As the coronavirus pandemic upended life around the globe, Latin American plant-based powerhouse NotCo decided it needed to slow down, said CEO and co-founder Matías Muchnick.
But considering NotCo's track record for quickly reaching enviable market shares in the burger, milk, ice cream and mayonnaise markets in Chile, Argentina and Brazil, slowing down is a relative term. Right now, NotCo is selling six times the amount of product it was this time in 2019, Muchnick said. And with a new $85 million investment round announced yesterday — more than doubling the fundraising the company has done since it was founded in 2015 — NotCo will move into the United States, Mexico, Peru and Colombia.
NotCo has established an office in San Francisco and is looking for manufacturing facilities and the smartest path to market in the U.S. for its diverse product array, which includes plant-based Not Mayo, Not Milk, Not Ice Cream and Not Burgers. Muchnick said some products should be on the market here — through direct-to-consumer, grocery stores or quick-service restaurants — by late 2020 or early 2021.
NotCo uses technology to create plant-based substitutes the company claims taste better than the conventional products they are replacing. Using an algorithm, Muchnick said they are able to use data to figure out what contributes to the taste, texture and feeling of food, then work with plants to replicate and improve on that formula. The goal, he said, is to use technology to create food that is tasty, accessible, affordable, healthy and sustainable.
Muchnick said this latest round of funding, co-led by Future Positive and L Catterton, shows the company is attaining that goal.
"[This round is] led by what we really wanted, which is a balance between disruptive tech and CPG execution, with L Catterton leading from the execution side," Muchnick said. "More into the tech-savvy space, we have Future Positive led by Twitter's co-founder, Biz Stone."
Stone is not the first tech giant to notice NotCo's potential. In March 2019, the company had a $30 million funding round co-led by Amazon founder Jeff Bezos's investment fund.
A meteoric rise
NotCo isn't well known in the United States yet, but it's one of the fastest growing food tech startups in Latin America.
Muchnick said the company spent two years after its founding in 2015 figuring out what to make and how to make it. The company's first offering was Not Mayo, in its home country of Chile, which is one of the world's top consumers of mayonnaise. Ninety-nine percent of households buy the condiment, he said, and per capita consumption in the country is 2.28 kilograms per year, according to trade reports compiled about export commodities.
Muchnick said that eight months after putting Not Mayo on the market in Chile in 2017, it had 8% of market share. The lupin and chickpea-based mayo won over all types of consumers, he said — 92% were not vegan, vegetarian or eating on a restricted diet.
"And that was kind of like the success story of NotCo that we wanted to amplify over the years," Muchnick said.
The company expanded to Brazil and Argentina and other products, creating plant-based milk, ice cream and burgers. And adoption of all products has skyrocketed. In Argentina, Muchnick said, NotCo has a 50% market share for hamburgers — both plant-based and conventional. In Chile, the company's Not Burgers are the basis for Burger King's plant-based Rebel Whoppers.
Similarly, six months after launching Not Milk in Chile, Muchnick said the product had a 2% market share in the entire dairy category.
"The only way for us to obtain those numbers was basically generating trial — so in-store tastings and demos," Muchnick said. "People that try the product bought it. For people who bought it, 83% of them repurchased. And that was something that was super, super good, that talks really good about the product itself, right? So to us, [the secret to success] is closing the gap between probably unfulfilled or, you know, underperforming promises [in the plant-based sector]."
A new way to look at food
NotCo's approach to improving the food system is different than most companies out there. Where the food industry has traditionally focused on single aspects of products — nutrition, taste, sustainability, price, protein, calories, fat — NotCo uses data to take a holistic view.
Muchnick used an analogy to explain just how different NotCo's approach is. The company focuses on creating solutions to the problem, not just using what is known to make smaller improvements.
"In the 1900s, if you asked somebody what would they like to improve transportation, they would have told you a faster horse, right?" he said. "They wouldn't tell you a car, because they don't know that that is actually a possibility."
Muchnick realized how powerful data is in determining the molecular makeup of products when he went to the University of California, Berkeley to learn more about food science. He'd sold his first startup, a plant-based mayonnaise and dressing company called Eggless, and wanted to improve on how R&D is done for his next attempt. Muchnick spent time working with the university's biochemistry department and was struck at how much data was collected and analyzed to create medical treatments.
"[This round is] led by what we really wanted, which is a balance between disruptive tech and CPG execution, with L Catterton leading from the execution side,"
Co-founder and CEO, NotCo
He wanted to apply that to food, and met Karim Pichara in a post-graduate program at Harvard. Pichara had worked in the astrophysics department, creating machine learning algorithms that helped researchers determine the composition of stars. Muchnick convinced Pichara, now the company's chief technical officer, to join him at NotCo. Rounding out the founding team is Pablo Zamora, an expert in genetic studies and biochemistry who was at University of California, Davis and is currently NotCo's science adviser.
"I ... joined these two disciplines together and created an algorithm that in that moment would allow us to predict which combination of plant-based ingredients should result in the same sensory experience as a target product," Muchnick said. "... So if you want to mimic something, you need to first understand it, right? That's the logic. And we wanted to understand what milk was, what meat was, what mayo was, what eggs were. Under functionalities, under taste, and so on, through data."
Expanding in the pandemic
The United States is a large market with many well-known plant-based options for milk, burgers, ice cream and dairy. Muchnick said this is one of the reasons NotCo is taking some time to decide where and how to launch here.
Since the company has such a diverse portfolio, he said there's been interest across the board from different potential partners, both retail and foodservice.
"The portfolio of products approach will be something that we think we have a value proposition so much [more] powerful than what there is already in the market. That it will become the top of mind of one single category and [we will] build the success case upon that," Muchnick said.
Muchnick and Pichara will be based in the U.S. to facilitate the expansion. NotCo has also hired industry veterans Flavia Buchmann as its chief marketing officer, Luiz Silva to lead global business development, Catriel Giuliano to head R&D and Jose Menendez as chief operations officer.
For a company that has built its success on consumer trial, Muchnick said NotCo has some innovative ideas to still succeed in an expansion during the pandemic. He also expects NotCo will expand into new categories soon — a field that is wide open for a company that works in plant-based replacements for dairy, eggs and meat.
"We can do stuff that the rest cannot do," Muchnick said. "In terms of how to create a yogurt or how to create a base for a hard cheese, we have a milk that is plant based that behaves like [dairy] milk as well, so we would expect to be rolling out to yogurt or to cheese."