I need someone read the Revolution Food case and answer the pages 4-6 from case analysis worksheet
khaled.al
revoloution_foods.pdf
Professor of Business Administration and Economics and Director of the Institute for Business & Social Impact Laura Tyson prepared this
case study with Social Impact Fellow Jennifer Walske, and with assistance from Case Writer Victoria Chang, as the basis for class discussion
rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 2015 by The Regents of the University of California. All rights reserved. No part of this publication may be reproduced, stored,
or transmitted in any form or by any means without the express written permission of the Berkeley-Haas Case Series.
Date: July 31, 2015
LA UR A TY SON
JENNIFER WALSKE
Revolution Foods: Expansion into the CPG Market
In the spring of 2015, the founders of Revolution Foods (RevFoods), Kristin Richmond and Kirsten
Tobey were handing out Meal Kit coupons to Walmart customers in Florida. They were excited to be
conducting a consumer test with the retail giant for their relatively new kids’ Meal Kit (recently
rebranded as a “Jet Pack”) product that competed directly with Kraft Food’s popular Lunchables, a
lunch kit that had been heavily criticized for its poor nutritional value. As noted in the New York
Times by Margo Wootan, a registered dietitian who also served as the director of nutrition policy at the Center for Science in the Public Interest: “Most Lunchables are terrible. If a parent goes to the
Lunchables section in the refrigerated case and just picks one out, chances are extremely high that she
will get a lunch that is high in sodium, sugar, and fat.” The decision to offer a 100% RevFoods CPG
(consumer packaged goods) product line was a big step for both the company and its investors.
However, Richmond and Tobey believed that RevFoods was ready for this step in their company’s
evolution, moving more broadly to a trusted, healthy, meal product brand for families.
As Richmond and Tobey squinted in the Florida sun, they felt proud of the Meal Kits the company
had launched in 2013 at more than 400 stores such as Safeway, Whole Foods, and Fresh & Easy. In
fact, by 2015, the Meal Kits were available at 3,000 U.S. grocery stores and the team had launched
several new flavors such as popcorn chicken and hummus with pita chips, while retiring its peanut
butter and jelly kit. They had also developed and launched a healthy snack product called Dynamos
and had acquired a company called Lunch Bundles, that was moving in the direction of providing
family meal kits for at-home dinners.
As the co-founders looked ahead, they wanted to build upon their success in the school meals business
by creating healthy, all natural, kid-designed, chef-crafted meals and making these types of meals
available for families as well through the grocery channel and beyond. Given additional financial
capital, and strategic hiring to bolster the organization’s human capital, Richmond, Tobey, and the
RevFoods team were up for the challenge.
B5845
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REVOLUTION FOODS 2
Company Genesis
In 2006, the year Richmond and Tobey graduated from the University of California at Berkeley’s
Haas School of Business (Berkeley-Haas), they launched Oakland-based RevFoods, a provider of
healthy meals combined with in-school nutrition education to public schools. Richmond served as the
CEO and Tobey as the COO, although they were equal partners in every respect. Initially, Richmond,
who had a background in finance at Citibank and had co-founded a school in Nairobi, was more
interested in externally facing tasks. This included fundraising and business development. In contrast,
Tobey, with a background in education, focused more on internal operations.
The pair had met while MBA students at Berkeley-Haas and found that they shared similar
backgrounds in educational fields. Richmond had served as a Vice President of RISE, a nonprofit
dedicated to the recruitment and retention of quality teachers in public schools. Tobey had previously
managed experiential education at Phillips Academy in Massachusetts, as well as food-related
education programs in Ecuador and Mexico. While both of them also had experience with food and
education internationally, they were drawn to the opportunity of creating and delivering healthy meals
within U.S. schools, particularly in low-income neighborhoods. Richmond said: “It was great to meet
a like-minded entrepreneur who had a similar vision and values, combined with a complementary
work style and skill set.” They then spent the remainder of their time at Berkeley-Haas honing and
refining their idea. This included tapping into the expertise of faculty members, such as Kellie
McElhaney and Will Rosenzweig, while applying knowledge gleaned from MBA courses in market
research, new product development, social enterprise development, and financial modeling to develop
their business plan. This ultimately led to Richmond and Tobey winning the Global Social Venture
Competition and receiving seed funding from DBL Investors’ prior firm (known as the Bay Area
Equity Fund, a division of JP Morgan) in order to fund a truck, lease a kitchen, and hire their first four
employees. Their initial food preparation site was a kitchen in Emeryville that they rented from a
catering company. Later, the RevFoods team worked in an abandoned McDonald’s restaurant. “We
installed our steamers instead of deep fryers,” said Richmond. “The irony was amazing.”
As RevFoods grew, it stayed true to its mission “to build lifelong healthy eaters by making kid-
inspired, chef-crafted food accessible to all.” 1 On its website, RevFoods further clarified how this
mission translated into products: “We create healthy, fresh, real foods for schools and families across
the country. Our meals are made from natural ingredients. Nothing fake. Nothing artificial (colors,
flavors, or preservatives). Because our families deserve nothing less.” 2 Richmond added: “The
concept of access is really important to us—the concept that every child deserves the best healthy
meal possible. The word ‘access’ is especially important because of the way in which we built our
model, messaging, and supply chains, centered around quality and affordability.” The ultimate goal
was to “build lifelong healthy eaters, to improve overall health among children, and to bolster the
educational outcomes for all students.” 3
RevFoods first clients were charter schools. These public schools were looking for a school lunch
solution that did not require a kitchen. At that time, charter schools were often too small to secure
contracts with the large food service management companies, and were also seeking higher quality
meal options than those that existed in the marketplace. This need was the perfect backdrop for
RevFoods to begin by delivering to charter schools “ready to eat” or “ready to heat” fresh food items.
