Tag: Food Business

On January 7, 2019, at the Consumer Electronics Show in Las Vegas, Impossible Foods announced its masterpiece: Impossible Burger 2.0, a soy-based protein batter that, when clumped into a patty and thrown onto a griddle, sears and sizzles like a real cow burger. To showcase the edible tech–the first ever presented at the gadget expo–the team had booked the patio and bar of the Border Grill in the Mandalay Bay hotel and prepared Impossible sliders, tacos, empanadas, and even steak tartare. To explain the underlying science and the environmental benefits and the culinary possibilities, they rounded up a panel featuring the restaurant’s chef, Mary Sue Milliken, Impossible’s chief scientist, David Lipman, and the company’s founder and chief executive, Patrick O. Brown.

“The Impossible Burger 2.0 is demonstrably better in flavor, in texture, in juiciness” than the 1.0, Brown told the throng of 350 as more folks pushed their way inside. “And unlike the cow, we are going to be getting better every single day from now until forever.” As he spoke, he looked a little nervous. He swayed in his seat; some in the crowd noticed that he’d absentmindedly left his iPhone’s flashlight on–it was glowing as he fidgeted with it. “We’re not just a technology company,” he said. “We are, right now, the most important technology company on earth.”

Brown, like the cattle he competes so hard against, is generally happiest back home among his herd (other research scientists). But no matter where he roams, the lanky 65-year-old dresses like a tech bro put out to pasture: faded hoodie, scuffed Adidas, dreamy gaze. Just don’t mistake his calm affect and soft monotone for bovine docility.

Halfway through the press conference, a reporter raised her hand and inquired about the burger’s safety. Wasn’t Impossible meat’s key ingredient, heme, made using genetically modified ingredients? Brown’s eyes went hard. He then treated her to a three-minute lecture on heme’s origin and biology. “The fact that heme is produced by genetic engineering is a complete non-issue from a consumer safety standpoint,” he said, sharpening his voice, word by word. “It’s a way safer way to produce it than isolating it from soybean roots, and a vastly safer way to produce it than covering the entire frigging planet with cows, which is the way we’re doing it now.”

Rachel Konrad, Impossible’s chief communication officer, brought her thumb and index finger to her forehead and stared down at the floor. To Brown, you see, Impossible Burger 2.0 is not simply a tasty, albeit processed, veggie option. Impossible meat is humanity’s best chance to save the earth. Forgive him if he gets a little wiggy about it.

Every December, Inc. recognizes a startup that, in the past year, has done more than succeed in the marketplace, but, in some way, has changed the world, shifting how we think or how we live our lives. Impossible Foods has given a radical twist to what used to be a straightforward question: What’s beef?

Well, beef is food, and an ever more popular one–the fatty protein generated a record $310 billion in global sales last year. But beef is also an environmental catastrophe. And the reason beef is so destructive is simple: It comes from cows. Cattle collectively occupy 27 percent of U.S. land, devastating biodiversity. Every year, a typical American cow eats five tons of feed, consumes 3,000 gallons of water, and subsequently belches and farts the equivalent of 15 kilograms of greenhouse gases for every 100 grams of protein it provides, making cattle one of the planet’s biggest contributors to climate change.

But what if juicy, delicious beef didn’t come from cows?

In 2009, Brown, an accomplished biochemist and pediatrician, took a sabbatical from Stanford University and decided to make a head-on charge at animal agriculture. He’d grappled with mind-bendingly ambitious projects before. In the 1980s, he helped map the human genome as a postdoctoral student in the lab of Nobel Prize winners J. Michael Bishop and Harold Varmus; in the 1990s, Brown invented the DNA microarray, also known as a biochip, which scientists still use to study gene expression, earning him membership in the National Academy of Sciences. But get the world to give up cows? Nothing came close.

