Mondelez Invests In Hu Kitchen and Products
Just over a month after taking a stake in Uplift Foods, Mondel¯ez International announced in April its second investment in Hu Master Holdings, the parent company of both CPG brand Hu Products and fast-casual restaurant concept Hu Kitchen. Hu Chairman and Co-Founder Jason Karp told NOSH the investment will allow the emerging brand to scale.
Last year sub-brand Hu Products closed a small funding round led by venture firm Sonoma Brands. Since closing that round, the company has grown to be sold in over 3,000 stores and now has a staff of 20 employees. Karp has also departed his multibillion dollar fund, Tourbillon Global Master Fund, to focus on Hu and is investing in the wellness space.
Karp and Hu co-founder Jordan Brown told NOSH the company wasn’t seeking more capital for the business but had been approached by several strategic investors, including Mondel¯ez’s venture and innovation arm, SnackFutures. The duo told NOSH that, in the end, they realized Mondel¯ez would bring more than just capital to the company.
Karp and Brown said they were impressed by both leadership additions at Mondel¯ez as well as the company’s recent increased focus on better-for-you snacking. The hope, the duo said, is that Hu can inspire Mondel¯ez’s own innovation, while the strategic provides assistance with operational efficiencies and supply chain.
Mondel¯ez currently has one of the larger brands in organic chocolate with Green & Black as well as several of the leading cracker brands in Ritz, Triscuit and Wheat Thins.
Hu Products initially launched with organic chocolate bars before branching into other chocolate confections. In April the brand debuted a line of grain-free, gluten-free crackers in sea salt, everything and pizza flavors. The company plans to bring the crackers, initially sold exclusively online and at its Hu Kitchen restaurant in New York City, to retail later this year. The partnership, Karp said, will help both product lines scale faster and reach more accessible price point sooner.
Alpha Foods Raises $7M in Quest to Become Plant-Based Leader
Plant-based frozen foods brand Alpha Foods announced in March the close of a $7 million round of capital with $6 million in direct investment and a convertible note of $1 million. The round consisted of two tranches – one that closed in December and one that closed in March. New Crop Capital and AccelFoods led the round with Stray Dog Ventures and other previous investors also taking.
According to documents filed with the U.S. Securities and Exchange Commission (SEC), Alpha Foods previously raised $5.4 million dollars in March 2018. Previous investors have included VegInvest and Arbell Growth Partners (which is headed by former Snyder Lance CEO Carl Lee). Co-founder and CFO/COO Cole Orobetz and co-founder and CEO Loren Wallis told NOSH that, for now, they have chosen to raise smaller rounds more frequently rather than a single large round.
Orobetz said this current round will help the company staff up and invest in marketing programs. He expects the brand will start fundraising for its next round in six to eight months. Many of Alpha’s investors are also stakeholders in other plant-based companies, but Orobetz and Wallis say that’s not a concern.
The path to building the company has been deliberate. Alpha spent two years developing its products and then locking down the intellectual property around the formulation of its plant-based proteins. Despite that, Alpha is focusing on selling “prepared meal solutions,” Orobetz said, rather then ingredients (such as patties or ground “meat”) to be used in cooking.
When developing new products, Wallis said, Alpha tries to look for white space in the category and build out a shelf that either doesn’t already exist in plant-based (such as tamales) or has only lower quality options (such as “meat” pies).
KIND Takes on the FDA, While Clif Takes on KIND
What constitutes a “healthy” product has long been contested in the snack industry, but a recent back-and-forth on the issue between KIND Snacks and Clif Bar has expanded the debate, bringing environmental causes and outside financial backing into the mix while putting two significant natural food brands on opposite sides of more than one issue.
For almost a month, the two nutrition bar companies sparred – online and in print – over their products’ respective ingredients. KIND is also continuing to push the FDA into changing its stance on nutrition labels, an effort that might also rub Clif the wrong way.
It started in early March, when Clif ran an audacious full-page ad in The New York Times challenging KIND to use organic ingredients in its products. The ad was structured as an open letter from Gary Erickson and Kit Crawford, founders and co-CEOs of Clif Bar, to Daniel Lubetzky, CEO of KIND.
KIND promptly responded on Twitter, replying to Clif’s tweeted link to the letter with an image of a Clif Bar with the words “31% sugar” printed over it, accompanied by the text: “Brown rice syrup is sugar, whether it’s organic or not.” The tweet went on to allege that Clif attempting to pass the ingredient off as healthy was “deceptive.”
While KIND nut bars each contain less than 10 g of sugar, some Clif Bar varieties contain over 20 g.
Meanwhile, KIND’s ongoing efforts around nutritional claims may be sideswiping Clif’s efforts to appear as a healthy choice.
KIND announced that, along with public health experts, the company had filed a Citizen Petition pushing the U.S. Food & Drug Administration to address “misleading nutrient content claims,” according to the press release. Lubetzky told Inc. that the petition was not related to the clash with Clif. KIND has been battling with the FDA on what constitutes a “healthy” product for several years, trying to get the agency to bring its regulations in line with new dietary findings around fat and calories.
Sans Crickets, Exo Founders Try to Revamp Cereal
In April, Exo co-founders Gabi Lewis and Greg Sewitz announced their intent to bring back the tradition (or at least the memories) of big bowls of cereal accompanied by Saturday morning cartoons with the launch of their newest endeavor, Magic Spoon. According to the pair, the goal is to do for cereal what Halo Top did for ice cream: revamp an “outdated” indulgence product type with engaging branding and a strong macronutrient profile.
After selling Exo, their cricket-protein bar brand, in early 2018 to Aspire Food Group, Lewis and Sewitz decided they couldn’t go back to “normal jobs,” and instead began searching for their next business venture. Cereal, a stale yet massive category, caught the duo’s attention. Research firm Mintel estimates that despite slowing sales, the category will hit $11.1 billion in sales this year. And although the segment is dominated by three large players – General Mills Kelloggs, and Post – Lewis and Sewitz believe that their understanding of the modern consumer will give them an edge despite their considerably smaller budget.
Launching in four flavors (Fruity, Cinnamon, Cocoa, and Frosted) Magic Spoon will initially be sold online for roughly $10 a box, with a four-box minimum order. Monthly subscribers receive a 10 percent discount and free shipping. Each serving has 12 grams of protein and 3 grams of net carbs – the antithesis of the high-carbohydrate, high-sugar offerings typically found in the cereal aisle. The brand also avoids artificial ingredients and sugar alcohols by using a blend of stevia, monk fruit and allulose for sweetness along with a blend of whey protein isolate and milk protein isolate for protein.
General Mills, Post and Kellogg’s have each tried to adapt their classic SKUs by cutting back on using artificial colors and flavors or lowering sugar content, but consumers have generally disapproved. For example, when General Mills revamped Trix for a slightly better-for-you nutritional deck, the response was so negative the company soon reverted back to the original recipe.
Lewis noted that other big cereal brands are leaning into indulgence, citing Post’s chicken and waffle cereal or Kellogg’s’ Peeps cereal as examples. However, he added, these releases only cater to current cereal consumers, while Magic Spoon hopes to capture shoppers who have already left the aisle for more nutritious options.