheese reaches the desired taste and consistency, users can flavor it with herbs, spices, oils or roasted vegetables.

The Kefirko Cheese Maker comes with a recipe book which also offers alternative uses for the device which includes tips on how to use the appliance to make tea, iced coffee and even almond milk. The company says it does not know whether the cheese maker will work to create nut-based cheeses, made with pureed soaked and peeled nuts instead of kefir.

As of June 9th, the Slovenian company has exceeded its “all or nothing” goal of $15,000. Some 1,740 backers have contributed more than $91,000. The company’s stretch goals include a larger jar and a spring-loaded lid to enhance the fermentation. At the same time, Borko, Glažar, and their team are introducing a new and improved version of their original kefir maker. According to their Kickstarter site, the new model has an easier-to-grip lid and improved airflow. They also added a Scrapper – a tool for mixing kefir grains during straining to make sure they easily separate from kefir drink. Also, by covering the hole on the Kefirko lid with the Scrapper the straining of kefir also becomes more practical and fast. Depending on pledge amounts backers can get the cheese maker, the newer kefir maker or both products. Delivery of the cheese maker and Kefirko 2 is Dec. 2017.

Make sure to check out the Smart Kitchen Summit, the only event about the future of food, cooking and the kitchen. Also, make sure to subscribe to get The Spoon in your inbox. 

Calling All Startups: Apply To Pitch & Demo At 2017 Smart Kitchen Summit

One of the best parts of attending the Smart Kitchen Summit is getting a front row seat to brand new technology and innovative products that are coming down the pipeline. The event’s startup showcase is now in its third year and invites all startups in the food tech and smart kitchen space to apply for a spot.

Details

The Startup Showcase is the perfect way to demonstrate the most innovative new ideas, products and companies reinventing food, cooking and the kitchen. If you have the next great idea that will change the way we buy, cook, store, or consume food, apply today on the SKS website. Anyone with a working product that is either a late-stage working demo or actually shipping is welcome to apply free of charge.

SKS organizers will select 15 startups as finalists and they will be invited to the event to demo their product and get on the Summit stage to talk about who they are and how they’re going to change the future of food, cooking or the kitchen.

From these 15, a winner will be chosen from a mix of judges and crowd-voting and be crowned the winner of the Startup Showcase on October 10th.

To apply, fill out the application and make your case for why you deserve to be a finalist – the more articles, photos, videos and compelling info you can provide on your product and company, the better your chances are of grabbing one of the coveted tables at the 2017 Smart Kitchen Summit.

Past Startup Showcases

The Startup Showcase in 2016 proved to one of the top highlights of the Smart Kitchen Summit – attendees poured into the showcase room to see live demonstrations of 3D food printing, home growing systems, smart precision cooktops, connected spice racks and more. For startups, the Smart Kitchen Summit audience consists of directors, executives, investors and press across the tech, food, design, housewares and appliances, commerce and retail spaces.

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The 2017 Showcase will not only offer a demo table and an eager audience but a demo space in the heart of the main Summit event at Benaroya Hall and a chance to pitch a panel of judges and the audience. No event brings together the decision makers and disrupters from across the food, cooking, appliance, retail and technology ecosystems. The Startup Showcase provides a platform for exciting startups, investors and entrepreneurs to demonstrate what they are working on and let others experience it firsthand.

The deadline for applications is August 15.

IKEA Gets In The Startup Game With Bootcamp Accelerator

In the last several years, we’ve seen major home, tech and food brands reach out to the startup community in the form of VC funds and accelerators to try and harness the massive innovation taking place in their markets. From General Mills, Kellogg and Google, companies are looking at hot areas like food, agriculture and housewares to find the disrupters to bring into their ecosystems.

IKEA, the maker of popular furniture and home goods – and most recently, smart lighting products – is getting into the mix, announcing the IKEA Bootcamp for startups looking to solve the world’s “Big Problems.” It’s clear IKEA is looking to cultivate and support entrepreneurs in hot innovative areas right now – including IoT, virtual reality, chatbots, food tech, drones and Big Data.

The Swedish home design conglomerate is no stranger to pursuing partnerships in search of the next big thing; last year they worked with IDEO and design students School of Industrial Design at the Ingvar Kamprad Design Centre at Lund University to come up with the Concept Kitchen 2025, a prototype of what kitchens of the future might look like.

