Interview with VP Julianne Hummelberg: How Plant-based startups can achieve healthy gross margins from an early stage

July 20, 2021


Inter­view cour­tesy of Nutri­tion Investor (

Julianne Hum­mel­berg, vice-pres­i­dent for the invest­ment team at growth equi­ty firm Pow­er­Plant Part­ners, has a keen eye for spot­ting future suc­cess sto­ries in plant-based food.

Hav­ing pre­vi­ous­ly invest­ed in Beyond Meat, the firm is par­tic­u­lar­ly encour­aged by how strong the exit land­scape is in the plant-based food world, and it strives to deter­mine the right exit plans for its port­fo­lio com­pa­nies as they real­ly start to make their mark with con­sumers.

Speak­ing with Nutri­tion­In­vestor, Hum­mel­berg offers up some insight on how foodtech SMEs can achieve healthy gross mar­gins north of 30%.

What’s your invest­ment man­date at Pow­er­Plant Part­ners?

Since we were found­ed back in 2015, we’ve been invest­ing behind a sin­gle the­sis that our $8 tril­lion food sys­tem is bro­ken and deeply out of line with cur­rent and future needs. It’s unhealthy. It’s inef­fi­cient, unsus­tain­able, inhu­mane and real­ly unpre­pared for the 60% increase in glob­al food demand that we’ll see by 2050 with two bil­lion more peo­ple enter­ing our plan­et.

We firm­ly believe that one of the strongest solu­tions that’s imple­mentable by con­sumers right now is a plant-based diet that pro­motes health and well­ness in humans and ani­mals, as well as for our plan­et more broad­ly. It has been proven to reduce green­house gas emis­sions, reduce glob­al mor­tal­i­ty and have sig­nif­i­cant eco­nom­ic ben­e­fits in terms of reduced health­care costs glob­al­ly.

all four of our part­ners were pre­vi­ous­ly oper­a­tors who cre­at­ed, found­ed and scaled their own plant-based food or bev­er­age brands that were sold either to pri­vate equi­ty or strate­gics, includ­ing Coke or Pep­si,. After these exits, they lever­aged their suc­cess through invest­ing and formed Pow­er­Plant Part­ners

Fund one includ­ed some phe­nom­e­nal names like Beyond Meat, Apeel Sci­ences and Thrive Mar­ket and I was brought on as we were rais­ing Fund Two as the first non-part­ner hire, which we’ve recent­ly ful­ly deployed

My back­ground has always been in invest­ing and asset man­age­ment, but not par­tic­u­lar­ly in this sec­tor. I went to Colum­bia Busi­ness School to make that piv­ot and find an invest­ment firm that real­ly res­onat­ed with my core val­ues around health, well­ness and sus­tain­abil­i­ty. I think we’re real­ly well posi­tioned to invest across impact-ori­ent­ed con­sumer brands that are lead­ing with the pow­er of plants.

We’re also unique­ly focused on the growth equi­ty space. So, typ­i­cal­ly com­pa­nies that have gen­er­at­ed at least $10 mil­lion in rev­enue and have proven prod­uct mar­ket fit in a spe­cif­ic chan­nel or geog­ra­phy.

We’re able then to come in with cap­i­tal, typ­i­cal­ly rang­ing from $8 mil­lion to $15 mil­lion in terms of ini­tial cheque size, to help the com­pa­nies repli­cate their suc­cess in oth­er chan­nels and oth­er geo­gra­phies – and scale sus­tain­ably to dri­ve towards prof­itabil­i­ty and grow the impact that they’re mak­ing, ide­al­ly to posi­tion them for a real­ly strong exit.

What are the key signs to spot­ting a suc­cess­ful busi­ness?

[The sec­tor] real­ly is com­pet­i­tive., brands are enter­ing at a more rapid pace than ever before. So, we need to sift through a lot. On aver­age, we get between 150 and 170 deals per quar­ter, most­ly through inbound with some through out­bound as well.

