Dennis Woodside's Fireside Chat at SPC

Dennis Woodside spent his career working for transformative companies like Google and Dropbox before making the leap to something far older: the food industry. During a recent in-person fireside chat at our San Francisco community space, Woodside shared what he has learned as president of Impossible Foods, the maker of plant-based meat products served in some 20,000 grocery stores and 50,000 restaurants nationally. Now working in what he labeled an analog industry, Woodside discussed the difficulties of pioneering a new product, how sustainability plays a role in other industries, and what sort of food industry innovation he has encountered.

Here's a sampling of what he shared during the conversation:

Projecting New Markets (8:05)

Our consumer isn’t vegetarian. We look for what we call flexitarians. If we just focused on vegetarians/vegans, our market would be 5 percent of the world, which isn’t big enough.
We want it to just be a product that people like. Over time, for us to be successful, it needs to be part of their daily habit, their weekly habit, their shopping trip.
One of the challenges of starting a company in a new category is you can't really prognosticate where the market will go. You really don't know.
It brings me back to when I joined Google in 2003. We accessed the internet through 128k modems. It couldn't do much. Digital advertising was 3 percent of advertising in the U.S. A friend from Google recently told me that digital advertising in global markets is now two-thirds of all advertising. Back in 2003, I don't think anybody would have predicted that.
U.S. plant-based meat is at 1% of all meat. Plant-based milk in the U.S. is at 15%-to-16% but plant-based milk has been around a lot longer. Can plant-based meat get to 20 percent? Our business now is close to $400m, which means it could be 20x bigger.
That actually creates a real challenge from a planning perspective: what kind of manufacturing capacity do you go by? How long do you make your contracts for manufacturing heme or for purchasing other key ingredients that go into our products?
Lead times can be 3-4 years to start up a new manufacturing facility. We're constantly guessing and re-guessing what the demand will look like in three years and five years. It's hard but it’s the reality, so you have to plan to be flexible on your overall approach to the business and your investments.

Sustainability strategy (20:32)

Our belief is that we can't rely on the government to help us at all in this. We have to have a better product that consumers like, and we have to win on taste. If your first taste of an Impossible Burger was like a Boca Burger, we wouldn’t succeed.
There's also all kinds of regulatory issues on the government side, so we also have to win on nutrition: it's no cholesterol, lower saturated fat, lower calories, all that helps.
Most consumers think if it's from plants it's better for them, which is probably true but they really don't know why. Environmentally, it's not commonly understood that animal-based agriculture actually contributes to greenhouse gasses. Most people think greenhouse gasses come from smokestack industries and transportation.
Over time, people will stay with us if they believe that what they're doing is better for the planet. But that takes a long time to educate millions of people, and you don't have enough money to do it through traditional means. You can't market your way there.
The government's going to subsidize incumbent industries and they have for a long time in the form of subsidies for animal feed.
You're seeing some changes in regulation in the UK. The government said they're going to take away those subsidies, which will probably collapse the animal beef industry. That isn't necessarily a good thing but there’s more awareness in the UK that animal agriculture is damaging the environment, and that there's alternatives.

Comparisons to the Tesla model (23:05)

Look at Tesla, yes EV subsidies were a big deal but at the same time they built a better product.
Consumers realize that. We don't call them mobile phones anymore, they’re just a phone, and I think people are saying Teslas are just cars, but they're also really good cars. We need to be just another meat that happens to be from plants.
Some people will make choices based solely on sustainability, but it's a psychological effort to make yourself do that. Most won’t.

Is sustainability a business category? (28:17)

I don't think that there's a space that is “sustainability.” I think there are sustainable companies that can see a line of sight to being profitable.
That's what sustainability really is. If the companies have a side benefit of what they are doing, such as reducing global warming or they're doing something that's truly more sustainable, having a societal benefit, those things are important.
What's more important are the classic questions: what's the product, what's the product market fit, what's the pricing, how big is the market, what's the TAM? Those are the questions that matter.

Given the current angel investor cycle, is now a good time to found? (28:17)

If you have a good idea, it doesn't matter really – you can get money for a good idea at any point in time and you can get talent for a good idea at any point in time.
Cycles only matter so much. Is today a great time if you need to raise $100 million and you're down to your last dollar? No, it's a bad time, but if you're starting out there's plenty of money that will seed a company.
I don't believe that the market for angel and seed investments really changes. When you have all this chaos, maybe it's less competitive on the investor side, so your valuations are lower. But as an investor, there are so few great ideas and great teams that those great ideas and great teams are going to find capital.

Selling burgers vs. software products (38:20)

Food distribution is an old industry – it's very complex. There's a lot of people involved, driving a new product through that old industry is tough and takes time. You have to educate the distributor on your products, they need to buy in, and they need to educate their sub-distributor.
I go back to software. At Dropbox it was pretty easy to put up a site and people could download our app. Anybody in the world could do it, there's no cost, there's no distributor, there's nobody between you and your consumer. That's a big advantage.

Is the food industry innovating? (39:20)

Think about Starbucks, a huge percentage of their sales now are coming through the app, which pre-Covid just wasn't true. That changes their whole business model. Their CEO was saying their stores were not designed for people ordering on the app, their stores were designed for people coming in and talking to the barista.
So that creates a lot of opportunity for them but it also changes the way that they do business. Luckily, they invested in that app experience pre-Covid and it really made them successful during the pandemic.
Restaurants are always seeking to innovate in their products because they want to provide what consumers want. They're very data driven because they actually have a lot more data than we do. They can tell by store what sells and what doesn't.
We know some stores, whether it's Burger King or Starbucks or White Castle, our sales are through the roof, others are very low. Then they can tune their marketing and their messaging and their product strategy at that granular level.

The Burger King deal (54:31)

We finished the deal with Burger King and did a small test in St. Louis. They put the patties on a broiler that’s on a conveyor belt that goes over the grill. At the end, the burger goes down a slide and our burger would break apart at a quicker rate than the animal patty.
We re-engineered the product, which was a lot of work. We finally tested again and the Burger King leadership team showed up in our office and said, “We've never had a test so successful. We have lines out the door. We want to go national.”
We were like, “sure, no problem” while having no idea how we were ever going to supply them like that on a national level. We went into a full court press to scale up manufacturing. We needed everybody who could work shifts in the factory, so we had PHDs in biochemistry working the line in Oakland. That was our make or break customer and we made it happen.

If you are interested in attending future fireside chats hosted by SPC with luminaries in tech, startups, venture, science, politics, and more, sign up for our events guest list. If you’re a technologist, builder, or domain-expert wondering where to navigate the -1 to 0 transition stage of your career, consider applying for membership to the SPC community.