Ten years and hundreds of millions of dollars in venture funding later, Brown and his team brought forth Impossible Burger 2.0, a veggie burger that tastes so uncannily like cow that a lot of people–vegetarians, carnivores, gourmands, fast-food executives–can’t believe their taste buds. Until very recently, the product would have sounded like an oxymoron: plant-based meat. Yet, in 2019, Burger King added the Impossible Whopper to its menu throughout the U.S., and José Cil, CEO of parent company Restaurant Brands International, credited the sandwich with a chainwide boost in foot traffic as the company posted its best same-store revenue growth in four years.

Practically every fast-food chain in America is now testing Impossible Burger or one of its competitors. There are Impossible sliders at White Castle and Impossible fajita burritos at Qdoba, not to mention patties made by Beyond Meat–Impossible’s more widely distributed, if not as meaty-tasting, competitor–at Carl’s Jr., McDonald’s, and Dunkin’. Food industry giants have raced to bring out their own beef substitutes, too.

Much like Tesla’s Model S electric car, the Impossible Burger is a fancy and costly invention, concocted by an outsider genius, that has proved that consumers will make an environmentally friendly choice if you give them an attractive product. In the process, it has done something even more remarkable: It made veggie burgers sexy. Its name is now synonymous with plant-based meat; people call almost everything an Impossible Burger whether it’s produced by Impossible or somebody else, making Impossible the faux-meat company to watch. And, unlike Beyond Meat, Impossible remains resolutely a privately held company.

Also like Tesla, Impossible Foods is unprofitable– despite revenue expected to surpass $90 million in 2019–and its future is uncertain. The success of its product has threatened to overwhelm the company, with staffers fighting, sometimes heroically, to meet demand and managers adjusting standard business processes on the fly. More than anything, Impossible Foods provides a lesson in the craziness that can ensue if what you do becomes a really big deal.

On a clear, crisp morning in late September, Brown parked his Chevy Bolt in the lot of Impossible Foods headquarters in Redwood City, California, and trotted into a conference room, a mug of coffee and a vegan chocolate chip cookie in his hand. He’s been a vegetarian since the 1970s, and cut dairy from his diet 20 years ago. The past week had been a whirlwind: Impossible Foods had introduced 12-ounce packs of Impossible beef in three supermarket chains, its first foray into the grocery business, and he’d traveled to Los Angeles and New York City for launch events.

Shortly after noon, he joined the weekly marketing department meeting. Thirty or so employees poked at salads in compostable bowls. (Impossible Foods provides a buffet of raw veggies, fruit, and other snacks in the break room every day, but not Impossible meat, which is still too costly and in demand to give away.) Joe Lam, a director of consumer insights, went over the first few days of grocery sales, highlighting the promising results–that weekend, the company had outsold ground beef by a considerable amount at Gelson’s, a chain in L.A.–and glossing over others–at Wegmans, Impossible had the No. 1 unit sales in “meatless proteins,” but he didn’t say much more.

Brown peppered the team with questions about the data. “But does it come at the expense of ground beef?” he asked about the Gelson’s results. “Were ground beef sales up, down, or steady? What else happened? Did they run out of hamburger buns?”

Since founding the company, Brown’s natural tendency has been to run it like a science lab–just like the ones he had at Stanford and the Howard Hughes Medical Institute in Chevy Chase, Maryland. Born in the D.C. suburbs, Brown saw a lot of the world as a child–his father was in the CIA–and then settled in at the University of Chicago, where he majored in chemistry and later earned an MD and a PhD in biochemistry. He had his first brush with the business world only in 2010, as co-founder of Kite Hill, which sought to make plant-based dairy products and quickly commercialized yogurt, cream cheese, and ricotta.

At Impossible, he and his R&D staff began their study of beef development at the molecular level, mapping the 4,000 proteins, fats, and other biological compounds that add up to a cow. Next, they put together a catalog of all commercially available plant-based ingredients, such as protein isolates from soy, peas, hemp, and potatoes. From there, Brown’s group created their simulacrum, matching plant compounds to the bovine ones, testing their concoctions for flavor, smell, and texture–occasionally by nibbling on them, but usually via sophisticated gear that could gnash meat samples and spit out chewiness data in charts.

