Catch the buzz - Our latest investment in Compound Foods
Compound Foods has created a cold-brew coffee without the coffee beans.
We are buzzing with our latest investment in Compound Foods! Compound Foods is a beanless coffee company that was founded by Maricel Saenz in 2020. They produce America’s most beloved beverage – coffee – without the beans. Using fermentation, and byproducts from other industries, their first product is a beanless cold brew coffee that uses ~90% less water and produces ~90% fewer carbon emissions than traditional coffee.
At Supply Change Capital, we believe that commodity prices will become increasingly unstable in coming years due to climatic disruption. Parts of the food system will ‘decommoditize.’ Coffee, in particular, is ripe for disruption.
We invested in Compound Foods for three reasons - the market, the movement, and Maricel!
The market opportunity
America is addicted to caffeine. Coffee is the second most consumed beverage after water, and its production is in peril. Coffee prices are already at a 10-year high (Arabica coffee prices increased 76% in 2021 😱), and this price trend is expected to continue. The specialty coffee market continues to experience rapid growth, at 20% CAGR in the US. This growth is fueled by millennials, who drink twice as much cold brew as their Gen X counterparts.
But how will we supply all of this coffee? By 2050, the suitable land for coffee will be reduced in half due to climate change. This fundamental supply and demand imbalance previously meant farmers would plant more trees, and sometimes more productive coffee varietals. However, the delay in production for this tree crop (3-5 years) often means dangerous price swings for farmers - and it is compounded by hedging against coffee futures contracts. Plus, the suitable land simply won’t be there.
At Supply Change we knew that a solution needed to be found, one that was more highly scalable, viable, and sustainable for farmers and for the industry. Enter Compound Foods.
The [fermentation] movement
There is a growing movement around unleashing the ancient properties of microbial fermentation to create healthier and more sustainable foods. The earliest evidence of fermentation technology in our diets can be traced back to 7000 B.C. We eat fermented foods on the daily (think yogurt, cheese, and sourdough bread).
Coffee is already fermented at scale to produce the complex flavor, taste and aroma that we love. Compound studied the microbiome/fermentation process to produce a conventional cup o joe - but instead of just fermenting coffee beans, they are using locally sourced, upcycled ingredients, roots, and grains to create a coffee alternative that uses less water and produces fewer carbon emissions than traditional coffee. With great results!
Compound Foods joins the growing tribe of fermentation based companies that Supply Change has invested in (Aqua Cultured Foods, Hyfé Foods). And the market is wide open. Atomo and Voyage Foods are innovating in the space. Non technical brands like Mud/Wtr, and ‘coffees’ made from chicory and from cacao are on shelf. Compound stands out as the only to rely on fermentation + used upcycled ingredients as an input, making their supply chain incredibly flexible and price competitive.
Maricel and team!
Maricel hails from Costa Rica, where she saw firsthand how the coffee industry was driving poverty and environmental destruction in her home country. She shares, “As a Costa Rican, coffee is close to my heart. I don't want to live in a world without it, nor do I want to harm the planet every time I treat myself to one.”
This is Maricel's second startup in the biotech space, and it shows. She has assembled a best-in-class team to tackle this enormous opportunity, with credentials from Eat Just, Brightseed, and Miyoko’s. Coincidentally, most of her team is comprised of other bad ass women :).
In their model, Compound Foods is looking for ways to support coffee farmers who must transition from coffee production (due to climate change and environmental conditions) to other crops. To this end, the company is exploring a partnership in Central America to assist farmers in the inevitable transition from coffee, increase their food security, and positively impact the environment.
At Supply Change Capital, we are particularly excited about hybrid approaches to the climate and culture impacts on the food ecosystem and because of Compound Foods’ focus on partnering with and supporting coffee farmers while also producing beanless coffee, we are in!