Dive Brief:
- Neutral Foods closed a $12 million Series A round led by Breakthrough Energy Ventures, an investment fund co-founded by Bill Gates. Other participants in the funding round for the carbon-neutral dairy company include Japanese firm Global Brain, its CVC partners Kirin Holdings Company Limited, and Norinchukin Bank and Craig Shapiro of the New York-based Collaborative Fund.
- The money will help Neutral Foods continue its expansion onto the shelves of Whole Foods and Sprouts Farmers Market stores nationwide and Target stores on the West Coast. The company says it plans to double the number of retailers that carry its carbon-neutral whole and 2% milk by the end of the year. The funds will also support Neutral Foods’ expansion in the foodservice channel.
- Companies like Neutral Foods have the opportunity to win over consumers — and investors — who are interested in sustainability. The traditional dairy sector is not good for the environment, so Neutral Foods can show a stark contrast in the environmental impact of its products.
Dive Insight:
A lot of attention has been called to the pollution that the traditional food system causes, since it is responsible for just over a third of human-created greenhouse gas emissions. And several brands in the plant based, fermentation, cell-cultured and snacking segments have been founded with sustainability as a core goal. However, there have been fewer planet-focused startups that work in traditional animal-based food segments not known for being environmentally friendly, including dairy.
Neutral Foods, founded in 2019, is making its mark as a dairy company that has sustainability at its heart. Its organic whole and 2% milk are Carbon Neutral Certified by SCS Global Services.
Here’s how it works: Neutral Foods calculates the carbon footprint of every aspect of a dairy farm, from the feed provided to the cows to the power used for its operation to the gasoline and energy used for trucking and refrigeration. The company then works directly with farmers to invest in and implement environmentally friendly feed and processes, like converting methane emissions into renewable energy. For any net emissions left over, Neutral Foods buys carbon credits from other dairy farmers with cow-driven renewable energy systems.
This investment from the Gates-founded environment-focused VC is its second in Neutral Foods. Breakthrough Energy Ventures led the company’s early seed round last October. Other prominent investors have also put money into Neutral Foods, including Mark Cuban Companies (the only other company in last October’s funding round), LeBron James, John Legend and Questlove.
Consumer awareness of the climate impact of food choices is growing slowly, with four out of five having at least some knowledge of it, according to a Kearney study earlier this year. In that study, about half of those consumers said they don’t always buy the most climate-friendly foods because they think they are too expensive.
But in the Kearney study, about four in 10 said that not wanting to transition to a vegetarian or vegan diet was their biggest impediment to a more climate-focused shopping cart. Companies like Neutral Foods, which makes a traditional animal-based staple in a more ecologically friendly way, can help these consumers meet both their sustainability and dietary desires. More funding will help the company grow, which would make the milk more accessible and bring prices down through economies of scale. And as it gets into more markets, Neutral Foods can also continue to raise awareness about what “carbon neutral” means, which can help more consumers make climate-friendly choices at the grocery store.