What we typ­i­cal­ly look for is a mis­sion-dri­ven founder who real­ly has the abil­i­ty to scale a com­pa­ny. I think we’re unique­ly posi­tioned to dili­gence that because all of our gen­er­al part­ners have been in that posi­tion before. We can under­stand quick­ly if they have what it takes or not.

We’ll start with the team first and we’ll then dive into the prod­uct and how that plays into the mar­ket oppor­tu­ni­ty. Is it dif­fer­en­ti­at­ed? Does it taste good? How is it priced? Is there tech or IP? Are con­sumers buy­ing it? This can be val­i­dat­ed by either sale veloc­i­ty met­rics in retail or D2C met­rics online.

After dili­genc­ing the team, prod­uct and mar­ket oppor­tu­ni­ty, we’ll dive into the mar­ket dynam­ics like how the brand is dif­fer­en­ti­at­ed against oth­ersin the space and what is the qual­i­ty of their rev­enue. Is it con­cen­trat­ed with­in a core set of SKUs and dis­tri­b­u­tion chan­nels? Or dis­persed across many? We’d pre­fer con­cen­tra­tion and keen pri­or­i­ti­za­tion at the growth equi­ty stage.

We typ­i­cal­ly invest in com­pa­nies that have already gen­er­at­ed $10 mil­lion in rev­enue and we like to see rev­enue dou­bling at least year-over-year and strong gross mar­gins with a path to north of 30%. But most impor­tant­ly, need to see a sus­tain­able busi­ness mod­el that we can see scal­ing to oth­er chan­nels and oth­er geo­gra­phies. And impact needs to be inte­grat­ed into every aspect of the busi­ness and real­ly a part of their DNA because we think it is authen­tic impact brands that are going to be the strongest invest­ments with­in food and bev­er­age in the future. So, we do a robust impact due dili­gence as well.

How can you help your port­fo­lio com­pa­nies look to achieve healthy gross mar­gins in a sec­tor where prof­itabil­i­ty is still pret­ty low when con­sid­er­ing the big pub­lic com­pa­nies like Oat­ly and Impos­si­ble Foods?

Alter­na­tive pro­tein com­pa­nies typ­i­cal­ly have low mar­gins at the begin­ning and real­ly need sub­stan­tial scale to achieve the mid-30% gross mar­gins. These com­pa­nies need to repli­cate the taste and mouth­feel of ani­mal prod­ucts with plant-based ingre­di­ents and that takes a lot of new ingre­di­ents and pro­duc­tion tech­nolo­gies.

Indus­tri­alised farmed-ani­mal ingre­di­ents are so man­u­fac­tured and extreme­ly cheap because of the sup­port that they’ve been giv­en from sub­si­dies etc.

What we encour­age founders to do is find that bal­ance and find pos­i­tive gross mar­gins at min­i­mal scale. It’s chal­leng­ing to do. And if com­pa­nies have that at an ear­ly stage, it’s cer­tain­ly a stand­out for us and some­thing that we’d be excit­ed to back.

We like to see that our cap­i­tal at the Series B or C stage can get these com­pa­nies to prof­itabil­i­ty. That way, we have max­i­mum option­al­i­ty for the next financ­ing round. We tend to see that sus­tain­able prof­itabil­i­ty can be achieved at 35%-plus prof­it mar­gins and 30–40% is a range alter­na­tive pro­tein com­pa­nies should strive for.

How do you assist com­pa­nies in deter­min­ing what the best exit strat­e­gy for them is?

We always start with the end in mind, it real­ly guides the val­ue-add process that we imple­ment post-invest­ment. Typ­i­cal­ly, we’ll iden­ti­fy risks that need to be mit­i­gat­ed dur­ing due dili­gence, come up with the val­ue-add that mit­i­gates those, imple­ment that val­ue-add strat­e­gy to mit­i­gate those risks imme­di­ate­ly post-invest­ment – and those risks are typ­i­cal­ly those that would pre­vent the suc­cess­ful exit out­come from hap­pen­ing.

