[00:00:10] Ray Latif: Hey folks, I'm Ray Latif and you're listening to the number one podcast for the food and beverage industry, Taste Radio. This episode features an interview with Ross Iverson, the co-founder and chief investment officer of Manna Tree Partners, a food-focused private equity firm that aspires to improve human health by investing in better-for-you brands. Just a reminder to our listeners, if you like what you hear on Taste Radio, please share the podcast with friends and colleagues. And of course, we would love it if you could review us on the Apple Podcasts app or your listening platform of choice. A private equity firm based in Vail, Colorado, Manna Tree Partners describes itself as believing that, quote, the future of health, well-being, and longevity is attainable through innovation in food. The firm's role in that vision? Invest in companies whose products are intended to make people feel and live better. Since its launch in 2018, Manna Tree has made mid-stage investments in 10 companies, including leading pasture-raised egg brand Vital Farms, indoor greenhouse pioneer Gotham Greens, organic kombucha maker Health-Ade, plant-based prepared food and beverage company Urban Remedy and The New Primal, a brand of clean-ingredient meat snacks and condiments. Manna Tree also holds stakes in tech-driven service and supplier companies, including those focused on gut health and plant-derived ingredients. In the following interview, I sat down with Manna Tree co-founder and chief investment officer Ross Iverson, who expounded upon the firm's investment philosophy and how consumer education and accessibility factor into its funding decisions, why diligence plays a bigger role than innovation when evaluating companies, and how Manna Tree assesses pre-seed and Series A stage brands. Hey folks, it's Ray with Taste Radio. Right now I am speaking with Ross Iverson, who's one of the co-founders and the chief investment officer of Manna Tree Partners. Ross, how are you?
[00:02:17] Ross Iverson: Great, thanks for having me today.
[00:02:19] Ray Latif: Thank you so much for joining me. I'm in frigid Boston, where it's eight degrees, currently eight degrees outside. I believe you're calling from Vail, is that right, Vail, Colorado?
[00:02:28] Ross Iverson: Yeah, we love the winter here. We've had 84 inches of snow in the last week, so can't complain.
[00:02:33] Ray Latif: Did you say 84 as an 8-4?
[00:02:35] Ross Iverson: Exactly.
[00:02:36] Ray Latif: Good Lord, I can't deal with that. We had a foot of snow this weekend and I'm just like, I'm good for the rest of the year, seriously. Yeah, you spend a lot of time outdoors?
[00:02:47] Ross Iverson: Yeah, I mean, that's part of kind of why we based Manitrean Vale was in kind of a health culture. Our team sneaks out for some runs during lunchtime, gears up after work to go biking, hiking. So it's just part of the ethos here.
[00:03:02] Ray Latif: Wow, very cool. That'd be kind of nice. Actually, our our office in Newton, Mass, I believe there's a couple of places where you can like, you know, walk around the parking lot. It's not really the same thing, though. You know, it's pretty tight. It's a pretty tight space.
[00:03:16] Ross Iverson: Well, if you have your wearable device, you know, you can always check your heart rate. It might not be too different.
[00:03:20] Ray Latif: I don't really believe. I'm sorry for people who do use those devices. I'm not paranoid, but I'm like, they're tracking all my health information like that. I'm a little worried about that kind of information. Where does it go? Really? You know, so.
[00:03:33] Ross Iverson: Well, I had the Oura ring I got for Christmas and I can tell you my readiness score today was good enough to do your podcast. So we can use the data in a lot of ways.
[00:03:42] Ray Latif: Oh, perfect. Is that the one that measures your sleep?
[00:03:45] Ross Iverson: Yeah, sleep. It's just a ring product that you can put on.
[00:03:49] Ray Latif: Oh, nice. Does that replace your wedding ring? Was that on your left hand?
[00:03:53] Ross Iverson: You know, it took me a while, but I actually found the receipt and I told my wife that the Oura ring was more expensive than my wedding ring. So she allowed the upgrade.
[00:04:02] Ray Latif: Wow. Okay. Something to take note of if you're thinking about buying an Oura ring. You know, I spent a lot of time on Manitree's website and watched a lot of videos that were included in the bios about the partners of Manitree. And, you know, it was interesting. I saw a few brands that, as far as I know, are not part of your portfolio, but I saw them on your desks, you know, in your workspaces and so on and so forth. I mean, I could name a few, but I'm hesitant to do so. But I'm wondering, you know, how often you look to invest in brands that you regularly eat and drink.
[00:04:42] Ross Iverson: Yeah, I think it's sometimes you get access to these brands because of what we do at Manitree. Other times, you know, it's through your social networks, it's through your doctors or your nutritionists that you work with. And I think when you actually start using something that you can feel a tangible difference with your quality of life, your health, it's hard to stop using it. And I think that that kind of goes into this, you know, once you see optimal health, it's kind of hard to unsee it. And you tend to spend the money on the things that make you feel good. So I think that all threads into why we think this investment thesis has traction, whether you're in an up economy, a down economy, pandemic, all of these things is when you feel good, you want to use the products.