By 2015, RevFoods had grown from serving 500 meals a day in 2006, to a national operation,
preparing more than one million weekly meals for nearly 1,000 schools around the country. Eighty
1 http://revolutionfoods.com/about/.
2 http://revolutionfoods.com/about/.
3 RevFoods.
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REVOLUTION FOODS 3
percent of the one million weekly meals were going to students in underserved communities who were
on the federal free and reduced-price meal program. RevFoods also had seven commercial kitchens in
parts of California, Colorado, Louisiana, Texas, the Mid-Atlantic region, and the New York area. In
the summer of 2015, RevFoods opened up a Midwestern hub in Chicago. The company had grown
from $1 million in revenue and 10 employees in 2006, to over $100 million in revenue and over 1,000
employees by 2015. The company had also raised over $100 million in funding. 4 With its deliberate
focus on growth, the company was not yet profitable overall, but did achieve profitability in six of its
seven regions (for more information on the company’s growth and fundraising, refer to Exhibits 2 and
3).
Developing its Core Business 5
RevFoods original focus was in offering daily, hot, fresh lunches, as well as breakfast and snacks to
public schools. Their meals were always made from carefully considered ingredients and never
contained artificial colors, flavors, preservatives, or high fructose corn syrup. Meals were based on
fresh and seasonal items. A typical RevFoods breakfast might include a whole grain bagel, cream
cheese, and fresh fruit. Lunch might be a Diestel Farms turkey breast sandwich on a whole grain roll,
chicken teriyaki with fresh vegetables and brown rice, or handmade enchiladas with black beans.
Snacks might include yogurt, whole-grain crackers and chips, fresh fruit, and snack bars.
Beyond the food, however, the company provided schools with administrative and operational support
to implement a successful food service program, including the ordering and federal reporting
documentation required by the National School Lunch Program (NSLP). RevFoods also offered
programming in nutrition to complement its meal services, which included lunchroom signage, a
mobile phone app, and on-site food presentations.
Richmond and Tobey founded RevFoods with the hope that they could build a “double bottom line”
company, as Richmond said: “The impact that we have on our customers and our communities is
closely integrated with our financial success. We measure impact by seeking aggressive growth in the
number of customers, partners, and products in our portfolios, and we hope to build lifelong healthy
eaters. We also seek improvements in the overall health of the children we serve over the long-term,
increased engagement among school communities on issues related to health, nutrition, and
sustainability, and the creation of good jobs for low-income individuals.” 6
Richmond said on the school meals business: “We are focused on a few key things: listening to what
our students and families want in terms of quality and choice, focusing on designing to affordability as
a key tenant of our offering, and being uniquely solutions-oriented in our approach with our school
partners.” Tobey emphasized: “There were a lot of great efforts going on in education reform, but
there was not enough attention being paid to the quality of what we were feeding kids at school and
how that sets them up for success.” In fact, RevFoods was the first company to provide a combination
of federally compliant meals, nutrition education, and a clean-label supply chain to schools nationally
at an affordable price, with the ultimate goal of making a sustainable change in the food quality within
schools. Prior to RevFoods, most schools either chose to have no meal program, self-operated its
meal program, or outsourced to a food service management company.
4 In 2007, revenue was $4 million with 70 employees; in 2008, $10 million and 165; in 2009, $18 million and 400; in 2010, $28 million and
575; and in 2011, $46 million and nearly 1,000. http://www.businessweek.com/articles/2013-09-19/revolution-foods-takes-on-kraft-to-get-
into-kids-lunchboxes. 5 Some of this section is referenced from Bethany Coates, “Revolution Foods,” Stanford GSB case study, E-322, 11/17/08.
6 Bethany Coates, “Revolution Foods,” Stanford GSB case study, E-322, 11/17/08, p. 2.
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REVOLUTION FOODS 4
The RevFoods team wanted their meals to be NSLP and Child and Adult Care Food Program
(CACFP) compliant. NSLP provided over $8 billion in federal funds to feed low-income students
around the country, meaning the meals were reimbursable to a school, of which $1 billion was in the
state of California. RevFoods school lunches generally cost less than $3 per meal, which is the price
at which schools could be fully reimbursed by federal programs for low-income families. Although
$3 for a healthy meal seemed like an impossible task, the RevFoods team was not discouraged. “You
can still access affordability with fresh ingredients,” Richmond said. “You just have to have great
recipes and a simple toolkit.” 7
During these early years, RevFoods had to focus on building a compliance organization to receive
federal funding, so they focused on menu planning (to meet nutritional guidelines) and record-keeping
(to ensure that schools had sufficient information in order to get reimbursed). “Compliance continues
to be a huge focus for the company, because it makes or breaks whether schools get reimbursed. We
have excelled in compliance due to our focus on this issue and its importance within our company,”
stated Tobey.
Early on, the RevFoods team had visited 30 schools to interview principals, students, and parents who
were dissatisfied with current offerings. On getting kids to eat their food, they learned that
presentation and taste were two important factors; if kids didn’t like what they saw, they wouldn’t eat
it. Tobey said: “We’ve done a lot of work with schools to encourage kids to try new things and adopt
healthy eating habits. You can’t just show up with a healthy meal program and expect kids to adopt it
on day one.” 8 For example, chefs from RevFoods visited new schools and gave menu samples to
students. RevFoods also allowed students to take a field trip to RevFoods’s commercial kitchen to see
how the food was prepared by hand versus by machine. Richmond said: “Our food approach was
important in that we listened to our community. We kept on hearing that we were never going to get
kids to eat healthy foods and that didn’t sound right to us, so we really developed a food approach that
listens to kids, parents, school food service leaders and administrators, and the general community.
