BALTIMORE — Could the future of snacking include marshmallows? Jon Sebastiani, founder and chief executive officer of Sonoma Brands, is willing to take that bet.
Months after launching his consumer products incubator and venture fund, Mr. Sebastiani is unveiling Smashmallow, a brand of premium snackable marshmallows made with simple ingredients and sweetened with organic sugar. Flavors include mint chocolate chip, toasted coconut pineapple, strawberries and cream, root beer float, Meyer lemon chia seed, cinnamon churro and espresso bean.
The launch is a marked departure from Mr. Sebastiani’s previous venture, Krave Pure Foods, Inc., the premium jerky brand he established in 2009 and sold to the Hershey Co. last year. Or is it?
“If you think about the similarities of what we did with Krave in the jerky space, where six years ago we entered a very stale category, where meat snacks were relegated to the gas station, and we breathed life into it with flavor and innovation and better-for-you ingredients, we really took a page out of that playbook and feel the marshmallow is really ready for the same graduation back into the spotlight,” Mr. Sebastiani told Food Business News.
Smashmallow, along with another recent launch from Sonoma Brands, Zupa Noma, were on display at Natural Products Expo East, held Sept. 21-24 in Baltimore. Launched in June, Zupa Noma is a chilled, ready-to-drink soup line that was developed as a lower-sugar alternative to premium juices.
“What we’re doing by creating a convenient, ready-to-sip, no-spoon-required product is changing the way people think about soup,” Mr. Sebastiani said. “If you go into grocery stores, convenience stores and gas stations in Europe, gazpacho is a very common beverage for people to grab and go, much like any form of beverage we have here whether it be a water or a juice.”
Most of Sonoma Brands’ capital, about 75%, is dedicated to investing in early-stage businesses with a better-for-you positioning. Powered by a team of industry veterans, including those with previous experience at such brands as PopChips, Vitaminwater, Pirate’s Booty, and, of course, Krave, Sonoma Brands provides expertise and support across all business functions.
In March, Sonoma Brands made its first investment, taking the lead in a minority funding round for Dang Foods, a Berkeley, Calif.-based maker of coconut chips and onion chips.
“When we make an investment like we did into Dang Foods a few months ago, it’s not just our capital that fuels the growth of the company; we’re literally going to join them in sales and marketing and operations and finance,” Mr. Sebastiani said. “The stage of investments we’re making — which is earlier stage, meaning revenues are generally around $10 million — most of the time the founders of those companies are still wearing every hat. They’re the chief marketing officer, the chief operating officer, they’re doing everything. And it’s a real hard transition from doing everything to letting go and hiring seasoned professionals to help build your business to the next stage.
“I think that’s how we can offer the most value. Because we’ve been there before, and we’ll join the entrepreneur and help build out that team to the next level of development.”
Read on for more business and innovation insights from Mr. Sebastiani.
Food Business News: What drove the insights to launch Smashmallow?
Jon Sebastiani: As an avid marathoner with a vicious sweet tooth, over the years the marshmallow in my cupboard was always a go-to because fundamentally it has zero fat, lower sugar than many other sweet snacks, and it was something that would satiate my sweet tooth but not be terrible for the waistline.
It was during a trip last summer through France, where the marshmallow is a real snackable delicacy and something consumers regularly enjoy throughout the day, when it really dawned on me. That was the epiphany. This country views the marshmallow kind of as this old, stale product that is only used for s’mores or perhaps a rice crispy treat, and that, if manufactured differently with some innovation and some packaging delight, we could reintroduce the product to the consumer.
With that epiphany, we set out with our R.&D. team and really looked to determine how we can strip the marshmallow as we know it today from all of the negative ingredients, like high-fructose corn syrup and artificial flavors. What we have today with Smashmallow is a super clean ingredient deck, it’s all organic cane sugar with all natural ingredients, whether it be dried fruits or other inclusions.
We think the consumer is not ready to completely abandon the sugar confection space, which is a $30 billion-plus space, and try out a marshmallow. So far, this humble snack reintroduced with this fun packaging is being received by customers in a very positive way.