“We are looking for startups to help us solve the IKEA ‘Big Problems’ around being truly affordable for the many people, reaching and interacting with the many, and enabling a positive impact on the planet, people and society.” -IKEA

The perks IKEA is offering startups are pretty enticing – fifteen companies will be selected to work and live in Almhult, Sweden with a stipend of 20,000 EU and free housing from September through December. Selected innovators will work in IKEA’s prototype shop and test labs and be able to tap into expertise within the IKEA Range & Supply group.

They’ll also have access to workshops, courses and mentorships from senior IKEA global business leaders. And maybe most appealing? IKEA is not looking to take any equity in accelerator startups but rather see it as an opportunity to collaborate, saying “We may end up being a customer, licensing your technology or even investing in your company, but first and foremost we want you to be working on the Big Problems and to share our vision to create a better everyday life for the many people.”

Applications are due August 6 to be part of the fall cohort, which runs from September 8 to December 18.

Are you a startup in food tech or the smart kitchen? Apply to demo at the Smart Kitchen Summit in the Startup Showcase on October 10 and 11 in Seattle, WA. Selected finalists will receive an opportunity to showcase their innovation to decision makers across tech, food, housewares and appliances, retail and commerce.

Apply by August 15 for a chance at a spot at the only event in North America dedicated to the future of food, cooking + the kitchen. 

 

 

Entrepreneur Hopes To Transform Shanghai Into Food Startup Hub

China’s middle class is changing and with that change comes emerging differences in the way their population consumes food. This week Fast Company introduced the new food tech accelerator, Bits x Bites – the first of its kind in China – and how it’s looking to help shape the nation’s food and agricultural systems. According to Matilda Ho, founder of Bits x Bites, the accelerator’s mission is to “shape the future of good food by investing in early stage startups that use technology to solve food system challenges in China.”

Ho founded the successful Chinese food startup Yimishiji, an online farmer’s market that delivers chemical-free produce by electric bike to Shanghai consumers. Her work with Yimishiji made Ho realize she wanted to expand on the vision and help build a community of other food tech startups that were working to shape food and agricultural sustainability across the country. The Bits x Bites accelerator was born and the 120-day program, based in Shanghai, gives startups capital, coaching and a like-minded community to network and help them take their idea to the next level.

While all of the startups under Bits x Bites are offering innovative solutions that are also common in other parts of the world, they also appeal to the nuances of Chinese culture. In Chinese culture, salad is not a common meal as it is in the West. Startup Frugee markets their cold-pressed, high-pressure pasteurized juice from fruits and vegetables as a nutrient-rich alternative to eating salads. Another participant startup, Alesca Life, addresses the issue of limited arable land in China by producing hydroponic farms that come in shipping containers, coupled with software to run them. Their first focus is on hotels that want to grow their own produce for in-house restaurants.

A third, currently unnamed startup addresses the issue of creating a sustainable animal agriculture system by developing noodles and other foods that are made from silkworm flour similar to the way other global startups are producing cricket flour. Since the worms are often discarded after using their cocoons for developing silk, using the by-product is a cost-effective alternative to wheat or other grain flours.

In an interview with That’s Magazine, Ho commented on her vision and drive to pursue an accelerator in Shanghai and how it might transform. the Chinese food system,

There are more than 4,000 startups opening shop in China every day. If we can harness some of this entrepreneurial energy to solve food system challenges, the impact can be astonishing. With our experience building the online farmers’ market Yimishiji, we hope to help more startups accelerate their growth and build a sustainable business.

Ho sees food tech startups growing rapidly in China, but recognizes that a lot of work needs to be done both in China and across the global food industry – starting with participation in accelerators like Bits x Bites. She is already seeing an influx of major Chinese food companies visiting the startup each week, looking for ways to get involved with food incubators or their own or to help make strides in the space. As a global leader, increased investments in tech for China’s food and agricultural system is important for sustainability inside and outside of the country.

Scripps Networks Buys Online Food Content Startup Spoon University

The world of food content can easily be divided into two camps: the traditional media houses who have access to warehouses of recipe-based content and the digital media startups using social and video to help a new generation of home chefs. Today, Scripps Network, parent company of Food Network, HGTV and the Cooking Channel has acquired digital food media startup Spoon University.