Impossible’s competitors approached the problem differently. More than 30 companies were attempting (fairly unsuccessfully) to grow actual animal protein in petri dishes, while startups like Beyond Meat were formulating plant-based patties from all-natural and gluten-free ingredients. Only Impossible Foods researchers sought to reverse-engineer beef from plants–and had zero qualms about employing cutting-edge science in the name of beefiness, including methods that some farmers’ market types find freaky.

This is how, using genetic engineering techniques, they got yeast to bleed mass quantities of soy leghemoglobin, which is typically found in soybean roots but is chemically similar to the myoglobin found in our own mammalian veins. Both contain heme–and heme is what makes Impossible possible. It looks like blood and tastes like blood, and when you add it to textured soy protein and a few other ingredients, it makes an extremely convincing burger.

Brown’s development process was painstaking and expensive. Impossible raised more money each year than the year before–$3 million in 2011, $6.2 million in 2012, $27 million in 2013, $40 million in 2014, $108 million in 2015–and poured it almost entirely into R&D. “The staff was 95 percent scientists” as late as the fall of 2015, says Dana Worth, a graduate of Stanford’s business school who joined Impossible that year, when it started hiring actual business people.

As Brown went about adding a company to his science lab, he approached entrepreneurship as he had beef–as though he were building the business from first principles. Some early decisions left the MBAs scratching their heads. Brown banned Gantt charts, the step-by-step product-management tool taught in business school, because they failed to account for the unpredictability of new projects. On the day I visited him, he launched into a lengthy complaint about using spreadsheets in Excel for sales modeling.

“Excel is–and no offense to Bill Gates, who is one of our investors, and a good guy–a shitty tool for modeling. OK?” said Brown, swiveling his chair over to the dry-erase board, marker in hand. He then excitedly began sketching out a Monte Carlo simulation, which can generate thousands of possible outcomes–a method he prefers.

Yet Impossible has struggled with issues that other companies handle matter-of-factly. When I asked Worth, who is now head of U.S. food service sales, and CFO David Lee about how budgeting worked there, they looked at each other and laughed. “We’re figuring that out,” said Lee, who tries to synthesize Brown’s many-world analytical approach with investors’ more conventional expectations.

Nor has Impossible’s publicity always been glowing. On September 5, 2018, a bar fight broke out at a company party when a man tried to stop a male Impossible employee from harassing one of their female co-workers, according to a legal complaint. “What you read in the newspaper is not necessarily an accurate representation of what happened” is all that Brown will say about it. “By and large, I don’t think our employees are any worse behaved” than his researchers at Stanford were.

The Impossible Burger 2.0 launch in early 2019 quickly showed what happens when a company isn’t ready for its wildest dreams to come true. Impossible’s existing distributors, which already sold Impossible beef to some 5,000 restaurants, vastly increased their orders–by mid-summer, Impossible meat would be on the menu at another 5,000 locations.

Yet, as demand swelled, the sole manufacturing facility still operated just one assembly line with staff sufficient for only a single eight-hour shift. Inventory ranging from vital ingredients like heme to basic supplies like liquid nitrogen, which helps keep the assembly lines cold, quickly dwindled. The company had achieved Brown’s first great ambition: It created a plant-based protein, and it was a hit. Only now, the company was speeding toward crisis.

Impossible Foods’ investors, who have owned a controlling stake in the company since the early funding rounds, say they knew about the company’s vulnerabilities from the outset but decided the risk was worth it. “There was no due diligence, no spreadsheets, no rates of return calculation,” says Vinod Khosla, founder of Khosla Ventures. But, he felt, the issue of animal agriculture “is too large and too important not to address, and this is a world-class guy to address it.” For his part, Brown concedes he’s no moneyman. “My wife manages our family finances,” he says. “I find the whole area just so tedious.”

The company would have to play catchup. Impossible’s board had finally joined the search for an operations-focused president to assist Brown in September 2018, eventually wooing Dennis Woodside, a veteran Google executive and Ironman triathlete who had most recently been chief operating officer at Dropbox. But by the time Woodside was ready to begin, it was mid-March, and he was blindsided by what he found.

