Why we invested: Believe in Science
Examining our impact investment thesis for Believe in Science
Believe in Science is applying cutting-edge science to reformulate bakery products to make them lower in fat, sugar, salt and calories. They are starting with the doughnut under a sub-brand Urban Legend. Launched in the summer of 2021, Urban Legend doughnuts contain less than 152 calories each, the equivalent to a slice of buttered toast!
At Eka Ventures, a core part of our thesis is that science can be used to recreate products to improve the health of our society, in particular shifting towards a preventative approach to healthcare. Obesity is one of the major causes of long-term health conditions and to date education has had limited impact on reducing this. Anthony, the founder, has two key insights on how to change the system to tackle this problem which fitted strongly with our thesis:
The obesity debate places too much responsibility on the consumer changing their habits, rather than encouraging the industry to produce less unhealthy foods. Substitution is an effective reduction method
Material science can be used to develop products that are lower in sugar, fat, salt and calories whilst still being appealing to consumers
The early proof of concept that Anthony developed with leading material scientists gave us confidence that the execution of this plan was possible. Together they mapped the “mechanical” properties of a normal doughnut along 14 dimensions. From that they developed new manufacturing techniques to produce a doughnut with over 50% less sugar and fat yet retaining the indulgent taste. Instead of deep fat frying, the dough is “set” by a beam of steam. The vision is to apply this scientific approach across multiple food verticals.
Team is a key component in our decision-making process and Anthony Fletcher’s reputation was known to us from his time as CEO of Graze, which he sold to Unilever, and the huge respect that other founders and operators in the space had for his raw intellect and technical capabilities. His vision for improving the food system was evident from our first discussion.
The market size and landscape provide the backdrop to build an iconic challenger brand:
Market size: the global bakery market is estimated to be $450b annual revenue, accounting for about 10% of global food spend. Donuts are the initial focus and represent a market size of $10bn+ and growing strongly
Margins: strong margins in incumbent players with Krispy Kreme, one of the global leaders, achieving a 58% gross margin and 16% EBITDA margin¹
Competitors: There is no scaled challenger brand in bakery in the way that we have Beyond Meat in the alternative meat vertical or Oatly in the alternative milk vertical, which as of Dec-21 had market caps of c$4bn
What hooked us was understanding the effect that a scaled Believe in Science could have on reducing obesity. An input into our investment thesis around impact was the The Impact on Urban Health¹ research report, which focusses on combatting childhood obesity (currently 25% in the top decile of deprivation) and found that:
Education alone will not solve the obesity challenge
Affordable, enjoyable and healthier options delivered through supermarkets (that account for 80% of spend pre-Covid for families) is required to enact system level change
New challenger brands that can create healthier options where incumbents won’t or can’t will be a key part of the solution to tackling obesity
Regulation will accelerate retailers’ willingness to engage with new brands as they aren’t able to promote existing options
In the UK, regulation is accelerating with the Government introducing advertising restrictions on goods that are deemed to be high in fat, sugar and salt (HFFS). This is a cornerstone pillar in the Government’s tackling obesity strategy². Our investment hypothesis is that this regulation will create disruption in the market landscape which will provide the opportunity for HFFS compliant challengers to take sizeable market share rapidly.
We look forward to working with Anthony and the rest of the team over the coming years as they re-wire our food system to be lower in fat, sugar, salt and calories and doing so in a way that is affordable for everyday families.
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(1) 2019 Krispy Kreme UK accounts