This post was originally published by Saman Warain Herath at Medium [AI]
4 takeaways from a Chilean startup going global
Did you know an AI company took 10% of the mayonnaise market within 8 months?
NotCo is a Chilean food-tech startup leading the disruption of the archaic food industry. Their products have already become a staple product in Chile. And after gaining market share in Chile, NotCo has launched in the US. You may have seen the “NotMilk” products in Whole Foods.
Its mission is both audacious and inspirational: “Take Animals Out of Food production while never, ever comprising taste.”
Changing the food culture that has been so ingrained in our cultures for thousands of years is extremely challenging.
However, NotCo’s rise to the challenge is an inspirational story with precious learnings.
Issues in the Food industry
The food industry is vast. The Global Software Industry has a $400 bn market size, only amounting to the global seafood market. However, the global food industry is $4.8tn, comprising 10% of the entirety of human productivity.
But it is an outdated industry with archaic technology and business models. One of the issues with the food industry is in industrial food: malnutrition and unsustainability. Obesity is higher in developing countries and impoverished areas due to processed foods having high addictiveness and high calories. Look at the positive correlation between income level and obesity below. The correlation is stark at high obesity levels (obesity grade 3, BMI 40+).
Another issue with industrial food is the considerable burden on the climate: land use, water use, and CO2 emissions. “Eating one burger has the same environmental impact as driving 10 miles on a gas-powered vehicle.”
NotCo serves to solve both issues by recreating animal-based staple foods with plant-based ingredients that actually taste good. Because, let’s face it, making a conscious switch to veganism or pescatarian is too difficult to continue for the majority of us unless it tastes good.
Forming the dream team
To realize this ambitious dream, the founder Matias Muchnik initially started to research the pharma industry at the University of California, Berkeley.
“I went to Berkeley and decided to go to the biochemistry department and really try to understand the data and the science” — Muchnik
From Berkeley, Muchnik then went to Harvard University, where he met Karim Pichara, an astrophysicist using data science and machine learning to understand the mechanisms of the galaxy.
Muchnik then needed someone with expertise in plants and decided to recruit Pablo Zamora, researching plant genomics at the University of California.
The dream team for NotCo was ready:
- Vision and Dream: Matias Muchnik
- Data Science and AI: Karim Pichara
- Expertise in Plant Genomics: Pablo Zamora
The secret to NotCo is Giuseppe, the AI algorithm formulating the perfect ingredients.
Giuseppe can learn, mix, and match unlimited plant combinations to deliver the taste found in animal-based products. Giuseppe is always becoming smarter, accounting for flavor, texture, nutrition, functionality, color, and perception, all part of the food experience.
For instance, an almond and walnut have a genetic match of 97%. The similarity is high, but there is 3% causing the difference. Giuseppe can understand what you need to compensate for the 3%. It is similar to using Lego brick pieces to build the perfect Lego house.
One of NotCo’s favorite products is NotMilk. To replicate the taste of milk, Giuseppe starts generating a bunch of different recipes. Then, it gives a score to see how similar the recipe is to the actual taste. For recreating milk, below are some of the recipes Giuseppe came up with:
- Most similar: coconut, cabbage, pineapple, pea, chicory fiber
- 2nd most similar: rhubarb, pineapple, soup, mushroom, vanilla (seriously mushroom!?)
- 3rd most similar: rhubarb, cranberry, limeade, vinegar, mushrooms
Giuseppe indeed comes up with some funky recipes, so the Research Chef in NotCo has to test more than 100 recipes every month.
But there is a strong rationale behind the suggestions as pineapple seems to have the same lactones that enhance the creamy notes in dairy milk.
“The texture is like milk and it is very tasty. There is more flavor than the milk you can buy at the supermarket” — World renowned Chef, Sergio Barosso upon tasting NotMilk
The texture and taste is very similar to real cow milk. I like it more than the other nondairy alternatives I have tried. I have found a new favorite. ーNotMilk review on GoDairyFree.Org
As mentioned above the NotMilk has favorable reviews with an authentic flavor overcoming the dislike of plant-based milk. 30% of consumers who try plant-based milk revert back to dairy due to the lack of taste.
The ingredients are also significantly more environmentally sustainable.
After founding the company in 2015, NotCo spent two years developing its first product, NotMayo (a plant-based mayonnaise). With just 7 employees and 8 months after launch, NotMayo became the 3rd best-selling mayonnaise brand by gaining 10% market share in Chile.
After that, NotCo expanded into Argentina and Brazil. Also, they have added NotMilk, NotBurgers, and NotIceCream to their lineup.
