Chilean food tech NotCo, an alternative protein startup, is on the edge of becoming Latin America‘s new unicorn, reaching a $1 billion valuation. “It will be no surprise if we receive a new fund round in the next months when the company’s growth reaches a level that we are in line to do so,” Maximiliano Silva Figueroa, NotCo’s country manager in Chile, told LABS.
Founded in 2015 by Matías Muchnick, Karim Pichara, and Pablo Zamora, the Jeff Bezos-backed plant-based startup is already valued at around $300 million, according to TechCrunch. In 2020’s third quarter, NotCo’s debut in the United States was powered by an $85 million-dollar Series C Round with key industry investors including Bezos Expeditions, Future Positive, and L Catterton.
The food-tech startup does not disclose sales or revenue numbers, but Figueroa says that even with the pandemic the company grew “five times in 2020” and two times only in its homeland, Chile. “We don’t disclose numbers but it’s proportional with the valuation between the last fund round and the next one (Series D) that is to come.”
“We are growing a lot, last year we had the opportunity to expand our portfolio in three countries and open an operation in the U.S. It has also been an expansive period for us. If things were different [with the pandemic], maybe this speed would be different or the complexity of developing new operations would be different, but it has been an important growth period.”
Latin America’s newcomers on thin ice in the U.S. plant-based market
In the U.S., plant-based products are growing almost twice as fast as overall food sales. SPINS’ retail sales data disclosed in early April shows that grocery sales of plant-based foods that directly replace animal products have grown 27% in the past year, to $7 billion, reported the Good Food Institute, a U.S. lobby group.
NotCo soft-landed in the U.S. (where it is yet a one-product company) through a partnership with Whole Foods, which already sells NotMilk in 500 of its grocery stores. “The U.S. market is a huge challenge. The plant-based market has a very important penetration with the consumer, the highest in the world,” says Figueroa.
One of these challenges is that a great market attracts great rivals. Recently, sources told Reuters that the US-based faux meat maker Impossible Foods is seeking an IPO or a SPAC (a merger with a blank-check company) within the following months, planning to achieve a $10 billion flotation.
According to Reuters, the market value of larger competitor Beyond Meat has sunk from a peak of $14 billion to closer to $8.5 billion. Brazil’s challenger Fazenda Futuro (Future Farm, its name in the U.S. operations), valued at BRL 715 million, began its journey in the U.S. in January.
Brazilian Bruno Franco is a managing partner of ENFINI Ventures, a proprietary fund that backs Future Farm. Asked why investors value plant-based foods positively, Franco told LABS that ENFINI sees this business as a powerful concept related to sustainability and more efficient use of natural resources for food production.
“We see that there are currently new processes and technology applied in food production, making the final product of plant-based companies closer [in appearance and taste] to conventional meat products, preserving our experience and our food culture. The sum of both factors is absolutely disruptive and makes a very robust thesis. This combination justifies the transformation of part of the food production chain, leveraging how much these companies can grow and generate business. In summary, we see that the solutions brought by the plant-based industry can provide more food, with less use of natural resources and, in scale, even cheaper products.”
NotCo says it has the key to tackle all these big players. It has been granted a patent for its proprietary artificial intelligence technology in the U.S., and Figueroa states that the company has the know-how to bring any alternative product to animal protein to the mass market. “Our value proposition comes from technology. One of our biggest assets is that we can compete in every replacement category.”
NotCo operations in the U.S. have been expanding to reach more consumers in the go-to-market channel split. Even though it started with baby steps, the company is starting to pick up the right pace, according to Figueroa. “Due to COVID-19, we started the first months in the U.S. at a low speed. Now the velocity, the shelf space turnover, has increased. The performance of NotMilk has been great,” says Figueroa.
US headquarters should also address and supply the Canadian market. The company expects to scale its product in the U.S. market before expanding its portfolio, which in Latin America includes dairy and meat mimics, such as NotMayo (plant-based mayonnaise) and NotMeat with NotBurger (a key product in Chile, Argentina, and Brazil). New products will be launched in Latin America by the end of this year.
Business in South America for NotCo is easy as ABC: Argentina, Brazil, Chile
In Latin America, NotCo has offices in Chile, Brazil, and Argentina, and it doesn’t have plans to open an office in Mexico yet. It has been expanding its products to the Andean region (Colombia and Peru).
Due to COVID-19, the project of having NotCo products indirectly in the most important markets in Latin America was delayed, but Figueroa believes that by the end of the year, it will roll out.
Also, because of social distancing, partnerships in the foodservice market (such as the one in the Andean region with Burger King, and some countries in Latin America with Papa John’s) haven’t been so important to bring growth as the startup expected before the pandemic.
NotCo knows that competition is strong in Brazil, as new rivals (Fazenda Futuro, The New Butchers, Yamo) emerge every day battling for the market. Still, it believes that it has what it takes to be the leading competitor in Latin America‘s largest country.
NotCo’s path to become public-listed
Landing in the U.S. was a crucial step to project NotCo as a global company. “When you come to the U.S., it’s easier to be known in Japan, China. It is a new stage of the consolidation of the company,” says Figueroa.
Asked about public listing abroad, Figueroa said that a company that wants to be known worldwide needs this strategy. “We want to bring our value proposition globally, coming from Latin America, and landing in the U.S. is very important in this journey. In this stage, our focus is 100% developing our products, markets, and brand awareness that can consolidate us into a very valuable company in the plant-based industry that has also been growing. We are in this path (of IPO), but 100% focused on developing products and markets.”
NotCo’s most important focus is to grow in terms of volume rather than in staff. Currently it has only about 250 employees. Yet, its operations and supply chain model are not very extensive either, since it doesn’t have its own facilities, and it works with co-partners, co-manufacturers, distributors, and business partners.
“For us, it is more important the technology and the product than being a big company. We want to be competitive, but not a heavy company. We think that we are still small, so the ambition is big. We don’t dream of huge buildings with the logo of NotCo in the front; we just dream of winning the heart, the kitchen, and refrigerators all around the world. That’s our journey.”