This remains a core pillar that drives us today.”
The company also faced cultural challenges with food. For instance, when they tried to make
quesadillas with cheddar cheese, the students informed them that, “We don’t eat yellow cheese in our
quesadillas. We eat white cheese.” With wraps, the students told RevFoods that they only ate warm
tortillas, until fast food chains began to sell wraps. When RevFoods then reintroduced wraps, it
became one of its most popular products. “We had to learn what was culturally relevant to gain
respect,” said Richmond.
In 2006, the founders negotiated a business relationship with the Northern California division of
Whole Foods Market as a key supplier of raw ingredients at wholesale prices. RevFoods tried to keep
costs down by working with mission-focused food suppliers such as Whole Foods that supported their
vision as well as focusing on building scale in their production. Several executives from Whole Foods
loved the concept of RevFoods and “due to their belief in our mission” helped to build the first supply
chain for the company. “Initially, we could order from their bake house, produce distribution center,
and other suppliers, and the Whole Foods truck would come and deliver things to us,” said Tobey.
Whole Foods executives also advised RevFoods on what equipment to put in their kitchens.
RevFoods initially targeted the California public charter school market (at the time, 600 schools and
220,000 students in California alone), after conducting a successful pilot with Lighthouse Community
Charter School. Eventually, the California Charter School Association promoted RevFoods to over
7 http://archive.fortune.com/2012/05/09/smallbusiness/school-lunch-revolution-foods.fortune/index.htm.
8 http://www.pbs.org/newshour/updates/teaching-kids-to-eat-healthy-in-school-and-beyond/.
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REVOLUTION FOODS 5
500 member schools. Beyond charter schools, RevFoods also began to serve after-school programs
and summer camps. In March 2007, RevFoods had expanded to serve ten charter schools, and by the
end of the 2006-2007 school year, they were serving over 1,000 meals a day to K-12 students in low-
income parts of the Bay Area. Richmond and Tobey used data, taste tests, and persistence to gain
trials with new schools and to expand within charter school management organizations (CMOs) such
as Aspire Public Schools. In 2007, the company received a major institutional funding, garnering
$3.15mm from venture investors (see Exhibit 3 for more detail on RevFood’s funding throughout its
history).
Consumer Packaged Goods 1.0
In 2007, RevFoods decided to build a CPG product line, with the support of a loan from Whole Foods,
to connect to the grocer’s customers. Tobey explained: “A key mentor at Whole Foods wanted to see
us build a branded line of products to raise awareness of our mission and what we were bringing into
schools, which they felt was really unique.” Because the founders “recognized the need for additional
support, given their full plates designing and executing the early-stage complex school meals business
model,” Whole Foods offered RevFoods one of their first Local Producer Loans (low-interest rate
loan) of $95,000 to help them create a line of branded products. “This felt like an opportunity that we
couldn’t turn down,” said Tobey. “Since we were mostly doing in-school meals, the idea of reaching
consumers in grocery stores with our brand was very appealing. We saw this as an opportunity
because the loan from Whole Foods de-risked it for us.” Richmond added: “We felt like we could put many things in play for both channels, such as food design, supply chain, and our mission.” However, as the team quickly discovered, building a CPG line was “a huge strategic undertaking”
according to Richmond. Whole Foods worked with RevFoods to determine what products the
company should launch: “We looked at the top-selling items targeted to kids and we created a
RevFoods branded version of organic peanut butter, jelly, boxed raisins, single-serve apple sauce, and
a few breakfast cereals. This was before the huge proliferation of kids’ brands. There was an
opportunity to build a trusted kid-focused brand in retail stores. “At the same time, our initial
products were basic, and lacked an innovative approach,” said Tobey. The company launched
cornflakes, Rev-O’s cereal, , organic peanut butter (crunchy and smooth), three different flavors of
organic fruit preserves, organic raisins, and organic applesauce. “Looking back at it, those are
different categories and different buyers. We started to call them the ‘brilliant basics,’” reflected
Tobey.
Despite their inexperience and ambitious launch across multiple categories, the products sold “pretty
well,” according to Tobey, and this experience helped them to recognize that the RevFoods brand
resonated with consumers. While the team did grassroots marketing, and Tobey and Richmond
personally gave out samples at Whole Foods, they quickly realized that in order for the CPG line to
succeed, they needed to invest more in innovation within their team, as well as a dedicated sales and
marketing team. “We were in the thick of building and expanding the school meals business,” said
Tobey. “There was so much demand coming in the door and we were doing all we could to keep that
business growing, that the CPG line felt under-resourced, both operationally and financially. We
realized we needed to build and fund an entirely new competency to address the CPG opportunity
properly.”
Richmond also reflected on the company’s CPG experience: “We discovered that we could be
successful doing this, but it also takes a lot of work. We proved there was viability for us in that
market, but we were only two-years-old and there was a large addressable market in schools that we
needed to succeed in first. Our thinking was influenced by our business school experience. We
thought about strategy and focus, and felt that we needed to build an entire competency, or find a
partner.” Richmond added that with hindsight and new experience: “I would have probably turned on
the gas a lot faster [on the CPG business] at that point and built out the organization much more
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REVOLUTION FOODS 6
quickly, but we were looking at another $10 to $20 million of fundraising, which was daunting since
that’s how much we needed to build out the school meals business, which was also doubling in size
each year. The learning curve was steep in the school meals business. It required creating healthy,
fresh, kid-designed chef-crafted meals for the most underserved kids, as well as logistics, team
building, fundraising, operations, and infrastructure.”
