Food e-commerce company Snap Kitchen recently announced the completion of a $22 million equity raise led by existing investors Catterton and company co-founder Bradley Radoff. The Austin, Texas based food delivery service currently operates at almost 30 store locations throughout Texas and Chicago, which are supplied by a series of company-owned and operated kitchens. Launched in 2010, Snap Kitchen provides ready-made single serve meals catering to health and nutrition-conscious consumers.
“For us, it’s been about phenomenal food, phenomenal service, and these great store environments,” Snap Kitchen co-founder and president Martin Berson tells AgFunderNews. Roughly five years ago, Snap Kitchen opened its doors in Austin and focused its efforts on solidifying its presence in the local market. Today, the company claims a dedicated consumer base and is looking toward opening new markets.
“With this round of capital, we are going to continue expanding by opening new stores in existing markets and entering some new markets,” says Berson. “Right now, we operate in Austin, Dallas, Houston, and Chicago. We are opening in Philadelphia at the end of the year, and in additional markets early next year.” The recent raise will help Snap Kitchen achieve these expansions, in addition to aiding other business goals. “We also hope to expand our infrastructure in existing markets, elevate our growth pace, and grow the team. There is a lot going on in this space and we want to make sure that we are on the cutting edge of any initiative that makes sense for our business.”
Berson isn’t exaggerating when he notes the substantial development taking place in food e-commerce. The sector has exploded recently, topping the charts not only in number of deals but in total investment dollars ($551 million) during the first half of 2015, according to AgFunder data. “We want to make sure we are improving our forecasting abilities, which will help reduce food waste. There’s also a lot going on in the tech space in regard to ease of use for customers. Everything from mobile apps, to better accessibility of information, to the ability to geo-sense customers. We want to make sure we are aware of all of that from a food tech and delivery standpoint,” says Berson.
The company also places an emphasis on sustainability, including bamboo floors in its store locations and BPA-free recyclable and compostable packaging.
Although Snap Kitchen’s strong foothold in its local markets allows it to keep a keen eye on broader industry trends, the company took a more cautious and dedicated approach during its startup growth phase. “We spent the first year-and-a-half just getting two stores open–one in Austin and one in Houston. We weren’t really focused on anything other than making great food and providing great service,” says Berson. “We put our head down in terms of what was going on in the industry and the space, and once we got to the point where we had a good following, we opened a couple stores in rapid succession. We went from three stores to 12 stores in two years.”
Soon after the expansion, Snap Kitchen closed a $13 million raise with East Coast-based private equity firm Catterton, which also invested in Restoration Hardware and Outback Steakhouse. The company used the funding to expand its existing market into Dallas and enhance the company’s infrastructure. “We went through traditional stages of growth like a brick and mortar business, not as much like a tech business, but we are morphing into something that is equally as tech savvy.”
Next to the mechanics of maintaining a food prep and delivery service, Snap Kitchen places an even greater emphasis on the content of it’s product. “Nutrition is hyper important to us,” says Berson. “Our concept is really about food nutrition and convenience coming together into one product.”
Berson cites the company’s supreme focus on quality and transparency as the key element that sets Snap Kitchen apart from the multitude of food prep and delivery companies in the current market. “We are a food business first and foremost. That’s probably the one thing that separates us from other companies. We really focus on the quality of ingredients, execution, and transparency in the food and ingredients that we use. And, of course, excellent taste.”
Another distinguishing aspect of Snap Kitchen’s business is the wide variety of dietary preferences included within its menu. From vegan, to gluten free, to paleo, there is something on Snap Kitchen’s menu to satisfy any specific appetite. “When we started five-and-a-half years ago, that was part of our initial business plan and something we spent a lot of time researching as we looked at the market and tried to identify fundamental areas that were not being serviced by fundamental retailers,” Berson explains. Snap Kitchen operates more like a retailer than a restaurant, he added. “If you walk into a grocery store, it can be hard to find things that are single-serving with transparent, easily-identifiable ingredient information and which also cater to people with dietary restrictions.”
Through focus groups, collaboration with industry professionals, and a dedicated customer feedback system, Snap Kitchen honed in on a product that offers a convenient solution to each of these dynamics. “Our first hire was our chief dietician, Andrea Hinsdale, who did a lot of initial work fine tuning the list of ingredients and offerings to make sure that we are offering the right things to our markets.”
For investors looking to get involved with food e-commerce companies like Snap Kitchen, Berson has some simple advice. “While the space has a ton of opportunity and is continuing to evolve, there are a lot of cautions out there. We are not immune to things happening around the country, or even around the world. This is a challenging business, but with a good team and a good product anything is possible.
For entrepreneurs, Berson’s advice is just as simple: “You really have to love what you are doing and embrace it with a passion, because there are tons of hours, tons of setbacks, and tons of challenges. It’s definitely possible to overcome all of them, but you have to love what you do because it tugs at you everyday.”
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