Spoon University was started by Techstars alums Mackenzie Barth and Sarah Adler who founded the company as a magazine while undergrads at Northwestern. The two created a selective content platform that allowed college students to create, upload and share their food videos – after they applied and were accepted. Barth and Adler raised $2m in 2015, positioning themselves as the Food Network for millennials and were accepted to the popular Techstars accelerator program. Spoon University started with 3,000 volunteers contributing to the platform and has grown to support 4 million daily website visitors and “tens of millions” of viewers across social platforms. Every college chapter contributes original content to the site, including recipes, reviews of restaurants, news and events and tips to make cooking simple and fun.

The terms of the deal between Spoon University and Scripps Network were not disclosed, but the announcement indicates the Spoon team will continue daily operations and exist as a separate division, reporting to the company’s head of Scripps Lifestyle Studios. Reuters talked to a source who speculated the deal was worth around $10 million. “Food Network has always been a brand that we have looked up to, and over time we have seen that our teams share similar energy, curiosity and passion,” commented CEO and co-founder Mackenzie Barth.

The move by Scripps is a smart way for the powerhouse network to move faster into the digital food content space, an area where Spoon University competitors like Tastemade and Buzzfeed’s Tasty are battling be the go-to resource for home chefs. Stations like the Food Network and Cooking Channel have historically relied on TV programming to monetize content with advertising sales. With cable subscriptions declining and a huge uptick in the use of online recipes and crowdsourcing via social media to figure out “what’s for dinner?” companies like Scripps have to innovate in order to keep up with a new generation of cooks.

According to the announcement, Scripps Network’s efforts to move reach younger audiences and create revenue streams on digital platforms have been paying off. With the launch of their digital division, “Scripps Lifestyle Studios,” in late 2015, the network claims to have delivered 5 billion video views across all shows and content areas.

Kathleen Finch, Scripps Networks Interactive’s Chief Programming, Content & Brand Officer added, “Food Network has become a significant force in digital and social food storytelling over the course of the last year, and this acquisition will provide us with the opportunity to build content, community and brand as we seek to accelerate our strategy in the sector.”

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Want to hear about the future of food, cooking and the kitchen? Come to the Smart Kitchen Summit. 

We Use 50 Billion Water Bottles Per Year. Here’s An Edible Container That Can Stop The Insanity

It’s hard to deny that the food industry is experiencing lots of disruption from startups around the globe who are trying to solve the market’s tough problems. Things like delivery, supply chain, sustainability, waste and sourcing are all on the minds of startups like Skipping Rocks Lab. The particular problem they’re trying to tackle? The proliferation of plastic bottles and the waste they generate.

Skipping Rocks Lab isn’t just minimizing plastic production or coming up with new ways to recycle water bottles – they’ve created a product that basically redefines the way water can be delivered and consumed. Meet Ooho, the water “bottle” that delivers single serve gulps of water and can actually be eaten.

Ooho Short Web from Skipping Rocks Lab on Vimeo

The Ooho balls look like a cross between a gross Jello-based dessert and one of those plastic stress balls you can squeeze to get out frustration. But the balls are in fact edible – made by dipping frozen balls of ice into an algae concoction – and biodegradable, meaning they won’t sit in the ocean somewhere for eternity but rather disintegrate after about 4-6 weeks. Given that 50 billion plastic bottles are used by humans every year (EVERY. YEAR.), it stands to reason that this type of innovation would attract lots of interest.

And so far, it’s working. Skipping Rocks has successfully funded their first campaign on CrowdCube and the videos of people popping spherical water into their mouths have gone viral. The company is mainly serving Ooho at events and festivals – and you can see why. They are small and are perfect for quick hydration where storage isn’t a factor. The product is great for things like marathons and sporting events as well.

But Skipping Rocks vision is to become THE go-to seaweed-based packaging company in the world; they clearly have plans to move beyond water and adapt this packaging to all types of beverages that might be served in plastic. How they move the concept from small balls of water to actual practical implementation remains to be seen. For one, people generally like to consume more than one sip of a beverage in any given setting, and the packaging as it stands cannot be resealed. Once you’ve bitten into it, you’ve committed to consuming whatever is inside in one shot.

