Healthier niche foods, including organic and gluten-free products, have taken off in recent years and one U.S-based start-up is using a subscription model to ride the wave.
Aihui Ong was helping a friend at a farmers' market, when the then-software engineer spotted a gap in America's food chain: Smaller-scale food makers had trouble getting wider distribution and onto the shelves of bigger supermarkets.
"I thought why wasn't this problem being solved on the Internet? So I did some research, and I love food and I love technology, so it was a natural marriage of both my passions," says Ong, the founder and CEO of Love With Food, in a "Managing Asia" interview.
Farmers' market participants traditionally hand out food samples as a way of connecting with the customer, so Ong got the idea of using a "subscription box" model for snacks. The Singapore-born and raised Ong propositioned food companies for snack samples, which she then mailed out across the U.S.
That allowed her to tap into the healthier living trend which is driving the booming organic food industry. The organic packaged food business alone has a global retail value of $32.15 billion at retail selling value, according to Euromonitor.
It became a win-win model, with Ong receiving revenue from subscribers' membership fees, while producers got a boost for their brand awareness by reaching new customers. She also passed along customers' feedback to the food producers.
Love With Food started in 2012 with $50,000 of Ong's own money and help from Silicon Valley venture capital (VC) firm 500 Startups. She graduated from 500 Startups' accelerator program and landed about $3 million from three funding rounds, which she invested in growing a team and building a customer base.
The company now has three revenue models, including a monthly subscription for snack boxes, an e-commerce store and data sold to the food producers. Over the past four years, the start-up has worked with more than two thousand food companies and acquired competitors Taste Guru and G-Free Foodie to expand into the gluten-free category.
The healthy snacking start-up is also branching out into corporate snacking, or sending snacks to offices, and its next milestone would be to go international, its founder said.
In 2015, Love With Food generated $5 million of revenue, nearly doubling from 2014. But, it has not yet reached profitability. Ong said the start-up had been focused on growth and expansion, but it would become profitable within the next six months.
Despite transitioning to healthy snacks entrepreneur, Ong said that her background in software engineering means she can't claim to know much about food, but she's turned to a lot of other entrepreneurs for advice.
"The beauty about the U.S. is entrepreneurs like to help other entrepreneurs," she said.
But she expects it will get tougher for other entrepreneurs to get started, noting that VC funding is drying up in the U.S., as "things got too wild in the last two years."
"I believe that this year and next, a lot of VCs will be tighter with their cash and are probably going for companies that can achieve the profitability path quickly," says Ong.