Seattle-based food tech company Atomo Coffee, the maker of a “beanless coffee” made with upcycled ingredients, has raised $40 million in a Series A round ahead of its ecommerce launch today, the company announced.
The latest round is backed by past investors – agtech-focused firms S2G Ventures, AgFunder and Horizons Ventures. The company previously closed a $9 million seed round in 2020 featuring S2G and AgFunder, and before that raised $2.6 million in a round featuring Horizon in 2019.
After years of R&D, Atomo is also now launching its first canned cold brew line online direct-to-consumer today, with a retail roll out expected to begin later this year. The line features Classic Black, Ultra Smooth and Oat Milk Latte varieties in 8 oz. cans and sell for $22 per 4-pack or $40 per-8 pack.
Founded in 2018, Atomo initially positioned itself as a “molecular coffee” brand, following in the trend of lab grown meats and cow-less dairy startups by producing a “reverse engineered” coffee product made without coffee beans. The company says it uses a proprietary process in which California-sourced date seeds are converted into grounds with a flavor that is nearly indistinguishable from traditional coffee.
While that process is still the core of Atomo’s identity, head of growth Ed Hoehn told BevNET that the company has moved away from the “molecular” label and has instead focused messaging around sustainability and flavor, noting that coffee farming and transportation have a large carbon footprint.
While Atomo’s cold brews have been previously sold in limited quantities through ecommerce pop-up events and select office accounts, including Microsoft, Hoehn said today’s direct-to-consumer launch marks “the first consistent opportunity for people to purchase” the product. The company delayed a planned 2021 launch – which at the time had cans featuring comic book styled labels with characters stating “It’s Molecular!” – and revamped the packaging in a minimalist design, highlighting callouts for “Beanless Coffee” and “Tastes Great, Does Good.”
The new look is intended to be more inviting and warm, Hoehn noted, and showcase more of the brand’s personality.
“We really want to prioritize connecting with consumers and helping them understand our value proposition,” he said. “We’re not going after coffee per se, we all enjoy coffee as well and have a lot of passion for it. It’s all about the growth of the industry and the trajectory of consumption, and our ability to help meet that demand and in a much more sustainable way.”
Atomo is currently in discussions with several potential retail partners, Hoehn said, and will likely focus on growing within the natural channel before expanding into conventional accounts. While the large financing round will allow the company to move quickly into brick-and-mortar, he noted that the brand plans to take a cautious, data-driven approach.
Beginning in August, the brand will begin an experiential marketing and sampling campaign to help raise awareness, while social media will continue to play a major role in marketing as well, he added.
“I think it’s really important for us to prove our model based on scalability, and I will say that we are, ultimately, tremendously focused around velocity versus distribution,” he said. “It’s the place where a lot of companies fall down, they can get quick wins by growing distribution, but we’re focused on building relationships with consumers and ultimately wanting to co-create and partner with retail to think about how we best deliver for their shoppers.”
The funding is also supporting the opening of a new production facility in California to accompany its Seattle plant. Including manufacturing, Atomo now has about 35 employees, but Hoehn said the company plans to grow to around 70 to 75 employees by the end of the year. Many of those new positions will be in distribution and innovation.
According to IRI, retail dollar sales for the cold brew coffee category fell -0.6% to about $324 million in the 52-weeks ending June 12. Category leader Starbucks, which makes up over two-thirds of the market share, declined 8.1% in that period, while smaller brands such as Chobani (+343.7%), STOK (+27.5%), La Colombe (+6.7%) and RISE Brewing Co. (+42.7%) grew sales.
Looking ahead, Hoehn said he sees long term opportunity for Atomo as consumers continue to seek out cold brew coffee while climate change puts more strain on the coffee supply chain.
“When you think about traditional coffee growers, based on climate change, having to push their farms further and further at higher elevations and causing deforestation – all of that – there’s some question on whether or not traditional coffee can meet the demands,” he said. “So I think you’re seeing some of the confidence around our taste, and a lot of confidence around our sustainability mission and our ability to join the ranks of coffee growers as we think about the long-term trajectory and growth of the industry and our ability to capture share as we move forward.”