Investment Opportunity – A Deep Dive Into True Made Foods

Welcome to Startups Insider for Feb 3rd, 2022 – free version. We analyze deals across AngelList, Republic, WeFunder, and more.

Today, we’re taking a look at True Made Foods – a promising food startup that takes everyone’s favorite condiments and makes them healthier.

But first, for your listening pleasure

Have you checked out our podcast yet?

Last week, Horacio sat down with the (22-year-old) co-founders of Kalshi, a super cool betting startup. From San Fran rents going up to whether or not Turkey will be allowed to join the EU by June 29 this year, these guys let you place bets on real-world events.

Fascinating, and it’s easy to see why these guys are gaining so much hype.

For now though, back to ketchup.

Let’s go!

Why True Made Foods?

Food startups face intense competition, low margins, and multiple other hurdles to survival. So when I see a startup showing millions in revenue, I want to find out what sets it apart.

Ketchup is perfect. It contains all five flavor groups: sweet, salty, bitter, sour, and the elusive umami.

Heinz revolutionized this originally tart sauce when they doubled the sugar in their “catsup” (changed to “ketchup” in the 1880s to stand out). Later, that sugar was replaced with corn syrup.

Delicious, yes. Healthy, no.

True Made Foods believe that ketchup doesn’t need to be unhealthy to be perfect. They sell condiments that contain no added sugar. Instead, they use butternut squash, spinach, and carrots as substitutes.

The result? Ketchup with half the sugar content.

Investment Overview

Opportunity

Americans are not exactly known for eating healthy, but that’s beginning to change.

Considering that since 2017 over 5,000 new sugar-free products have emerged, and more than half of people are generally trying to consume less sugar, it’s safe to assume that demand for healthier alternatives is on the rise.

North Americans are leading the way in demanding sugar-free alternatives. Source technavio.com.

So the opportunity is there, and growing: 7/10

Problem

Brace yourself guys… Ketchup is horribly sugary.

In fact, almost every condiment you can think of contains more sugar than you probably ever imagined:

Hot diggity dang. Image courtesy Greatist

The sugar provides both sweetness and functional properties, like color, viscosity and texture.

So, when you take out the sugar, you have to replace it with something else. But here’s the catch – some sugar replacements (like Splenda) can be worse than sugar itself. And while tapioca, maple syrup and agave syrup can be used as substitutes for corn syrup, the decrease in sugar content they provide is insubstantial.

And what’s the problem with sugar?

Unfortunately, a lot is the problem with sugar. It’s one of the leading contributors to obesity and diabetes. It has also been linked to acne, and cancer patients are advised to decrease sugar consumption due to its inflammatory effects on the body.

In summary, too much sugar impacts all facets of life (see below).

I had to put my donut down while reading this. Source: ditchthecarbs.com

The problem is real: 7/10

Product

True Made currently offers BBQ sauce, honey mustard and ketchup in their product range.

To produce these sauces with a greatly reduced sugar content, True Made uses a spinach, apple, carrot and butternut squash blend as a sugar substitute. The result is half the sugar of regular condiments.

The reviews were generally positive, but there were some mixed comments on how the flavor and texture compared to regular ketchup.

So, I had to taste it for myself.

My neighborhood Whole Foods had done no favors for any ketchup brands by positioning all ketchup on the bottom shelf. But the full shelf from the photo below suggested that this particular Whole Foods store had not sold any True Made. The reason was quite clear: the Organic Heinz ketchup was selling 50% more ketchup for only 20¢ more.

Organic Heinz 1 – 0 True Made

I snagged a bottle to stage my own side by side taste comparison with Heinz at a local burger joint, and here’s what I found:

  • Heinz has a saccharine flavor; True Made has a more subtle flavor. You can detect the puree, especially the carrot, but it still tastes like ketchup.
  • The sweetness of the Heinz meant a stronger concentration of flavor. Even a small amount carried an explosion of sweetness.
  • True Made lacks the flavor density but makes up for it with full-bodied richness. It gave the fries a presence in the mouth resembling meat.
  • Heinz’s texture was smooth, sticky and syrupy. True Made’s texture was smooth too, yet there was a sense that it was a puree when it hit the tongue.
  • From a waste perspective, Heinz left a lot behind in the bottle. With True Made, nothing remained in the bottle.
  • Heinz is the color of ripe tomatoes (artificially achieved). True Made is the color of BBQ sauce.
  • The Heinz ketchup exited the bottle with an accompanying pool of vinegar. True Made had no such problem.
  • Heinz gave me acid reflux, True Made soothed it.

Overall, the ketchup did not sacrifice flavor or texture significantly and was less acidic. Even though the True Made bottle came with less product, there was less left inside it, so it balanced out.

I didn’t have a chance to order the BBQ sauce or mustard from True Made yet, so I can’t comment on those, but I can safely say I’m a fan of the ketchup.

The product tastes great and works well as regular ketchup: 8/10

Team

Abraham Kamarck (left) and Ryan Mitchell

Abraham Kamarck, a former US Navy Helicopter Pilot and London Business School MBA, founded True Made in 2015. He partnered with Ryan Mitchell, the son of Ed Mitchell, a prominent professional barbecue chef (pit-master) in the South. Ed lent his recipes to True Made’s lineup and is a prominent feature of their BBQ range branding.