The other issue is distribution – the idea that they could be sold widely to consumers in stores means the balls themselves will likely need some type of packaging around them. The membranes are edible and therefore can’t just be left to sit out in the open on shelves. The retail model definitely leaves some questions around sustainability and the impact of the product as a whole.

But for now, it will be interesting to see how the startup uses the investment money and what types of unique implementations they come up with next. And of course, we’ll keep our eyes out for any Ooho balls in the wild – and be sure to document the experience.

The Robots Are Coming, And They’re Bringing Salads

The restaurant salad bar is often a mixed bag – sometimes it’s great, other times the ingredients are sad, with wilted lettuce and less-than-fresh cucumbers side-by-side. And sometimes the salad options at traditionally fast food chains are just downright sad.

That’s where Sally comes in. She’s the robot from Chowbotics Inc., a robotics and AI company that’s creating perfectly portioned salads and positioned as an alternative to the casual dining salad restaurants. Chowbotics, formerly known as Casabots, has  raised $6.3 million in funding from notable venture capital sources as Techstars and Foundry, the company behind Fitbit and 3D printers.

Sally takes up minimal space (about the size of a dorm room refrigerator) and uses 21 popular salad ingredients like romaine, kale, seared chicken breast, Parmesan, California walnuts, cherry tomatoes, and Kalamata olives that will create thousands of salad combinations in a mere 60 seconds.

In many ways, Sally is like a 3D printer for salads, spewing out prepared ingredients to create a ready to eat dish. In case you’re worried about Sally just being another automation nail in the food service coffin, you’ll be glad to know that Sally actually requires human interaction to do her job. Workers as the restaurant, airport or hotel will have to chop and wash the vegetables before putting them into the machine – at least for now.

“Sally is the next generation of salad restaurant,” said Deepak Sekar, founder of Chowbotics. “For one thing, a robot can make salad faster than a human can. Also, you will know precisely how many calories your salad is delivering; there won’t be the problem of consuming one piled high with garnishes that turn out to be more fattening than a burger.”

Sally is making her debut in a fast-casual restaurant in Silicon Valley and at a corporate cafeteria in Texas, with the public launch slated for April 13 at co-working space Galvanize in San Francisco. The robot was designed as a solution for hospitality settings, convention centers, airports and gyms where customers want healthy quick service options, as well as an option to install in fast food chains to bolster their fresh food options.

Automation in front of house restaurant operations is a growing trend, as Michael Wolf wrote in The Spoon back in January, with a focus on how fast food companies are adapting. “Companies like Panera, Wendy’s and McDonalds are rolling out self-order kiosks nationwide, making fast food one of the fastest growing categories in what some predict will be a $73 billion self-serve kiosk market in 2020.”

Sekar, for his part, isn’t concerned about the effect Sally and other food preparation robots like her will have on the restaurant industry. “It’s happening in every industry now. You can either fight it, or be on the team that makes it happen.”

The Food Delivery Boom Comes At A Price

Food delivery startups have been all the rage, dominating food tech investment for the last several years. In what has become an extremely crowded market, there are signs that the market is shifting, with companies like Square reportedly looking to sell off its food delivery business Caviar and competitors like Postmates struggling to raise more funds.

But even with the consolidation, food delivery startups have added a level of convenience to ordering takeout that consumers are now used to. But at what cost?

The New Food Economy, a non-profit publication that publishes long form pieces on the forces that are changing food as we know it, published a piece looking at the dark side of food delivery and the challenges it presents to small restaurant owners.

The business models of companies like Seamless, UberEats, Yelp Eat24 and Postmates goes like this: hungry customer goes online to order food. Instead of going to a specific restaurant’s website and ordering through their system or picking up the phone (an antiquated notion these days), they visit a food delivery website that gives them menus, pricing, online ordering and delivery options for all the area eateries. The GrubHubs of the world then turn around and charge said eateries 10-30% of each order. The lowered margins aren’t desirable, but the idea is that the increased volume from the food delivery site will make up for it.

Except that’s not always the case. Working with these services requires the business to have a tablet on site that takes orders and it can get overwhelming to track different orders from different services. And then there’s the matter of profit – when Teddy Roland, a restaurant owner profiled in the New Food Economy piece, tried to raise his delivery prices, Postmates and DoorDash refused.