That being said, each mis­sion-dri­ven founder has dif­fer­ent def­i­n­i­tions of suc­cess and we are unique­ly equipped to help them achieve what­ev­er that def­i­n­i­tion of suc­cess may be. Some­times it’s an acqui­si­tion, some­times it’s sell­ing to a finan­cial spon­sor or pri­vate equi­ty group, more recent­ly it is some­times a SPAC, although I’m unsure how long that trend will last, and oth­er times its IPO and pub­lic mar­kets.

We real­ly have diverse expo­sure to help com­pa­nies pre­pare for that, but the prepa­ra­tion  varies depend­ing on which path they want to go down. We’ll always do a mar­ket map of the strate­gic land­scape so that com­pa­nies under­stand what the poten­tial strate­gic acquir­ers are and what they typ­i­cal­ly look for, whether it be the type of brand or type of prod­uct that is incre­men­tal to their port­fo­lio, or some­thing more quan­ti­ta­tive like a finan­cial met­ric

If you’re real­ly aim­ing for a uni­corn val­u­a­tion the pool of poten­tial strate­gic investors decreas­es sig­nif­i­cant­ly because there are not many that are will­ing to pay that type of price. And then your prob­a­bil­i­ty weighs a bit more towards exit­ing in the pub­lic mar­kets.

You’ll still have a focus on mar­gins and prof­itabil­i­ty, prob­a­bly less so than you would under a strate­gic acquir­er, but it is a real­ly stren­u­ous and intense process. We would start encour­ag­ing con­ver­sa­tions with invest­ment banks to under­stand that a bit more and posi­tion accord­ing­ly.

What sort of invest­ments you’re look­ing at next?

Alter­na­tive pro­teins, whether it be plant-based fer­men­ta­tion or cell-based food is just such an enor­mous oppor­tu­ni­ty. The mar­ket share pen­e­tra­tion of tra­di­tion­al ani­mal prod­ucts across every pro­tein ver­ti­cal is so low rel­a­tive to what plant-based milk has been able to achieve with 15% dairy mar­ket pen­e­tra­tion and north of 60% house­hold pen­e­tra­tion in the US.

I firm­ly believe in the the­sis we have of ‘beyond Beyond’, which is what’s next beyond Beyond Meat and Impos­si­ble Foods. I think it is clean­er ingre­di­ent pro­files, alter­na­tive and adja­cent cat­e­gories like alter­na­tive pro­teins and the use of tech­nol­o­gy through fer­men­ta­tion and devel­op­ing cell-based foods.

McK­in­sey just pro­ject­ed that cul­ti­vat­ed meat could grow to a $25 bil­lion indus­try by 2030. It’s effec­tive­ly nascent today and in the hun­dreds of mil­lions of dol­lars giv­en the bot­tle­neck of tech­nol­o­gy pro­duc­tion, pric­ing and reg­u­la­to­ry approval, but we’re real­ly encour­aged by that trend.

As Pow­er­plant moves into beau­ty and well­ness, how will your invest­ment approach change and what can you take from your expe­ri­ence with food busi­ness­es?

Our core focus has been, and will con­tin­ue to be, plant-based food, food­ser­vice and foodtech. How­ev­er, per­son­al care and beau­ty are very excit­ing cat­e­gories from a growth, invest­ment and impact per­spec­tive. Plant-based is a lifestyle that we’ve bet on for over a decade. This trend is per­me­at­ing con­sumer sec­tors beyond just food as con­sumers have start­ed to demand plant-based across all prod­ucts they con­sume.

These com­pa­nies are not only cater­ing to the same con­sumers but they also use sim­i­lar ingre­di­ents, go-to-mar­ket strate­gies, dis­tri­b­u­tion chan­nels and brand­ing strate­gies to plant-based food.

Addi­tion­al­ly, these busi­ness­es typ­i­cal­ly have high mar­gins and strate­gics pay big mul­ti­ples for them. We see a lot of oppor­tu­ni­ty here and are active­ly review­ing invest­ments in this space.

Our invest­ment approach and val­ue-add strat­e­gy are sim­i­lar to food and bev­er­age giv­en these over­laps and we will remain focused on the growth equi­ty stage lead­ing Series A, B or C rounds in these sec­tors.

Date pub­lished: 8 July 2021,

You May Also Be Interested In