New investor Ahimsa Companies on backing plant-based

We’re very fortunate to be in a position where we can take a really long view of the world. The companies we’re looking at and looking to support are the changemakers. Society operates in these cycles, right? Our thesis is that three, five years down the road – maybe it takes ten years – but we want to be on the right side of history. We think that supporting these companies today, supporting a movement towards a more just and I think sustainable food system will ultimately pay off for us in the end, whether it takes five years or ten years. We’re going to stick with it.

DB: What were the factors that sparked the Wicked Kitchen deal?

MT: I think first and foremost is that we’re opportunistic. We see the opportunity to put these best-in-class companies together. Right now, food is really tough. Food is expensive and yet consumers want it cheap. It’s really, really hard to start a small business and that’s what these start-ups are. The plant-based movement was effectively a bunch of start-ups and the cost structure of food does not support start-ups. The realities of moving foods, the various people who have their hands in it, you’re effectively selling on consignment. It’s very, very difficult to make that work at low volumes.

For us, seeing that, being mission-oriented and saying a lot of these companies aren’t going to survive but, if we can put together the best ones and create a cost structure, it might actually allow us to invest in their growth, in great people and actually turn a profit at the end of the day.

Let’s be honest, you don’t need three or four accountants times every one of these brands if the brands are only doing $5m, $15m or even $25m in revenue, so let’s put them all together and let’s get some, you know, whatever it is, an accounting group to help manage these different groups. Those are kinds of the efficiencies that I think we can create.

DB: Is the management team at Wicked Kitchen staying in place leading its further development?

MT: So far, we’ve been able to maintain 100% of the positions to today. Like I say, we’re going to work through making sure that everyone finds the right home long-term. I’d be lying to myself and to you if I said that we weren’t going to see a lot of efficiencies created, so to speak. There has to be cost cutting. There has to be this integration work but, as of today, everyone is still in their seat

DB: So far, is Wicked Kitchen the sole asset sitting underneath Ahimsa Companies?

MT: No, we’ve actually closed on a manufacturing facility in Ohio. We’re looking to in-house a number of the processes because it’s going back to some of the basic things that we can do to try to create a more — what I’d say is a fruitful financial structure is the vertical integration. With all those mouths to feed along the value chain, if we can bring some of that basic manufacturing prowess in-house that’s going to help us.

We have a 40,000 square foot facility dedicated solely to manufacturing plant-based foods. We’re going to maintain it as a dedicated vegan facility, so no animal products go through that and we have some blue-chip clients already that unfortunately I can’t share but manufacturing for private-label predominantly.

We’ll move some of Wicked’s production action there and we’re doing diligence on about six companies right now. I would imagine, over the course of the next two to four months, we will be able to announce probably a minimum of — I’d say two to three of those are going to get over the line in the near term.

DB: Are all of those companies based in North America?

MT: They are. We’re going to focus on the US market. We’re really going to lean into the UK for Wicked Kitchen. That history with Tesco demonstrates quite a bit of familiarity and trust with the UK consumer. I’m really excited about that and I think most of our contract manufacturers are in the UK. Those are best-of-breed partners as well because they come from Tesco. I think there’s a lot to be optimistic about what Wicked can do in the UK. For the Ahimsa Companies today, we’re going to focus – aside from the Wicked Kitchen – on the US market.

DB: What attributes would other acquisition targets have to have for Ahimsa Companies to be potentially interested in acquiring them?

MT: They have to be 100% plant-based. There’s a couple of companies out there that have used a little bit of a egg, a little bit of milk. If we were to move forward with those acquisitions, they’d have to be 100% plant-based. Now, don’t get me wrong: I don’t think that the whole world is going to wake up one day and say I don’t want to eat animals. Wouldn’t that be nice? It’s the world I believe in. It’s a vision that I am working every day to create. However, I think that we have to meet people where they’re at.

There’s a variety of other factors but they’re highly variable in the sense that a great team is always a fantastic attribute for a company you’re investing in. A great product set that really delivers on a brand promise that is clear and resonant with the consumer. I think a clean ingredient deck is on-trend, particularly in the US where plant-based foods have become somewhat synonymous with ultra-processed and that’s really hurting us. How that happened, I have my theories. There’s some entrenched and very vested interests in not seeing these products take off in the way that they were just three or four years ago. I think they’ve done a really good job with the misinformation related to this stuff.

DB: What about the business’ presence in the market? At what stage of their development would they be of particular interest to invest in or acquire?