Kamarck’s background is in emerging markets, so it’s important to note that he could leverage his culinary bona fides to go international. Consider:

  • South Africans use ketchup in traditional dishes
  • Trinidadians, Lebanese, Polish and German folk eat ketchup on pizza
  • Germans use it on sausage
  • The Chinese use it for sweet and sour chicken
  • Japanese people eat it on spaghetti

These guys know food, have solid business experience, and have a global arena to play in: 8/10

Business model

True Made condiments are available in over 5,000 stores across the U.S., including Kroger, Walmart, Sprouts, and Whole Foods.

At Whole Foods, I paid $5.20 for a 17oz bottle, and the organic Heinz right beside it was $5.40 for a 32 oz.

But the prices seem to vary wildly based on the retail outlet.

On Walmart’s website, the ketchup sells for around $4. On Amazon, $12!

Meanwhile, for the other sauces, it’s the other way round. On Amazon, the 18oz BBQ is $8, and their 18oz mustard is $15 while on Walmart’s website, both of these are over $20 😱.

True Made has partnerships with the Boston Red Sox and The Washington Nationals to be the official ketchup brand at their ballparks. Additionally, True Made has partnered with a touchless condiment dispenser company, Sestra. This eliminates packet waste, including the Heinz plastic pumps that require sanitization.

Super strong branding, plus covid-friendly touch-free dispensers

This means True Made has both B2C (business-to-customer) and B2B2C (business-to-business-to-end-customer) channels.

The business model is robust with potential in several directions: 7/10

Competition

True Made’s main competitor is Heinz on both the B2C and B2BP (business-to-ballpark) front. Heinz is familiar, affordable, and huge.

Heinz also just so happens to own True Made’s direct competitor – Primal Kitchen, a Paleo-oriented brand. Heinz acquired Primal Kitchen for $200M in 2018. The year before, Unilever acquired Sir Kensington, another health-oriented condiment brand, for $140M.

In terms of the difference between True Made and Primal Kitchen, they are both very low sugar (lower than Sir Kensington). What sets True Made apart is the packaging – Primal Kitchen ketchup comes in a glass bottle, which attracts eco-warriors, but True Made’s squeezy bottle (which can be recycled) is more portable and child-friendly.

In summary, True Made has made impressive encroachments into Heinz territory on several fronts:

  • Contracts with 2/15 US baseball teams (see below); rest are Heinz
  • Shares shelf space and bottle design with regular Heinz
  • Health benefits with greater value than Heinz’s latest acquisition

Competition is fierce, but True Made is holding its own: 6/10

Traction/unfair advantage

True Made didn’t quite hit their $4M sales goal last year… But they did make $3.16M in revenue in 2021.

That’s 120% YoY (year-on-year) growth, up to 138% YoY in the Boston metro area, suggesting that the brand exposure from the Red Sox helped drive sales.

2021 revenue growth as provided by the CEO, Abraham Kamarck, on Republic

They’ve raised over $4M in VC (venture capital) funding so far, and according to the pitch on Republic:

Our other prominent investors include SOSV, Siddhi Capital, Black Jay Investments, Veteran Capital, and the New York Angels. We are also supported by the FOOD-X accelerator.

Pretty impressive.

Their roadmap goals for 2022 and beyond are: partnerships with more sports teams, expansion into school cafeterias; offering a family size (a better value proposition vs. cheaper Heinz); and expanding their product offerings.

They’re on a mission to replace Heinz, and traction is strong: 7/10.

Valuation

True Made is raising $1M at an $11M cap. That’s over 3x revenue. If True Made secures its planned partnerships and sustains revenue growth, it might well live up to that valuation.

Similar brands have sold for over $100M, with fewer distribution channels. An $11M cap, even if liberal, allows for a significant return with an exit in that range.

True Made will likely be acquired by a large food brand, at the behest of its VCs.

Valuation looks good to us: 6/10.

Our View

[INSIDERS ONLY]

How to invest:

You can invest via Republic until May 1st, 2022. Minimum investment requirement of $150, and this is a Crowd SAFE investment.

There are some pretty cool tiered investment rewards, from branded T-shirts and caps at the lower end to private catered events (a Pitmaster BBQ, anyone??) and Red Sox tickets at the higher end of the scale.

Startups we passed over

Here’s the shortlist of other opportunities we reviewed before settling on True Made Foods for this week’s write-up:

Sugarfina

  • Opportunity 8/10: Similar to True Made, massive revenue, good distribution
  • Problem 5/10: They claimed there was no non-chocolate“luxury candy brand”, and there was an opportunity for a high-end gummy brand.
  • Why We Passed? Overall 3/10. In their competition matrix, they conveniently omitted their cheaper but otherwise identical rival Squish, and when polled, r/candy preferred Squish.

Gamestar+

  • Opportunity 7/10: Cool idea (Streaming board games on demand), backed by Steve Harvey, 660K downloads…
  • Problem 5/10: Fun concept, but will people pay a subscription to play board games?
  • Why We Passed? Overall 3/10: Apparently not, since it’s got negative revenue, and increasing operating expenses.

Swopblock

  • Opportunity 7/10: Interesting concept, cross-blockchain protocol, using autonomous agents to conduct transactions
  • Problem 7/10: Exchanging cryptocurrencies for other cryptocurrencies is still a risky activity and possible on primarily centralized exchanges.
  • Why We Passed? Overall 6/10: I would like to see this concept battle-tested before an investment.

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Author

Stefan Von Imhof

Stefan Von Imhof

Stefan lives and breathes asset analysis and valuations. Before co-founding Alts, he created a Due Diligence Service for evaluating website & micro PE deals. In his spare time he enjoys record collecting and managing his short-term vacation rentals. Originally from Boston and later Santa Barbara, CA, he now lives with his wife in Australia.

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