Natural Products Expo highlights challenges of launching companies with sustainable missions

By April 28, 2017Blog

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In March, over 80,000 people made their way to Anaheim, Calif., for the natural products industry’s 37th annual tradeshow.

I had the opportunity to visit this year’s expo as part of the MBArk program, which helps MBA students learn about career paths in the natural products industry. The show itself is quite a spectacle, with people cramming aisle after aisle of company exhibits (over 2,500 of them), where you can try out the latest and greatest in natural products (assuming you haven’t already overindulged in chimichurri seaweed spread, honey-spiked drinking vinegar and bar-b-que-flavored cricket crisps).

I got to meet entrepreneurs from two different companies seeking to create more sustainable products. I’ve included some of my takeaways from asking these companies’ founders about their experiences trying to achieve a broader social goal in addition to financial viability.

Runa’s rainforest elixir still requires focused brand management.

Photo: Tyler Gage (second from left) with MBArk participants.

Tyler Gage and Dan MacCombie founded Runa, a beverage company that uses an extract from the guayusa leaf as the main ingredient in their bottled teas, energy drinks and dry tea mixtures. Guayusa is a caffeinated leaf in the holly family that grows in the upper Amazonian basin in Peru, Ecuador and Colombia. The company sources guayusa from over 2,000 farming families who cultivate the plant in diverse forest gardens with multiple species of trees and plants, rather than large-scale plantations commonly associated with tropical crops like palm oil, bananas and coffee. By sourcing this ingredient directly, Runa has paid farmers over $1.2 million since they launched.

Gage and MacCombie have demonstrated that their product can improve the lives of their producers while meeting consumer desires for a cleaner energy drink. However, one of the challenges they have faced is how to grow. Gage explained that after taking investments from family and friends, as well as some celebrity and impact investors, they created many different guayusa-based beverage products. But they soon realized they needed to have a more focused strategy and recently decided to consolidate their product offerings, rebrand and concentrate on increasing sales of their energy drink, since energy is the key characteristic of the guayusa leaf and the energy drink is their core product.

They have worked hard to embed their business’s social mission into its operations by incorporating as a benefit corporation and by setting up a separate foundation to continue research into how to support rural livelihoods and sustainably produce guayusa. I think the big test of their model will come with scale. Right now, Runa sources about 150,000 pounds of the leaf from communities in the Amazon, but what will happen if they increase that to 10 million pounds? Will it change the way people cultivate the plant? Will someone else start growing it in plantations? These are some of  the questions they will need to grapple with as they grow.

Consumers may hop on board with insects if the product tastes good.

MBArk participants with Exo founders Gabi and Greg (2nd row, 4th and 3rd from left)

Gabi Lewis and Greg Sewitz founded Exo in 2013 while still in their senior year of college. Exo makes five flavors of protein bars in which the primary ingredient providing protein is crickets. Lewis and Sewitz started the company in part to promote more sustainable protein consumption, since many animal proteins require more water and land—and emit more greenhouse gases—in production. Lewis and Sewitz believe crickets are part of the solution to consuming more sustainably by allowing us to diversify our protein consumption as global demand for meat rises.

When asked whether they had tried to market their product as “made from a sustainable protein,” they said that initially they had thought that would be a good selling point, but instead, they found that most customers are less concerned that it is made from bugs and more concerned with taste. Investors, however, are very interested in the sustainability angle and see opportunity in expanding into other products made from edible insects. I think one of their major challenges will continue to be price. They are competing in a crowded protein bar market, and other brands like Clif offer products with the same amount of protein for about half the price. One of the reasons their product is so expensive (~$2.99/bar) is that cricket protein is expensive. However, as Exo scales and cricket farming becomes more refined, they may be able to reduce their price.

Exo and Runa’s experiences provided some important reminders that even if you have a great mission, to sustain that mission, you still need to deliver an excellent product in what is now a very competitive natural and organic food marketplace.

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