[00:05:27] Ray Latif: OK, so I'll ask you more directly. Do you plan to invest in Vienna snacks?
[00:05:33] Ross Iverson: OK, so Vienna snacks is one of the inputs of that is a chickpea company that we own called Nutriati. And so this is a B2B investment that we have. We do both B2C and B2B, but that chickpea flour has got a pretty good functional benefit. Now, you could say Vienna has a bunch of other ingredients in it, so that's up to you to decide what the whole health benefit is, but we like Vienna because of the artisa flour that our firm, Nutriati, produces.
[00:06:03] Ray Latif: How about that? I was not aware of that, but that makes a lot of sense. So, in doing my research about Manitree, I came across an article in which the firm was described as taking a, quote, food-based approach to healthcare. which is a really interesting way of describing you guys. Is that accurate? Is that a fair description of what you do?
[00:06:23] Ross Iverson: Yeah, you know, when we launched Manitree, we had a lot of the three co-founders had an interest in human health. And so I would say the most accurate is saying we're here to try to improve human health, but through more of a preventative mindset rather than a treatment mindset. Food happens to be one of those categories that is more detrimental to our health than any other kind of environmental thing that we're dealing with. So we said our first couple investment products are gonna be focused exclusively on food. I do think you hear food is medicine. It becomes a little bit cliche to some extent. So we try to be a little bit more pragmatic and say we're almost in the calorie conversion business right now where we're making these incremental shifts in people's diets. incremental shifts in the science, but I still think we're a couple decades away from the whole human Remedy and The food producers marrying up to make us all optimally healthy.
[00:07:17] Ray Latif: And you're talking about all people. You're talking about everyone improving human health through nutrition. I assume that's globally, right?
[00:07:25] Ross Iverson: Yeah, I mean, we've got investors in 18 countries, and what's phenomenal is when I'm on the phone with them, it doesn't matter what language, which culture, how you grew up with your food traditions, everybody in this generation wants the same thing. They want a healthy family, and they don't want to be putting things in their body that are causing premature death. I mean, one of the stats that is phenomenal in the US is the average American right now is spending 14 years of their life in a sick state. So people always ask us, like, are you doing this because you want to live longer? And it's like, no, we're doing this because we think that there's a better, you know, well-being along the way as well. So 14 years of somebody that lives 75, 80 years old, that's a big percentage of your lifespan that you're spending in a sick state.
[00:08:08] Ray Latif: Yeah, it doesn't even need to be that old. I know folks who are in their 30s and 40s or are, quote unquote, always beat down. And that has a lot to do with exercise and nutrition for sure. But, you know, speaking of which, When I think about your portfolio and I think about the brands that are part of that portfolio, Health-Ade, Urban Remedy, Gotham Greens, these all have a premium price point and are premium positioned. You know, not everyone has access to these types of products, not everyone can afford these types of brands. So how does access to an education about better eating and better diets fit into this equation for Manitree?
[00:08:49] Ross Iverson: Yeah, and you said the optimal word there, and it's education. And so, you know, part of us with launching Manitree, building Manitree, we call it kind of building this ecosystem of health. There's things that we do personally as founders from a philanthropic standpoint. One of my co-founders' family is part of the Giving Pledge nationally, which is, you know, that group is giving away billions of dollars. We support university research. We support university MBA programs that are training The New generation of leaders in the food system to make those choices. So that's, I think, one thing. We're a convener. This year we'll host kind of six international events to convene investors and health professionals to do that. But the other thing is, I always say that there's an opportunity cost of not spending on some of this premium food. And so that's going to show up in your healthcare bills. That's going to show up in, you know, are you choosing a high quantity of calories every day? Are you choosing a high quality of calories? And so I'm CIO. I love spreadsheets. I've done the math. You take an average male consumer consuming 3000 calories a day, and they're going to eat about 1.1 million calories a year. If you reduce that to 2,500 calories, but you choose higher quality calories, you've actually got about 20% savings that you can put towards some food that's on that premium level. So I think it just comes down to people's personal belief systems of, do you wanna spend the money at the doctor's office or do you wanna spend the money at the grocery store?
[00:10:19] Ray Latif: Yeah, and I think that really does come down to education and education about nutrition and health. Which brings me to my next point about the firm's philosophy. Now, something that we've seen that's kind of trendy in investment firms and in private equity firms is this notion of ESG. And you guys have added a plus H to that philosophy. Can you explain what ESG means to folks who are not familiar with it? And then is the H component, whether the H component is unique for Manitree among other firms?
