- Hampton Creek has reportedly been running a large-scale operation in which contract employees would buy Just Mayo and other products from retailers, according to a Bloomberg report published Thursday.
- The report includes information from five former "Creekers," or company employees, and more than 250 receipts, expense reports, cash advances and e-mails that suggest these purchases led to artificial boosts in revenue. Employees also said Hampton Creek management instructed them to call retailers and read from prepared scripts asking about Just Mayo to encourage retailers to buy more products.
- Hampton Creek CEO Josh Tetrick and other executives at the company told Bloomberg this was a quality assurance program that enabled the company to better understand the retail delivery leg of its supply chain and mitigate the risk of extreme temperatures on its products. Tetrick said the quality assurance program cost $77,000, less than 0.12% of revenue.
This is a major turn of events for a company that has been seen as a "trailblazer" for food tech and an example for food startups hoping to challenge the status quo and pose a threat to legacy brands and major manufacturers.
In May, Bloomberg reported that Hampton Creek was attempting to raise about $200 million at a $1.1 billion valuation, according to sources familiar with the matter. Tetrick told Food Dive in June that his company would not be for sale but that he did encourage collaboration both internally and with other companies, such as Hampton Creek's partnership with General Mills.
Up until that point, Hampton Creek had been on the opposite end of a food industry scandal. The American Egg Board had reportedly launched a multifaceted anti-competitive campaign against Hampton Creek that included a consultant contacting Whole Foods on behalf of the board to have Just Mayo removed from the store's shelves, per emails from AEB's CEO Joanne Ivy obtained by the Associated Press and reported last September. Ivy stepped down from her post in October, ahead of her planned Dec. 31 retirement.
It's unclear at this point how investors will respond to the allegations of artificial sales inflation. It's even less clear how consumers will react toward a company that represented a movement for transparency in the food industry while possibly participating in secretive business tactics. The report has a bigger direct impact on investors, but the scandal could impact consumers' perception of the company and whether any food business — major or startup — can be completely transparent.