[Disclosure: AgFunderNews’ parent company AgFunder is an investor in Kawa Project]
Spent coffee bean grounds are being used for everything from soil amendments to substrates for mushroom cultivation. But how do they stack up as cocoa alternatives?
AgFunderNews (AFN) caught up with Kawa Project founder Aaron Feigelman (AF) to discuss what firms seeking to replace some cocoa are looking for, how close coffee and cocoa are from a taste perspective, and what scale he needs to operate at for the economics to make sense.
AFN: What is Kawa Project doing?
AF: Kawa Project makes a substitute for industrial cocoa powder derived from a used coffee ground upcycling process that has a more stable supply chain with less volatility, comparable or cheaper prices than industrial cocoa, and more beneficial nutritional components.
AFN: What processing is involved?
AF: So you’ve got to stabilize the grounds and dry them to a very low moisture percentage. And then we do an extraction process to remove a lot of the coffee-forward notes and keep a lot of the sour and roasted notes that are found in both coffee and cocoa. And then you’ve got to mill it at the end to get to a very, very fine particle size, just like cocoa.
AFN: How close do you get to the flavor profile of cocoa?
AF: After our extraction and refining process for the more alkalized varieties, it is very, very similar, especially in application, which is really what matters at the end of the day. If you eat it raw, you can probably taste some differences because there’s less fat. But when it’s in applications, especially in something like cocoa free brownies, and there’s evidence of this in a UC Davis study [on Kawa Project’s alt-cocoa], it’s really hard to tell.
AFN: Typically, what kind of percentage of cocoa are companies looking to replace?
AF: It’s a moving target. Some are looking for 100% cocoa free, especially if there are middlemen who are looking to sell to others because they want to have a cocoa free story. But if you’re talking to end buyers who might be using it in their own brownies or cookies or snacks, the majority of the time it’s some mixture of both; they’re just trying to minimize volatility in their supply chain.
AFN: Do the economics of your alternatives only make sense at massive scale?
AF: If you’re going after smaller customers such as bakeries and small snack brands, it makes sense at sub one-million-pound production scale, using some co-manufacturing. But if you want to work with the big guys, the big players, you really have to have your own facility, or partner with somebody to make a facility and be at one-million-plus pounds of production.
AFN: Do you need to be able to match the price of cocoa or undercut it if you want to get in this game?
AF: The best scenario is if you can be a little cheaper. The reality is because cocoa is so volatile and unstable, it does open the ability for us to sell at the same price, because it is better than cocoa in that you [don’t] have to worry about price volatility. Our pricing is very stable because our inputs are very stable.
AFN: Do some potential customers lose interest in alternatives when cocoa prices drop?
AF: It is a challenge… Customers that are looking at the long term and are invested in their business planning for 3-10 years out continue to be interested in this, because this past three years were a real nightmare and they don’t want to experience it again. So they’re thinking how can we prevent this from happening? For those who are [only] thinking about the next year, they’re definitely less interested [however].
AFN: What do companies currently do with spent coffee grounds?
AF: It really depends on the country and kind of coffee company. With ready-to-drink beverage companies that are doing canned coffees or cold brews, especially in the United States, it’s a cost center, so they will pay a waste hauler, or at best, a compost company, to come take it. Sometimes it’s a million dollar plus cost center.
So for them, especially with the margins being challenged in the coffee industry, the waste is a challenge, and also just dealing with waste haulers who may or may not always come to get it. Sometimes they have to have multiple waste haulers and backups. In the instant coffee world, especially in Asia and South America, they will burn the spent grounds.
AFN: How challenging has it been to raise money for your startup?
AF: Raising money has been pretty challenging… I think that one of the smart ways that we figure out how to bring in cash to the business is to do paid pilots with coffee factories that have waste streams and are interested in doing paid R&D, of looking at their waste, understanding what value is in there, and what applications there are in the chocolate market.
We did one paid pilot with Nabeiro Group in Portugal, which was very helpful for our business and for them. And the same can be done with companies that are buying chocolate or cocoa that are looking to figure out… can they look at substitutes? But it’s not easy to do. Not everyone wants to pay…
Further reading:
Prefer raises $4.2m, launches soluble bean-free coffee and cocoa powders
Compound Foods launches ingredient platform to future proof coffee and cocoa
Food Brewer nets funding from Lindt and Sparkalis for cocoa grown via plant cell culture
Mez Foods turns to mesquite as skyrocketing cocoa prices drive interest in choc alternatives