[00:10:50] Ross Iverson: So you've got the environmental social governance component of traditional ESG and investors and institutional investors have become really focused on this, seeing that we need to create progress on all of those fronts. And I think all of those are really relevant right now. The reason we added the H to the discussion is we were looking at, again, this quality of life, this wellbeing, and also some of these correlated pieces. So again, go back to, you're in a sick state, you're gonna drive to the doctor's office 14 times this year with your family. There's an environmental footprint that you can link to your health. You might prescribe certain medication. What's going into producing that medication? What's the packaging of all of those plastic bottles? So we're a big proponent of saying everybody has a health footprint in addition to their environmental footprint. And then you start to look at, we always say we're trying to recapitalize the food system. And we work with Big Food all the time. So we're not dogmatic against Big Food. But one of the things that Big Food has done to kind of the American farming communities is it's centralized a lot of things. Just in the last week, you saw Biden pass a new law around trying to help the beef industry because it's just, it's not competitive anymore. It's controlled by four players. In our investments like Vital Farms, you know, you've got a couple hundred family farms that now get to sell eggs into the marketplace. If anybody knows anything about eggs versus beef or chicken, it's a cash crop. You're getting paid every couple of weeks. It makes a big difference. So that really fits on the social side of how do we help the small farmer. Cheetah Technologies is an investment that we've done that is helping small independent restaurants. And so if you look at through COVID, who's been beat up the most through that, a lot of it's these small restaurants and their product is actually doing that. So as an investor, we always look at it like, how do you give access to consumers, but then how do you empower the people throughout the supply chain to help them with that? So there's all kind of different parts of ESG that Manna Tree focuses on, but the health is something that's kind of unique to our lens.
[00:12:58] Ray Latif: I'm glad you mentioned Vital Farms because Vital Farms was one of your first investments and Vital Farms primarily plays in a commodity category, that of eggs. Given your investment strategy and philosophy, I would think this makes a lot of sense that you're trying to reach as many people as possible. You know, eggs is a good way to do so. Was that your primary interest in the company?
[00:13:20] Ross Iverson: Yeah, you know, and I think the word commodity is interesting in food because there's all sorts of places in the supply chain that are commoditized, but we didn't actually look at Vital Farms as a commodity driven business at all. We looked at Vital Farms as this, they had this promise of producing honest food for the consumer. And yes, there are a feed input that goes into the chickens that produce the eggs that you could say is a commodity, but all of the steps along the way with training the farmers on how often the chicken should be outside, training the farmers on how to harvest the eggs, bringing it to a central processing plant that had better practices. We saw value-added pieces on top of that commoditization. And that's when you get the consumer saying, hey, I'm willing to pay three times more for these eggs. But again, I think it comes down to the consumers that are choosing these premium brands or these health-forward brands might be consuming less per week of the product, but they're choosing the premium when they do consume. So you might not be consuming 12 eggs every four days, but if you're gonna consume one or two eggs a week, you're definitely gonna choose Vital Farms as your best brand in the market.
[00:14:31] Ray Latif: I guess it depends on what diet you're following this week, whether it's the keto diet, the paleo diet, or... perhaps a vegan diet.
[00:14:39] Ross Iverson: That's a question our investors ask us all the time is, how do you make sure you're not investing in trends and with all of these diets coming and going? And it is tricky because one of the challenges we have as a health forward investor in the food space is we navigate misinformation all of the time. And so a prime example of that, you've seen now this evolution of fat used to be bad in this country 20 years ago, now fat is good again. Cholesterol used to be tied to eggs. Ingested cholesterol doesn't impact your other cholesterol. And people are realizing, oh, wait a second, eggs are ingested cholesterol. They're not the natural form of cholesterol. So it is something we navigate as investors to make sure that the consumer education is mapping towards the companies we're investing in.
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[00:16:08] Ray Latif: You are investing in a lot of companies. You have invested quite a bit over the last 21 months. You announced your first fund in April of 2020. That fund was valued at $141.5 million. As I mentioned, pretty active in deploying that capital since. Let's talk about those investments, starting with the brand I mentioned earlier in the interview, that is Urban Remedy. Talk about premium, it's ultra-premium, ultra-fresh. I wonder, you know, it seems on the surface that there are a lot of synergies that exist between Manitree and Urban Remedy. Yet, going back to this point of improving everyone's health, Urban Remedy is very inaccessible to a lot of people. And I love Urban Remedy. I love what they stand for, what they do, but I have to admit, it's not for everyone.
[00:17:02] Ross Iverson: I think you're looking at the innovation cycle in food right now. And when you back a company, whether they're doing $25 million, $50 million, $75 million, One of the reasons you're backing them at that stage and we're growth stage investors is you're trying to get them to economies of scale and that will open up accessibility. You're also trying to get innovation that comes out that you're seeing as making a true health impact. So I can't tell you which SKU from Urban Remedy today, but we have a pathway with them to take one of their SKUs on a national level into a lot more accessible locations. And that simply has to do with the fact that We've helped them scale up co-packing options and getting the right partners for distribution. And that opens up a completely different business model for them. I mean, one of the things we loved about Urban Remedy from the start was this omni-channel approach and accessibility where it became embedded in your lifestyle. And it wasn't just this once a year cleanse that you were gonna do, but you had the ability to grab and go during your lunch hour at a Whole Foods kiosk. You had the ability to direct order, so you had your juices lined up every day of the week. And again, these are intentional consumers that refuse, I hate to use the word being lazy, but at lunchtime when you're in the office, to go down to that cafe in the lobby and grab something that's poor for your health. These are optimizers that are saying, hey, Urban Remedy's gonna give me that extra two hours at the office at the end of the day to kind of power through my work, and that's worth a lot more than paying $3 extra for my salad.
