A new product by a startup named Yofix Probiotics is about to reach the supermarket shelves. What is unusual about this product, however, is not the product itself, but the fact that in contrast to other products, this one was not developed by one of the major food companies; it was developed in a food tech incubator.
The startup operates in The Kitchen Food Tech Hub, which is sponsored by Strauss Group Ltd. (TASE:STRS) and the Israel Innovation Authority. It received $2 million in financing from Strauss Dairies and a group of private investors in a recently completed financing round. Strauss Dairies and a global venture capital fund specializing in substitutes for animal products led the round, together with three foreign investors.
Yofix is the first company to complete two years of development and training in the incubator. After having established a manufacturing plant in the Lower Galilee, it is bringing its first product to market.
The product was invented in the kitchen of entrepreneur Ronen Lavee. In contrast to other products on the market that are soy-based, this product is based on raw materials such as black lentils, oatmeal, walnuts, and bacteria. It is classed as "clean label" - preservative-free. The company aims to later develop ice cream and other food items based on the same raw materials. The floor in the new plant is now being laid, and the company hopes that its product will be on the shelves in mid-2018.
"Today, people hesitate to use soy-based milk substitutes," says The Kitchen CEO Jonathan Berger. "Israel does not usually stand out in overseas marketing, and technologically speaking, there will be something here that no one else has. There are vegan yoghurts around the world made out of either soy or a large quantity of components and preservatives, and most of them are sold on the shelf, not in the refrigerator. Here, we have developed a product that is probiotic and has the same values as yoghurt."
Berger says that the product has already been sold in a pilot to a few stores, and that the company is currently negotiating with a distributor to the supermarket chains. He adds that the CEO's personal cellphone number appears on the product package: "He wants to hear both the compliments and the criticisms."
On the question of what led a dairy, a natural direct competitor of Yofix, to invest in a product of this type, Berger explains, "I don't know, but in a few years, the product lines of Strauss, Tnuva Food Industries Ltd., and Osem Investments Ltd. (controlled by Nestle SA (SWX:NESN)) will be completely different from what they are now. The major companies will have no choice but to adapt."
Strauss Dairies CEO Eli Itzkin says, "We believe that some of the breakthroughs in products will come from startups and the technological developments achieved outside the companies, and we definitely want to be there and be involved."
One of the considerations in investing in a startup is also the proximity of the entrepreneurs to the field. Yofix cofounder Shlomi Alfia, a former CEO of Gad Dairies, says, "In recent years, major companies around the world have been investing in startups and raising and nurturing them outside the company. After a brand has been built, they buy it and absorb it."
The dairy substitute market current amounts to NIS 200 million a year, including NIS 20 million in yoghurt substitutes, and is growing by 10% a year.
Published by Globes [online], Israel Business News - www.globes-online.com - on September 13, 2017
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