ReGen Brands Recap #56

Kyle Koehler @ Wildway

Transitioning An 11-Year Old Brand To 100% ROC™

Kyle Koehler is the Founder and CEO at Wildway. Wildway is supporting regenerative agriculture with its commitment to transition its entire product portfolio to Regenerative Organic Certified® (ROC™). Wildway's product lineup includes 4 SKUs of Planet Friendly Oats (fully ROC™), 3 SKUs of Coconut Chip (fully ROC™), and 10 SKUs of Grain Free Granola that are currently transitioning to certified organic and ROC™. Their products are heavily distributed in Texas plus the coasts, including California, New York, and New England. 

A Bootstrapped Build

Build it and they will come. That’s the leap of faith Kyle took 11 years ago when he launched Wildway. After years working in accounting in New York, he returned to Texas to pursue a very personal passion. Adhering to the Whole 30 program, he had spent years taking things out of his diet (soy, dairy, sugars and more), and saw an opportunity to capitalize on the niche success of a granola recipe originally created simply for his own enjoyment. After having some success at farmers' markets in San Antonio, Kyle thought he might have a winner on his hands. Armed with his newfound confidence, he walked a sample into Whole Foods' corporate office without an appointment, met with a buyer, and got his product on the shelf within 6 weeks. Wegmans and HEB soon followed.

“It was a lot of just really scrappy work and labor to begin with. We still produce in-house today, moving from a rented commissary kitchen space to our own 1,000 sq foot manufacturing facility. It was just, whatever it took, you know, whatever we needed to do to kind of make it happen and get it into stores in those early days.” – Kyle

Ditching Diet Culture

As the grain-free, paleo, and keto trends gained steam, it became clear that Wildway was getting sucked into “diet culture” – but Kyle's vision was different.

“My emphasis for Wildway was always to get people to eat real, whole food…If we’re going to talk to people about getting back to the wild, we need to really embrace the agricultural principles that take us there. We need to look at how our products are grown and where they're grown and really focus a lot more on our ingredients and supply chain. We need to use ingredients that aren’t just better for people but better for the planet as well.” – Kyle 

For Wildway, COVID offered an opportunity to reset. They phased in a more holistic, systemwide approach that required balancing the desire for better ingredients with keeping their products affordable (inspired by Kyle’s more modest upbringing).

“I wanted to make products that were also accessible to people that really needed them. We bootstrapped it – making some really hard choices. Now that we've grown and have a little bit more scale, we’re able to do what we initially wanted to do with all the ingredients – transition all of them to organic and take that step further on the regenerative side.” – Kyle

Transition Pains

As Wildway found out, the transition to organic and regenerative organic is not an easy one:

    • Sourcing ingredients directly can require higher minimums, create longer lead times, and negatively impact cash flows
    • Sourcing organic ingredients requires additional operational complexity and cost in terms of refrigeration, shelf-life, and logistics
    • Distributors can pile on fees and forms related to the transition to organic and they often buy big quantities at lower prices when they know new versions of certain SKUs are coming soon
    • Sometimes you have to make the tough call to discontinue a product line (the 95% ingredient threshold on organic or ROC™ claims adds complexity and expense for multi-ingredient products)

“All the price considerations from distribution into retail, it becomes a lot to chew on, right? When you start factoring in all those things and try to build all those things into your margin calculation, it can become a nightmare – especially with something like a granola that's got a dozen ingredients. It's not something that's gonna happen overnight.” – Kyle

Collaboration > Competition

For regenerative brands to succeed, Kyle believes we need a new mindset – spelled out succinctly on his shirt. 

  • Purpose > Profit
  • Signifiance > Scale
  • Collaboratoin > Competition

“There are a lot of ways to build collaboration into this space so we can all be more successful. We’re all sourcing the same things from the same systems, and we’re all working towards the same thing – changing what's broken within our food system. So it benefits all of us to be a lot more collaborative than competitive.” –  Kyle

His suggestions?

  • Share the costs of educating retailers and consumers
  • Put collective pressure on retailers to prioritize regen and give preference to regen brands
  • Aggregate sourcing and processing infrastructure for regenerative ingredients 

Funding their Future

As Kyle sees it, VC funds are applying their tech funding models to food – investing in 20 or 30 brands hoping that at least one of them will see a big exit and "return the fund." This model is incredibly binary (massive success or massive failure), with no middle ground, and a very limited timeline (usually less than 10 years). It’s also a model that’s not going to work for 99% of food brands that aren’t built for that big exit, particularly for brands that want to build a business that's mission-driven and purpose-aligned for the long term. 

Kyle believes it’s especially not practical to expect large returns in a compressed timeline in the regenerative space where brands are focused on long-term outcomes. There’s a need for different models to fund these companies – and that’s why they've embraced redeemable equity.

How it works for Wildway:

  • An investor buys shares in Wildway
  • Wildway redeems 75% of those shares over time (specifically, Wildway redeems shares as a certain percentage of their revenue until 75% of the shares are fully redeemed)
  • Wildway puts a multiple on it, redeeming shares at a 2x valuation from what the investor purchased them – meaning over the lifetime of the investment, the investor gets a 2x return on 75% of the shares
  • The investor keeps 25% of the shares; if there is a liquidation event or acquisition, the investor participates – regardless of when or if that happens
  • It's a true win-win for both the founder and the funder. Wildway gets to stay mission-aligned and purpose-driven, avoiding that growth-at-all-costs business model. The investor gets their risk reduced and still gets a decent return, with the opportunity to participate in any large upside if there’s an exit. 

“It solves a lot of the problems that exist with the traditional funding model. I’ve seen so many entrepreneurs over the years get sucked into these models early on and then their vision for what they want for the business changes later. But guess what? They can't do anything about it because they're stuck on this train of “I got to go and exit and I have to generate a certain return”. That return comes first before purpose, before mission, before anything else at the end of the day.” – Kyle

50% Market Share for Regen

To gain real traction, Kyle believes regen brands have to get clarity around how to market their claims and get consumers to think more holistically beyond dietary attributes. He also believes retailers must share the burden of identifying how to make these claims resonate with consumers.

For Wildway, that means leaning into “beyond sustainable,” the initial tagline they're using on their ROC™ Planet Friendly Oats. 

“We want people to stop and not just get what they've always gotten off the shelf, but like say, hey, what is that? And why is it what it is? We want to stoke some kind of curiosity in the customer to stop, pick it up and read more and want to learn more about what regenerative is.” – Kyle

You can check out the full episode with Kyle Koehler @ Wildway HERE.

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This ReGen Recap was produced with support from Kristina Tober