[00:18:36] Ray Latif: For sure. The product that you're taking nationally, I know you really piqued my curiosity, I gotta ask, is it a food or a beverage?
[00:18:43] Ross Iverson: It's gonna be a little bit of both.
[00:18:45] Ray Latif: What the heck? Okay, well, I can think of one product that might be considered both, but I'll leave it at that for now. I'm excited to hear. Maybe I'll just call Paul and see what he can tell me. Paul Colletta, the CEO. Gotham Greens, you know, I interviewed their co-founder and CEO Viraj Puri a couple of years ago, just an incredible business, an incredible operation. I went and saw their greenhouse in Brooklyn at the Gowanus Whole Foods or on the roof of the Gowanus Whole Foods, just blown away, really amazing. And one of your colleagues described Gotham Greens business model as highly scalable and having a track record of profitable commercial scale production. Now, if anyone knows anything about Gotham Greens, it seems to be very localized in terms of where the products are grown and sold.
[00:19:37] Ross Iverson: When we talk about highly scalable, you look at this conversion from outdoor agriculture to indoor agriculture, and the fact that in every major metropolitan area, you've got a multi-billion dollar market that can be served. And so with Gotham Greens, in a lot of our investments, what we look at is, there's a lot going on in food right now, especially in indoor agriculture, where investors, I would say, are buying the stage production. versus the back of the house and what's behind the curtain. And Gotham Greens was a decade-old business when we invested. And people have to remember is you can't just put up a greenhouse and add technology, whether it's robotic or not robotic. You actually have to get a seed to grow. You have to grow it to the right level at the right timing, and you have to figure out a way to harvest it correctly in a way that is profitable by the time it gets to the grocery store. And so Gotham Greens had just, they had figured that out over a period of time, and now they were ready to put that CapEx to work and go from five markets to nine markets, and from nine markets now we're working to get into 14 markets. And so every greenhouse, a little bit different footprint from a square footage level, but we've got such good relationships with the distributors that they starting to see that there's an advantage of having one partner that can that can fulfill a national footprint for them.
[00:20:57] Ray Latif: It sounds like you were investing as much in Gotham Greens's technology and their ability to replicate this profitable strategy or this profits focused strategy as you were this idea of, you know, bringing more healthy and local produce to grocery stores.
[00:21:19] Ross Iverson: Yeah, Gotham was the 23rd indoor agriculture business we had reviewed in three years. And to tell you the truth, when I heard that there was another investment in this space, I didn't even want to look at it because I'd seen all the economics, the payback periods were seven, 10 years out. Luckily, we did take a look at it. And I think here's the thing we have to remember in any business, but I see it a lot in food is, you know, this concept of people do business with people. Businesses don't do businesses with businesses. Gotham Greens had built such a strong rapport with their key distributors on the grocery store level. that we had a lot of confidence and we did diligence and said, hey, would you continue to buy from Gotham Greens if they moved into The New markets? And it was that relationship that they built. And you're going to find that across a lot of our portfolio is that these founders are so authentic and so innovative that when they go out and their staff meets the buyers at Whole Foods, there's almost like a kinship that gets formed of saying, we're going to help each other move to scale.
[00:22:19] Ray Latif: So it's relationships more than the technology you're talking about.
[00:22:22] Ross Iverson: The technology is the backstop to that. But the acceleration of Gotham Greens from a revenue standpoint I really feel is based upon their commitment to creating sustainable change in the space which means why are we shipping lettuce from California to New York. for dinner? Why are we shipping from Arizona to Minneapolis and the footprint that that creates? Whereas the other thing is shelf stability. I mean, the food waste on Gotham is, if you've ever had it in your refrigerator, I mean, that lettuce can last up to three weeks before it browns out. And so you've got this opportunity that it's just, they're upgrading every step of the way from what they're doing on the technology side.
[00:23:03] Ray Latif: Two more things on Gotham Greens. Number one, once again, I have a ton of respect for the company and for the founders. At the same time, you talked about reducing human beings' personal footprints on the environment, personal impact on the environment. And Gotham Greens uses clamshells to distribute and sell their leafy greens. How does that jive with your focus and strategy?
[00:23:24] Ross Iverson: Yeah, there's a great evolution. I was actually just on the phone this morning with a group out of Israel that has an amazing biodegradable plastic covering. We're seeing all sorts of sustainable packaging options now finally getting to scale. Again, first and foremost, as a company, you want to fulfill your supplier's needs, and you don't want to disrupt them by kind of tinkering The New technologies. But there's definitely technologies on the forefront that will help these firms like Gotham Greens become fully sustainable or advance in that. So stay tuned on that front.
