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In The Time Of Coronavirus, Daily Harvest Is Reinventing Mealtime For A Generation That Hates To Cook

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The pandemic is causing people all over the world to look at their freezers with newfound appreciation. Government mandated coronavirus lockdowns have millions of households stocking up for extended home stays – and a large supply of non-perishable but nutritious food suddenly feels as essential as abundant heating oil in the dead of winter.

That rush to hoard has been a jolt for Rachel Drori’s Daily Harvest, a subscription-based healthy food startup which sells frozen smoothies and veggie bowls. When the crisis started in the U.S. three weeks ago, the 37-year-old CEO began doubling up on inventory and has since appealed to her network of 400 farming suppliers to keep produce flowing to Daily Harvest kitchens. Sure enough, as more and more states began mandating residents stay home to avoid spreading the virus, sales have surged.

“I don’t think a lot of people have actually tasted good figs,” Drori said a few months ago on a visit to a partner farm in California’s central valley. She reaches for a low-hanging branch and plucks a ripe fruit, slurping it as she speaks. “Eating fruits and vegetables shouldn't be hard, but it's the hardest thing.” 

Her strategy is to make it super easy for a generation too busy, too tired or too quarantined to prepare their own meals. Even before the coronavirus hit, Millennials hated to cook. According to a 2017 USDA report, Americans aged 25 to 40 spend 55 minutes less per week, on average, cooking and washing-up than Gen X adults. Now with restaurants shut down – and even take-out becoming limited – those millennials are going to have to learn to fend for themselves – or face weeks upon weeks of frozen pizza. 

In the five years since it launched in 2015, Daily Harvest has grown into a $125 million (2019 sales) business. A subscription costs around $90 a week with 4 to 12 ounce cups or bowls of frozen food delivered directly to customer’s doorsteps. Each contains between 80 and 500 calories, the equivalent of a light meal. 

Daily Harvest has also upended the way those cups make it to tables. Many fruit farms pick their crops weeks before they ripen, gassing them in warehouses to complete the process. Daily Harvest partners use on-site freezing technology to preserve the crops within 24 hours of being picked. Once frozen, the ingredients get mixed up and packaged into pre-made recipes that are turned into a meal by adding milk and blending, or tossing into the microwave.

Daily Harvest has so far raised $50 million in funding, making it a leader in the growing category of home-delivered prepared meals. Independent investors tell Forbes the company could be worth as much as $500 million, giving Drori a net worth of $125 million. 

Business comes naturally to Drori, the youngest of five siblings born to two New York City entrepreneurs. For decades, her dad ran a small wallpaper business in Brooklyn while her mom is the CEO of a chemical distribution company. On her first day at Columbia Business School, the dean asked her incoming class to articulate the purpose of business. “To make money,” Drori responded honestly, diverging from more politically correct answers like “doing good” or “solving needs.” 

She started Daily Harvest six years after earning her MBA, while working as a marketing executive for the Gilt Groupe, funding it with $25,000 from her savings. The first products were smoothies. She used a local Trader Joe’s for ingredients and mixed them up on the weekends in a commercial kitchen leased in Queens. At the start she would mix the frozen produce she bought, seal it in plastic and pay her teenaged nephews $20 a night to deliver them in Manhattan. Pregnant with her first child, she pledged that she wouldn’t quit her day job until orders from strangers outweighed friends and family’s purchases five-fold. It took two months.

She focused her marketing efforts on social media channels, eventually building a micro-influencer program a few hundred strong, and soon expanded further out in the Northeast, and then California and the Midwest.

Daily Harvest says it’s been nearly profitable since day one and should be solidly in the black later this year. That’s one of the shortest payback periods ever seen by Carter Reum, cofounder of Los Angeles-based venture firm M13, who has invested in a slew of millennial-focused brands in addition to Daily Harvest, including Rothy’s, Bonobos and Birchbox. That financial discipline could pay off if the economy does go into steep decline.

“Rachel was one of the first people to recognize that the world was shifting from growth-at-all-costs to growth-with-profitability,” says Reum. “She’s built a tremendously successful, capital efficient business.”

Drori first began looking for funding in 2016, between the births of her two children, raising almost $50 million in three rounds from a mix of celebrity investors like Gwyneth Paltrow, Serena Williams, Shaun White, Bobby Flay and Haylie Duff, as well as VC funds Imaginary Ventures and VMG Partners. Throughout, she was peppered with questions about her ability to commit to running a business with young children to care for.

Most of that capital is still in the bank, despite moving headquarters twice in a few months after the business grew far more quickly than she projected and funding a pricey pop-up in New York’s Soho neighborhood and expensive advertising buys that include primetime spots on CNN, MSNBC and a full-page ad in the Sunday New York Times

Today Daily Harvest offers a mix of recipes: a line of soups introduced to keep sales moving during winter months, breakfast parfaits of oats and chia seeds, and bowls of mixed vegetables and grains. Its hyper-focused menu means Daily Harvest can create a new recipe in about eight weeks, while most publicly traded food companies require a year to do the same. It helps her quickly pivot too, like when a strawberry-vanilla smoothie proved to be a dud and was given new life as a cherry-almond shake that sold 30% more cups in its first week.

She’ll need that kind of help to stay relevant in what can be a fickle customer base. When Drori started, Blue Apron was on its way to becoming a foodtech unicorn valued at $2 billion but by the start of this year, it was a penny stock company with revenue of $450 million, half the size it was at its 2017 IPO.

But that was before the coronavirus. A rush to hoard food has quadrupled Blue Apron’s value in the past month. HelloFresh, the meal-kit leader in the U.S., took nine years to become cash flow positive, which it did, on an annual basis, for the first time earlier this month.

Drori insists she has an edge over the meal-kit crew because her product comes frozen, which means it will keep even if consumers wait days or weeks to prepare it. It's also easier to ship than fresh food. And Daily Harvest’s recipes don’t change every week, which helps keep headcount down. She aims to use those advantages to reinvent the perception of frozen food.

“I have no interest in the freezer aisle. It's broken,” Drori says. “We have totally turned that on its head. We're reimagining what a packaged food company can look like.


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