In order to maintain an effective and profitable business, most company leaders subscribe to some manner of innovation. Examining business through an innovative lens works to achieve efficiencies and evolve approaches to product development. Traditionally, research and development departments have carried responsibility for cycling innovative practices through organizational systems. However, in the current economic landscape, only major industry players have the resources to maintain robust R&D projects. And even so, the scale of such projects pressures corporate decision-makers to a risk-averse position, the context of which can limit the positive effects of innovation on product development.
Budgetary constraints and risk-aversion in a majority of corporate board rooms have propelled a shift of innovative activity from R&D departments to an ever-bubbling spring of food and beverage start-up companies. Borrowing from the tech-industry start-up model, these small and energetic companies rely on a perpetual willingness to develop products from uncommon, unaccepted and unproven vantage points. The practice assumes a fair amount of risk, and ultimately results in a high rate of company failure. It also yields some of the most successful product launches in the modern marketplace. This promise of introducing a resonating product keeps entrepreneurs devising business plans, raising funds, assembling small teams and fueling their start-ups with endless energy.
Start-ups foster a culture of innovation. Recognizing the contributions that start-ups make to the marketplace, some regions and cities have calculated the benefits of providing a context for start-ups to cluster and ascend. With a combination of policy, incentive and organizational support networks, Chicago has set out to become the epicenter of food and beverage start-ups and innovation in the United States.
Chicago is home to a number of food and beverage incubators and accelerators, which provide invaluable support to young companies struggling to navigate early growth stages. Organizations such as the Industrial Council of Nearwest Chicago and The Hatchery Chicago have connected an ever-growing roster of start-ups with counseling and essential resources. Working alongside these organizations is the Chicagoland Food and Beverage Network, with the mission of establishing a forum for food and beverage companies of all sizes to come together in a spirit of collaboration. The organization also aims to uncover business opportunities and spur the local economy. More than 4,500 food and beverage companies call Chicago home, according to the Chicagoland Food & Beverage Network. The accumulation of industry knowledge and skill in the city makes Chicago a natural place for food and beverage companies to grow, connect and immerse their brands into the regional, national and global marketplace.
“Chicago has an infrastructure and ecosystem of people who understand supply chain and marketing,” said Alan Reed, executive director at Chicagoland Food & Beverage Network. “The depth of expertise here is massive.”
Though the Chicagoland Food & Beverage Network works to build relationships with and among companies of all sizes, Reed points to the start-up culture in Chicago as fertile ground for collaboration between large CPG companies and entrepreneurs.
“It wasn’t that long ago when larger companies weren’t interested in what the start-ups were doing. But the industry is changing,” says Reed. “The ingenuity and agility of the start-ups can be difficult for the larger CPGs to reproduce. And the larger companies have the ability to scale and a depth of resources that are not readily available to the smaller companies.
“My task is to bring these diverse groups together, and have them realize the value that each brings to the picture.”
Several Chicago companies have taken the spirit of collaboration to the next level, the most recent being Chicago Bar Company LLC and Kellogg Company. In October 2017, Kellogg acquired Chicago Bar Company, maker of RXBAR, a line of clean label protein bars, for approximately $600 million.
Major recent investments in the Chicago food and beverage industry include Kraft Heinz, through its Springboard platform, naming Poppilu to its inaugural Incubator Program class, and PepsiCo North America Nutrition and The Hatchery Chicago announcing a partnership aimed at helping food industry entrepreneurs sustainably grow and scale their businesses. And earlier this year, The Hatchery Chicago developed a partnership with Ingredion Inc. and its Emerging Business initiative.
These commitments and others have created an environment that puts Chicago on the leading edge of food and beverage CPG enterprise.
As industry activity swirls around them, dozens of Chicago start-ups are steadily building brands with the help of an energetic community of entrepreneurs and experienced industry professionals. Prepared Foods connected with a handful of Chicago’s food and beverage start-up owners, and asked them to share their experience via email.
Patrick Tannous
President, Co-Founder
TIESTA TEA
Dan Klein
CEO, Co-Founder
TIESTA TEA
Anne Shaeffer
Co-Founder
SULPICE CHOCOLATE
Lenny Lebovich
CEO & Founder
PRE BRANDS
Melanie Kahn
Founder
POPPILU
PREPARED FOODS: PLEASE DESCRIBE YOUR CONNECTION TO THE CPG START-UP COMMUNITY IN CHICAGO AND HOW IT PLAYS A ROLE IN YOUR COMPANY’S SUCCESS.
