By Eric Peterson | Jul 09, 2018
Colorado Springs, Colorado
Surplus and imperfect food
A self-described "kid with an ag background," Bultema grew up around his family's rice farm in Northern California. "I had food roots and a deep sense of stewardship in my DNA," he says.
He went on to work in software for a number of venture-funded startups, including CodeBaby, before accepting the Selig Chair of Innovation at Colorado College. At CC, he learned about the massive amount of food waste in the U.S.
"You hear these big, arm-waving numbers of 40 percent of what farmers produce getting thrown away, billions of dollars going into landfills," says Bultema, noting that more than $200 billion of food goes to waste in the U.S. every year. "I was interested in what happens with big food systems."
That provided the impetus for FoodMaven. Launched in mid-2016, the company buys excess food from farms, ranches, manufacturers, retailers, and distributors on consignment and sells it at roughly half price via an online marketplace to restaurants, commercial and institutional kitchens, and breweries. "We cobbled together a solution," says Bultema. "It just took off."
Two years later, FoodMaven is headquartered in Colorado Springs with a 25,000-square-foot warehouse, and opened a second facility in metro Denver in 2017. About 30 to 40 percent of the food comes from local producers and manufacturers, and half is sourced from grocers and distributors. Nothing goes to waste: Leftovers are donated to local food banks and the Cheyenne Mountain Zoo in Colorado Springs.
Growth has been dynamic. "We're at a pace now where we're doubling revenue every quarter," says Bultema.
The existing system was ripe for a startup like FoodMaven. "The system oversupplies," says Bultema. The guiding principle for many stores is: "We should have everything all the time," he adds. "Oversupply is one of the big things that drives lost food."
Food that's cosmetically imperfect but perfectly edible is another, as is surplus among contract growers. For many farmers and ranchers that sell surpluses to FoodMaven, says Bultema, "That's product they wouldn't otherwise find a home for. It's found money." He cites Strohauer Farms, a potato grower in La Salle, and Sangre's Best Beef in Westcliffe as examples.
The kitchens at hospitals and colleges are now the largest market for FoodMaven, followed by restaurants. That's largely based on volume per account: Bultema says a single restaurant might buy $1,000 or $2,000 worth of ingredients from FoodMave in a given month, while an institutional kitchen could spend $10,000 or more.
"Institutional kitchens have now surpassed restaurants," says Bultema, citing Bon Appétit Management Company, the concessionaire at Regis University and Colorado College, as one big buyer. "There's a lot of [restaurants], but it takes more time for them to adopt and come on board."
Because institutional food operations often have locations across the country, it's a good "baseline" to grow FoodMaven, says Bultema. "Part of what we're doing is building a critical mass of strategic relationships between producers and buyers," he explains. That's also a good fit with many of the company's suppliers that have numerous operations, like Whole Foods and Walmart.
"People like the idea of sourcing local, but there's no system for it," he adds. "If you're a hotel chain, how are you going to source local throughout your system?"
Craft breweries are also taking notice of FoodMaven, which counts Castle Rock's BURLY Brewing and Smiling Toad Brewery in Colorado Springs among its customers. "We've got a lot of local hops we're providing for local brewers," says Bultema. Fruit and gluten-free grains are among the other ingredients that are a good match for brewing. "Quinoa is a hot crop, but it's not in the big distribution system right now," he says.
FoodMaven's broader mission is about people and the planet. "We just need to make sure we do a good job of using everything," says Bultema. "We're taking land out of wildlife habitat to put into marginal ag production to produce food we don't really need."
Challenges: "What we're doing is conceptually simple and logistically complex," says Bultema. Keeping values intact as FoodMaven scales up "is not a trivial challenge," he notes.
Finding delivery drivers and other staffers is difficult in a tight labor market, but FoodMaven has an advantage. "Being for-profit with social impact really helps us recruit and keep good people," says Bultema.
Opportunities: National and international expansion. Bultema says FoodMaven is on the cusp of announcing its third market -- and the company's first outside Colorado -- in which it will be operating by fall 2018. Plans call for the company to expand into 10 more out-of-state markets in 2019.
This will be accomplished in part via acquisitions of existing small food distributors and porting them to FoodMaven's model, and many such businesses are receptive to such offers. "There's a lot of them that are legacy, third-, fourth-generation type of businesses," says Bultema, likening it to Corporate Express' model of buying mom-and-pop office businesses in new markets.
Europe is another target market. Worldwide annual food waste is estimated to be more than $1 trillion, says Bultema. "It's a massive issue."
He sees potential growth drivers in branded FoodMaven products that "upcycle" food waste into sellable products, such as beef products that could be used in pet food. "The small ranchers in Colorado are paying to throw away their beef byproduct, and there's economic value with that byproduct," says Bultema.
Needs: Money. "We're going to consume some capital," says Bultema of the expansion plans.
After FoodMaven closed a seed round in early 2016 and an $8.6 million Series A round led by members of the Walton family in early 2018, Bultema is setting the stage for a Series B round in the neighborhood of $60 million. "We need to put fuel in the tank to make this thing work," he says.