[00:23:56] Ray Latif: Gotcha. And second, you know, I asked Viraj, the co-founder and CEO of Gotham Greens, how much of a dent, if any, Do you think Gotham Greens can make in the overall market for leafy greens? It seems like the answer is none, but what are your thoughts?
[00:24:14] Ross Iverson: Yeah, I mean, this is why you've seen multi billions of dollars come into this category in the last 12 to 18 months is, again, the conversion that you're going from outdoor to indoor is going to happen over a period of decades. But there's going to be multiple winners in this space. And we think Gotham obviously will be one of them. But at the end of the day, you're going to then see leafy greens turning into other fruits that have a different impact, other vegetables that have an impact. But this is the stage where we're at. We're at this beginning of this innovation cycle in food. I think as an investor, it's a great time to be in. Where investors are challenged is the life cycle and the patience of their capital. And is this a three-year Is it a 10-year hold? Is it a 20-year hold? We also have this great mix of quasi-philanthropic investors, sovereign wealth funds, institutional investors that are all kind of commingling. And I think our job as an asset manager is to make sure that we are very clear with when we invest, what kind of bucket it goes into to make that progress that we all want.
[00:25:19] Ray Latif: Okay, so I lied. I have one more question about Gotham Greens. It's such an interesting company. And you talked about innovation and future innovation that they'll be engaging in. You also talked about due diligence. Where do you each sort of stand when you are thinking about investment? Do you put more of a priority on due diligence or on innovation?
[00:25:38] Ross Iverson: On our end, diligence is really, really important. We're not a venture fund, so we can't afford things to go to zero and just write it off as part of our model. We look to invest in 8 to 10 firms per fund. And so we want to make sure that we're checking in with customers, we're doing all of the diligence on the technology side. you're always going to see when people are raising capital, some type of innovation, product extension, next leap. From our experience, most of the firms that are producing the best growth are doubling down on the core business and continuing to grow that core business organically. And they're not relying on these kind of home run product extensions or technologies to take hold to get that growth. I think it's a sign for us that we love our investment banking partners, but sometimes when the investment banker has too much influence over the entrepreneur, you start to see things creep into those investment decks that look a little bit pie in the sky.
[00:26:36] Ray Latif: Well, this is a perfect segue because I'm going to be talking about another brand which has a very solid primary focus and primary line, yet is investing heavily in brand extensions, line extensions that can appeal to more mainstream consumers. That brand is Health-Ade. What a perfect name for a company that you guys would invest in. You know, Health-Ade, just a remarkable company in that small tiny kombucha company you know in los angeles becomes hundred million dollar brand just about seven years later you guys as a mandatory invest in the brand last year in twenty twenty one. What was your primary interest in health aid, particularly given that kombucha is sort of plateaued. So you must be looking at future opportunities for their brand extensions for new products underneath that brand umbrella.
[00:27:35] Ross Iverson: Yes and no. I would say that the reason we got interested originally and had met that team in 2020 was we saw functional beverage. We obviously know the detriment of high sugar soda products and what sugar consumption is doing to diabetes, obesity on that front. you know, again, we're that kind of calorie conversion, product conversion business at our stage right now. And so we thought kombucha was an interesting category. It definitely has a unique flavor profile, but we also saw that there was a lot of this, you know, away from alcohol from a generational trend as well, in that kind of these distinctive flavors that Health-Ade had had the ability to kind of hit multiple consumers on that front. So, yes, they have gone into kind of the pop product, which is competing against others like Olipop and Poppy on that front. I think that the distribution on the pop alternatives struggles the most right now just with kind of how they're staged in the grocery store themselves. I don't know if you've shopped for them, but to be buying a single can of Ollipop next to 12 packs of everything else in an unrefrigerated part of the store doesn't seem to be producing a lot of volume for that category at the moment. But here's what we see is, you have a, I would say, 2.0 of kombucha that's starting, and that's this health, more health-conscious, broad-based consumer. I think kombucha started, you know, you probably say, do you do yoga and do you drink kombucha, right? Like, there is a correlation there. Like, people that are really ultra-health-forward, maybe a little bit on, you know, the transformational side, now you're looking at it and saying, okay, gut health, links to brain health, links to overall digestive health. Kombucha has not only good tea in it for gut health, it's got acids in it for digestive health, the probiotics that are in there. And we have another investment that is in gut health for infants that's out of UC Davis. And I talked to the scientists there and I say, hey, what is kombucha doing for you? And the thing I hear about kombucha and like anything in gut health is what you're really looking to do is create a chemical reaction in your gut. And it's the kombucha that is creating that chemical reaction. And in order to continue to have that chemical reaction, you need to be consuming this multiple times a week. And so that's, when I saw a category of kombucha, and the average consumer was only consuming kombucha a couple times a year, I saw a great chance for educating the consumer. If you were to go four times a year to four times a month, you're gonna see that category go up seven, eight times. And right now, the kombucha kager internationally is set at 19% on a lot of studies that we've looked at. So that's a pretty good tailwind in the space.
