As part of a blog series on Social Entrepreneurs, we spoke to Kristin Richmond, co-founder of Revolution Foods, which aims to transform the way America eats by making healthy, kid inspired, chef crafted meals accessible to all families.
You and [Revolution Foods co-founder] Kirsten Saenz Tobey have been on an incredible journey over the past decade. You started making healthy lunch options in your Oakland, CA home and today Revolution Foods is on track to be a $130 million registered B-corp providing over 1.4 million affordable, nutritious meals each week to students across 27 US cities. You also have a retail presence in over 3,000 grocery stores in the US. What was the initial inspiration behind the idea?
To give you a sense of the magnitude of the problem, 1 in 3 students is obese in the schools that we serve, and close to 50% of them are likely to develop Type 2 Diabetes in their lifetime. This has tremendous impact on individual health outcomes and on families, but it also puts an enormous cost burden on the country as a whole. So putting children on a path to healthier eating habits should be an urgent national priority.
On a personal level, Kirsten and I both have experience in education. We have seen first-hand the relationship between healthy bodies and healthy minds, and what a difference a healthy diet can make for children’s attention spans, classroom behaviour and overall academic success. Ever since we created the company, our intent has been to use nutrition as a lever for setting kids up for success both inside and outside the classroom.
Our other motivation was to run a business that provides access for all. Whatever models we build at Revolution Foods to address the challenge of healthy eating, the crucial test is that they work for all of the families to whom we provide our meals and programmes. These guiding principles are the foundation of everything we’ve built together.
To serve US public schools under the Free and Reduced Lunch Program (targeting low-income children), you are often competing against contractors that rely on lots of processed foods, sodium, artificial ingredients and unhealthy oils. How can you compete on price despite relying on higher quality, all natural food – how did you break the cost versus quality trade-off?
From the very beginning of our supply chain work, our product design work and our nutrition strategy, we built the model around fresh, real, whole ingredients. It was difficult when we started, because there were certain items we just couldn’t access at the price points we needed. Now what we offer is a great deal of volume and the ability to reach consumers at an early age to instil lifelong healthy eating habits. That is attractive to partners who are looking to have a bigger impact. The financial return on a per unit basis is not what it would be at retail, but when you put the whole package together it’s often very attractive for a like-minded supplier. We have both local and national suppliers in order to make the model work, and fresh real food is our number one priority.
Secondly, we have a relentless focus on operational efficiencies. Along every step, from the sourcing to the cooking to the assembly to the distribution of the meals, we have worked consistently to drive costs out of the system. That does not mean we pay workers less. Part of our mission is to create healthy jobs (and more importantly career paths) for all of our employees.
Compensating employees fairly is becoming a hot button issue; some CEOs are taking meaningful steps but many companies complain it will make them less competitive. Can you tell us more about your employee compensation packages?
It starts with a commitment to families in the communities that we serve. We have nearly 1,500 employees and most of them live in the public school district that Revolution Foods is serving in that particular metro area. Often their kids or nephews or nieces attend a school we serve. We work to provide fair wages and benefit packages to our employees.
In addition, we believe this is a team effort, and everyone should have a stake in what they’re building for themselves and their families. So every single employee, from the CEO to a school account manager to the drivers and the dishwashers, have a chance to own part of our company through stock-options after one year of employment with us. It’s more than just a statement. It is part of our ethos and it’s what drives quality and commitment within our company. Our investors have upheld and encouraged employee stock-options in every financing round we have had, and I hope it will become standard for companies moving forward.
There are different ways to think about how Revolution Foods is scaling its model – through organic growth, through a competitive effect on other industry players, and through policy change. Let’s start with your direct service model. Are you replicating into new geographic areas?
We are growing between 30% and 40% year over year. This year alone we’re launching in Tennessee, Arizona, Boston, Philadelphia and San Antonio. Although we will continue to grow aggressively, we also realize it’s not fast enough because the need is so much bigger. To help us reach a national landscape faster, we are developing prototypes of our healthy meals with a longer shelf life to sell through other channels such as Walmart and Safeway.
Beyond growing your direct market share, you’ve had a larger influence on the industry. You successfully demonstrated there is a market for healthy foods from parents and kids alike, and traditional suppliers’ old refrain “But kids won’t eat it!” just doesn’t hold up anymore. How is the industry landscape changing, and how have you contributed to that?
We’ve always been proud to say there’s no reason why we can’t serve the highest quality meals that are delicious and that kids will eat and love. We share our data and results to combat these stereotypes that kids refuse to eat non-processed food. Great quality meals are not going in the trash and it’s not a waste of resources to invest here.
First Lady Michelle Obama has played a huge role in this as well – she’s one reason the landscape is shifting so fast. We have worked with her team at Let’s Move! and have had multiple discussions with government representatives about menu, how to drive up participation in programs like Breakfast in the Classroom, and how to use fresh commodities to deliver on great nutrition for kids. We have also opened up our books and shared our cost structure on the different components of meals and contributed our expertise on cost trends in terms of what we think is realistic in putting together a healthy meal. We play an active role with multiple stakeholders always with the ultimate goal of setting up kids for success and we are starting to see new policies come out that will scale nutritious food for schoolchildren.
That’s the role we’re playing in the industry. In terms of the other food service providers, it’s tough to measure. Great news is, there is a large and growing set of self-operated school districts where food service directors are working very hard to provide quality food for kids in their district. So demand from decision-makers inside school districts, including superintendents and principals, is catalysing change. The industry is definitely shifting as the internal demand from school districts grows.
What advice would you give to other social entrepreneurs or young people passionate about this issue and excited about your model? How can they replicate what you’re doing in their local context?
There’s no substitute for rolling up your sleeves and starting a pilot to see how the execution works. As small and simplistic as it was, the pilot we ran at one larger charter school in Oakland while we were in business school provided the basis for us to understand sourcing, student feedback, menu design, and the financial model. It gave us a basis on which to talk to investors and invite investors to see our work in action. Writing the business plan is important but putting steps into action and learning in the field are far more important.
Then you need to think about your capital structure. A huge secret to our replication success is funding. We’ve raised over $100 million in growth capital over the last nine years and we have focused on bringing investors to the table who truly believe that our “values create our value” as a company. There is a whole set of investors that looked at our model and said, “Sorry, not for me, the return models aren’t correct for my timeline and expectations,” but there are some investors who believe the values we stand for will create both an impactful and an incredibly valuable company. My advice is to set your financial expectations carefully – we were very thoughtful and precise about modelling our cost structures and our timeline for financial returns – and choose your investors and your board members carefully. The way you set up your governance structure is critical, because ultimately you need their support from an advisory and a financial standpoint.
More important than almost anything else, though, is building a world-class and committed team. Revolution Foods is so much bigger than the co-founders. We wouldn’t have got out of the gate if we hadn’t thought about how to bring people to the table who are so much smarter than we are in their areas of competency and have so much to offer. So my final piece of advice is to start thinking about who you need on your team, hire as early as you can, support and inspire that team and learn from them. Be both confident and very humble in your approach.
The great thing about doing what you’re passionate about and building an organization with a heart and a purpose is that you’re going to attract people who are driven by that mission and who will be with you through thick and thin. We always say, starting a revolution is never easy but it’s worth every ounce of effort!
Author: Kristin Richmond was interviewed by Katherine Milligan, Director and Head of the Schwab Foundation for Social Entrepreneurship.
Image: Students eat lunch at Salusbury Primary School in northwest London June 11, 2014. REUTERS/Suzanne Plunkett