Startup central: The new industry players to watch
Once blips on the radar, food and beverage startups are challenging the status quo and helping those industries evolve to meet the changing needs of consumers. To assist startups in their early business development and set them on a path for growth, accelerators like Food-X have given startups the tools they need to be disruptive.
The role of startups and accelerators in food and beverage
Accelerators like Food-X are enabling startups to compete in an industry that was once heavily dominated by major players. As the food and beverage industries become more diversified via the rise of startups, larger manufacturers are bearing the losses — the top 25 U.S. food and beverage companies have lost $18 billion in market share over the last five years, Fortune reported.
Crowdfunding platforms like Kickstarter and CircleUp are helping startups obtain funding to develop and market their products. Food and beverage-centric angel investment groups like Edible Ventures are also providing more capital opportunities. But money and entrepreneurial spirit aren't always enough to keep businesses alive in the increasingly competitive industries.
What's also often needed is mentorship and guidance through the complex web of finances, distribution, promotion, and other aspects of making it in the industry. As Enjoy Life chief sales and marketing officer Joel Warady told Food Dive in October, sometimes this can be provided by larger manufacturers that acquire smaller ones. Mondelez acquired free-from foods producer Enjoy Life earlier this year.
But for companies that want to retain their independence, that's where accelerators come in.
Food-X is one such accelerator program that screens startups and their applications to select those that exude high founder quality but also embody five critical product filters: tasty, affordable, accessible, healthy, and sustainable, according to Food-X founder Shen Tong.
For Cohort III launched in fall 2015, nine startups were selected and now work alongside each other while enjoying the benefits of mentors and advisors who help guide them through the early stages.
Meet the Food-X cohorts
Of the nine cohorts from the most recent round of Food-X, four were involved in food production and manufacturing. These cohorts demonstrate how powerful startups can be in terms of disrupting the industries with innovative products that have the potential to be strong competition for major manufacturers.
Tapping the promise of a new, relatively unknown superfood, chaga mushrooms, ChugaChaga is producing a chaga-infused tea that the company says offers a healthy, functional alternative to traditional beverages, which often contain sugar and/or other sweeteners.
The company says it has formulated the first organic, wild-crafted chaga beverage, Tree Tea, using chaga sourced from a supplier network out of Canada and Alaska. ChugaChaga founder Luke Evans says chaga is packed with antioxidants and phytonutrients which provide energy, mood, and cognitive enhancing abilities and a way to deal with stress in a healthy manner.
In addition to emphasizing the functional and healthy aspects of its chaga tea, Evans said the startup's large and fast-growing social media following on sites like Facebook, Instagram, and Twitter help set the company apart, even while the final chaga beverage formulation is still in production. The company is launching a Kickstarter campaign this month to raise funds to bring its product to market.
Bizzy Coffee founder Alex French recognized the potential for cold brew coffee after searching for an alternative caffeine source that was as natural and healthy as possible. He and his team created an organic, sugar-free, zero-calorie, and shelf-stable cold brew coffee using proprietary technology — with the aim he says to bring this product to market at an affordable price.
Bizzy Coffee says the proprietary technology enables the product to be positioned alongside other traditional caffeinated products, such as energy drinks, in center store grocery aisles, even outside refrigerated sections. Also, the technology enables the startup to produce multi-packs at an affordable price, which is unique to the cold brew community and disrupts the caffeinated beverage industry.
According to French, the branding also resonates with its target audience—the young professional Millennial crowd who is dedicated to exercise and consuming healthy products.
Made by athletes for athletes, TRUEnergy is what the startup’s founders deem to be a healthier alternative to traditional energy shot products, such as 5-hour Energy, which dominates about 94% of the market, according to TRUEnergy founder Jack McNamara. As a pro hockey player in Europe, McNamara and his teammates found products traditionally targeted at athletes, such as sports drinks, energy drinks, and energy shots, to be too sugary, too overloaded with caffeine, or packed with vitamins well over the recommended daily intake.
So, McNamara and his business partners, also athletes, decided to disrupt the energy shot market with a product that is caffeinated by a natural source, green tea extract, has an amount of caffeine that achieves a focus level without the jitters, and provides the correct amount of recommended daily vitamins.
What sets TRUEnergy apart is not just its formulation, which is unique to the market, even among the smaller companies competing for the remaining 6% of the energy shot market. TRUEnergy also stands behind its branding, including a distinct bottle design that stands out from the generally similar designs of other energy shot products, McNamara said.
After seeing the dire situation in an Ethiopian marketplace lined with spoiled produce and a community suffering from lingering malnutrition, Wakati founder Arne Pauwels created a solution for many farmers in Africa and other developing nations. The resulting product is an affordable and lightweight solar-powered tent that creates a sterilized microclimate to keep fruits and vegetables fresh without refrigeration.
Starting out in Africa, Wakati is helping this major agricultural sector grow and export produce, particularly through aid organizations, by disrupting the traditional supply chain where Pauwels says over 45% of produce is wasted, with that percentage jumping to 60% in some areas. These numbers can be devastating to small local farmers. Before Wakati, their options were limited due to lack of the regular access to electricity needed to keep their produce fresh.
Pauwels says that what sets this product apart is that this type of post-harvest solution for extending shelf life of produce in developing nations simply does not exist yet. Wakati currently has 171 units in the field.
Whether startups are infiltrating food and beverage categories or contributing new ones altogether, disruption is the prime objective for members of Food-X Cohort III and the innumerable other startups that are changing the face of food and beverage to suit a new breed of consumer. Larger manufacturers that take notice may be the ones that can more closely mimic the explosive growth many of these startups end up seeing.
"Companies like Coca-Cola and Pepsi just don’t have the entrepreneurial spirit, culture, or the quickness to deploy their resources and capital toward innovations in the industry like startups can," said Evans. "And that’s why they’re really looking toward [startups] to answer problems and pain points more effectively than they can currently do."