The food industry is going through an interesting shift in the U.S. We’re moving away from an era of processed food and microwave meals, to one where people are increasingly concerned about the kinds of foods they’re eating, their freshness, sustainability, healthiness, and other factors. And yet, we still crave the convenience that comes with pulling through the drive-thru at McDonald’s.
This has left a wide open space for innovation in the food startup space, which was the subject of an interesting panel this morning at TechCrunch Disrupt NY 2016. Three founders of notable food startups joined us to share their insights on the state of the industry: Maple CEO co-founder and CEO Caleb Merkl, Sweetgreen co-founder and CEO Nicolas Jammet, and Blue Apron co-founder and CTO Ilia Papas.
One might imagine that the three consider themselves competitors, despite their different business models. Blue Apron sends meal ingredients and recipes to customers’ homes, Maple delivers top-chef prepared meals to select neighborhoods in Manhattan. And Sweetgreen is more of a retail business that uses technology like mobile “order ahead” to better serve its customers.
However, the founders believe that they’re not necessarily fighting against each other when it comes to attracting customers.
Explains Jammet, “we’re competing against the older guard of food.”
He means that these businesses are challenged to convert people from the old way of eating – fast food meals, TV dinners and other convenience and packaged foods.
But building businesses in the food startup space is not without its challenges, which was a large focus of the morning’s panel.
The companies have to make decisions about whether to bring on staff as contractors or full-time employees, or whether to outsource their deliveries or keep them in-house, for example. They have work with farmers and other purveyors to get the right quantity of ingredients, delivered on time – just like traditional restaurants and food service companies.
However, what they’re also facing is the technological hurdle that comes from innovating in the food space.
As Papas noted about Blue Apron, “there’s no software to run a business like ours.” His company’s engineers have had to build software from the ground-up for the service that ships meal kits to customers’ homes – something it’s doing in great numbers today. Over 8 million meals are being shipped out per month now, he says. That’s up quite a lot from the 5 million the company reported back in October.
Also discussed this morning were the struggles the food startup space has been seeing as of late, though none of the founders felt that investors’ cooling on the market would impact them directly.
Papas said he believed there’s still this large, untapped market ripe for exciting innovations as America itself comes out of “this lull of TV dinners and processed food.” Merkl essentially agreed, saying that while we would see less entrants coming in droves to the food startup space, “the reality is that really large businesses are going to be built.”
Unlike some startups in the on-demand industry, the founders on this panel stressed the importance of hiring and training staff who work as full-time employees, not contractors. This isn’t only so they’ll understand the systems and processes more fully, but also because of how food companies like theirs have to establish a social connection with their customers.
“Food is very emotional,” said Jammet. “So you’ve got to find a way to connect with the guest.”
Papas also spoke of the importance of hiring, when he offered advice to others entering the space. Asked what’s the hardest thing about growing and scaling a food startup, he answered simply.
“It’s definitely hiring,” he said.
“Finding talent that can keep up with demand, keep up with scale – there really isn’t a playbook for anything like this.”