Tiesta Tea: Since day one we have been very active with partnering with other groups - ICNC (Industrial Council of Nearwest Chicago), the Food & Beverage Network, Hatchery, and Accion to share contacts, help out operationally, and discuss marketing ideas. It's very helpful because of the proximity of Chicago. To be a hub in the central US is amazing, we are very lucky.
Sulpice Chocolate: I think that our connection grows by the day. One of the many great things about Chicago is that there is a deep and knowledgeable base of resources for CPG start-ups. From sales and marketing support to packaging design, there are so many great teams out there that can help fledgling companies. The start-up community in Chicago also does a great job of networking and connecting. We meet new resources all the time through our existing network - and the recommendations have been great!
Pre Brands: I’ve always loved connecting with other entrepreneurs, especially within the CPG start-up community. It’s great to meet new people and hear new ideas, and attending industry events across the country has facilitated my introduction to high caliber people, colleagues, advisors and business partners.
In addition, hearing about the problems that other people or start-ups are facing reminds me that our challenges are often shared. This provides perspective, and importantly, helping others work through their challenges fuels my brain. Working towards solving others’ problems makes me better equipped to solve our own.
Poppilu: My previous career was in big CPG in Chicago; until recently it was completely removed from the start-up scene, and it still mostly is, although some big companies are now taking the time to explore the entrepreneurial ventures, recognizing that the next big thing could be among us. Since becoming an entrepreneur, I’ve made an effort to become part of the start-up community and have really enjoyed the camaraderie among entrepreneurs and among investors. I like to think that our Midwest culture contributes to the spirit of inclusiveness and support rather than being competitive. Everyone has been really forthcoming about introductions, so my network has grown rapidly and I can comfortably say that I’m part of this start-up community.
PREPARED FOODS: WHAT DOES BEING HEADQUARTERED IN THE CHICAGOLAND AREA MEAN TO THE GROWTH AND SUCCESS OF YOUR COMPANY?
Tiesta Tea: With all the food contacts in Chicago, it gives you a unique platform to scale and to distribute in a very short time frame. It’s a great area to be able to launch your business. You have a whole community that is there for you that is going through the same thing or have been there before ready to share tips!
Sulpice Chocolate: We love being here in Chicagoland. There are a tremendous amount of resources available here, and I think even more so for a CPG company. Chicago has such a rich CPG history, and the packaging, production, and distribution infrastructure is the best in the country. It is a great place for young CPG companies to grow.
Pre Brands: In Chicago, we’re surrounded by many longstanding and sizeable CPG companies. That exposes us first-hand to how these bigger, established companies think and act and allows us to assess how we as a start-up might think and act differently. Also, it’s exciting to be part of a growing start-up community. Chicago is replete with talented food industry professionals, and we’re honored to be among the leaders in a new wave of innovation.
Poppilu: Some people say that if your food/beverage product can succeed in the Midwest, then it has broad enough appeal to succeed nationally. So learning from consumers in Chicagoland is extremely beneficial. I greatly value the community support among other food/beverage entrepreneurs and investors.
PREPARED FOODS: HOW DOES BEING A START-UP LEND ITSELF TO INNOVATION?
Tiesta Tea: You’re forced to innovate because that's your only way of succeeding against the big companies. Big companies can’t pivot as quickly on the marketplace as small companies can. Small companies are able to be the first to innovate a category and be a challenger brand.
Sulpice Chocolate: Being a start-up means that you can be a bit more nimble in your product development strategy. For example, our turnaround from product idea to bench sample to live product is significantly shorter than larger companies. Additionally, as a start-up our brand is always evolving. This allows us to incorporate innovation into our brand strategy as it starts to mature. It is much easier to do this before we grow out of the start-up phase!
Pre Brands: Innovation is inherent in start-ups. As part of a start-up, you’re doing something different – stepping out of the norm with a new take on things. You don’t have legacies to protect. Rather, you have a market to fill, and you innovate to fill that market. Using Pre as an example, we entered a longstanding industry and innovated at every step of the way, from product sourcing, to packaging, to engagement with our consumers, in order to stand out.
