Innovative bottled soup brand Tio Gazpacho has completed a $1.25 million Series A funding round led by 301 INC, General Mills’ business development and venturing unit. Proceeds from the round, which was raised on equity crowdfunding platform CircleUp, will go toward new sales and marketing initiatives designed to expand placement and awareness of Tio Gazpacho’s high pressure processed, ready-to-drink soups. The company will also use some of the investment for the development of a new sub-line designed for conventional grocery and foodservice channels.
Tio Gazpacho founder Austin Allan began the search for new funding last year, initially targeting $500,000 for the raise. That number grew based on a revised business strategy for 2016 and additional interest from potential investors. Along with 301 INC, the round includes partnership with a fund managed by CircleUp — aptly named the “Growth Fund” — which matches other investments made through the platform. It also includes financing from a Miami-based investor and another company that Allan connected with through CircleUp; Allan declined to name the two parties and said that each wanted to remain unnamed.
Launched in 2014, Tio Gazpacho markets a four-SKU line of super-premium, organic fruit and vegetable-based gazpacho drinks. Leading with the tagline “no bowl required,” the products won acclaim for their ultra high level of freshness and flavor and as conveniently packaged and healthy soups that span a range of use occasions.
“Tio Gazpacho offers a new soup experience with its refreshing and vibrant high quality ingredients served in a drinkable and portable bottle,” John Haugen, Vice President and General Manager of 301 INC, said in a statement. “We strongly believe in brands eager to make a difference in the marketplace and are thrilled to work with Tio Gazpacho to maximize its success within the food industry.”
Although gazpacho was Tio’s entry point to the market, Allan believes the bigger opportunity is in a range of bottled soups offered at affordable price points. That perspective was also a key selling point in the funding round.
“We’ve reinvented soup for a modern, on-the-go consumer,” Allan said. “And so I changed my tone a little bit in my fundraise and started talking about us as this cutting-edge soup brand that leverages technology in a way that’s never been done before and is also a soup-beverage hybrid. I started using a little different terminology, and I also developed this new concept of launching a smaller size, less expensive version. Still the Tio name, but under a different line. When I started talking about that, people really started listening.”
To that end, Allan hopes to launch a new 10 oz. line in 2017 and envisions a price point of approximately $5 for the products. While the flagship Tio Gazpacho soups are primarily sold in natural grocers and retail for $8 per 12 oz. bottle, the smaller sized soups will be targeted for placement in conventional grocery retailers and foodservice outlets. 301 INC will be a key strategic partner in the development of the new line, with Tio leaning on General Mills’ knowledge and expertise in sourcing, distribution, marketing and operations.
“I think what we’re really excited about with Tio is really the convergence of a number of trends,” said Haugen. “Reframing that soup opportunity in a fresh, portable great-tasting way, we think is really exciting. And if you also think about how people use the product, it has the opportunity to span a number of different occasions.”
301 INC will also play a key role in Tio’s efforts to take advantage of market opportunities for its current offerings, Allan said. Tio Gazpacho is distributed in metro New York at several natural retailers in the region, including Whole Foods and Fairway, and the company will look to expand distribution along the East Coast throughout the year. Although Tio Gazpacho launched in Miami, the brand is gradually exiting the market. Allan described Florida as tough market for new brands because the state is dominated by just a handful of retailers.
While Tio’s positioning as a bottled soup brand has investors excited about its future prospects, it’s been somewhat of a growth barrier. Allan said that some retailers are stymied by how and — more importantly — where to merchandise the products. As a result, the company will use some the new funding to invest in retailer education efforts and identify ideal shelf placement for the brand.
“It’s early in the product life cycle and I think people can discover it and look for ways to incorporate it into their daily routine,” Haugen said. “It also warrants continuing to think about different merchandising options and testing different ways in.”
Also supporting the company’s evolution is James Tonkin, a longtime beverage industry consultant, who joined Tio as an advisor and equity shareholder last year. Tonkin has been involved as an investor with several successful brands, including Zico and Suja, and “played a really important role” during the fundraising process, Allan said.
While additional support will come by way of new hires in sales and marketing, 301 INC’s investment and partnership in Tio Gazpacho gives the brand the biggest leg up as it plans for future growth.
“For General Mills to say, ‘we really like what you’re doing and we think your brand has awesome potential,’ it’s not every day you get an opportunity like that,” Allan said.