Danone Manifesto Ventures takes controlling stake in Harmless Harvest: ‘We want to preserve the unique DNA of the company’

Speaking to FoodNavigator-USA after DMV – Danone’s corporate venture arm – acquired a controlling stake in Harmless Harvest, Mand said: “Danone brings a ton of capabilities and resources, from expertise in packaging and processing to infrastructure that we can potentially leverage, so we have been actively looking at expanding internationally. “We haven't announced yet where we're going to launch first, but we’re looking at Asia, Europe and further expansion in North America.” Danone Manifesto Ventures (DMV) CEO Laurent Marcel added: “ In some cases, our investment agenda is to take a minority stake and to learn, and in other cases we invest in brands or categories or products that could fit very well one day in our portfolio, and Harmless Harvest is a perfect example of that [Danone has targeted €5bn in plant-based sales globally by 2025]. “ Over the last four years [DMV led a $30m round in San Francisco-based Harmless Harvest in 2017], especially since Ben joined the company in 2018 , we have developed a true partnership to identify areas where we could create value together; so one good example of that is the launch of the coconut yogurt , which is made in a Danone factory. We have been a support system and an advisor on supply chain, manufacturing, and innovation.” 'What we want is for Harmless Harvest to continue operating independently ’ Now that DMV has acquired a controlling stake in Harmless Harvest (for an undisclosed sum), said Marcel , “Ben and the team will remain as leaders of the company. What we want is for Harmless Harvest to continue operating independently, because we want to preserve the unique DNA of the company. “But at the same time, we think there are areas where we can amplify the support and the collaboration, for example in sales and distribution.” On international expansion, he said, “What we want to do… is identify where we have the best chances to win.” ‘On the core business, there’s a lot of upside…’ In the immediate term, however, there’s still a “ huge amount of runway ” to grow the Harmless Harvest brand in the US, where the company’s double-digit growth outpaces the competitive set in coconut water, with sales expected to surpass $100m this year, said Mand, who said this more than doubled 2017 sales. “On the core business, there’s a lot of upside. A lot of it is just simple blocking and tackling, getting the right pack size, selling multipacks . So single serves were down for a while [during the pandemic], but they've flipped back to growth as things have really opened up again. “We’ve also streamlined our business and gotten stronger from a supply chain standpoint, so we’re able to start investing more in marketing and promotions to raise awareness, as we have exceptionally strong repeat rates. When people try our products, they tend to repeat disproportionately higher than any other products. “There’s also room to grow distribution because we are still only just over 50% ACV in the MULO channel. We’re also growing our e-commerce business… we've seen significant acceleration [in online sales over the past year]; we launched our own DTC [direct to consumer] site and we're on Amazon.” ‘The velocities have been very strong…’ Good start for coconut non-dairy yogurts New products beyond pure coconut water have also driven incremental sales, he said, highlighting the success of Harmless Harvest smoothies and coconut (non-dairy) yogurts , which combine coconut meat and coconut water, and launched in Whole Foods last year. “ The velocities have been very strong. Whole Foods is very pleased with our performance, and we’ve started to expand in other natural players where we’re seeing similar ramp ups in velocities and similar performance. So we feel very good about the dairy side as it's a compelling offering that's differentiated, as we have a very novel way of making our yogurt versus most other yogurt brands [see box below].” The flavored coconut waters are also performing well, he said, although the brand’s protein & coconut beverages featuring pea, pumpkin, and sunflower seed protein, did not set the world on fire, he conceded. “We were not the first to market on protein, so we were not as well established. It [initially] did pretty well, but during the pandemic, people were not buying as many on the go functional items, so we went to our retailers and said this is not a business we think we're going to be in long term, and we’re exiting.” NPD: ‘I think of the [addressable] market as premium functional beverage’ More new products will be launched over the next 12 months, he added: “ There are a number of areas within beverage where we think have opportunity. “I think of the [addressable] market as premium functional beverage, so we are looking at the entire set. If you look at who's buying Harmless Harvest, they're also buying kombuchas and things like that, so as we think about innovation, it doesn't have to be 100% coconut water. “In the short term, you’re going to see a fair amount of coconut. However, we are already starting to incorporate other ingredients, and long term, it is not embedded that Harmless Harvest has to be coconut.” Inflation: ‘The biggest challenge right now is freight’ Asked about inflation – with CPG companies across the board reporting higher costs for some raw materials, packaging, and freight – he said: “ The biggest challenge right now is freight, getting items to the US from Asia [Harmless Harvest sources its coconuts from Thailand], but we're making it work.” On packaging, he said , “We're in the process of converting to 100% rPET (recycled polyethylene tetraphyte), and so with that we're seeing a very significant increase in cost anyway.”

Danone Manifesto Ventures takes controlling stake in Harmless Harvest: ‘We want to preserve the unique DNA of the company’

Harmless Harvest and majority stakeholder Danone Manifesto Ventures (DMV) are exploring opportunities to take the organic coconut water into international markets, says CEO Ben Mand, who says the San Francisco-based brand also has the potential to stretch into new categories.

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