[00:30:24] Ray Latif: Well, I guess the big question is how do you get people to drink kombucha four times a month instead of twice a year?
[00:30:30] Ross Iverson: Yeah, I think, I mean, we're in this age of influencers. We're in this age of people that are more health forward. I think Kombucha sits in this area where it doesn't have to be a science-driven study that's gonna show consumers. There's also a lifestyle component to it. And back to your name, out of all the Kombuchas out there, we felt that Health-Ade really fit that lifestyle component that would hit kind of that middle market of the consumer, not just the premium side.
[00:30:58] Ray Latif: Isn't it the hardcore kombucha enthusiasts that are driving the majority of sales in that category? You know, I guess my question is, how do you get new consumers to buy in? Or do you see, you know, a strategy that is promising in terms of attracting new customers to the category, especially ones that have already tried kombucha once and said never again?
[00:31:20] Ross Iverson: Yeah, I think that's a great point. And you know, one of the things that we look at is international consumers have always followed American consumers on a lot of things, whether that's food, fashion, unfortunately, we've exported, you know, our fast food around the world. And now that's having a detrimental But you've got now this beverage. Hey, hip, cool. You know, this movie stars drinking it in the US, this sports athletes drinking in the US. So, you know, Health-Ade has an amazing opportunity to expand internationally. And I think they have also the ability to partner. One of the interesting things about Health-Ade compared to so many, you go to Whole Foods and you see those 400 specialty beverages. because we have a concentrate product. And so think of Pepsi, Coca-Cola, selling their recipe to a bottler around the world, and you're adding carbonation and water. Healthy Kombucha has the technology to do that through this latest round of investment, and we have plans to make that come to fruition.
[00:32:17] Ray Latif: Very interesting. I wonder what A guy like GT Day would say about that, but we'll leave that for another conversation. In investing in health aid, there was also a divestment from the Coca-Cola company last year as well. Now, if you're looking to exit your investment at some point, Coke's gotta be one of the potential buyers, right? But why would Coke, or say any software company at this point, invest in a company that they've already divested in or seemingly have little interest in?
[00:32:50] Ross Iverson: You know, last year was very interesting. If you look across corporate VCs, and I'm not gonna name them, but there's prominent ones in food, there's some other prominent small VC consumer food funds, and then you've got Coca-Cola. There was a lot of restructuring going on. I always say that we had a five-year window where corporate VC activity was almost in its FOMO. We've gotta get into a plant-based cheese. We've gotta get into this functional beverage. And what happened is that huge portfolio of VC investments at corporate, corporate was shaking their head saying, you know, nothing has grown to 100 million yet. What are we doing? We're managing all these assets. And so a lot of these things started to shut down and they got no more funding and they divested. And it was really just a cleanup cycle. We know that obviously Pepsi has Kavita. We know other large food companies, international beer companies are really looking at this kombucha category. So we think Coca-Cola, you know, there's a great relationship there. We'll continue to track. And because they were an investor in the past, they've got great information of kind of the life cycle of the growth.
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[00:34:46] Ray Latif: Okay, onto your most recent investment. That's in a company called The New Primal. Manitree was the sole investor in The New Primal's Series B round, which was valued at $15 million. Now, The New Primal has a very strong relationship with Whole Foods. I think 33 of their products are carried in Whole Foods nationally. I know earlier you talked about the importance of a great retailer relationship, but was that the crux of your interest in the company?
[00:35:16] Ross Iverson: Yeah, that was one of the core benefits that we saw is that, you know, there was a kind of a pull versus push mentality. So many small brands are just pushing to get into Whole Foods and, you know, kind of begging for that shelf space. Whole Foods is coming to this firm and saying, Hey, we've got a category, we do a lot of velocity here, or we think we can do more velocity. But the ingredient integrity just isn't that great. Can you help go out and manufacture that? And that was really what we looked at is this clean ingredient company. Again, you've got dressings and sauces that used to be loaded up with sugar and gums and all of these products. And The New primal said, hey, we're going to build a category around kind of clean ingredients. It's a pretty competitive area, but because of that relationship, they've got good shelf space. And these things tend to be ones that people kind of attach to a certain brand. And then as those brand extensions happen, again, back to the Vital Farms model, you launch a butter product, a geek product, egg bites, you don't even question, you probably don't even start looking at the back of the package after you've been buying this for a year, because you just trust the brand.
[00:36:23] Ray Latif: Well, that's an interesting point because, you know, for years or at least the last two, three years, we've been hearing about how retailers are investing heavily in private label and how consumers are more interested in and willing to buy private label products. So the point you mentioned earlier about how they're looking for someone to fill these gaps in different categories, well, why wouldn't Whole Foods just do it itself?
[00:36:46] Ross Iverson: Yeah, great question. And you know, if you go into a Target grocery store, it'll kind of slap you across the face if you're a food brand, to see the, you know, migration to that. I think these things are cyclical. And I think that certain data will justify certain categories. And when we diligence companies as well, like there's certain categories that we see the migration to the private label. And I think there's a great opportunity for investors. I know that we're also very interested in that co-packing area because there's just not enough good co-packers out there. And then you can, again, you can have different channels that you can do different products for. But I think The New Primal in general has enough outlets that they've got growth in front of them in that category. Because again, people are used to buying their salad dressings with a brand, their barbecue sauces with a brand. But it is an evolution. And I think we just have to partner with the right retailers.