At that time, Richmond and Tobey met the founders of Nest Collective, a company with a mission to
create a suite of healthy, organic, and nutritious products for babies and kids. In 2008, the RevFoods
team decided to license the packaged product line to the Nest Collective “so they could take the
packaged goods product line and run it, staying consistent with our brand,” said Tobey. Richmond
added: “The licensing agreement felt good from a strategic standpoint. We were growing the
RevFoods brand and company, while leveraging both teams’ competencies.”
But after four years, RevFoods felt that the brands were diverging. Nest Collective (“Nest”) was
introducing new products such as Mashups (pureed fruit and vegetables in pouches), Pop Alongs
(whole grain organic chips), and Jammy Sammy’s (fruit snack bars). Tobey said: “The core pillars in
our school meals business focused on high quality, affordable, and accessible food through whole
meals to build lifelong healthy eating habits. But the products that Nest was creating hit only a
portion of our brand opportunity because the line was limited to snacks. And Nest continued to focus
on organic products which weren’t necessarily as accessible or affordable as we hoped to be.” Nest
also primarily focused on young toddlers and infants, while RevFoods focused on older students, in
the K-12 grades. “Although there was strong mutual respect amongst the Nest and RevFoods
founders, we had the bigger organizational strategy challenge of having two different companies
building one brand,” said Tobey.
In 2009, Nest acquired Plum Organics (that had started as a frozen baby food brand). In 2012,
RevFoods and Nest decided to amicably end the brand licensing agreement, allowing Nest/Plum
Organics to continue selling products that they had created under the RevFoods name and
subsequently, merge those projects into their own Plum Organics retail line. Richmond said: “We
split with Plum so that we could own our brand within the retail channel; this would be important in
the future, when we re-entered CPG, allowing us to be successful by running our own operation.”
David DeSouza, Executive Vice President at RevFoods, said: “It’s very hard for one brand to be
managed by two fast-growing entities. For that reason alone, I would say it was a flawed approach,
after a certain point, and thus a good decision to separate.” By 2012, Plum Organics had grown to be a
$93 million revenue company, with a number two position in organic baby food (a category growing
at 43 percent annually), and a number four position in the $2 billion larger baby food market. In mid-
2013, Plum Organics was acquired by Campell Soup Company (Campbell), on the heels of
Campbell’s acquisition of Bolthouse Farms, for an undisclosed sum. 9
School Meals Expansion and Growth
In 2010, Congress passed the Healthy Hunger-Free Kids Act that gave the U.S. Department of
Agriculture the power to make changes in the NSLP. RevFoods incorporated these changes in the
NSLP, and continued to expand its school meals business. Initially, the company approached growth
and expansion organically through word-of-mouth and through its business development team that
focused on determining whether a particular school was a good fit for their model.
9 http://www.fool.com/investing/general/2013/05/24/news-campbell-buys-plum-organics.aspx.
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REVOLUTION FOODS 7
In 2010, when RevFoods had grown to providing 8,000 meals per day, the company decided to
expand beyond Oakland to Los Angeles by building a culinary center that included food suppliers,
kitchens, and delivery fleets. In the summer of 2010, the company simultaneously expanded to
Denver and Washington, D.C. Richmond called the D.C. launch “one of the hardest moments for the
company,” because of the sheer volume of meals at launch and due to the fact that, in D.C., decisions
about food vendors were made the week before school started. “We ended up with 6,000 meals per
day in contracts and had to quickly find a new facility. The best we could find was one near
Baltimore, and so we decided to bus our staff to the culinary center for the first year. We thought we
would lose staff after that, but it became a tight-knit team and we retained most people.”
“Although we were ultimately successful in D.C. in 2010 and beyond, the experience forced us to lock
down every facet of our replication approach and focus even more on recruiting world-class
operational talent across our team,” concludes Richmond. The RevFoods team also experienced menu
challenges in D.C. schools. For example, the local team had dozens of tastings and focus groups to
create a child-approved baked chicken wing with a spicy sauce. 10
The company monitored daily
reports on student perceptions of the food in D.C. and other regions, and worked to boost demand
through tastings, promotions, and education.
In 2011, RevFoods, while still a Delaware based “C” corporation, also became a certified B
Corporation. 11
B Corps are certified by the nonprofit B Lab to meet rigorous standards of social and
environmental performance, accountability, and transparency. Tobey and Richmond structured
RevFoods as a for-profit C corporation, so that they could pursue funding from private investors, as
well as foundations and nonprofits. 12
But the organization then pursued B Lab certification as a way
to evidence its clear commitment to the environment, employees, customers, community, and to good
governance, 13
reinforcing RevFoods as a social-impact brand, which was a further point of
differentiation from some of its larger competitors. While not its primary objective for B Lab
certification, RevFoods also obtained discounted prices from certain vendors.
After D.C., the company launched in New Jersey/New York and Texas in the same year, which were
much smoother launches. The company also decided to build a state-of-the-art facility in Texas. “It
was a big moment for us—we wanted to stop thinking like a startup and shift our mindset to start
thinking like a larger company. This meant thinking longer term and making bigger investments.
RevFoods launched in New Orleans, Louisiana, in 2012 with the support of the local community,
local foundations, and the Kellogg Foundation nationally.
By 2015, the company served eight regions (Chicago launched in 2015) and focused on expanding
from those bases more deeply into school districts. One such example was in the San Francisco Bay
Area, where in 2012 RevFoods was awarded a $9 million contract to provide meals to San Francisco
public schools—114 schools or 55,000 students. Due to this contract win, RevFoods was able to
double the number of meals per day that it was providing within the Bay Area.
