Food Insider June 3, 2017


Following in the footsteps of its fellow German discounter, Aldi, grocery chain Lidl is establishing a beachhead in the U.S. this summer. It promises to be a thorn in the side of established grocers, with Lidl promising to offer products up to 50 percent cheaper than competitors. It uses the same model as Aldi - small stores and up to 90% private label products. Lidl has deep pockets and a lot of experience in discounting with over 10,000 stores in 27 countries. They, along with Aldi, have already disrupted the British market, upending large local chains such as Tesco. The first 20 stores will be opening mid-June in North Carolina, South Carolina, and Virginia. They hope to be up to 330 stores by 2020. 


Meal-kit company Blue Apron has filed for a $100MM IPO, hoping to raise more cash to expand into other other markets. It has its skeptics. Even though it posted a $3 million profit in the first quarter last year, the company has struggled to make money since it was founded in 2011. Interesting tidbits from their filing papers:

  • Topline is increasing at a rapid rate. 2016 revenue of $800MM was more than double from 2015. This year, the first quarter was up $77MM from 2016 first quarter. 
  • Orders for Q1 2017 were 4.3 million compared to 3.7 million in Q1 2016.
  • Average revenue per customer in Q1 is dropping, from $265 in 2016 to $236 this year.
  • Average order value per customer is also dropping from $59.28 to $57.23.
  • Marketing costs are ballooning - from $25 million in Q1 2016 to $61 million this year.

Bottom-line: It's not cheap to scale a meal-kit company. Focusing on large metro areas is easy. Expanding to lightly populated areas is where it gets real tough.


  • Tim Keough's self-funded startup WythMe is taking a unique reverse auction approach to restaurant promotion. Customers use an app to make a bid for specific services and wait for participating restaurants to respond. Keough says he has over 3,000 restaurants in the system already.
  • Campbell Soup is making a $10 million bet on meal kit startup Chef'd, hoping not to be left  out of the movement to online food marketing channels. The money is a direct investment from the company, not their independent investment arm Acre Venture Partners. "We believe that digital and e-commerce is going to transform [the food] industry," Campbell president Mark Alexander, told Fortune.
  • Land O’Lakes Inc. has launched a Dairy Accelerator to try and stimulate innovation in dairy products. To be eligible, entrepreneurs must have sales of at least $200,000 over the last 12 months and must have foods with dairy as a primary ingredient including yogurt, cheese, whey or other milk-based proteins or ingredients. The only exception is butter. 

  • Chicken producer Wayne Farms is building a $4.5 million innovation center next to its prepared foods facility in Decatur, Ala. The center will include a USDA-inspected pilot plant where new products can be developed more rapidly and integrated with Wayne’s production of ready-to-eat and ready-to-cook offerings.

  • Wisconsin-based butchery RJ’s Meats is the first in the country to sell meat from a vending machine. The company is using a German-made Regiomat vending machine to dispense a wide array of refrigerated meats 24/7.

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Food Insider May 3, 2017


Target's experiment to incubate food R&D Food + Future could be shut down soon as the big retailer struggles to find outside investors. The Star Tribune reports Target has been looking for investors for a few months, but none have been forthcoming. Target first opened the Food + Future lab in January 2016 with MIT Media Labs and the design firm Ideo as partners. It has been exploring ideas including building indoor farms inside of stores. Food + Future includes a lab in Cambridge, Mass which employs about 10 and a farm in Vermont. One of the key people behind the lab is a former Tesco exec Greg Shewmaker who thought Target should lead the way in promoting food transparency. "We know less about our food we eat today than at any other time in our history period," Shewmaker told the Star Tribune last year.


Panera Bread is back in the news again, announcing plans to hire 10,000 new employees by the end of 2017 for expanded delivery services. Panera started delivery service in early 2015, and currently offers it at around 15% percent of its total stores. Founder Ron Shaich believes there's a need for delivery in many locations which currently only have the option of Chinese or pizza. The food will be delivered in the driver's own cars and will add around $5,000 or 10% to weekly sales at each restaurant. Customers can follow their orders in real time with an order tracking system Panera developed using Bringg technology.


