Compound Foods, the San Francisco-based startup behind the ‘Minus’ beanless coffee brand, has moved into the b2b arena with an ingredients platform offering cocoa, coffee, and chocolate alternatives to manufacturers looking to “future proof” their supply chains.
With prices going up and availability becoming more unpredictable, many formulators are looking to reduce the amounts of these ingredients they use in a given formulation and make up the difference with alternatives, founder and CEO Maricel Saenz told AgFunderNews.
“B2b was always in our plan, because large scale transformation is always going to be at the b2b level,” said Saenz, who first showcased her tech via a ready to drink (RTD) beanless cold brew in 7.5oz cans. She has since pivoted to selling a powdered instant oatmilk latte positioned as a protein-fortified, lower-caffeine product with l-theanine.
“From the beginning though, we felt it was important to have a consumer brand [Minus], because we wanted to get feedback from consumers, so that when we’re talking to larger partners, we can not only demonstrate that we can produce high quality products at scale, but that consumers accept them.
“But it is also a case of where to focus resources. RTD is a difficult and crowded segment and it was a case of do we want to basically be a CPG company and focus on scaling this brand at retail, or do we want to use our consumer products like a business card when we’re talking to [b2b] partners, as in, ‘This is what a finished product could look like.’”
According to Saenz: “There’s a big opportunity in ingredients, so think of ice cream or granola companies that use coffee, cocoa, or chocolate as an ingredient.”
“Coffee and cocoa are at a breaking point. Compound’s platform is a critical tool for food brands looking to adapt, and thrive, in this new reality.” Shuo Yan, partner, Lowercarbon Capital
Formulation
The firm, which has reverse engineered coffee, cocoa, and chocolate, has built an ingredient database that attempts to replicate these foods at a molecular level, and has also built some expertise in fermentation to develop more complex flavors, although this adds extra costs, said Saenz.
“We’ve developed a database of strains and many different processes that help us get the complexity that you find in high quality coffee, for example. But we can also process our ingredients without using fermentation if we want to go for more cost-effective alternatives.”
She added: “The important thing is that we have the building blocks to play with so that we can work with companies that might have very specific requirements of what they want in a taste and cost profile, and we have the capabilities to design products for them.”
Like fellow beanless coffee firm Atomo [disclosure: AgFunderNews’ parent company AgFunder is an investor in Atomo], Compound Foods has also validated a broad range of ingredients that can work in its formulations such that if the supply of an ingredient it currently uses is threatened, it can switch it out with something else without huge difficulty, said Saenz.
“It’s all about having a diversified supply chain so if one of our ingredients is at risk, we can go to our database and say, here’s three or four alternatives we can use.”
Manufacturing
As for manufacturing, she said, while there is IP in the formulations and processes, the equipment required to produce Compound Foods’ beanless ingredients (instant coffee, coffee concentrate, and cold brew, plus cocoa powder, cocoa extender, chocolate compound) is not proprietary, and they can be produced by co-packers.
“It has been our strategy from the beginning to use co-manufacturers to scale and we’ve designed our products and our processes to fit within existing food manufacturing capabilities.”
The coffee alternatives are made with date seeds, chicory, sunflower seeds, carob, and grape seeds; while the cocoa alternatives are made with carob, mesquite, spent grain, sunflower lecithin, and cascara (what remains after the beans are removed from coffee cherries).
While scores of startups have recently piled into the beanless coffee and cocoa space as the supply chains for both ingredients have become increasingly challenged and demand continues to exceed supply, the surge of activity is good for the entire space, claimed Saenz.
“There are a lot more solutions in cocoa than there are in coffee, which is more complex and where I believe we play best. But our expertise in this space has allowed us to move more quickly into the cocoa space, which we started working on in about the middle of last year, because we could leverage a lot of the work that we did on our coffee, which actually tastes a little bit like cocoa.”
Messaging
As for messaging, it depends on the audience, said Saenz, who has raised about $10 million to date from investors including Lowercarbon Capital, Bossa Invest, One Way Ventures, Collaborative Fund, and Ulu Ventures.
If you are talking to industry partners, it’s all about cost, taste and performance, she said. For consumers, who are largely unaware of the threats to the coffee and cocoa supply chains, it’s all about offering an immediate benefit, she said. In the case of Minus beanless oatmilk lattes, for example, they key callouts on pack are less caffeine, added protein, and l-theanine.
“Consumers are not leaving coffee because of concerns about sustainability or taste,” said Saenz. “They love it. The people that are leaving it are avoiding it or drinking less because of how it makes them feel, because too much caffeine makes them jittery, anxious, and it affects sleep.
“By offering some protein, less caffeine, and l-theanine for smoother caffeine absorption [in the Minus oatmilk latte mix] we have a very solid value proposition, and we’re getting really great feedback.”
Further reading:
Food Brewer nets funding from Lindt and Sparkalis for cocoa grown via plant cell culture
Is plant cell culture a scalable way to futureproof cocoa and coffee?
Mez Foods turns to mesquite as skyrocketing cocoa prices drive interest in choc alternatives
Meet the founder: Voyage Foods’ Adam Maxwell on futureproofing the chocolate supply chain