In general, start-ups, by nature, are more willing and able to take risks than large, established companies. In fact, they have to.
Poppilu: Innovation is critical to a start-up because it’s the only way we can carve out our niche in the marketplace and survive. No one needs another ‘me too’ product, and it’ll be hard to get investors without significant differentiation.
PREPARED FOODS: WHAT ARE 2-3 FOOD AND BEVERAGE TRENDS CURRENTLY INSPIRING YOUR NEW PRODUCT DEVELOPMENT?
Tiesta Tea: We know everyone is looking at that sugar content of food and beverages and we are conscious of it, too. Sugar does not need to be added to beverages and we follow that. All of our beverages have naturally occurring sugars that are low on count. We also know that people are looking more into their health benefits — what will their body receive by eating or drinking this product. We place a huge focus on our beverages being functional - we named our tea categories by function to even make them more understandable. We have Energizers, Slenderizers, Eternities, Immunities and Relaxers. How do you want to feel? We have a tea for that.
Sulpice Chocolate: The better-for-you movement is certainly inspiring our product development. The consumer is moving towards higher protein, higher fiber, and lower sugar, and that is where we want our products to go as well. Ingredient sourcing is also important to us. Fair Trade is important, in particular for our chocolate, and Non-GMO sourcing is also something we spend a lot of time on. I think that these trends are here to stay. Our job is to deliver on these attributes, while also making a great tasting product.
Pre Brands: Pre’s business model is 100% consumer-driven. We create the products we do and rigorously maintain quality and consistency so that we can give consumers exactly what they want, every single time. And we plan to continue to deliver what consumers want. We’re constantly interacting with our consumers online, via social media and in-store to stay informed. That means that food and beverage trends always inspire us. Right now, a couple of trends driving us are consumers’ desires for: Complete transparency in brands and food products, and plant-forward, better for you, real, whole, unprocessed foods and diets.
Poppilu: Consumers are increasingly interested in flavor exploration. That’s why we have a blueberry-lavender lemonade and a passionfruit flavor too. Antioxidant superfoods are also increasingly popular, from matcha and turmeric to coffeefruit and, our favorite, aronia. As a brand, we benefit from antioxidant communication that other brands put in front of consumers. We don’t have the dollars to do the same, but we appreciate the work other companies are making into supporting antioxidant claims.
PREPARED FOODS: COULD YOU TALK ABOUT THE IMPORTANCE OF COMPANY CULTURE FOR YOUR ORGANIZATION?
Tiesta Tea: Yes, we strive to “Live Loose” as that has become our company model and slogan for our tea, as well. We live loose by having collaborative meetings, making all departments cohesive and understanding, while we also like to go out and have fun. We have team bonding events every month, where we get to sip on some of our Tiesta Tea beer! Tiesta Tea has a positive and unique culture where everyone is able to focus on personal development, as well as career growth.
Sulpice Chocolate: Company culture is extremely important for us. It helps lay the groundwork for every decision that we make as an organization, from new product development and long term planning, to the day-to-day operation of our business. Having a consistent company culture allows us to make decisions that take us to where we want to be.
Pre Brands: I’ve learned over time that company culture is (almost) everything. Culture is driven by the people, and when you bring people into a company that don’t fit the culture you want, the impact is felt across the entire organization. Good or bad, company culture is contagious. So I’ve learned that time spent refining company culture is time well spent.
PREPARED FOODS: START-UPS ARE DEFINED IN MANY WAYS. WOULD YOU OFFER YOUR DEFINITION OF WHAT YOU BELIEVE A START-UP TO BE?
Tiesta Tea: We believe a start-up begins with an innovative concept that either is completely new or an improvement on something that currently exists. People that start start-ups are so passionate about their idea that they are willing to risk everything for it. It's a small company that works closely to grow quickly.
Sulpice Chocolate: I think that a start-up is defined by the entrepreneurial spirit involved in its creation. Whether it is a mom and pop brand or a creation of an internal incubator at a Fortune 500 company, that spirit is key to creating a brand. It is also the source of the passion required to succeed, in good times and bad!
Pre Brands: A start-up is a collection of people focused on doing something that is different from what is currently available in the marketplace.
Poppilu: I define a start-up as any young company trying to establish itself without the benefit of being able to self-fund through its own P&L.
