NCFIL Director’s Perspective: April 2020

“What a long, strange trip it’s been.” Jerry Garcia could not have known his phrase would apply to the challenges we’ve all faced in the last month or so due to the coronavirus. Our team’s sympathy goes out to those whose health or livelihoods are impacted by this virulent virus. We hope better days are ahead. 

Nonetheless, the NC Food Innovation Lab team has been active, and I’m pleased to share some results with you.

Pilot Plant Status

The demolition and re-construction work to correct our exhaust hoods was completed this month. We are now able to finish installing equipment, initiate training and commissioning, and hopefully have the facility inspected by regulatory personnel in mid- to late-summer.  

More packaging equipment and storage vessels arrived in the last few weeks, and more equipment will arrive in the upcoming months. Our Buhler twin-screw extruder, the last piece of major equipment, will arrive in late September to early October. This equipment will expand our client offerings.  

The Product Development Laboratory was busy up to March 17th, when we had to shut-down for social distancing. Several projects have been initiated, but are now on hold until we can resume operations. This has not stopped our team from developing formulas and ordering ingredients during this time.

NCFIL Announces New Pilot Plant Manager 

Joseph Hildebrand joined the NCFIL team as our new Pilot Plant Manager. With two degrees from N.C. State University, Joe has industrial experience in pilot plant and larger scale operations and is a reputable product developer. We are excited to have Joe get his “feet wet and hands dirty” in our lab and hope that occurs next month. Joe and his wife are relocating back to North Carolina from New York.

NCFIL Activity During Stay-at-Home 

Modern food processing facilities that are cGMP compliant and follow the Food Safety Modernization Act, like NCFIL, have copious numbers of standard operating procedures (SOPs) and other required elements equaling a large amount of paperwork. This paperwork has kept our team busy while working remotely. We have also worked on training classes, in-depth market studies, continued interaction with potential clients and existing customers, and blog writing. 

Published on our website and distributed via social media, our blogs address the impact of COVID-19 on food entrepreneurs (see below for further perspective on this topic) and the complexities of the food supply chain. We’ve also met with a few North Carolina legislators to provide them with virtual tours of the completed facility and discuss future needs.

NCFIL will reopen as soon as our governor and the university deem it safe. We are mapping changes that need to be implemented for client interaction and personnel safety. NCFIL will use guidance from the N.C. Department of Agriculture and Consumer Services and the Centers for Disease Control and Prevention as tools, but will exceed many of these recommendations to ensure food and personnel safety.

Impact of COVID-19 on Food Entrepreneurs

The pandemic has impacted entrepreneurs in several ways. Those who were not in the process of raising money before the pandemic have not been able to keep investors’ attention to open new rounds. Seed funding across all industries was down 80 percent in March 2020; all indicators point to April being similar. Investors are nervous about short- and long-term consequences of an economic downturn, which would impact the realization of quick returns on investments. 

Entrepreneurs should take this opportunity to finely hone their pitch decks and their ability to demonstrate how they react in a crisis to investors. Start-up investing is not so much about the product, but about the team behind it. The commitment and tenacity of founders is imperative to investors.

Limited Focus on New Products

Retailers, and even consumers to some extent, have been reluctant to stock, purchase or try new products. Food processors have been producing their most operationally efficient products to maintain replenishment in the supply chains, and co-manufacturers have done the same, making it difficult for start-ups to have their products manufactured. 

This has hindered entrepreneurial companies with product in the market as well as those trying to establish some shelf space. Small companies need to survive this pandemic with liquidity and solvency. Normalcy following the pandemic will see inventory replenishment of all products, and the consumer’s desire for novel, domestically-sourced products will reward new products.

Some Product Success Amid Pandemic 

In the market now for over a year, plant-based meats were not readily accepted by customers, despite spot shortages of meat. However, in recent weeks, sales of these products ticked upward. Many of the major plant-based meat companies have announced expansion of their product offerings in new outlets.

Not all entrepreneurs have been detoured. Some start-up companies have been beneficiaries of consumers’ rampant buying frenzy. Companies marketing healthy snacks, gluten-free products, cereals, infused mineral waters, beverages promoting health and wellness, frozen foods, and decadent snacks have achieved consumer demand.

Post-Pandemic Preparations

Currently, the food industry is doing very well as consumers pivoted from 50+ percent of their meals prepared and eaten away from home to re-engaging in at-home food preparation. After pandemic uncertainty passes, the industry will consider how to invest profits realized from stay-at-home orders. Now is the time to think creatively about the industry’s future directions and to design product offerings to accommodate Jobs to Be Done. Some start-up companies may even need to rethink their models.

NCFIL is your resource for market analysis, Jobs to Be Done, ideation and prototyping. Even though we currently work from home, we continue to engage with potential clients, who are already looking at productivity beyond isolation.

Word of Caution for Start-Up Companies 

I offer a word of caution for start-up companies: There will not be an endless supply of cash for early- and growth-stage companies after the pandemic. Adam Bergman, Managing Director of EcoTech Capital recommends, “These companies should refocus their business on optimizing their balance sheet cash and move to profitability rapidly at the expense of high-revenue growth and market share. Companies unable to identify the right business model will go bankrupt prior to getting to a point where they can build a viable business and brand name.”  

As we transition back to normalcy, all aspects of the food industry will witness further consolidation and probably use their cash for mega growth and not buying start-up companies.

Final Thoughts

Thank you for reading this month’s perspective. The NCFIL team hopes all of you stay healthy and make wise decisions in these unusual times. We welcome your feedback and perspectives. 

Plant-based food innovation will maintain its momentum after COVID-19, so let’s talk about how NCFIL can collaborate with you on new ideas and bring those to market!