As we stay home more and dine out less, food retailers are hunting for new packaged products, and small, Black-owned companies are pitching everything from Nigerian spices to a baobab energy bar.
Toyin Kolawole sat at her desk in a suburban Chicago office, waiting to be let into a Zoom breakout room—where a panel of major retail buyers were ready to hear pitches for new products to stock on market shelves. Kolawole would have four minutes to sell them on her line of Nigerian-influenced gluten-free flours, spices, and baking mixes.
Around 30 small businesses were lined up to do the same. When it was her turn, Kolawole shared a photo of her family and told a bit of her story: The 2003 immigrant, who now has her MBA, lives in Illinois with her husband and two American-born sons.
Her sons were her inspiration. “I wanted them to have a connection to their Nigerian heritage,” said Kolawole. “At the same time I wanted them to have everyday American food.”
Her company, Iya Foods, is already in 1,300 Walmarts across the country, but she hopes to expand her retail footprint next year, because bad news also means opportunity. The pandemic has changed the way Americans eat, and a racial reckoning has encouraged buyers to consider the face behind the product. There’s potential for growth.
Around 30 hopeful food entrepreneurs—most of them women or people of color—gathered for a Zoom pitch session hosted by Hot Bread Kitchen, a New York City non-profit, for a chance to talk to about a dozen buyers, including representatives of Whole Foods and FreshDirect. There was Caribbean-American hot sauce, jerk chicken seasoning from Harlem, a vegan cheese company from San Francisco, and more. The lucky ones would come away with a distribution deal.
Since 2010, Hot Bread Kitchen has helped over 250 entrepreneurs grow their food businesses with access to pitch sessions like this one. But this year’s program is bigger, with CommonWealth Kitchen in Boston and La Cocina in San Francisco involved. There’s new demand: Over half of Americans report eating at home more since the pandemic started, and a quarter say that pandemic fatigue has entered the kitchen—they’re sick and tired of cooking, according to a survey by Acosta, a sales and marketing firm.
Another entrepreneur, Nafy Flatley, joined the forum from her home in San Francisco. She held up a baobab, a dark, round fruit from her home country of Senegal and the main ingredient in her Teranga Superfood Baobar, a packaged energy bar, “your best friend during your Zoom call breaks,” she said.
The buyers popped in with questions: “Where are you sourcing your vegetables?” “Are you shelf-stable or refrigerated?” “What’s the price point?” “Do you make any dietary claims on the packaging?”
“Two minutes left,” the moderator chimed in.
Demand for artisanal, eclectic food products was on the rise even before the pandemic—Specialty Food Association reported record sales last year, up 10 percent since 2017. But when the pandemic disrupted supply chains and shut down customer-facing businesses, small food businesses took a hit: At the start of the year close to 70 businesses worked out of Hot Bread Kitchen’s commercial kitchen space; now it is down to 20, and 64 percent of the active businesses have reported a decrease in revenue.
Hot Bread Kitchen used to hold these pitch events in person in NYC event spaces with brightly colored booths, product samples, and schmoozing. Now everything is online, and the non-profit has shifted focus from helping new brands to sustaining their current ones.
At the same time, major grocery stores are thriving, and for many diversity is a priority, both in terms of the products they sell and the companies that produce them. Kroger, the country’s largest supermarket chain, has announced a diversity and equity plan, in part to stock shelves with more minority-owned products. Last year the company spent $3.4 billion on more than 1,000 diverse suppliers, and it plans to spend $10 billion by 2030, according to the press release. But without the kind of strong, generational financial foundation that is often out of reach for minority owners, it can be especially hard to raise enough capital to stay competitive.
Rakhya El-Amin, CEO of Chef El-Amin, a health-conscious soul food catering company, joined Hot Bread Kitchen in 2018, and finds herself, now, at a frustrating crossroads, trying to figure out how to underwrite growth.
Hot Bread Kitchen
Her father, Yusef El-Amin, owned a popular soul food restaurant in New Rochelle, New York, when she was growing up. At Hot Bread Kitchen, the father and daughter duo developed healthier versions of the family recipes. Soon they had regular catering gigs at large companies like Facebook, Venmo, and AirBnB, and sold their vegan potato salad both in packages and at the hot bar at the New Rochelle ShopRite.
Last year they made over $150,000, and this year they hoped to double that. February was their best month yet: Zero Cater, the platform they use for catering gigs, had featured Chef El-Amin during Black history month. “It was like our Christmas and Thanksgiving in one month. We had to reject some orders, that’s how explosive it was,” El-Amin said.
