Bezos-backed plant-based company NotCo reaches $1.5B valuation

Matias Muchnick, NotCo Founder & CEO joins the Yahoo Finance Live panel to discuss the plant-based brand NotCo.

Video transcript

KRISTIN MYERS: Jeff Bezos has backed NotCo, a new company using artificial intelligence to produce plant-based foods. Now the company has raised more than $230 million in its latest funding round and is now valued at $1 and 1/2 billion. We're joined now by Matthias Muchnick, NotCo's founder and CEO. Congratulations on that money that you were raising in that last funding round. Let's just start with how NotCo really works. You guys say that you use AI to produce some of these plant-based foods. Exactly how does that work, that you're using AI technology as a part of your production?

MATIAS MUCHNICK: Sure, well, thanks for having me here, first. And second, well, one of the biggest problems in the food industry is that we don't understand what we eat. And therefore, the technology and this industry itself has been run by an obsolete technology for the last 50 years. And that created a lot of burden for the environment in efficiency and the use of resources. You know, it has become the common denominator to every major environmental field known to humankind-- you know, deforestation, land use, water [INAUDIBLE].

So one of the things we really wanted to do is to take the animal out of the equation, create our plan, you know, our milk, cheese, eggs, and meat from plants and from animals. So in that way, we need to first understand what actually milk was or what a piece of cheese is. And then we had to explore the more than 300,000 species of plants in the world. And we have no idea what they can do. We have unexplored 99% of them.

So in the idea of using artificial intelligence to allow us to predict which combination of plant-based ingredients should result in the same sensory experience as a target animal-based product, it could really create such amazing things. You know, so things that are not clear to humans, right?

So the combination of pineapple and cabbage to create the taste of milk, right? For a human being, it's very hard to actually understand that, but for an artificial intelligence algorithm, we understand that combination of ingredients, you generate the taste of milk. So at the end of the day, you have a product that tastes like the real thing, but comes from plants. And so, you know, if you have a better product in terms of sustainability at the same price, why not?

ZACK GUZMAN: Yeah.

MATIAS MUCHNICK: Right.

ZACK GUZMAN: Yeah, I mean, I've done a lot of things with pineapple. Milk's generally not what I make with it, but it is very interesting to see how this all works. And you guys have raised $350 million now to date. And you got more than just the nut milk products out there, not burger, not meat, not cream, not mayo.

It's interesting because we've seen the growth of some of these other companies maybe focused in on one product, and thinking about Oatly there with what they've been able to do with oat milk. I mean, with the money raised, maybe it is, of course, possible to chase all these categories. But why is that the better model to go with, rather than focusing in on just one?

MATIAS MUCHNICK: When you have-- that's a great question. And when you have a company that is based on technology, what you can do is basically create a system that will not only allow you to create your own categories of products. And we're playing different ones, right? And we-- there's that video showing we created a plant-based product for Burger King in Latin America. What you want to do is to really kind of, like, create that technology platform that has the potential of affecting other brands as well, right?

So not NotCo has a technology that is not only allowing us to create products faster, better, more accurate, and less costly than anyone else in the space, but it's allowing us to actually alter or affect or catalyze the change for other companies as well. So if you think about the Intel inside model, this is exactly what NotCo can do, basing everything as a tech-based company and not necessarily asset-only, CPG, mass market oriented company.

KRISTIN MYERS: You know, I do want to ask what some of the hardest foods to replicate are and really make plant-based. And what are you trying to push into next?

MATIAS MUCHNICK: Yeah, I mean, one of the biggest constraints is always allowing a product to not only have the correct [INAUDIBLE] also experience related to the price point, related to the nutritional fact labels. It's very hard to understand food only by replicating the taste, right? You need to, if you're replicating milk, you need to make sure that that milk has the nutritionals and also has the capability of creating other things as well, and lattes and all of your recipes, sort of your cookies, everything that you should use your milk with. You need to replicate that.

Textures generally are the most difficult things to replicate. So everything that has complex tissues, like, you know, a piece of meat, a piece of chicken, all of those things are probably the most difficult ones to replicate. But technology today has allowed us to really come very, very close to the real thing.

ZACK GUZMAN: And NotMilk on track after launching seven months ago. You say 8,000 retail doors by the end of the year. When you look at that distribution there, how is that matching up to the competitors you're trying to chase here, and what more should we expect to see, given the latest fundraising here to increase that?

MATIAS MUCHNICK: Yeah, I mean, this is a matter of two things, right? One is distribution, and the other one is velocities. And velocity is in the point of sale, so how many units for store per week you're sending. That's the traction. That's the momentum that you really need to try to build, right? It doesn't matter how many doors you have if you don't have velocities, right?

And so NotCo's ambition has always been to replicate the success case that we've had in the first retail chains. We launched in Whole Foods nationwide. And we created velocities that are above the average of the category. In only six months of sales with awareness, that is close to 0%, right?

This round will give us the ability to really deploy money and communications, deploy money into, really, the awareness and create partnerships with big QSRs that will help us get that awareness that we need in order to raise velocities in order to make a substantial market share penetration of our products. The list of things we want to do is to mesh our product into vegans, vegetarians, or anything. It's more about how deep we can go into the mass market because that's when you move the needle. That's when you change everything.