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A Good Egg: Hampton Creek Raises $23M, Strikes Deals With Major Stores

The alternative egg startup is aiming for mainstream appeal.

Hampton Creek

The only hint of what’s under way in a squat building on an industrial block of San Francisco is a little white egg on the door.

Inside the offices of Hampton Creek Foods, a team of chefs, biochemists and food scientists are trying to reinvent that global food staple, using plant proteins to produce cheaper, healthier and greener alternatives. The two-year-old startup’s first eggless product, Just Mayo, already lines the shelves at Whole Foods, and its Eat the Dough eggless chocolate chip cookie dough will launch at unspecified stores next month. Additional products and retail partnerships are on the way.

On Monday, Hampton Creek will announce it has raised $23 million in a Series B round led by Li Ka-shing, an investor whom Bloomberg describes as Asia’s richest man. The company will also reveal it struck deals to supply products to a half dozen Fortune 500 companies in the last three months, including major manufacturers and retailers. They’re not naming names yet, but odds are good you’ve shopped at their stores or bought their products in recent days.

Hampton Creek was launched out of a Los Angeles studio apartment in December 2011 on the premise that the way we’re producing food for the planet’s seven billion people is simply unsustainable.

Worldwide egg output reaches at least 1.1 trillion each year, the majority produced under factory farming conditions that make for a bleak existence for the birds — and leave a major dent in the environment.

Livestock production contributes 18 percent of the planet’s greenhouse gas emissions, accounts for more than 8 percent of water use and takes up 26 percent of the Earth’s land, according to an earlier report from the Food and Agriculture Organization of the United Nations. World Watch more recently put the greenhouse gas impact at 51 percent.

Bill Gates, as co-chair of the Bill and Melinda Gates Foundation, has highlighted the growing challenges this presents as the world population marches toward 9 billion and more people rise into the middle class. Meat consumption has doubled in the last 20 years and is expected to double again by the middle of the century, he wrote.

Gates pointed to companies like Hampton Creek and Beyond Meat, a startup creating meat alternatives using plants, as promising approaches for supplying the world with affordable, healthy and sustainable protein. He has invested in both startups.

“All this innovation could be great news for people concerned about health problems related to overconsumption of fat, salt and cholesterol,” Gates wrote. “It’s important too in light of the environmental impacts of large-scale meat and dairy production.”

Producing egg alternatives with plants also promises to reduce health risks like avian flu and salmonella.

Hampton Creek founder and chief executive Josh Tetrick stresses that animal rights, health advantages and environmental issues are critical considerations for the company. But he added that they’re not the selling points that will move their products into the mainstream.

“The reality is, that might work for people who live in Northern California or Manhattan, but it doesn’t work for most of the U.S. or India or China,” he said in an interview at their offices earlier this month. “If you can’t solve the problem for most of the country and India and China, I don’t think you’re solving it.”

The only way to do that is through price. And Hampton Creek’s egg equivalent runs about half the cost of the conventional variety.

Tetrick hopes the price tag is what will catch the consumer’s eye in stores. If it’s about being healthy and green, Hampton Creek risks becoming a niche brand that fails to make a broad impact on food sustainability, even if it succeeds financially.

Of course, none of these selling points matter much if the products themselves are unappealing. The various egg substitutes on the market to date famously come up short on taste, texture and other qualities.

An egg is a pretty versatile culinary tool: It browns, binds, emulsifies and aerates. It makes muffins fluffy and cookies consistent.

No single plant protein is nearly so multitalented. And that’s where all of those chefs, biochemists and food scientists come in.

They’ve identified 22 functional features of an egg and are scouring the world for plants with proteins that can pull off similar tasks — or even exceed them. They’ve already analyzed thousands, looking for particular molecular structures.

The promising ones get passed along to the chefs to test, combine, season and refine, focusing on the qualities needed in any given product. The emulsifier for the mayo; the binding for the cookies.

So far, they’ve hit upon 11 plants with the features they need, including a particular variety of yellow pea. But they continue to search and evaluate additional species, in part to improve on their products and in part because they’re not stopping with alternative eggs. In the future, the company might explore things like alternative chicken, beef or sugar, Tetrick said.

Having sampled the cookie dough, as well as pancakes and flavored mayos, including chipotle and garlic, this reporter can attest that it’s pretty difficult to detect any difference. (In fact, because I’m such a diligent reporter, I might have even gone back for seconds on the cookie dough.)

That taste test buffet also reveals a few of the products under development.

But it’s probably easier to get a tech reporter in San Francisco or a Whole Foods shopper in Berkeley to sample a new product than it is to get your average middle-American consumer to buy something they’ve never heard of. Brand loyalties and buying habits run deep. And Hellman’s has been around a long time.

As promising as Hampton Creek’s products are, it remains to be seen whether they can penetrate beyond a health- and environmentally-conscious crowd. Getting into more stores represents a test of their mainstream appeal — not necessarily proof of it.

Meanwhile, the conventional industry isn’t standing idly by. The American Egg Board has kicked off an “Accept No Substitutes” marketing campaign and last year published a study highlighting reductions in the industry’s environmental footprint.

Tetrick said the new partnerships will be accompanied by new marketing aimed at broadening their appeal.

“We’re planning a lot of clever things on social media to get some brand resonance out there, that might be a little surprising,” he said.

The company said it will use the new funding, which brings its total to $30 million, to accelerate growth in North America, open operations in Asia, pursue additional partnerships and expand the staff. They currently employee about 45 full-time workers.

A number of individual investors also participated in the latest round, including Yahoo co-founder Jerry Yang, Google vice president Jessica Powell, Morado Venture Partners’ Ash Patel and angel investor Scott Banister. AME Cloud Ventures and previous investors Khosla Ventures, Collaborative Fund and Eagle Cliff also participated. Ka-shing invested through Hong Kong venture firm Horizons Ventures.

“Everyone wants a clean and sustainable world and we love that Hampton Creek is committed to that goal — egg by egg,” Ka-shing said in a statement.

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