“How is that different from the Mafia in the 70s saying, ‘I’m going to take 200 bucks not to break your legs?’” he says. “‘We’re going to take 20 percent of your money and you have to live with 80 percent.’ – Roland

The longer piece is worth the read. It’s not surprising that consumer appetite for more convenience comes at a price. Lower-priced clothing is made by workers making unlivable wages in deplorable conditions, cheap meat is produced by giant factory farms and quick food delivery services take profits from take out joints who are often small businesses.

Some restaurants are fighting back and using tactics to encourage customers to take the extra step and keep their money in the restaurant. Says Roland, ““I’m asking a little more out of my customers,” he says. “You want to be lazy and just use your thumbprint and GrubHub app, you’re going to pay more for it, that’s all.”

Sudden Coffee Looks to Disrupt A $9.9 Billion Market

Instant coffee is not a celebrated food item. It’s cheap and convenient but that’s where the accolades end – which made a perfect challenge for entrepreneurs Kalle Freese and Joshua Zloof to tackle with their new startup. Sudden Coffee launched with the mission to find new ways and technologies that could make instant coffee better. Why?

Opportunity. Instant coffee is a $9.9 billion market according to a Research & Markets report released earlier this week. Instant coffee’s appeal is it’s accessibility to anyone. You only need a cup and some boiling water and you can enjoy a hot, caffeinated beverage. The problem is that dissolving powder into water does not produce anywhere near the same flavors and textures as traditional brewing methods.

So Freese, the 9th best barista in the world (no big deal) and Zloof, a food entrepreneur, set out to reinvent the process of making instant coffee grounds and creating a product that rivals even the best hipster coffee house brews.

TechCrunch talks with the founders (and does a taste test) about how exactly they plan to change the taste and quality of instant coffee. Their first not-so-secret tool is sourcing high-quality coffee beans to start. But then they work to ensure the extraction process doesn’t mess up the flavors of the beans, basically by using a cold(er) brewing method in a centrifugal system. This allows for a sweeter, less bitter brew. They then developed a unique freeze-dry technique that allows them to process lots of coffee at a time without compromising the end product.

TechCrunch’s taste test fell a little short of the promise, though it did outperform the standard instant coffee by a large margin but did not do the same with standard brew, according to the writer. The VCs who vetted and ultimately invested in Sudden had much more glowing things to say in their Medium post about the funding, supposedly testing it on friends and family with extremely positive results.

Sudden just closed on a $2.7 million round of funding in December 2016 led by CRV and was just accepted as the second-ever food brand allowed into the coveted Y Combinator startup accelerator. It seems the instant coffee market is indeed about to change, hopefully for the better.

Ember Is The $150 Coffee Mug You Never Knew You Needed

Every year, a host of new “smart” products launch into the connected ecosphere. We’ve seen connected vibrating pants (yes really) and Wi-Fi diapers and smart water bottles – where does it end?

Throwing connectivity into all of our things has led to some pretty dumb “smart” stuff. But then there’s Ember. I have to admit, you probably have to like coffee a whole lot to shell out $150 for this smart travel mug, but it’s basic function? To keep your coffee the right temperature, the whole time you’re drinking it.

The mug, which looks a little like an Amazon Echo (…don’t make that mistake and pour coffee on Alexa) is able to heat up or cool down the liquid inside. The temp can be controlled on the mug itself or via an app (smart!) and is wirelessly chargeable.

Ember Company Video

The folks over at New Atlas have a full review of the Ember mug and they have good things to say, including,

if you fall into Ember’s picky target audience – and want coffee flavor to stay optimized all the way to the end – you’re getting a product that does its job well and without compromise.

Coffee does not taste the same from the beginning of the mug until the end – especially if you have young kids who don’t let you finish a cup in the morning before demanding things from you. So yeah, it’s a little spendy. But if Ember is going to keep my coffee tasting the same from start to finish? I am here for it.

I am not the only one, apparently, because Starbucks reportedly keeps selling out (the company’s only retail location as of now) and the mugs are back ordered until April on the site. Though it’s the company’s flagship product, the website indicates the company plans “to revolutionize the way the world eats and drinks,” indicating more food tech products to come.

Check out the New Atlas full review of the Ember connected coffee mug.