MT: The nice thing is we have a broad mandate, which is to remove animals from the food system. That gives us a wide latitude in terms of what kinds of companies we can look at. Obviously, we are structured as a for-profit and we have to look at return on investment. Time and focus are the most finite resources of them all. I think it’s less likely that we, you know, look to take Beyond private, or structure some sort of leveraged buyout of MorningStar.

At that size, we’re less intrigued but we’ll have a conversation. I think at the growth stage or early stage — I think there’s going to be a lot of early-stage businesses that are going to need some help so that we can bring these new products to the market. I think there are some more entrenched but still very early businesses in that kind of $10-$30m revenue rate that are now getting pinched because they grew up so to speak leaning on venture [capital] as a fuel source and now those venture dollars have dried up.

DB: What kind of revenue multiple would you pay?

MT: Hey, for a great business, I couldn’t put a price on on that.

DB: What kind of budget have you set aside for this?

MT: We’re not really talking about numbers. We have very large ambitions and, like I say, plenty of funding to try to make a dent on a mission that we care deeply about.

DB: Suffice to say you’re firmly of the belief that the category does need consolidation to help kickstart the sector into growth again after a challenging period?

MT: I mean, I think any story that presents the plant-based market through this consolidation lens as a unique phenomenon is perhaps missing the parallel with every other industry ever.

I just always think we should take the long view of history. I have friends who have been vegan for 35 years and they tell me about how they had cereal with orange juice on it because they didn’t even have access to rice milk.

Let’s look at this in that in that 30-, 40-, 50-year timeframe. We’re in some sort of Eden of vegan foods where we have this competition between — I mean, just if you look at the plant-based chicken space, it’s, like, MorningStar, Gardein, Impossible, Beyond, Daring – and that’s just the top five. There’s another nine competing and that I think is how every industry [develops]: a bunch of money goes into it, there’s a lot of excitement. Maybe it creates a bubble. You have a little shake-out, the worst products, the under-performing teams, they fall to the bottom, the folks with money – whether that’s an incumbent or that’s an outside private-equity player – try to do some sort of consolidation and the cycle perpetuates. That happens in every single industry and I think that’s where we find ourselves.

If we look at the last 30 years and what direction we’re heading in, I think we’re heading in a positive direction that has people eating more plants and more plant-based foods than less and that’s what we’re betting on.

DB: To what extent do you concur with those who say the category’s growth has slowed due to taste, price and the processing of the products? Do you agree some of the products currently available have suffered because of some of those factors?

MT: Yes, absolutely. I think there’s a number of elements that you wrapped into one question. On taste, a great product is a great product. If you don’t deliver on taste, you’re going to struggle and certainly I’ve had better or worse plant-based products, 100%, but I think that’s the shake-out that we’re going to experience.

Absolutely we have to deliver products that taste great, that are affordable that are convenient and that are accessible in terms of both the price and also convenience. I think on the price side, though, to zoom in on that, I think that’s an unfair comparison because of the level of subsidies that go into animal agriculture.

I would absolutely agree with you that we have to get better on price. We have to get better on taste. That’s a process but I also think that there are some policy changes that have to be made and this consolidation effort like the one that we’re undertaking will certainly help.

Some of that price issue is because you have this very fragmented market and not enough vertical integration. The winners today – the Beyonds, the Gardeins and the MorningStars – are vertically integrated and that’s what allows them to push that price down. I’d say that’s one of the reasons we bought that factory in Ohio and that’s why we’re going to be continuing to emphasise that we have to get those margins right so that we can bring the price down to compete, even if it’s competing on an unfair playing field.

DB: What about the processed element of the products though? You would concur the plant-based sector has some way to go to improve recipes? We’re already seeing some efforts, obviously.

MT: Yes. I would take issue with the premise, right? The plant-based sector is the ultimate whole-foods, unprocessed thing. It’s, you know, carrots and sweet potatoes and potatoes, right? I think a lot of it comes back to we’re trying to compete in certain metrics that maybe aren’t the place to win

DB: Some of the brands’ ingredients lists can be quite long, though.

MT: Absolutely. I guess I was being cheeky but my point is I think we as a society have to acknowledge the fact that the healthiest way to eat is whole foods, for sure, but that doesn’t mean that we don’t love ice cream, right? There’s a great ice cream that’s made out of avocados. It still has a tremendous amount of sugar but the ingredients list is, like, avocados and a tremendous amount of sugar. I think those will be ultimately the products that end up winning out. Daring is a great example. Daring, I think, is five ingredients and it’s plant-based chicken. That’s a strong brand and I think it’ll continue because it has that cleaner-label approach.

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