It could be a test year for Heura Foods, as the alternative protein maker braces for a price hike, but a lot is running in the startup’s favor.
speaking to just food, co-founder and CEO Marc Coloma says that Heura refrained from raising prices last year. The test will be whether the Spanish firm can repeat the 80% increase in billing in 2022 in what is a premium price category.
However, so far Heura Foods is ignoring the sluggishness in the plant products sector, which, according to Coloma, is showing signs of “stagnation” or even declining in some markets such as the US, a country outside from the company’s radar at the moment.
In January, the company entered fish alternatives, giving consumers options across the spectrum of plant-based proteins: It already had a range of beef, pork and poultry products.
Also this year, Heura Foods is launching a bespoke production technology and patent, which it claims is a “breakthrough” for the industry, Coloma says, and will “jump-start the entire category.” And that could be a welcome note for investors, with a Series B round planned for 2023 on top of last year’s €20 million ($21.2 million) of bridge capital and a €16 million Series A. in 2021.
Consumer Repeat Rates
But it’s Heura Foods’ repeat rates that might be the best judge in these testing times, a bone of contention for the alternative protein market where consumers are often deterred by one factor or another, usually taste, texture, excess and even not so much. -Healthy ingredients, and price.
“With all the inflation that exists in the market, people’s consumption is decreasing, their spending on food is decreasing, and this is a premium category in price, so consumption is impacted,” says Coloma. “There has been a kind of gold rush in the category that caused many companies to release products that were not aligned with people’s expectations.”
And he adds: “Repeat [rates] in the category they have not been good because there are many cases of products that are not good enough for the vision we have: to be successors to animal products. There are huge challenges in the taste experience, but also opportunities to further improve the nutritional value of the products.”
Much will depend on the course of inflation for the rest of the year, and much will depend on energy prices and the war in Ukraine, and the tightness of household food budgets. Food inflation in Spain eased to 15.4% in February, while the general rate accelerated to 6.1%. And the trajectory of grocery prices remains in the double digits or single digits in many major European markets and beyond.
While appetite is waning in some countries, Coloma says Heura Foods is ramping up volume, with “very high” repeat rates of 50% in Spain last year, for example, where its market share “more than doubled ” at 25%.
Outside of its main Spanish market, Heura Foods gained a UK listing in December with luxury supermarket Waitrose, one of its main target countries along with France, Benelux, Italy, Austria, Switzerland and Poland. Currently around 20 markets are served. It has distributors throughout Europe, as well as in Singapore, Hong Kong, Vietnam, Egypt, Canada, Mexico and Chile.
“Our vision is to become the European champion by 2028,” says Coloma when asked about his intentions for the US, a possibly weakening market where the startup has no presence and is not on his radar.
swimming in fish
Italy, Switzerland and Spain were introduced to Heura Foods’ plant-based fish fillets and fish sticks in January, followed by France and Austria.
“We expect fish to be one of the top selling products, based on the feedback we are getting from retailers and consumers. In most of the countries we are in, there was nothing there [in fish alternatives] for consumers”, explains Coloma.
“I think the category’s worst enemy is products that don’t live up to consumer expectations. In the end, we have to overcome many barriers about what is the impact of food on greenhouse gas emissions and many of the humanitarian challenges that we have this century. We have to make sure that this category excites people to be able to be a part of that.
“There is an opportunity to attract more people. Ninety percent of the people who buy our products consume products of animal origin. It is expanding the value proposition beyond vegans and vegetarians. We are just at the beginning.”
Heura Foods, created in Barcelona in 2017 by Coloma and Bernat Añaños, has a wide range in its bag, from hamburgers to nuggets, meatballs to mincemeat, sausages and chorizo, all made from soy and pea proteins with olive oil. extra virgin.
He and his colleague remain majority owners of the company, even though investment rounds have meant they have had to “give away a piece of the company each time to speed up development.”
Coloma was coy about any acquisition proposals, saying “we are receiving a lot of interest from different parties.” And a public offering could be on the cards as part of a “possibility roadmap,” but more in the medium to long term than a short-term option.
“Category Trainers”
By offering variety, the company hopes to attract more people to the category, with key offerings for nutritional density and flavor. All Heura Foods products are classified as A in the European Nutriscore classification system.
The goal is to be “category shapers,” Coloma says, adding that most people seek plant-based protein because “they want to eat healthier.”
He explains the thesis that he believes sets Heura Foods apart from some of its industry peers.
“We’re merging two tracks that are kind of an anomaly right now. It’s packing incredible flavor and incredible nutritional density. We are bringing together products that are superior and bringing together a community that is accelerating the transition to a net positive food system and protein transition.
“We are getting more protein density than is available on the market with much less use of fat. We are talking in more cases of less than 50% and bringing the best fats to the category such as extra virgin olive oil where we develop fat analogues that will help us bring the juiciness and palatability that people are looking for, but in a responsible way. .”
Heura Foods works with science and technology teams on what Coloma calls “microstructure design,” or nutrition-dense ingredients that offer “functionality.”
In its alternative fish fillets and fingers, for example, it uses soy to mimic the flaky texture and hits the “matrix structure for the same sensory experience as fish,” with a superior fat profile, more protein with fiber and nutrients. as omega-3 DHA.
Coloma says that producing a fish alternative was not without its challenges, as the textures are very different from meat, as are the fats and “mouthfeel,” and the flavor and color profile. All while he uses a “minimalist ingredient label to get the right functionality and better nutritional density.”
price equation
Revenue last year was 31.4 million euros, in contrast to 2.5 million euros in 2020. Heura Foods expects to grow again at a double-digit rate this year, says Coloma, not wanting to limit himself to a actual goal.
Opportunities abound in plant-based foods, Coloma suggests, given that penetration rates in many countries are “really low.” But the price premium on animal proteins has tended to be a drag for the category, particularly with inflation currently eating away at consumers’ wallets.
In his defense, Coloma compares alternatives with another premium category, the organic one: “When we look at the organic offerings of products of animal origin, we are below one euro per kilo in most cases, especially in beef. But at this stage, the price of the category puts pressure on the consumer to have the frequency that we would love. The message at this moment is towards the institutions to make it easier and facilitate the protein transition that the world needs”.
Lidl is a good example. The German discount retailer was recently blamed for planning to reduce its supply of animal meat in favor of plant-based options, allegedly over environmental concerns.
“The world is going in that direction,” Coloma replies. “The role of the companies that are here is to make sure that we accelerate the path that we are already taking.”
He argues that the category is still in its relative infancy despite some “stagnation” or decline in some countries. But inflation is playing a role in that as growth continues in some emerging markets, Coloma says, emphasizing again that quality products are key to ensuring consumers repeat rates.
Heura Foods is set to disclose its first patent in the second quarter after working on the project for the past eighteen months. It has already been applied to a new product, which will be launched at the end of the year.
“We have been working hard on fundamental science and technologies that can help solve relevant challenges,” Coloma explains. “We think that objectively it is the highest scientific and technological advance that there has been in the category in the last decade.”