The demand behind the product is quite strong, with NotCo forming solid partnerships with companies like Papa John’s and Burger King. NotCo has gotten a 5% market share in the burger market and a 2% share in the entire dairy category in Chile.
US readers may be familiar with the NotMilk as it is available in WholeFoods.
“[Whole Foods] tasted our milk and said, “There’s nothing like this in the United States” — Matias Muchnik
With their substantial success, global investors have been rushing to their door to take a bite. NotCo has raised $115M from international investors such as Bezos Expeditions, General Catalyst, Future Positive Investment (Twitter Co-Founder’s Investment Firms, IndieBio, etc. Valuation is currently estimated at $300mn and is well on its way to becoming the first Unicorn from Chile.
Currently, NotCo is recognized as the #1 Most Innovative Company in Latin America by Fast Company.
Reading about NotCo’s journey is truly inspirational. There are not many local startups that have gone global. In Japan, the only recent startup that has tried to go global is Mercari, a C2C marketplace, but it has not seemed to be getting any traction in the U.S.
NotCo has ambitious plans to launch in Mexico and Canada in 2021 and accelerate adoption in the US.
“We are aiming to have a $300 million company by 2024 with 70% of that business in the U.S.,” — Matias Muchnik
I think local entrepreneurs can learn from the 4 takeaways below to build a compelling product and expand globally.
Takeaway 1: Understanding the inefficiencies in the industry and building the dream team from scratch
Matias dipped his toes in entrepreneurship before NotCo, building a company called Eggless. He tried using traditional food companies and experienced how obsolete it was.
“It was three guys in lab coats doing trial and error, reading research papers from the 1980s on how to replace animal-based food. It was so obsolete, and this was a company that made food formulations for huge companies around the world.”
However, this did not stop Matias from giving up. He realized he needed to take things in his matter and recruit the correct people from scratch. Although the idea had been brewing in his mind, he took time and patience in developing his dream team—one from Harvard, another from the University of California, Davis.
Takeaway 2: Leveraging AI and data science where it has a competitive advantage
One of the large megatrends of our present time is unmistakably Artificial Intelligence and Data Science. However, the spotlight has also been a curse, as large companies and startups want to implement AI just for the sake of having AI and beefing up valuations.
Also, often the goal of implementing the technology is to have the highest accuracy and the latest algorithm. The key is understanding where AI is most effective and running the algorithm at the lowest cost. Simplicity is often the best solution.
I recently wrote about an AI-OCR company in Japan that did well because it was able to find an area where AI is more efficient than human beings.
I think NotCo was able to find an area where the value proposition of AI is clear. A human being can only distinguish between 2~3 ingredients, but for AI, the limitations are limitless. Also, food profiling is an area where gathering more data increases the accuracy and speed of the algorithm, allowing to increase product development iterations significantly as the machine gains intelligence.
Takeaway 3: Understanding the pain points of the customer and the relentless strive to meet them
Clayton Christensen, esteemed academic and consultant, has a theory of Jobs to be Done, which states that innovation stems from understanding what causes customers to make choices that help them achieve progress on something they are struggling with in their lives. The key question is: “What job would consumers want to hire a product to do?”
NotCo realized that they could not rely on the consumers to eat plant-based foods based on sustainability and nutrition. It is not the “job” customers want to be accomplished when eating food. Instead, the food simply has to taste good, and NotCo recognizes that. This is why they don’t blindly follow Giuseppe’s recommendations but ensures it tastes good and flavorful. The results speak for themselves as 92% of NotCo’s consumers are not vegetarians.
Takeaway 4: Hiring the appropriate expertise when going global
Food is a global product that can be expanded and serviced anywhere in the world. However, you need to understand the local regulations, business market, competitive overview, and customer needs to build a compelling go-to-market strategy globally. Marc Benioff has mentioned that you should send the best people from your headquarters during the early days of international expansion.
NotCo surely understands the difficulties of international expansion and has built a proper team made up of seasoned executives from large multi-national brands.
- Chief Marketing Officer: Flavia Buchmann, a former executive at Coca-Cola overseeing the company’s Sprite brand
- Head of Global Business Development: Former Danone executive Luis Silva
- Head of Global R&D: Former Danone executive Catriel Giuliano
- Global Chief Operating Officer: Former Jeffries and Tapad executive Jose Menendez
It is exciting to see local startups disrupting the archaic food and agriculture industry on a global scale. I believe it won’t be long until we see NotCo and other companies going IPO in the near future.
This post was originally published by Saman Warain Herath at Medium [AI]