The organic and natural foods market has been outpacing the growth of the overall food industry for years. In 2019, it grew at 5% compared to 1.7% for the overall food market.
In 2020, the pandemic has accelerated the growth of the natural food space. Organic produce growth alone was up 20%. As more families have stayed at home, their food of choice has shifted towards organic food options. Consumers want to eat healthier, especially in light of findings that poor diets can make you more vulnerable to the coronavirus.
All this suggests that there are great opportunities for entrepreneurs in the natural foods space. The startups of today may become the mainstream brands of tomorrow. Here are three startups making inroads capitalizing on the natural foods trend.
Not long ago, various specialty food delivery services like Blue Apron and Hello Fresh led a wave of meal-prep delivery services that gained traction in major markets across the U.S. While there was a novelty effect with the introduction of these products, with the pandemic, they’ve seen renewed growth. Consumers want to avoid the grocery store and have more time at home, making meal kits an ideal product.
One such service, Daily Harvest, has found success meetings consumer needs for healthy organic products delivered straight to their home.
The business started when founder Rachel Dori began preparing frozen serving packs of healthy fruits and vegetables for herself after finding existing food delivery services lacking. She wanted the option of having pre-measured servings that could become ultra-convenient meals throughout her busy week. In short, what started as a personal project bloomed into a business with over 100,000 subscribers. It’s also a business that has attracted $43 million in VC funding to date, and is now riding a surge of interest in at-home food delivery created by the pandemic.
The shift to remote work that came in response to the pandemic has either been a blessing or a curse for businesses. Companies like Starbucks have struggled. They have reportedly lost over $3 billion in retail sales, stemming from store closures and a sharp decline in weekday foot traffic to its stores.
However, consumers still continue to drink coffee, just now in their homes, benefiting coffee companies with direct-to-consumer models.
Taking advantage of this shift, and building upon the consumers’ desire for healthy alternatives, is Ryze Superfoods. Founded by Harvard ‘16 classmates Andrée Werner and Rashad Hossain, this wellness startup recently came to market with a product that mixes a healthy blend of functional mushrooms with MCT oil and coffee to form a healthy alternative to the conventional coffee blend.
According to CEO Rashad Hossain, the product’s genesis came from managing other large global coffee brands. He says, “I was shocked to find out that traditional coffee, despite its many health benefits, had some significant negative side effects associated with it. That includes nearly 50% of drinkers suffering acid reflux, jitters, or anxiety. Our blend cuts the caffeine and adds natural compounds to create a tasty alternative without the downsides.”
Given that their product is aiming for a slice of an $83 billion market at a time when coffee shops are shutting down, Ryze Superfoods has a unique opportunity for success.
Launched in late 2015, Imperfect Foods started with a simple and important mission to help find a way to eliminate food waste in the US. To do it, founders Ben Chesler and Ben Simon began working with farmers to find a way to rescue what they called “ugly and surplus fruits and vegetables” and to deliver them straight to consumers at a steep discount compared to supermarket prices.
This eco friendly idea led to a company that has attracted over $137 million in VC funding and now has a presence in 36 states. And their development couldn’t have happened at a better time. The pandemic has more than doubled Imperfect’s subscriber base, and they’ve formed strong partnerships with farm suppliers who have found a new source of revenue from Imperfect Foods.
Recognizing that consumers in poor communities had virtually no access to healthy food, Sam Polk, a former Wall Street trader, was convinced to address the problem.
He launched Everytable restaurants in underserved communities with an audacious goal — to serve a healthy, delicious, fresh meal for $5-$7.
Everytable now has locations in Watts, Compton, South LA, several California State University campuses, amongst others. During the pandemic, it has been able to leverage its central commissary to service relief organizations, homeless shelters, senior citizens, vulnerable students and more. They also introduced subscription and delivery options, bringing fresh ready-made food directly to their customers.
A continuing boom
These companies are just the tip of the iceberg of the boom in natural and healthy food startups. In the first half of 2020 alone, innovative food startups raised more than they did in all of 2019 at a time when VC opportunities as a whole have dropped considerably.
While consumer demand has been moving towards healthier foods, the pandemic has only accelerated what’s likely an irreversible trend. As evidenced by these startups, there are untold unique opportunities to capitalize on this if you have the entrepreneurial hunger.