Meal replacement company Soylent is dealing with another PR crisis after issuing a voluntary recall of its Soylent 1.8 powder. The company, which built its brand around the absence of any real animal-based ingredients, is recalling products because of potential presence of real milk. Soylent said the problem was caused by was caused by "a temporary breakdown in our 3rd party manufacturer’s production and packaging processes." This is the second time the company's suppliers are taking the rap for product problems. Last year it was its algal flour supplier which was blamed for causing Soylent users to fall ill.


A new invention could reduce egg-sourced incidences of salmonella poisoning. David Geveke led a team at the Agricultural Research Service in developing a device which rapidly pasteurizes eggs by heating them with radio frequency waves. The process is potentially cheaper and faster than the current commercial practice of salmonella control by pasteurization which immerses eggs in hot water for up to an hour. The new RF process  targets the egg yolk more than the egg white  and only takes around 20 minutes. The market for the device is significant. ARS says less than 3% of the 74 billion fresh eggs produced and sold to U.S. consumers each year are pasteurized.


The latest data from the US CDC's FoodNet (Foodborne Diseases Active Surveillance Network) shows salmonella still leads the pack in food-borne illnesses. CDC advice: "To reduce incidence, we need interventions that target the types of Salmonella that are increasing or staying the same. Work to decrease the incidence of Salmonella infection is ongoing. Whole genome sequencing is helping us better figure out the sources of people’s illnesses, and FoodNet continues to track illnesses so we can see if prevention measures are working." Overall, CDC says the number of food-borne pathogen reports is increasing. The number of CampylobacterSalmonellaShigellaVibrio, and Yersinia infections diagnosed by CIDT alone increased 114% in 2016 compared with the 2013–2015 average.

Source:  CDC FoodNet 

Source:  CDC FoodNet 


  • Tyson Foods is buying Ohio-based packaged sandwich company AdvancePierre Foods for around $4.2 billion. Tyson also said its refocusing on its core protein business and selling off its three non-protein brands (Sara Lee Frozen Bakery, Kettle and Van's). Although its paying a premium for AdvancePierre, it gets a well-established player in the prepared food business and gets closer to its core protein customers.
  • Nutriati, a Richmond, Va.-based developer of plant-based food ingredients, has raised $8 million in VC funding led by Tate & Lyle Ventures

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FI April 20, 2017


The food and beverage industry is increasing its investment in technology through acquisitions, according to Hasti Afsarifard at the Plug and Play Tech Center. Afsarifard says food processors spend around 0.8% of revenue on R&D and beverage companies about 0.3%. By comparison, pharmaceutical companies spend up to 20%, and most tech companies will spend around 10%. To keep up with tech, food companies are buying. There were over 600 acquisitions in the industry in 2016. The most active sectors were soft drinks with 74 acquisitions, packaging with 64, dairy with 58, and ingredients with 51. Alcoholic beverages also had highly active sections with 49 acquisitions in wine, 41 in spirits, and 37 in beer.


Coinbase, a pioneer in the world of digital currency, has just launched a beta version of Token, a new tool which allows consumers to purchase food and other goods using an app on their smart phone. Digital currencies like Bitcoin and Ethereum bypass traditional banks and credit card companies and promise to lower the cost of financial transactions. Token is a mobile browser for Ethereum apps and includes a messenger and an Ethereum wallet. Digital payment systems are growing rapidly in China on mobile platforms such as WeChat. Token promises to make them popular in the US soon too.


One of Russia’s largest fast-food chains, Teremok, is trying it's hand in the US, selling its unique style of fast-casual Russian cuisine to the masses in Manhattan. from two locations in Union  Square and Chelsea. Their unique fare includes bliny, borsch, and buckwheat kasha. The chain’s founder, Mikhail Goncharov, told New Yorker magazine they had come to the US because it was "the motherland of fast food.”