[00:37:40] Ray Latif: The New Primal is also a very paleocentric brand, or at least at its outset, that's what it represented. Going back to this question about trends, were you at all concerned that a brand that has such ties to a particular food trend or lifestyle would be limiting to a mainstream consumer?
[00:38:00] Ross Iverson: Yeah, again, I think it depends on the outlet. Some of those, whether it's a diet, a trend, a fad, you actually can build an online audience pretty quickly. And you can connect to people on your Ecommerce component really well. So we actually liked that component of it. And there was good data behind there. That becomes less important when you're on the shelf, although it is added to some of their packaging. And you've seen some of their competitors also do really well in that category. Again, we're not judging if it's a good diet or a bad diet, but what we judge is obviously consumer adoption, and in some cases, that really helps.
[00:38:36] Ray Latif: Now, we've talked about co-packers a number of times, or you've talked about co-packers a number of times. Most co-packers aren't built to sell. So I wonder if investing in a co-manufacturing partner or a co-man would ever be in your purview.
[00:38:52] Ross Iverson: Yeah, I think we're in this amazing era in private equity right now. And, you know, we almost point ourselves more as an asset manager because, you know, private equity has this, you know, it's a fund and there's a lifecycle on that. But as an asset manager, you're buying assets to obviously produce cash flows, to produce investment opportunity. And, you know, there's a lot more evergreen structures available now, and that's where a co-man would probably fit. And, you know, there's just not a lot of great deals that are producing cash flow in the space. And so when you find one of those, we've got an investor base of really over 220 investors and, you know, have raised over 550 million in the last three years at Manatree. So we have no problem raising the capital. It's really, we have to find those really good opportunities to bring to those investors.
[00:39:40] Ray Latif: I would guess, given that Manitree has been in The New pretty prominently over the last couple of years, that you get a lot of inbound pitches. And there's probably a lot of inbound pitches that are just not the right fit for one reason or another. But I'm wondering if there are brands that you look at that are very promising and have had promising starts that are still in that seed, series A phase. Do you look at those types of companies? How do you evaluate their potential?
[00:40:08] Ross Iverson: Yeah, I would say, I mean, we see a few hundred of those a year that come through. And, you know, we always like to tell those entrepreneurs, you know, please stay in touch with us. We actually like to get to know those companies early because it's amazing if an entrepreneur says, I'm going to do this, and then they actually do what they tell you that they're going to do. it's ready for investment. Because so much of this world is people telling you they're going to do things that just never come to fruition. So tracking those series A investments of what they're projecting at that phase is really important for us. But here's the thing that I would say is, I've found that there's a few different benchmarks. And usually an entrepreneur in this space can build a tribe of customers and get to 15 to $20 million with a tribe. And that means they're just hustling. to break over that $20 million, you really need to have some type of product attribute and distribution strength to get into that 50, 60, 70 million. And then to break over a hundred million, you're really needing broad-based consumer adoption and either big trend shifts to give you that tailwind. So we're just very pragmatic on helping those entrepreneurs say, you know, get to that next benchmark, but don't try to get to a hundred million when you're at 15 million, just get to the 20. you know, prove that you can build that tribe, prove that you can execute, and then we'll diligence The New phase.
[00:41:30] Ray Latif: You mentioned sales. What about profitability?
[00:41:33] Ross Iverson: I think it really depends on, we always look at the intellectual property behind it. Is there a moat with competitive pressure? Is it a highly competitive space? Is it easily reputable? I mean, look at our plant-based burger section. I mean, as much as those early investments made some investors a lot of money along the way, We just felt early that if it actually was something that consumer wanted, there was going to be 100 different plant-based burgers, and here we are. So if there's a technology like our infant microbiome for gut health, and there's patents, there's a different expectation for profitability. If it's a highly competitive space, then we need to see some type of distribution where they've been able to get into a Costco and hold that relationship with good margins. And they're going to have to be at that even a positive at that point in time, because it's really hard to grow your way out of an unprofitable business in the food sector.
[00:42:28] Ray Latif: What about mission? There are, I can think of a dozen companies right off the top of my head that have a mission that's very much aligned with your philosophy. Is mission a critical point for you guys, or is it, again, you know, that's just sort of table stakes at this point?