“When I started having conversations about the role, everybody said it was initially going to be largely about sales,” he says now. “Then, two weeks in, Pat said, ‘You’ve got to go up to Oakland. You’ve got to figure out how to scale supply.’ “Frustrated employees, writing reviews on Glassdoor that month, described a company with its wheels coming off. “The organization is eating itself alive. The arrogance is overwhelming,” wrote one. “It’s a great mission with some of the worst management in the bay area,” wrote another. “The CEO has good intentions (and is a true scientific genius), but is a terrible business leader,” posted still another.

Brown believes that staffers were feeling more stressed than they needed to be, and were doing a good job. “It’s not really in my phenotype to freak out or assign blame,” he says. “People were kind of demoralized because they felt like, oh, we fucked up. But, frankly, I never felt that way. I felt like the problem was we had planned naively, and we could learn from it.”

His takeaway was that the supply crunch arose not from mismanagement but from a misunderstanding of “the kinetics of the food sales process,” as he puts it, notably the delays as orders filter up from restaurants and distributors stock the products. That lag disguised demand at the end of 2018, so the company failed to ramp up production quickly enough. “It wasn’t so much that our sales fell below projections,” Brown says, “but that they were a couple of months behind.” Welcome to Restaurant Biz 101.

Regardless of what the data said, the company now had to scramble. Starting in April, it shifted salespeople from prospecting for business to addressing concerns of existing customers. It then hurried to make a deal with OSI, a Chicago-based food processor that makes beef patties and the like for McDonald’s and other chains, to duplicate the output of Impossible’s Oakland plant.

Meanwhile, the good news kept getting worse. That very month, overjoyed Burger King executives flew to Impossible’s headquarters to tell them that their small test of an Impossible Whopper at 59 of their locations in St. Louis had been a roaring success. They wanted to roll the product out to all 7,200 U.S. Burger Kings as soon as possible.

On April 22, Brown sent a companywide email, explaining that surging demand, along with the new Burger King rollout, was putting the company in existential peril: “We will need to increase production at least sixfold over the next several months and 10-fold by the end of 2020. (Yes, you read that correctly),” he wrote. He asked for volunteers to come to Oakland to staff a second assembly line.

The work would be hard, he added, “but an epic opportunity for heroism, with huge stakes.” Forty employees (who got overtime pay) headed up to the refrigerated facility. There, a motley crew of scientists, salespeople, and IT staff took turns working 12-hour shifts, stacking patties and operating machinery. Person by person, the R&D lab was transformed into a manufacturer.

Unified by the stress and the cold, the staff put together a plan they called Back to Redwood City, with the aim of getting scientists home to R&D. By August, the partnership with OSI was up and running, just in time to supply all of those Burger King outlets for the fastest launch in the chain’s history.

On a recent morning at Impossible’s Oakland plant, production was brisk. In a specially sanitized fabrication area, staff in full bodysuits operated huge paddle mixers as dry ice vapor wafted through the air and five-pound bricks of bright pink Impossible beef ­chunked along a frozen conveyor belt toward the packaging station. Still, Oakland employees appeared to be under enormous pressure.

Earlier that morning, I’d watched a distraught quality assurance technician rush up to the plant manager and ask if production staff could be tasked to help her meet an urgent sampling deadline. “I’m going to cry,” she said, fighting back tears and rushing off before getting an answer.

But Impossible is making progress in smoothing out processes. At the Oakland facility, the company added a noon standup meeting to check production against targets, and implemented a scheduling system for the trucks that deliver the 20-kilogram sacks of textured soy protein, the vats of sunflower and coconut oil, and the 55-gallon drums of heme. Improvements like these, along with cost savings from economies of scale, have brought down the cost of goods by 50 percent this year alone, Woodside says.

The challenges remain formidable. Impossible is taking a measured approach to retail, for now selling only in small chains. But the slow rollout leaves it vulnerable: Beyond Meat is already in 28,000 U.S. groceries, and Nestlé, Tyson, and Don Lee Farms have all recently introduced simulated-meat products.

