As coronavirus has ramped up demand for plant-based foods and beverages, companies are working to keep shelves stocked and figure out what to launch next.
In the midst of the pandemic, Califia Farms unveiled its new vegan butter line at Whole Foods in May. The launch of its plant-based butter, which is made with avocado or olive oil, cashews, tiger nuts and nutritional yeast, comes after Califia Farms raised $225 million in a massive funding round earlier this year.
Greg Steltenpohl, CEO and co-founder of Califia Farms, spoke to Food Dive about the growth of the plant-based dairy space and how the company is launching products and raising funds during a pandemic. And as protests against systemic racism have popped up across the nation, Steltenpohl also spoke about choosing to pause promotion efforts during this tumultuous time. This transcript has been edited for length and clarity.
Food Dive: Why launch the plant-based butter product now and how does it stand out from the competition?
GREG STELTENPOHL: Califia is really unique in that it's a 100% plant-based company, which compared to most of our competitors, which are actually owned or are very large multinational companies like Danone, Nestlé or PepsiCo and Starbucks, which has a joint venture, ... these companies have very diverse portfolios. So what makes Califia really unique is our independent company status that's 100% plant based. Our whole purpose is to try to bring a wide set of alternatives across the whole dairy landscape.
Butter is a pretty high volume category for the supermarket... So we looked at it and we said there were three big factors driving it. One, our brand was built to travel across the dairy case. B, there is a definite need amongst plant-based consumers or plant-centric consumers to have a great solution for a vegan or plant-based butter. And then thirdly, what I mentioned earlier is that it's a large and important category to the retailer and the consumer. And for us being a smaller company, it's an opportunity to expand our presence and awareness in that dairy case.
What are the challenges and benefits of launching a product in a pandemic?
STELTENPOHL: We've all seen in the last week of social unrest, life under COVID is not a cut and dry thing. It's not like, 'Oh it's COVID, so therefore X, Y or Z.' ... The truth is that the beginning, in the first month of COVID, all innovation launches were out the window. In fact, I would say almost the first two months, and retailers had no mindshare for either having a conversation about the future, or trying to address anything else except making sure they were delivering fulfillment of their current product allocations. In fact, many retailers were asking producers, like us and other brands, to cut down on the number of SKUs that they were shipping, so that they could have the warehouse space for the highest velocity items.
The COVID that we're in now has morphed a little bit. Both our social listening and consumer insights have shown Califia that people have evolved from comfort foods, which is where they had familiarity and comfort and convenience, which was the first month and a half of COVID and quarantine. Well, the result is weight gain, waistline enlargement, people not getting quite as much exercise as they used to and also getting tired of the same old thing that they were always buying.
So now, all of a sudden, we've been getting a lot of calls from retailers around what's next and what can Califia deliver on innovation this year. And I think what we've heard back from those retailers that they love the idea of having an incredibly active holiday season. And as you've probably heard the cliche things, it's sold out of bread making kits and yeast so at least we know a lot of Americans know how to make banana bread by now. I think this reexposure to baking and reexposure to home cooking has stimulated people's curiosity about cooking with vegan and plant-based recipes more.... So we think it's actually an incredible time to launch a plant butter. We will be taking this on the road to conventional retailers before the end of the year as well and they're pretty excited about giving their shoppers a little bit more variety on the shelf.
Now with everything happening with the protests, how do you market new products in a time like this?
STELTENPOHL: I think every brand should be asking themselves some hard questions about that. So the truth is that at this point in our development, we have stopped all social media production of any paid advertisement of any kind. Actually, whether it's social, digital or non-digital because I guess there's no other way to put it, it doesn't feel right in the face of the sensitivity and pain that people are feeling around these critical issues, which have been ignored for a long time. That's my personal viewpoint, and I think all of our folks in the marketing group, just felt like not advertising was a better statement around solidarity with what a lot of our core shoppers and consumers feel right now.
It's hard for me to make a business case study out of that and say, 'Oh this is the way for long-term loyalty' because we're in uncharted territory to be honest with you. Our brand was named after a beautiful black queen so it's pretty hard for us to act like none of this is happening. [The brand's name comes from the mythical warrior Queen Califia.] And I think that actually our company internally is inspired for change and inspired to make deeper commitments to support these communities that have been not just underserved but persecuted and that includes a lot of people of color as well. There's a lot of Latino communities in California that have very difficult access to healthy food, just like the African American community does. So we think food justice is also going to emerge as a topic of conversation after the emotions and the rawness of the moment move into more action orientations.
How does the $225 million financing round secured earlier this year help the company's growth goals?
STELTENPOHL: Well the company has different uses for capital and half of it went to buy out some shareholders so that we could have a greater alignment around the long-term vision for the company. And we also have applied some of that funding towards capital projects that will help us be able to compete against these bigger companies, the so-called Big Food.
There are a lot of structural advantages that large companies have and to be very blunt with you about innovation launches, Califia is fortunate to have survived COVID with a very good performance record of delivering on time and serving these bigger retailers like Kroger, Publix, Target and so on. And many small brands couldn't do that either because their funding was interrupted, they just didn't have the scale to negotiate with pressurized private contractors and so on. It's been a very tough time for some smaller brands to launch innovation items at the same time. And so I think this turbulence of the period we are in has benefited the larger companies.
Califia is just on the cusp of being a fly on the back of the elephant — at least we're in a place that they can't quite swat us off at this point. I'm very proud of the fact that we earned that. The company is 10 years old this year and our team worked hard to earn a place of trust with retailers. So my encouragement for younger brands is to have the tenacity and resiliency and have those goals be on par with your passion and innovation.
Califia Farms has launched a variety of products in the last year, like protein-enriched oat beverages and now plant-based butter. How do you decide what products to add to your portfolio?
STELTENPOHL: We do a tremendous amount of listening, both social listening and behavioral observation. And we synthesize that with data that we look at on a global basis around where trends are going and when there is what we feel is kind of a tipping point. Not that a tipping point has happened because that's when everybody else jumps in. Like in surfing, my son surfs and I surfed a bit when I was younger, but you have a place on the wave and you have to paddle and get out there earlier to earn your place on the wave. And if you pick the right spot and if you paddle at the right time, you will get on that wave in a very good position. And so, in picking innovation, I think you have to look at what we call foresight, which is based upon deep listening and consumer behavior observation, with the insights of data and then the secret sauce is the third thing, which is what we call product vision... You have to have a vision of something that even the consumer hasn't quite even seen themselves yet.
What do you expect to see from the future of the plant-based industry? Will this growth rate continue?
STELTENPOHL: Yes, very much so [expect growth to continue]. We do see the tipping point of the decline of animal agriculture as a preferred form of eating in developed countries. We see that rate of decline steepening. And we also see that COVID has provided increased tailwind for people synthesizing the connection between planetary impact or footprint, the more carbon dioxide, lower water usage, lower land use and personal health — meaning lower calorie, lower sugars, lower unhealthy fats, less processed ingredients and actually higher quality nutrition.