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Thursday, May 19, 2022

A Seat at the Table

When Jenny Goldfarb went vegan, the New York native wanted to find a way to replicate her favorite corned beef without animal byproducts. After tweaking recipes in her home kitchen, she came up with a solution so good even her meat-and-potatoes-loving husband couldn’t deny it. The mixture of wheat gluten, beets, chickpeas, spices and sauces was a hit at home, but she didn’t realize just how popular the concoction would become.Today, Goldfarb is chief executive of Unreal Deli in Woodland Hills, one of the fastest-growing vegan meat brands in Los Angeles.

“You can get a good burger these days in the plant-based realm, but there’s no good deli meat,” Goldfarb told the Business Journal.

That’s where Unreal Deli’s products come in. “They’re made with whole vegetables. You’re getting a complete protein and a lot of fiber. They’re healthy and delicious. Many, many people have failed the blind taste test,” she said.In just two years on the market, her company has struck distribution deals with Whole Foods Market, Kroger Co.’s Ralphs banner and several other grocery chains to carry her products, which include vegan corned beef, vegan roasted turkey and soon-to-launch vegan roast beef. Fast-casual chain Quiznos sells the products at locations in Denver and Seattle, while Veggie Grill and Mendocino Farms sell pre-made “Unreal Reuben” sandwiches nationwide.Goldfarb’s operation has also drawn attention from high-profile investors. An appearance on ABC’s “Shark Tank” television program in 2019 earned Unreal Deli an investment of $250,000 from billionaire entrepreneur Mark Cuban, who owns the National Basketball Association’s Dallas Mavericks franchise. Cuban received a 20 percent stake, giving the company a valuation of $1.25 million at the time.Just months prior, Goldfarb was knocking on delicatessen doors for menu placements.Early deli daysGoldfarb said it wasn’t her intention to turn her vegan cooking into a business.“I was going to put (the corned beef recipe) on my food blog, but before I did, I had a number of friends and family say to me, ‘This is so delicious, I would not have known this wasn’t real meat. You should try to make a business out of this.”Through connections in the blogosphere, Goldfarb linked up with a vegan consulting group in Newbury Park. They loved the product and agreed to rent a small commercial kitchen to Goldfarb one day a week for $25 an hour.The rest of the week, after dropping her two kids off at preschool, Goldfarb – who at the time was pregnant with her third child – would drive to popular New York-style delis such as Canter’s in Hollywood, Factor’s in Pico Robertson, Art’s in Studio City and Izzy’s in Santa Monica, pitching her vegan corned beef to the owners.

“Nine times out of 10, they’d say ‘it’s delicious. We know we have people who want this,’” she said.

After selling well in trial runs, she started getting reorders and eventually earned permanent menu placements.With confidence anew, Goldfarb set her sights on Whole Foods, offering the Amazon.com Inc.-owned chain a premade vegan sandwich for their deli section.“We weren’t retail ready at that point,” she said.

Whole Foods picked up the sandwich for 58 stores in Southern California, Southern Nevada, Arizona and Hawaii.

“It’s one of their most popular sandwiches. We sell about 500 a week,” Goldfarb said.

Along the way, Unreal Deli had outgrown the test kitchen in Newbury Park and needed space to ramp up production. Through referrals she partnered with a 10,000-square-foot bakery co-packer in Van Nuys to source ingredients in bulk, combine them per her recipe, flatten the mix into sheets, bake it, cut it, package it and ship it to distributors.Then came “Shark Tank,” a pivotal moment that propelled Unreal Deli to a new level of growth.

Sandwich switchGoldfarb called pitching to the sharks “the most exhilarating experience of my life.”“It went really beautifully,” she said. “I came out with a deal for double the cash I was asking for. That’s almost unheard of. If you know ‘Shark Tank,’ you’re usually giving away a lot more (equity).” It didn’t take long before the transaction started netting results.

Cuban’s resources and relationships helped Goldfarb edge her way into the service sector, landing placements in restaurants, sports arenas, hotels and film studios. Fox Studios and Netflix Inc. both agreed to sell Unreal Deli sandwiches at the cafeterias on their lots in L.A. As business boomed, Goldfarb took on another co-packing partner in Compton to handle increased demand.Then in March, everything changed. The coronavirus reached the U.S. and wreaked havoc on the food service sector. Restaurant sales flatlined.

“(Quiznos) had us start with a test in their Denver stores. The test went so well that in February, they gave us a call and said, ‘We want to do a North American expansion.’ 27,000 pounds was the first order,” Goldfarb said.

But when COVID-19 hit, “they put that project on ice,” she said. “We realized we needed to pivot to retail to stay relevant and meet customers where they were.”That’s when Goldfarb went back to the lab in search of a second product.

The result? Unreal roasted turkey, made with white beans, onions and celery.

“We developed these two products, got our packaging together and started reaching out to grocery stores.”Like delis the year prior, grocers were quick to add a vegan option to their shelves. Takers included 152 Ralphs stores, 58 Whole Foods, 340 H-E-B locations in Texas, 179 Giant Foods in Baltimore, 80 Giant Eagle stores in Pennsylvania, Loblaw’s in Canada and, soon, Publix in Florida and Georgia. There, 5-ounce packages of Unreal Deli meat sell for $5.99 – a comparable price to premium deli meats.Goldfarb recently hired a grocery consulting team from publicly traded marketing firm Advantage Solutions to help get Unreal Deli into the few chains it hasn’t yet conquered.

“Over the course of this year, we’re looking to be in anywhere from 3,000 to 5,000 stores,” she said.Running the show is a small but mighty crew that includes Goldfarb’s executive assistant, a chief financial officer, a product design expert, an R&D chef and a sales executive, all of whom work remotely. Cuban’s team handles accounting, business development and legal.Huge potentialUnreal Deli has scaled well in a short time, but vegan consultant Meredith Marin, who owns Vegan Hospitality group in South Florida, told the Business Journal in an email there’s tons more growth to be enjoyed in the space.

“The vegan product market is steadily expanding. … To make veganism an accessible and acceptable choice in our communities — a key piece of the puzzle for promoting planet and population health — we need plant-based companies to offer innovative, abundant, flavorful and affordable options. Consumers like variety, so we don’t worry about Beyond Meat and Impossible Foods  monopolizing the market. There is huge potential for plant-based entrepreneurs in the current national and global food markets,” she said.

A report published by San Francisco’s Grand View Research in September estimates the vegan food industry will soon skyrocket from its $4 billion valuation in 2020, growing at a compound annual growth rate of more than 19 percent over the next seven years. It projects industry-wide revenue of $13.8 billion in 2027.“The demand for plant-based foods is projected to increase further on account of shifting perceptions of consumers around food sustainability and safety,” the report said.A few companies are already reaping the financial benefits of the vegan, do-no-harm lifestyle. Publicly traded vegan-burger behemoth Beyond Meat out of Los Angeles already has a market cap of $7.3 billion, while Eat JUST Inc. in San Francisco is rumored to be readying an initial public offering after selling more than 50 million of its vegan JUST Egg products in 2020.

Goldfarb noted such companies aren’t competitors to Unreal Deli’s sliced “meat” products. Rather, their goods are complementary.

“I think we fit beautifully in the same refrigerator as those other items. You can’t eat a burger every night of the week. Every now and then you want a good sub. We’re here for that,” she said. “There’s a big picture here of closing down slaughterhouses one day. I want these other vegan companies to succeed and I know we have our place at the table.”

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