Who is your target consumer for this product?
Mr. Sebastiani: I think it’s appropriate for us to admit that’s what we’re figuring out right now. We’re not going to pretend we know where we are as the incubator division of Sonoma Brands — the incubator division is perfectly curious —and we want to remain agile to adopt and adapt to any changes in our assumptions.
We believe clearly the packaging and the way we presented this is a playful approach, and so it is more female-centric than a more male-focused product.
This is not meant to be a kids-only food. We get that question all the time. Absolutely not. Many people still like an afternoon sweet treat, and this is something that’s perfectly snackable.
Why did you establish Sonoma Brands?
Mr. Sebastiani: I spent the first half of my career in the wine business in Sonoma. I come from a family of entrepreneurs. My great grandfather was an entrepreneur, too, when he came to America from Italy and started the second winery in California and the oldest winery in Sonoma.
When our family sold our winery in 2005, I started Krave. Krave was a real eye opener for me in the world of food. It opened my eyes to a level of enjoyment different from the wine business. When you’re in Sonoma or Napa, there are hundreds of wineries, but in the food business, we’re more mission driven. There’s an opportunity to fill a void that doesn’t exist or purely blaze a new trail with new categories or new innovative thinking.
When I sold Krave last year that was the moment of “what’s next?” I personally really enjoy the early stage of a business development the most.
We are very mission driven in terms of trying to find better ways of doing old products and old thinking. Not only is Sonoma Brands in its DNA an incubator of new brands, but we also wanted to provide the learnings of the ecosystem that we have developed by building Krave with other entrepreneurs.
There’s lots of investors in the food space today… from larger private equity groups to individual angel investors. What makes us different is we bring a team of veterans to the table with our investment. We redefine what the term “value-added capital” means.
What did you see in Dang Foods and its product offering that made you want to get involved?
Mr. Sebastiani: It’s very well known that we as Americans are eating differently. We’re not eating meals as regularly as we once did, and we’re snacking throughout the day. The term snacking is being redefined every year.
When you think about the ordinary potato chip or flour-based chip or tortilla chip, which is a massive category, and then you look at a fruit-based chip or vegetable chip, we felt this represented a far healthier opportunity for the consumer to still get that crunch and that grab-and-go, easy-to-consume convenient snack food, and it was just far superior, we believe, and represents a future snacking platform than using a genetically modified potato.
We also look at the founders themselves. At the end of the day, all the way through the lifecycle of the business, the founder is really the most passionate, most important sales person that a company will have. If that founder has an authentic story, meaning they created the company out of something authentic and real to them, that’s a value-add. Vincent (Kitirattragarn), the founder of Dang, named the brand after his mother; this is her recipe that has been passed down through generations.
Make no mistake, coming out of Krave, we understand the snack business; we understand the channel strategy associated with snacks. That’s in our core discipline.
In terms of future investments, what product categories are interesting to you right now?
Mr. Sebastiani: The continued movement in plant-based, vegan, non-dairy products that are touching almost every area of the store from cheeses to butters. We’re really interested in looking at that. We think there are a lot of health reasons why this is going to continue. It’s less impactful to our environmental footprint. These are products used every single day. We think there’s a lot of innovation. The flavor profiles of these products are improving greatly. So we’re looking at several companies in that category.
We’re also looking at the major shifts away from soda pop and all the beverages that are gaining steam because Americans are drinking less and less soda, and that’s a reality we think will continue. I think kombucha is a phenomenal category that’s going to keep growing. We like that space.
What’s next for Sonoma Brands?
Mr. Sebastiani: The plan is to stay the course. We’ll show up to Expo just like other investors to meet and greet other entrepreneurs… And about 25% of our capital is going toward continued incubation, not only funding the two brands today, but designing new ones.When you think about Sonoma Brands two years from now, we will be a bigger organization with more capital but doing predominately the same things. This is a real disruption to the investment model, where we are coming to the table with capital and we’re not just joining the board, which is what most investors do, but we’re actually delivering a real toolbox of tactical support that’s going to help a company grow.