[00:42:46] Ross Iverson: I would say it's a little bit of both. But here's what I would say is, it doesn't matter what industry you're looking at right now, mission is attached to it. I think it's a generational push. And I think that's a really good thing. But so many of these missions, people feel like have to transform the entire planet. I'm an entrepreneur and my business is going to save the planet. I would much rather work with an entrepreneur that is super pragmatic. And again, Vital Farms did this. We've got another investment we're looking at. Say, hey, you know what? I'm going to work with 40 dairy farmers in Indiana, and we're going to build a really cool, authentic supply chain. And that feels really good to me. You know, and so again, it's giving a clear picture of some incremental progress rather than saying, I'm going to get rid of all non-regenerative cows on the planet because we have to do that. Or, you know, the planet's going to explode in a year. So I think what we want to do is we want to back those entrepreneurs that have a very clear mission and a very achievable mission. And what that does is it trickles down to the employees that they can recruit to say, Hey, I want to get on board with this, but it's not over-promising.
[00:43:53] Ray Latif: I talked to an investor last year who runs a VC firm and she said that most of her time during the day is spent talking to entrepreneurs, hearing pitches. How much of your day and how much of your week, perhaps, do you spend talking to early stage entrepreneurs and how do they get that first meeting with you?
[00:44:15] Ross Iverson: Yeah. So, you know, we don't have a huge team, but, you know, we do have a team of 16 and, you know, as a CIO, I typically am not seeing 80% of our deals until they get to investment committee. But as kind of an entrepreneur at heart and kind of just being curious, I take random meetings all the time with people because, you know, you just never know. Even yesterday, I took a meeting with a brain health business in order to figure out if this wearable device could prove out gut health and how after you drink or eat something, it affects your brainwaves. That's not something I would invest with in this fund. But you've got to be able to, again, the overplayed quote of where the puck is going, you got to have these little connectivity points of where you think the consumer adoption, especially on the health side, because this is gonna move really, really rapidly on that. We have the luxury and veil of getting a lot of our investors, but also a lot of people that just come to Colorado to ski. And I had a guy show up at my door knocking, we have locked doors, but he was knocking on the door looking under from Central America with this authentic dried fruits company four days ago saying, hey, I'm in town, is there any way we can meet and chat about this? product. So I think it comes back to the network. If you've ever done any research on what it takes to be a super connector and the difference between that, it produces a lot of opportunity if you keep your head up and you don't have that kind of gated mentality as an investment firm that you've got to fill out these forms and you're not going to get to the top of the list. But that might be because we're only in year four at Manitore and we're still very opportunistic.
[00:45:51] Ray Latif: Last thing, Ross, you know, I was just thinking about all the brands in your portfolio, or at least the consumer brands in your portfolio. And I was thinking, okay, you have eggs, you have lettuce, you have sauces and marinades, you know, you have fizzy drinks called healthy to fizzy drink. These are all relatively easy concepts for a consumer to understand. A lot of the products that we're seeing come to market do have a bit more complexity in terms of what they offer on a functional level, which makes you wonder how complex, or do you avoid ideas that are too complex, too functional, too esoteric for the average mainstream consumer?
[00:46:34] Ross Iverson: I love that question. And so if you think about this philosophy, you kind of begin with the end in mind of saying, okay, if we want to recapitalize the food system or be an accelerant, I mean, manufacturing is going to do its small part, but this industry needs hundreds of billions of dollars of new capital to back The New businesses. We have to attract the capital. In order to attract the capital, you need to provide investment returns. in order to provide investment returns, you can't be swinging for the fences in this innovation cycle. I mean, I fully believe in a lot of the huge innovation that's coming out, but in my time horizon, it's not investable to get an exit under seven to 10 years. And we also don't know the initial adoption cycle of that. I mean, we've looked at the seafood category quite a bit, and there's pros and cons between wild seafood and farmed seafood. and now lab-grown seafood, but it's early days. And so I would rather sit on the sideline and let the venture capital kind of weed their way through that, and then build the relationship with those entrepreneurs that in five to 10 years, when it's ready to take something global, we can do that. By that point, I think the consumer is also gonna be more educated. And I think that's a big part of this next decade is consumer education around this is, you know, the first movement of healthy food and beverage It was a lot of lifestyle-driven, a lot of misinformation. But even in the last three or four years, you're seeing a lot of, you know, go on social media, look at people's comments towards Big Food when they launch a product. People just don't buy into it. They don't believe because of the transparency issues.
[00:48:11] Ray Latif: Well, this has been such an amazing conversation, Ross. I really appreciate you taking the time. And I have a feeling that a lot of folks are going to be heading to the Mandatory website, filling out that inbound communication form. Perhaps some will come and knock on your window or door, and hopefully not too many. But if they do, it's just a sign that they're really interested in what you're doing and see a lot of promise in your firm, as do I. So once again, thanks so much for taking the time to speak today. I really appreciate it.
[00:48:39] Ross Iverson: Yeah, thanks for having me. And hopefully you'll use this knowledge and get on an investment committee in our space in The New future, because great questions today.
[00:48:46] Ray Latif: I really appreciate you saying that. Thanks so much. That brings us to the end of this episode of Taste Radio. Thank you so much for listening, and thanks to our guest, Ross Iverson. As always, for questions, comments, ideas for future podcasts, please send us an email to askatasteradio.com. On behalf of the entire Taste Radio team, thank you for listening, and we'll talk to you next time.