10
http://www.economist.com/news/united-states/21577098-new-company-trying-make-school-meals-healthier-biting-commentary. 11
https://www.bcorporation.net/what-are-b-corps 12
http://www.pbs.org/newshour/updates/teaching-kids-to-eat-healthy-in-school-and-beyond/. 13
http://www.bcorporation.net/community/revolution-foods
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REVOLUTION FOODS 8
Consumer Packaged Goods 2.0: Meal Kits
In 2014, Revolution Growth (no relation to Revolution Foods), an investment fund led by AOL co-
founder Steve Case, invested $30 million in RevFoods. The company planned to use the funding to
expand the school meals business substantially, and also expand into CPG by developing a new
product line. Steve Case subsequently joined the board of RevFoods.
Tobey said: “Success in serving families through the CPG channel was very much a part of our
strategy all along; it was just a matter of when the timing was right to build this competency
internally. It was our intent to create our own retail product line, because we had seen our brand’s
prior success in retail, and we saw how valuable it was to have a consumer-facing brand beyond
schools. We had also learned from the past, in that we had to build a team and resource it right.”
Richmond added: “At that point, our schools business was ready to scale, since we had honed the
model quite a bit and had a high performing team in place. We expected retail to have a higher
margin than school lunches once established.” The RevFoods team also felt that the time was “ripe”
for CPG since consumer awareness of food nutrition and demand for healthier, natural products was at
an all-time high, especially in the convenient grab-and-go-foods segment. 14
When the company began to think about re-entering the retail business, they knew that they could not
exactly replicate its fresh salads, sandwiches, and hot meals that they served in schools. The team
launched a listening tour—talking with consumers, parents, teachers, school administrators around the
country, as well as soliciting ideas from their own team about possibilities that would make sense
under the RevFoods’s brand in stores. Collectively they came up with a refrigerated meal kit concept
to target the $1.35 billion market of prepackaged lunch meals for children dominated by Kraft Foods’
Lunchables line (which owned 76 percent of the market). Richmond said: “We saw this category as
an area ripe for reinvention and disruption, and we followed the lead of families and consumers that
we spoke to in our innovation process. We took a similar approach to our school meals founding story
by listening, learning, and responding with a healthy, delicious, and affordable alternative.”
The RevFoods team decided to enter the fresh refrigerated category rather than the snack segment
because their brand represented fresh and balanced meals. They felt that the equity that they had built
through the school meals program translated well into a retail setting, given the strong family
connections to the brand. “We were looking into products that we could launch in the grocery store
that most directly correlated to kids’ lunches,” said Richmond. The team had brainstormed many other
ideas, such as creating meal kits to help parents cook meals for their families, but decided to focus on
the Lunchable category first, since the consumer would “get it” more easily, if they knew about
RevFoods’s school meals business.
In 2013, RevFoods hired David DeSouza, a former General Manager at Kashi (a whole grain food and
cereal brand) to oversee the development of a CPG line (he would also lead product development for
the school meals business). His CPG group was a standalone profit center and received specific
funding allocation for CPG products. DeSouza said: “We recognized that this was a complex
category in terms of needing refrigeration, complex supply chain (of putting all the different
components of a kit together), and short shelf life. It wasn’t a light decision to jump into this
category, but we felt the strength of the brand connection and our ability to be the first mover was
very compelling. Being a first mover is very important, because we could define the segment and
benefit from being the first one.”
14
http://www.nytimes.com/2013/08/22/business/lunchables-king-of-the-lunchbox-faces-another-challenger.html?pagewanted=all&_r=0.
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REVOLUTION FOODS 9
Tobey said on this new product segment: “We had a big vision: we wanted to launch across the
country; we didn’t want to start in a few stores and then expand slowly.” Over time, they also hired
other members of the CPG team that eventually grew to 15 people by 2015, and including a dedicated
sales team. Tobey added: “There’s a lot of infrastructure that we don’t have to build such as HR,
finance, and accounting, because we have that for our meals business already, so there are existing
strengths to build from.” DeSouza said: “We knew that we couldn’t behave just like a typical CPG
brand because we needed to make our launch synergistic, while connecting it with our school meals
business, like a brand ecosystem.”
Challenges
Specifically, RevFoods’s Meal Kits were made with high-quality ingredients, natural ingredients that
never had high fructose corn syrup or artificial colors, flavors, or preservatives, making them the first
of their kind in the category. The Meal Kits initially came in four choices—peanut butter and jelly,
cheese pizza, turkey and cheddar, and ham and cheese, with a goal of delivering packaged lunches that
had been historically more accepted in this food category.
Richmond said: “We’ve not only focused on making sure we have a compelling nutritional panel, but
also on one of our largest points of distinction—our ingredients standards.” 15
On nutrition, Tobey
said: “We’re a stand out in this category, because we have high integrity behind our ingredients. For
example, we have real cheese and not something that has to be labeled as ‘cheese product’ because it
has no real cheese in it. And we make sure we’re not putting artificial flavors, colors, or preservatives
in our food. When you’re eating cheese, there’s fat and salt in it, but it’s okay as long as you’re eating
real cheese and reasonable serving sizes.”
Packaging was one of the key issues that the team faced. They assessed options like a plastic seal and
a clear carton, so that the food could be visible, but ultimately decided to select an opaque carton as it
was faster to manufacture and lower in cost. “We decided to spend our precious little resources on the
highest quality food that we could find versus packaging,” said DeSouza. While ideally they would
have liked to have all compostable/recyclable packaging, the company also had to balance the cost of
their overall product, due to consumer price sensitivity, and ensure that their food’s quality remained
high during its shipment and sale. “That was a critical decision,” stated Tobey.
