It may be chicken feed to Asia’s richest man but for California-based egg substitute startup Hampton Creek Foods, Inc. it could help seed a healthy market for the company in China.
The developer of plant-based alternatives to chicken eggs has received US$23 million in a Series B round of funding led by Li Ka-shing’s Horizons Ventures and sees China as a key market for future development. It is also on the lookout for partnerships with Chinese farmers and agricultural companies.
“About 38 percent of the 1.8 trillion eggs [produced annually] are laid in China, which has to be a central market for us,” Hampton Creek cofounder and chief executive Josh Tetrick told the Hong Kong Economic Journal’s EJ Insight. “If we want to build a company that is meaningful, China has to be front-line and critical for everything that we are doing … or else we are foolish.”
The company is hungry to know more about China’s egg industry and wants to help build a new supply chain in the world’s second-largest economy. According to Tetrick, it’s in talks with potential partners in China and hopes to makes further announcements on progress by the end of this year.
Hampton Creek has just launched its first product, an eggless mayonnaise called Just Mayo. To get this far, the company’s food engineers had to sift through more than 1,500 plant species and cook up 1,400-plus prototypes. In the end they went for a recipe based on a California yellow pea extract, making what the company claims is the healthiest and most environmentally friendly mayo in its class.
The company has also completed a prototype of a plant-based liquid egg called Just Scramble and invited Li to help whip up interest with a cooking demonstration in Hong Kong earlier this week. It was a chance for the Hong Kong businessman to offer more than just funding to the food entrepreneur.
“Mr Li gave me some cooking tips … In fact, I was too nervous to fry an egg in front of the camera and actually I overcooked it,” Tetrick said.
Other shareholders in the company include Microsoft Corp. chairman and co-founder Bill Gates and Yahoo! Inc co-founder and former chief executive Jerry Yang. It has so far received total funding of US$30 million.
Tetrick said the company has to meet certain revenue targets that he cannot disclose. He also declined to comment on when the company will go public.
Peter Lee, managing director of asset management firm Veco Invest (Asia) Ltd., said Hampton Creek could end up being worth around US$80 million. “With this US$23 million in a Series B round, the company’s valuation would probably be in the region of US$60 million to US$80 million or above,” Lee said.
He said some companies go directly for an initial public offering after a Series B round if their businesses develop faster than expected. Whether there will be a Series C or pre-IPO round depends on market conditions, the size of the listing and the need to bring in strategic investors, Lee said.
In the meantime, Hampton Creek has other fish to fry. It must decide whether to package Just Scramble in a shell or a bottle. In the world of scramble, about half of the eggs are sold in shells to consumers and the rest in containers to buyers such as fast food chains, Tetrick said.
Hampton Creek is also working on ways to preserve its liquid eggs in the absence of a shell’s natural protection. To that end, it hopes to identify a natural substance that can preserve its food products for up to six months. Just Mayo is available with and without calcium disodium EDTA, a commonly used food preservative.
“I wouldn’t consider [regular] preservative to be natural … We choose not to add that in our products and will look at what the plants can do,” Tetrick said.
But the main concerns are whether the product is cheap, convenient and tastes good, he said. Tetrick said Just Scramble is “67 percent more affordable than the traditional eggs” because it skips the middleman — the chicken.
“This is not a campaign against eggs but the egg industry, which causes the possibility of avian flu and wastes food,” he said. “Mr Li and Bill Gates also share the same view. They are both really driven to do things that can fundamentally change the world for the better … By 2050, we have to figure out a way to feed the 9.5 billion world population without destroying the environment.”
Tetrick, who graduated from Cornell University’s sociology department and the University of Michigan Law School, spent seven years working in Sub-Saharan Africa with the President of Liberia and the United Nations, among others, before deciding to invent a food product that could help change the world. The 33-year-old’s business partner, Josh Balk, was a high-school classmate.
“We are in a deep learning and listening phase right now and welcome ideas from consumers … I know Chinese like boiled eggs, [but] eventually we will have them,” Tetrick said. The company is focusing on liquid eggs at the moment as a third of all the eggs produced in the world end up in baked goods and dressings.
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