The beef industry is fighting back, too, with lobbying under way in 24 states to ban the phrase “plant-based meat.” Impossible Foods won’t have the newest tech forever, either, with upstarts working on gadgets like 3-D printers that make steak. And Impossible is burning cash as it builds production and develops new items, from breakfast sausage to fried chicken.

The company must also fight off negative perceptions that its product is “processed crap that comes in a box,” as South Park recently described plant-based meat in an episode titled “Let Them Eat Goo.” Impossible Foods doesn’t like to talk about the provenance of heme, its magic ingredient, perhaps because it’s produced by a contractor in a microbial fermentation plant that has turned out antibiotics, biopharmaceuticals, and enzymes used in biofuels and fracking. And the Center for Food Safety, an environmental group, has petitioned the FDA to keep Impossible meat out of groceries, contending that testing of heme has not been sufficiently rigorous.

Brown argues that nothing about heme should trouble consumers–it has been approved for use by the FDA–and that the term processed is an almost meaningless buzzword. “Virtually every food that you love is processed to a similar degree as the Impossible Burger in the sense that a bunch of ingredients are carefully chosen and fermented, cooked, or blended to make something that’s delicious,” he says. “It’s useless–like food racism or something–to just slap some stupid, broad label that mischaracterizes our products in this way.”

He is equally dismissive of nutritional cavils like the fact that Impossible meat has four-and-a-half times the sodium of beef. “You’d have to eat six Impossible Burgers to hit your sodium limit,” Brown says (though at Burger King, two Impossible Whoppers would nearly do the job.) “It’s kind of like saying passion fruit has more sodium than a peach, but who gives a shit?” As for lab-grown meat, says Brown, “Good luck harvesting embryos of calves, feeding them intravenously, and, since they’re immuno­deficient, making sure not a single virus or bacteria gets in there.”

Brown would rather focus on what he does best: rallying the troops toward his planet-saving vision and running his highly pedigreed R&D lab. He says he expects to double production every year, which would help him with his goal of achieving cost parity with traditional beef by 2022. That’s no mean feat, given that the price per pound of textured soy protein–Impossible’s primary ingredient but not its most expensive one–is about the same as the wholesale price of ground beef. “All the economics of everything we’re doing get progressively better with scale,” he says.

And size matters. Though he generally avoids speaking ill of his plant-based competitors–they’re all working to tip Big Cow on its ear–sometimes he can’t help himself. He scoffs at Beyond Meat’s research budget, which was a mere $9.6 million in 2018–not even the same order of magnitude as his company’s. “The goal here is we have to completely replace animals as a technology in the food system,” Brown says. “That is a huge task.”

To anyone who hasn’t been sipping heme recently, the phrase “replace animals as a technology” sounds insanely ambitious, or just plain insane. But consider who’s saying it, and what he’s achieved so far, and, perhaps, this simple fact: A few years ago, what would most people have said about the idea of making meat from plants? Impossible.

Additional reporting by Guadalupe González.

 No Cows Allowed: A Millennium of Plant-Based Meat

Ca. 900 CE: Let There Be Soy
Chinese writer Tao Gu describes tofu as “small mutton”–the first recorded reference to tofu as a meat substitute.

1877: Spam for Vegans
John Harvey Kellogg introduces Protose, faux meat in a can made from peanuts, wheat gluten, and soy, to feed patients at a vegetarian sanitarium.

1985: Fun With Fungi
In the United Kingdom, a company called Quorn makes fake meat out of a microfungus. In the U.S., Gardenburger brings out a patty made from mushrooms, onions, brown rice, rolled oats, cheese, garlic, and herbs. It tastes remarkably like cardboard. The company files for bankruptcy in 2005.

2013: Petri-Burger
Dutch scientists make the world’s first lab-grown burger from cow muscle cells, fetal calf blood, and antibiotics for the bargain price of $325,000, while in the U.S., Beyond Meat introduces its faux chicken made from pea and soy protein at Whole Foods.

2019: Head of the Class
Impossible Foods unveils Impossible Burger 2.0, which contains heme, derived from soy leghemoglobin, giving the patties their beefy, bloody flavor. Burger King fashions it into the Impossible Whopper.