On packaging, shelf life was also an issue because the team wanted the meal kit to have over 45 days
of shelf life once it arrived in stores (or 60 days of shelf life when shipping and storage were factored
in, with meat being the limiting factor). 16
After investigating different packaging options, they opted
to work with one of their existing meat suppliers to use their new packaging technology (by packing
meat in a separate film) that extended the shelf life of meat without using artificial preservatives. 17
Knowing whom to appeal to most was also a key issue when determining the company’s packaging
strategy. DeSouza said: “We knew we wanted to be very distinct from the competition, visually, in
how our brand came across on shelves. We talked about how much kid-appeal to have versus
focusing on moms and we leaned heavily on moms.”
Sourcing was another challenge faced by the team. DeSouza explained: “We needed to source foods
that met our ingredients and nutrition standards because we didn’t just want components with no
artificial flavors, colors, or preservatives, but also wanted our components to deliver high levels of
positive nutrition like fiber, protein, and whole grains. Finding that combination wasn’t easy and
15
Stephanie Strom, “Lunchables, the Lunchbox King, Faces a Rival Vowing Higher-Quality Fare,” New York Times, August 21, 2013. 16
http://www.businessweek.com/articles/2013-09-19/revolution-foods-takes-on-kraft-to-get-into-kids-lunchboxes. 17
http://www.businessweek.com/articles/2013-09-19/revolution-foods-takes-on-kraft-to-get-into-kids-lunchboxes.
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REVOLUTION FOODS 10
finding it in kid-sized portions, with easy-to-open packaging, is also pretty tricky because that supply
chain pretty much doesn’t exist; so we had to create the components.”
The team was always looking for financial and operational synergies. “Sourcing is one example
where our meat supplier for our meal kits is the same supplier for our school meals.” In addition, the
cracker supplier was the same for both lines of business. They were also considering moving the
assembly of the meal kits to their own in-house facility. “This would add some complexity with our
schools manufacturing operation, but this would give us control and flexibility, and a cost advantage,”
said DeSouza. By June of 2015, all Jet Packs were assembled in-house. Moreover, in 2015,
RevFoods acquired Lunch Bundles, a competitor, and that product was packaged in house as well.
Distribution and Marketing
RevFoods’s Meal Kits launched in 2013, and were available in grocery stores throughout the country
such as Safeway in Northern California and H-E-B and Central Market stores in Texas. “Safeway has
been a great partner,” said Richmond. “They have believed enough in the product, brand authenticity,
and value proposition to take us national.” Shortly thereafter, the Meal Kits launched in Whole Foods
in the Bay Area and Fresh and Easy stores in several states. Tobey said: “Retailers have been thrilled
to have innovation in this category, and have seen the value in the connection to our school
communities.” In year one of its launch, Safeway carried the Meal Kits nationally. The team launched
with a “robust” PR campaign, a Citibank national commercial on RevFoods (catalyzed by the
Company’s connection to revitalizing inner city communities), a digital and social strategy, and
comprehensive launch marketing programs that included couponing, trialing, and a customer feedback
loop. Tobey emphasized that she felt “it is a whole new world now when building brands” with
grassroots efforts, combined with direct marketing and social media, quite effective even when
stacked up against more traditional TV advertising. “One advisor said ‘this is not about how to reach
consumers—but how to get consumers to reach for you,’” emphasized Tobey.
Meal Kits were launched at $3.49, which was a premium to other offerings at that time. “We broke
the ice in terms of challenging a premium to Lunchables,” said DeSouza. “This was a big barrier for
customers, but we saw a huge jump in our sales; 80 percent of our shoppers, who were buying our
products, were either new to the category, as they felt that the competition was not providing
acceptable options for their kids, or they had been buying a little of the category, and now they were
buying a lot more.” Richmond added: “Our primary focus is on trial—brand awareness, field
marketing, and sampling.” Richmond said that the company did “great” in securing distribution for
being such a young brand, but in terms of velocity (products per week sold), “we still have room for
improvement…that’s due to our need to increase trial. The good news is that people who buy our
lunch product are buying it again.”
In terms of accessibility, the team specifically wanted to be in mainstream grocery stores like
Safeway, and eventually Publix and Walmart. “We made a very conscious decision to focus on the
mainstream channel, in addition to grocery stores known for their natural and organic food brands, so
that we are very accessible from a channel standpoint,” said Tobey. “We have learned that consumers
don’t have to be defined by their demographics or income level. When we talk to parents across
demographics, there’s a unifying mindset that they want to provide the best healthy food for their kids.
They might have different education levels and awareness about what healthy means, but when
they’re given choices, parents tend to choose the healthiest option that they know their children will
eat.”
Distribution for any new product was a challenge: “For any new product, getting distribution in a
critical mass of stores was really important,” said DeSouza. “We couldn’t launch unless we secured a certain number of stores and that’s even more exacerbated in a refrigerated supply chain, because
refrigerated products have the shortest shelf life. It was very important to secure an acceptable
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REVOLUTION FOODS 11
number of stores, otherwise we would have to write-off product.” DeSouza added: “Our CPG line
deals with accessibility differently than our schools portfolio does and we had to come to terms with
that before we launched. In our schools portfolio, it’s about getting our meals to as many kids as
possible in under-served communities. With our CPG product, we had to think about it as, ‘how do
we enter spaces where there isn’t a good healthy option,’ and so accessibility is about providing a
healthier option where there isn’t one. And at a higher level, scale drives the ability to improve
economics and accessibility and that’s always on the back of our minds—the bigger we get, the more
leverage we have, the more we’re able to increase accessibility.”
