After Raising $85M, NotCo launches Milk Alternative Before Turning to Food

The plant-based dairy and meat categories are extremely competitive with new entrants and products every month. Yet Latin American company NotCo, which earlier this fall raised $85 million, thinks there’s room for one more, announcing last week it was launching a new non-dairy milk in Whole Foods nationwide.

NotMilk will debut in Whole and 2% Reduced Fat varieties, which will retail for $4.99 for a 64 oz. carton. Like NotCo’s other products, the milk was developed by matching the animal proteins found in traditional milk to their “ideal replacement” among “thousands” of plant-based ingredients. The result is a product that is not made from more traditional alt-milk ingredients such as oat or almond, but rather chicory, coconut, peas, cabbage and pineapple.

Unlike other milk alternatives, NotCo also says their NotMilk can be used interchangeably in cooking and baking.

Though Whole Foods is the line’s launch partner, NotCo CEO and co-founder Matias Muchnick said the brand is actively examining other channels, including mass grocery, ecommerce and even quick service restaurants.

To support the launch, NotCo has brought on Lucho Lopez May to serve as the company’s North American CEO. Lopez-May most recently was the CEO of Garland Food; before that he spent 15 years at Group Danone, ultimately serving as the company’s President of Strategic Growth Channels. Muchnick said the company ultimately decided that it needed a leader in the U.S. in order to handle the “large and complex” organization they expected to need to build.

Lopez-May is currently hiring for other senior leadership roles. NotCo plans to open a new office in New York focused around operations while maintaining its San Francisco-based machine learning team. Muchnick and fellow co-founder Karim Pichara, who serves as CTO, had already relocated to the U.S. to support the launch as well.

Founded in Chile in 2017, NotCo had been largely focused on South America to-date — with a plant-based milk, ice cream, mayonnaise and burger alternative sold in Chile, Argentina and Brazil. In these countries, the portfolio appeals to flexitarian shoppers, Muchnick said, with its ground beef product used by both Papa John’s Pizza and Burger King.

Along with the U.S., NotCo also plans to launch into Columbia and Mexico this year.

“[Our plan for 2021 is to] consolidate our number one position in Latin America and one, amplify our portfolio of products into eventually cheese and other meat replacement and two, expanding to new countries,” Muchnick said.

The company previously raised $3 million in December 2017, followed by a second $30 million round of funding in 2019, which included investment by Bezos Expeditions, the investment firm for Amazon.com founder Jeff Bezos’ personal venture capital investments.

In September of this year, NotCo closed $85 million in funding, co-led by Future Positive, the investment vehicle of Fred Blackford and Biz Stone, and private equity firm L Catterton. At the time, the company said the capital would be used to push into the U.S. market, but could not disclose which product would be its first launch.

“The goal all along had been to pick one hero product line as an entrance to the U.S. before bringing in other SKUs,” Muchnick said. This allows NotCo to establish brand loyalty, he added, and then parlay that into other categories.

“There’s not space for 15 companies doing a plant based burger,” he said. “There’s always one big winner… and we want to be that winner and timing is of essence. Brand loyalty is developed around the first player who reaches the market, and that cannot be avoided.”

Muchnick believes the broad animal product replacement strategy at NotCo will be key to its success. Generally speaking, he said, the average NotCo consumer spends $25 to $30 per order on NotCo products. Meanwhile, because they are more narrowly focused, other producers only tend to see a ring of $5 to $10 per trip. By creating “synergy” between products, NoCo is able to create a portfolio with solid gross margins overall, balancing lower margin items with higher margin items.

Meanwhile, the company’s product mix strategy is supported by focusing on developing global partnerships with suppliers, and (unlike some other brands) eschewing self manufacturing. While NotCo’s AI-based technology platform is also unique, the company has not invested in developing new and novel ingredients, instead focusing on new ways to utilize existing plant-based ingredients.

“When you think about NotCo, you have a very good balance between vision and execution,” Muchnick said. “Major problems can come from the scaling up process. As we, NotCo, have solved that problem by joining upstream with copacker and downstream with suppliers of ingredients, we have the capabilities of generating faster traction and faster out to market strategies.”

Still, despite these business strategies, the US will remain a key part of the company’s march towards profitability. By 2021, Muchnick said, the company is projected to have $100 million in revenues, following a “consistent” pattern of growing four to five times in sales every year and by 2023, the goal is to have revenues of $320 million, with 70% of those sales coming from the US market.

“We cannot become a company that subsidizes growth for the next ten years,” Muchnick said. “We are a company that is planning to be profitable by the end of 2022, but still a far objective.”