CNBC Disruptor 50

A $120 million vegan food start-up fires back after being accused of inflating sales

Hampton Creek CEO: I would do mayo buyback again
Hampton Creek CEO: I would do mayo buyback again

The CEO of a vegan food start-up that's raised more than $120 million defended his company from accusations that it was buying inventory of its vegan mayonnaise in order to inflate sales.

The primary reason for a product buyback was quality assurance and quality control, and it had "no impact at all" on sales data, Hampton Creek CEO Josh Tetrick told CNBC's "Squawk Alley" on Friday. Accusations that the company was effectively channel stuffing first appeared in a report by Bloomberg.

"We have all the data to back it up," he said. "Of course we didn't break any laws," he added.

A start-up that has garnered praise from the likes of Bill Gates and Li Ka-shing, Hampton Creek aims to make healthy, sustainable and affordable plant-based products like mayonnaise, cookies and cookie dough.

Josh Tetrick, Hampton Creek
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But the maker of vegan Just Mayo came under scrutiny on Thursday when Bloomberg reported that Hampton Creek was buying back its own mayo, likely in an effort to make the product appear more popular than it really was, at a time when the company was courting investors.

Tetrick didn't deny that the company had a buyback program, but told CNBC on Thursday that it was a typical practice used to ensure quality control and "build momentum" around the products.

"Listen, in the beginning, unfortunately, we had mayo breaking, we had lids coming off, we had labels that were screwed off," Tetrick said. "We kind of had a rag-tag team sitting around a wooden table figuring out how to do it."

Tetrick told CNBC that getting a "little lift" for the company's sales was a "secondary, but much less important" reason for sending teams into stores to buy the mayo — and he's proud they did it.

"We're selling to thousands of stores across the country," he said. "In this 'great mayo buyout of 2014,' as reported by Bloomberg, it was noted that 'hundreds of jars were not accounted for.' We sell millions of jars ... Of course it was properly accounted for."

The money spent on buying back the inventory, $77,000, was also insignificant in context, Tetrick said.

"We spend more money on snacks than we spend on this program," Tetrick said.

In addition to buying hundreds of jars of the mayo across the U.S., contractors at Hampton Creek were told to call store managers pretending they were customers asking about Just Mayo, according to Bloomberg reporter Olivia Zaleski, who reviewed hundreds of receipts.

"In the beginning, we had folks call, say, 'I'm super excited about the product,'" Tetrick said. "We had hundreds of volunteers all across the country, calling, saying how excited they are about it."

Tetrick said the company is still rolling along with its retail partners after the report.

"Right from the beginning we fought to stay there," he said. "Today, we're doing really well, and my team's really excited about what we're doing."

— Reporting by CNBC's Lauren Thomas and Mary Catherine Wellons