Target was a retailer who decided not to continue selling the product after a pilot. DeSouza
added: “In Target, we were in stores that were scattered across regions, but not entirely in one region.
This meant we couldn’t do in-store promotions because their system wasn’t set up to do promotions
other than by region. And that was a major reason why we struggled in our test. In other tests, we
were in a whole block or region, and we could promote effectively to drive trial. We learned a lot
from this.” Richmond said on Target: “Target has an aggressive inventory write-off system which is
difficult for young brands. However, we’ve learned a great deal and one year later, we are engaged
with Target about offering a new innovative line that aligns with their objectives.”
The RevFoods team was also excited to leverage its school meals team to help drive trial. With over
1,000 people across seven points in the country, roughly 25 cities, “we’re trying to figure out how to
use the numerical strength and passion of that team to be evangelists for our brand,” said DeSouza.
One successful marketing campaign the company had was to have their school meals team give out
coupons and be ambassadors for the brand within test markets like Walmart stores in Florida. They
also gave out meal kits at PTA meetings as snacks in order to leverage the school meals business.
Competition
Since RevFoods launched their Meal Kits, two competitors have launched similar products as well—
one being Applegate, who launched its “Half Time Natural Lunchbox” at retailers such as Target,
BJ’s, and Safeway. Each kit contained Applegate American cheese with no added hormones,
Stonyfield YoKids Squeezers (organic), and Annie’s Homegrown Buttery Rich Crackers. Each kit
also has either Annie’s Bunny Graham Friends or Annie’s Organic Berry Patch Fruit Snacks. The
lunch kits came in three varieties of Turkey & Cheese, Ham & Cheese, and Bologna & Cheese and
retail for $4.99. The other initial competitor was Lunch Bundles (mentioned above), a Vermont-based
company that launched in 2013, and which RevFoods acquired in 2015. This product was also
available at Safeway for $4.39 each.
On competition and price points, the RevFoods team felt that the entrance of Meal Kit competitors at
similar and higher price points helped shoppers realize that for healthy and natural meal kits,
RevFoods’s price point was reasonable. “Just like with cereal and granola bars where natural
offerings entered, it will take three to five years for the notion of an acceptable premium,” said
DeSouza. “Before brands like Kashi and Cascadian Farms came along, no one thought they would
pay $4 for a box of cereal and today, that’s pretty common practice.”
On competitors DeSouza commented: “Our results for our Meal Kits have been positive so far and I
think it was the right move. However, we underestimated how quickly we would get credible and
natural brands competing with us. As it turns out, we only had six months because others had been
thinking about the category just like we were. Applegate took a very different strategy compared to
us, by launching with three well-known brands, and priced at a premium to us.” RevFoods’s
competitors in Meal Kits more broadly included the other “natural” food companies like Annie’s and
Plum Organics. However, “to assume there’s a one-for-one competitor relationship is a fallacy. People buy a repertoire of products—it’s not like a car, where you only buy a Honda or a Toyota. Our
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REVOLUTION FOODS 12
biggest opportunity is to grow the natural food category, which is growing really fast—retailers are
trying to make more space for this category,” said DeSouza
Reflections
As DeSouza reflected on the Meal Kit launch, he felt that RevFoods had “leaned too heavily on
moms” in terms of target and packaging. “We should have appealed more to kids.” He added: “We
also underestimated the structure of the packaging to make sure everything was really easy to open for
kids and we didn’t get it right out of the gate and had to fix it. And that’s just not good because
people who try for the first time may not come back if they have trouble opening the package, no
matter how good the food is. In retrospect, we should have been more mindful of that.”
DeSouza felt that launching four different items was a “smart decision” for brand presence on shelves,
even though they knew the peanut butter and jelly product was “weak,” because consumers felt like
they could make the product themselves. “We knew that we would have another product to replace
that weak one within a year and that’s exactly what happened,” he said. RevFoods’s strategy to pick
SKUs that would be most relatable and attractive to families, turned out to be accurate, as turkey and
cheddar was the highest selling flavor, followed by ham, pizza, and peanut butter and jelly. “I
sometimes wonder if we should have launched with just two such SKUs and two unique flavors,
which is what we have now with popcorn chicken and hummus & pita chips,” said DeSouza. “In
hindsight, maybe we could have had a combination of kid favorites and those that pushed the
envelope.” In 2015, the company rebranded its Meal Kits as “Jet Packs” and also as a new part of its
strategy, RevFoods has partnered with Clif. In June 2015, RevFoods included within its new Jet Pack,
Clif Kids organic Z fruit ropes.
Future: “A Trusted Brand”
The long-term vision for RevFoods is to become the trusted brand for families to go to for all of their
food needs—at the supermarket, through the CPG channel, and at schools, through their school lunch
program. Tobey said: “I think we are very well-positioned now to achieve our long-term vision.
We’re really focused on building trust and providing food solutions in areas where there are
opportunities to provide better options. While it took us a few years to position ourselves, we have
continued to successfully build our brand; there’s recognition in the marketplace that a brand can
stand across multiple channels very effectively and be trusted by families to play a role in multiple
parts of their lives.” Richmond commented: “A leader of a major retail partner told me that she
would like to see RevFoods throughout the store, so that parents start identifying the brand as a trusted
go-to and affordable brand. We want to be much more than a product, and instead, a strategy for
retailers.” The company has started to tackle this challenge and in late 2015 will be piloting a new
Meal Bundles product, to help families make quick and easy healthy dinners.