Researchers at UC Berkeley and MIT have developed a portable device to create water from air. The device uses a special material combining zirconium and adipic acid to collect water molecules from the air at night and uses a condenser to release the water during the day. It can produce nearly three liters of water over 12 hours for every kilogram of the zirconium-acid material. But don't expect it to replace bottled water soon. The cost of high cost zirconium is a big barrier to scaling. Researchers are testing with lower-cost aluminum, but it's still early days.


Burger King's sly attempt to hijack voice-activated speakers in a TV viewer's home got them a lot of publicity, but also a backlash from consumers. The short ad (watch here) had an actor saying, “OK, Google, what is the Whopper burger?” to try and trigger a nearby Google Home device to describe a Whopper from a Wikipedia entry. Problem is Wikipedia entries can be edited by anyone and the ad quickly prompted many inappropriate edits. The ad also drew a lot of negative comments from consumers miffed at having their home devices hijacked by an advertiser. 


PetSmart is paying $3.5 billion for Chewy, a Florida-based online retailer - the largest e-commerce deal to date, in fact. More evidence that bricks-and-mortar retailers need to write very large checks to gain quick access to a digital customer base.  Chewy built a $880 million/year online business in part by paying close attention to customers. A lesson to online wannabe's in the human food business. 


Fierce competition has developed between meal delivery services in the San Diego area. The war is being fueled by the aggressive tactics of Uber’s food-ordering app, UberEats, according to the San Diego Tribune. As Eats pushes into the city's outlying suburbs such as Chula Vista, Poway, and National City, rivals such as DoorDash, Postmates, and GrubHub must follow. Uber's deep pockets may win out, however. Since arriving in June 2016, it has expanded coverage to an estimated 97 percent of the county’s population, or more than 3 million people. “On-demand food delivery is a notoriously low margin business, so a lot of these startups are trying to go for economies of scale to achieve profitability,” Zoe Leavitt, consumer tech analyst at CB Insights told the Tribune. The real question is how many cities can these start-ups afford to blanket before they run out of cash.


A German consumer interest group Verbraucherzentrale Hamburg is making the case for better information on sugar content in foods through visualizations such as the one below for Nutella. Their work follows in the footsteps of the BBC's revealing 2015 documentary The Truth About Sugar.

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FI April 14, 2017


New cloud-based technologies are disrupting the grocery business globally and also starting to impact the big brands. In the UK, home of Deliveroo and Just Eat, food consultant Prof. David Hughes says 62 or the top 100 grocery brands in the UK saw a sales decline in 2016. The top six (led by Coke) dropped £155 million. Meanwhile in India, The Financial Times reports big ecommerce players like Snapdeal, Flipkart and Amazon India lost $1.4 billion combined in the year to March 2016 as they invest heavily on marketing and logistics in an effort to gain scale. 


  • Supervalu Inc. moves deeper into wholesaling with its deal to buy Unified Grocers. This will boost annual revenue in their wholesale business to around $12 billion, almost three times what they will do in retail revenue. Should be good for Unified's retail grocer clients who benefit from the technology and larger buying power that Supervalu brings.
  • The move on Whole Foods Markets by activist investor Jana Partners LLC is putting pressure on the margin-challenged grocer to sell or restructure. Amazon apparently took a look at them last year but decided it was too rich of a price to pay to get a large footprint in the grocery business. We think they made a good decision - there aren't enough consumers today (and may never be) willing to pay a premium for organic food.
  • Roark Capital Management is cashing out on its investment in Atkins Nutritional Holdings, purveyor of low-carb foods and best known for the Atkins Diet. As a new publicly traded company, Simply Good Foods, we should soon know more about the cyclical nature of the weight control business and the marketing costs involved in keeping customers on a diet program.
  • While we are on the subject of weight management, French company TargEDys just raised another $3.7 million, on top of the $6.2 million it raised in 2016, to further develop its promising appetite suppression technology. The science is based on new knowledge of proteins generated in the gut which signal satiety to the brain. Cash is needed to run a pile of human clinical trials. It may be some time before it hits the market. 