But the shutdown order meant no corporate lunches, the ShopRite hot bar closed, and El-Amin furloughed her entire staff: three full-time employees and three part-time workers. They were denied a PPP loan; she went on unemployment.
At home with her four-year-old daughter and her husband, an applications engineer, El-Amin came up with a plan: to package more of her father’s recipes, like his fish-fry batter and sauces, and sell directly to consumers. She began work on an item for the freezer section, a healthy version of a Hot Pocket that she’s calling a “soul pocket,” which she pitched at the Hot Bread Kitchen session.
Charlotte Myer, a buyer at east coast online grocer FreshDirect, thinks that El-Amin has the right idea: Frozen foods and easy meals are increasingly popular. “People are really looking for frozen solutions whether it’s frozen fruits or vegetables that are easy to keep in their freezer or frozen meals,” said Myer. “Just easy ways to get a meal on the table.”
Frozen food sales were up 20 percent this September compared to the year prior, according to the American Frozen Food Institute, and 70 percent of consumers have increased their frozen food purchases since the pandemic began, according to its April survey.
“I’m also looking at the person who is pitching themselves, like their energy level, their commitment to the brand and to growing the brand, if I think they’ll make a good partner to us.”
Myer looks for a quality product and beautiful packaging—but she’s also interested in the founder’s story and presentation. “Anything that has a great hook and is attention-grabbing,” Myer said. “I’m also looking at the person who is pitching themselves, like their energy level, their commitment to the brand and to growing the brand, if I think they’ll make a good partner to us.”
But if El-Amin gets a deal, she will need enough capital to get back in business: to rent kitchen time, pay her chefs, package and distribute. She needs to place volume orders with her suppliers so her price point—the amount she has to charge to cover costs and still make a profit—goes down.
It’s a catch-22: she needs capital to fulfill orders, but needs orders to generate capital. El-Amin has applied for numerous grants and loans, and received some smaller ones—$2,000 from the SBA’s Economic Injury Disaster Loan and $2,500 in from Facebook, which would enable her to fulfill a small local order, say at the Whole Foods in Harlem. But El-Amin estimates she’ll need $50,000 to cover starting costs for a regional or national roll-out.
When FreshDirect takes on a product, it rolls out to an entire region at once. If a business can’t meet that demand, the deal is off. “We say, let’s stay in touch. And when you get to this point let’s have another conversation,” said Myer. “We can help them in terms of mentorship and give them feedback on some decisions that they are making. But we don’t really have the ability to help them from a scaling standpoint.”
Traditionally Hot Bread Kitchen helps connect its entrepreneurs with CDFIs (Community Development Financial Institutions, or government loans for underserved communities) and micro-lenders. But Shaolee Sen, Hot Bread Kitchen’s CEO, said this is a particularly challenging time to find capital.
“That’s where many, many businesses get stuck because affordable capital is not available to them,” said Sen. “Especially now.”
The problem is so dire that Hot Bread Kitchen’s Kobla Asamoah, director of small businesses for the past five years, is stepping away from his day-to-day responsibilities to focus on the “capital access problem” full time.
“My dad has been doing this and grinding for over four decades. This was probably his 17th pivot, he was like, okay what else can we sell?”
Meanwhile, Hot Bread Kitchen looks for other ways to help members. At the start of the pandemic, the non-profit raised $260,000 in an emergency response fund, donating an average of $1,500 each to 177 alumni. Now, they have a program in the works that will allow multiple businesses to share costs of packaging, delivery, distribution, and marketing. They’re also in the pilot stages of a project to hire out-of-work caterers, the hardest hit of their members, to cook donated meals for food-insecure New Yorkers. They’ll use a buy-one-donate-one model, to bring in funds as they work to launch meals on an e-commerce platform.
Despite the financial hurdles, El-Amin is optimistic. Her father was a fish distributor in the ’80s, when his freezer, holding thousands of pounds of fish, broke. “He had two choices: lose his money on the fish and let it rot, or thaw it out, fry the fish up, and have a fish fry for our community.”
He chose the latter, which turned into the restaurant he ran for a decade, the catering business he ran with his daughter, and their packaged goods project.
And now the waiting begins. If FreshDirect wants to move on a product, it generally takes about four to eight weeks to get it on virtual shelves, Myer said. If buyers turn down a product, entrepreneurs will get feedback while they continue to look for capital. El-Amin is determined to move forward, no matter what news she gets.
“My dad has been doing this and grinding for over four decades. This was probably his 17th pivot,” said El-Amin. When the pandemic halted their business, “he was like, okay, what else can we sell?”