RevFoods’s founders were thinking about organizational changes too. At the time of this case,
DeSouza managed the branding function for the company while Tobey managed marketing and
communications. “We’re thinking about how to evolve that and how to create more of a central
innovation role that has both product innovation and also brand voice underneath it,” said DeSouza. In
February 2015, Chris Cornyn joined the team as the Chief Innovation Officer, overseeing RevFoods’s
brand and innovation.
As the RevFoods team looked towards the future, they plan to expand their Meal Kit flavors, as well
as launch new products into new categories that support their mission. “We never saw ourselves as
just being about kids lunches, in the school or the grocery store. We saw ourselves as extending into
other categories like snacks and family meal solutions,” said DeSouza. He added: “We asked
ourselves, what are the new occasions where our brand can credibly stretch and we talked to
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REVOLUTION FOODS 13
consumers. Then we looked at our food values and kinds of categories that need healthier solutions to
see where we could provide something meaningful and differentiated for kids.” As evidence of their
commitment to new products, in the summer of 2015, RevFoods launched “Dynamos,” high protein
granola bites product, into retail stores. In May 2015, the company also acquired CPG brand Lunch
Bundles, a company that had similar values as RevFoods and offered snack packs free of artificial
colors, flavors, preservatives, and high fructose corn syrup. Richmond summed the company’s future
direction in the following way “Our focus as a company is building upon our brand to become a
trusted, healthy, and affordable meal base for families in the U.S.”
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REVOLUTION FOODS 14
Case Discussion Questions
1. What do you think about RevFoods’s re-entry into the CPG market? What is different now, from the times it had done this before?
2. How do the two different businesses (school lunches and CPG products) complement and compete for internal resources?
3. What might be important new areas of investment for RevFoods in order to be successful in their broader vision (i.e., human capital, media, plant and equipment, etc.)?
4. Does RevFoods’s expansion increase the likelihood of a successful exit (i.e., being purchased as Plum Organics was by Campbell Soup Company, or holding an initial public offering as Annie’s,
Inc. did prior to being purchased by General Mills)? Given the investor mix for RevFoods—how
patient are RevFoods’s investors likely to be before they want to see a return on their investment
in the form of an acquisition or IPO?
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REVOLUTION FOODS 15
Exhibit 1 RevFoods Bios
Kristin Groos Richmond Co-Founder and Chief Executive Officer
Kristin’s career has spanned from corporate finance at Citibank to education. She was formerly the
Vice President of Resources for Indispensable Schools and Educators and co-founded the Kenya
Community Center for Learning in Nairobi. Kristin is an Aspen Institute New Leaders in Education
Fellow, an Ashoka Fellow and an Education Pioneers Fellow. She is also a member of the White
House Council for Community Solutions and a Young Global Leader Fellow of the World Economic
Forum.
Kirsten Saenz Tobey
Co-Founder and Chief Impact Officer
Kirsten began her career teaching and leading education programs in the U.S. and Latin America. She
is an Ashoka Fellow, Aspen Institute Environmental Fellow, member of the Culinary Institute of
America’s Sustainable Business Leadership Council and past mentor for the Women's Initiative
Fellowship Program.
David deSouza
Executive Vice President
David has over 20 years of marketing and management experience in consumer products, the food
industry and health and wellness. Most recently, as the general manager of Kashi Company, he led
the natural CPG business with $550M in annual sales.
Chris Cornyn
Chief Innovation Officer
Chris began his career working with Klondike Ice Cream Bars, Betty Crocker and Yoplait Frozen
Yogurt. His background includes roles as business and brand strategist as well as creative director
with a number of food brands before founding DINE, The Food & Drink Agency. Chris is a frequent
speaker and lecturer at industry events including Food Vision, Fancy Food Show, Best of Food and
Beverage Packaging, Next Level Summits, and IFT. Moreover, Chris served as a mentor judge on the
Lifetime TV show "Supermarket Superstar.”
Source: http://revolutionfoods.com/about/.
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REVOLUTION FOODS 16
Exhibit 2 RevFoods Revenue and Employees
FY Revenue (millions) Employees
2007 $1 10
2008 $4 70
2009 $10 108
20010 $18 142
2011 $28 289
2012 $46 648
2013 $46 948
2014 $82 866
2015 $101 1,114
Source: RevFoods and http://www.bloomberg.com/bw/articles/2013-09-19/revolution-foods-takes-on-kraft-to-get-into-kids-lunchboxes. RevFoods fiscal year is July – June. So, FY 2007 is ends June 2007.
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REVOLUTION FOODS 17
Exhibit 3 Funding History
Series A Series B Series C Series D Series E Series F Series G Series H
2006 $600k
2007
$3,150k
2008
$6,500k
2009
$6,500k
2010
$20,000k
2012
$12,500k
2013
$20,000k
2014
$31500k
Total
100,750k
Investors Include: DBL Investors, Catamount Ventures, New Schools Ventures, Physic Ventures, Oak
Investment Partners, Revolution Growth, Westly Group and others.
Source: CrunchBase,VentureXpert, RevFoods
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REVOLUTION FOODS 18
Exhibit 4 Original RevFoods Meal Kits
Source: RevFoods.
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REVOLUTION FOODS 19
Exhibit 5 Popcorn Chicken Meal Kit
Source: RevFoods.
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REVOLUTION FOODS 20
Exhibit 6 Hummus & Pita Chips Meal Kit
Source: RevFoods.
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REVOLUTION FOODS 21
Exhibit 7 Rebranded “Jet Pack”
Source: RevFoods.
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