  • As the market for wearable devices disappointing, Apple is said to have a team of engineers working on glucose sensor technology which would allow non-invasive, constant monitoring of blood sugar levels. Idea is to turn the Apple Watch into a must-have for anyone with diabetes. Expect similar innovations from other large players in wearable tech like FitBit and Garmin if they can find enough money to do it.
  • Chinese e-commerce giant Alibaba is launching a pilot Blockchain-based tracing system to fight food fraud in partnership with New Zealand dairy giant Fonterra  and Australian vitamin supplier Blackmores. Alibaba says global food fraud costs the industry over $40 billion a year.


Bloomberg's profile on Blue Apron highlights the risks inherent in the growing food/packaged meal delivery business. The company is bringing in a boatload of revenue ($750MM to $1B last year) and has been able to leverage incredibly sophisticated software to manage delivery to millions of customers and make money at it. But they are also more and more vulnerable the larger they get. One bad experience with a late delivery or poor quality could drive away a customer and impact their reputation. And the viral impact is much larger. Less than 1% poor quality/dissatisfaction may lead to a much larger percentage loss in customers.    


As the farmer's markets start to ramp up again around the country, worth noting that a lot more of them are catering to those with lower incomes. According to the USDA, the number of vendors accepting SNAP (Supplemental Nutrition Assistance Program) has increased more than eight-fold between 2008 and 2016:

As always, we welcome feedback and tips. E-mail:

FI April 7, 2017


Welcome to our debut edition of Food Insider. If you're interested in what's trending in the retail food world and influencing future demand and consumer taste, you're in the right place. We plan to provide fresh insights on the entire food supply chain and how it is being radically changed by technology and social media. If you like what you see here, please subscribe and tell others about it. We also welcome feedback. Please email us with tips on food tech startups or local trends which you think others should know about.


JAB Holdings' big play for Panera Bread is a payday for founder Ron Shaich and confirms his strategy of bridging the gap between traditional fast food and sit-down casual dining. As Starbucks, the trendsetter in coffee coolness, treads water, JAB needed to do something to diversify beyond its coffee core. It clearly thinks that there's more potential growth and long-term margin in a business built around quality food and good marketing/branding. 


Despite their remarkable rise to retail power (more on that below), Amazon still has a lot to learn about the food business. Word is that Amazon Fresh, the Seattle ecommerce giant's ill-fated foray into grocery/produce, has lost money on spoilage at more than twice the rate of traditional supermarkets. Logistics genius does not overcome fundamental truths about customer sensitivity to food presentation. Any worker in the produce aisle at Krogers or Safeway can tell you that. 


German chemical concern Evonik is trying to leap ahead in the race to find the best products to manage gut health with the development of a sophisticated gut simulation model which can be used in conjunction with actual animal performance on farms. As more and more meat is produced without the aid of antibiotics, the big players with deep pockets like Evonik are competing with scrappy startups to find the right magic balance in the gut in constantly changing environments and sub-clinical health challenges. We like Evonik's graphic representation below of how a healthy gut should work. Oh, were it that simple... 



Jack in the Box and Qdoba are the latest restaurant chains requiring all their chicken suppliers to comply with new animal welfare standards by 2024, including:

  • Switching to broiler breeds approved by Global Animal Partnership (GAP) as having higher welfare outcomes;
  • Reducing stocking density in barns, per GAP standards;
  • Enhancing the birds’ living environments, including improved litter, lighting and enrichment, per GAP standards;
  • Switching to a multi-step controlled-atmospheric stunning that will help ensure that birds are rendered unconscious before processing.

All of these measures will increase producer costs and will need to be passed on to the consumer. We expect the industry to desegregate on welfare lines and offer a choice: cheap chicken raised in the most efficient way or expensive chicken raised in the way you prefer. 


Market cap history is a good measure of the sea change that has occurred in retail over the past five years. This is the triumph of digitization. While the big established players have been mired in the costly analog world of brick and mortar and physical inventory, Amazon has mastered the art of selling stuff without needing to own it first. They have also created the world's most efficient system for predicting consumer demand and delivering the goods in a timely fashion. The trajectory is clear: while groups like Target languish in the cellar, AMZN is headed for the stratosphere. Some are even predicting a trillion-dollar valuation.

Market Cap of Retail Giants

Total market cap (in $billion)

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