Shake Shack founder's VC fund just invested in this plant-based milk brand that's aiming to be the 'Nestle for millenials'

  • Plant-based startup NotCo just received money from a fund backed by Shake Shack’s founder.
  • The Chile-based startup will use the money for its US expansion, including getting into foodservice.
  • Its CEO told Insider last year that he wants a majority of revenue to come from the US by 2023.
  • Visit Business Insider’s homepage for more stories.

Chilean startup NotCo sold its first plant-based milk in the US last fall. Now, it has attracted investment from the founder of Shake Shack and is eyeing unicorn status.

NotCo’s latest backer is Enlightened Hospitality Investments, or EHI, which counts Shake Shack founder Danny Meyer as a partner. The company did not disclose the size of the investment in a statement Thursday, though it did say that it has raised $130 million to date.

The maker of NotMilk also said it plans to reach a $1 billion valuation by the end of 2021, a feat that would make it a unicorn in the food industry along with Impossible Foods.

NotCo, founded in 2015 and based in Santiago, Chile, has previously raised money from sources including Amazon CEO Jeff Bezos, venture capital firm Future Positive, and private equity firm L Catterton. The EHI funding will help fund its expansion into the US, including breaking into the New York City foodservice scene, NotCo said.

The company’s early sales were to restaurants and retailers in Latin America, including Burger King Chile, which introduced the Rebel Whopper using NotCo patties in 2020. But NutCo’s most recent geographic move took it into the U.S. market, which CEO Matias Muchnick told Insider in September will make up 70% of the $300 million in annual sales that the company hopes to realize by 2023.

“It’s the most competitive market,” Muchnick said at the time. “There is a fragmentation of every single category of product,” he added, referring to an array of plant-based options that range from burgers sold by Beyond Meat and Impossible Foods to Eat Just.

“We don’t want to miss the chance of being there,” he added. In the US, NotCo sells its products through Whole Foods stores as well as online grocer Imperfect Foods.

Muchnick said the company is planning to use some of the playbook from its South American expansion in the U.S. That includes formulating new products or tweaking existing ones based on local tastes using a catalog of thousands of potential plant-derived ingredients that the company has developed since its founding. 

NotCo’s strategy in Argentina, for instance, included a burger formulation that resonated with restaurant diners who are among the world’s highest per-capita beef consumers, Muchnick told Business Insider. And in Brazil, the company sells plant-based milk with a lactose-like compound created from pineapple and cabbage.

“We always choose one product to really generate traction,” he said. 

NotCo relies on co-manufacturers to produce its products, a decision and saves money over operating its own facilities and allows the company to focus on research and development, Muchnick said. Its researchers analyze animal proteins and plant components, using an algorithm to find ingredients or combinations of ingredients that can mimic animal-based products.

Compiling that data is key for finding just the right combination of ingredients, Muchnick said. “You can find many ways of replicating the protein of meat, but that protein doesn’t necessarily go with the flavor or texture or smell or color” of its animal analogue, he said. 

That approach is part of the company’s plan to “be Nestle for millennials” by developing products in multiple categories, the CEO said. 

“If you don’t understand something, you cannot replicate it,” he said. “We work kind of like a pharmaceutical company” by “using equipment that we never used in the food industry,” Muchnick said.

U.S. sales of plant-based alternatives grew 11% to $5 billion in 2019, according to the Good Food Institute. By contrast, total food sales advanced 2%.

That growth has continued during the COVID-19 pandemic, with plant-based sales growth outpacing total food growth both during a period in March 2020 when consumers stocked up at grocery stores as well as in the months afterward, according to the Plant Based Foods Association.

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