If you visit the Really Cool Foods website today, you'll find a bare bones splash page that promises: "We're busy cooking up some REALLY COOL stuff and will be back soon. REALLY." But "really" in this case means "never." The organic and natural prepared foods purveyor failed to find a buyer or investors willing to keep production running and closed its doors in Cambridge City, Ind., on Nov. 28.
The company that had once planned to hire 1,000 workers instead will be laying off 131 people, the company's chief financial officer, Joseph Meyers, reported in a letter to government officials. In the three months Really Cool Foods has been on the market, no parties stepped forward and the company's lenders were unwilling to advance additional funds.
A 21-year-old Really Cool Foods worker, Josh James, offered his perspective on the closing to pal-item.com. James had been working for the company since 2010: "It was just sorry management, sorry people who were running the place. I had about five different supervisors on the projection floor and four different (human resources) directors," he said. "I'm more sad than anything else because the company had a lot of potential but didn't have the right person in the driver's seat."
Timeline of Really Cool Foods' struggles
A review of the company's timeline shows that Really Cool Foods did experience many problems during its short time in operation. Below are some highlights:
In an October 2007 groundbreaking ceremony, Really Cool Foods announced it would make a $100 million investment over five to seven years in Wayne County, Ind., reported pal-item.com.
In 2009, the company's production facility came under fire for wastewater treatment problems. The company had nearly 200 employees at the time.
After two rounds of layoffs in 2010 and 2011, and more struggles and money paid to curb its wastewater problems, the company took a brief production break in October of this year.
This month, the U.S. Department of Agriculture found evidence of Listeria at the plant, but the problem was remedied and no products were recalled.
- Really Cool Foods officially closed its doors Nov. 28, 2011. President Steve West said in a press release: "Although we have received support from both state and county officials, as a result of increasing costs and continuing delays in anticipated sales, we were unable to sustain our business and forced to discontinue operations."
Are organic, natural companies still lucrative for investors?
Although Really Cool Foods may have floundered, other natural and organic food companies should note this is not indicative of an industry downtrend. According to Nutrition Business Journal, total natural and organic food sales amounted to $32.7 million in 2007 (the same year when Really Cool Foods began operations in Cambridge City). By 2010, total natural and organic industry food sales climbed to $41.3 million with projections to hit $44.6 million this year.
"On the investment front, we see a lot of interest and plenty of deals," said Tom Aarts, principal of Nutrition Capital Network. "Stonyfield Farm's doing great, Kashi's having a record year, as are supplement companies."
So what happened to Really Cool Foods? The company's downfall appears to be wrapped up in mismanagement and a changed investment climate.
Lance Gentry, now president of Justin's Nut Butter, worked for IZZE when the Boulder, Colo.-based all-natural sparkling beverage company sold to Pepsi in 2006. "In those days you could build a business to significant revenue, lose money every year and still sell," he said. "Now, it's really about being profitable." Plus, many venture capitalists aren't willing to invest at the evaluations companies are demanding.
How to attract investors
Aarts said investors are all looking for the same key things when making deals: companies that have momentum, substance, a proven sales record and a way to differentiate their products. But perhaps most important is the people behind the company.
"Who's the CEO, what's the team and what's the track record?" he asked. This is perhaps what made Really Cool Foods unattractive to potential buyers, ultimately leading to its closure. There's less chance of closure for an organic, natural company that has the right management, but the threat is still there.
"It's really hard with a small company like Justin's, EVOL and Hope Hummus," said Gentry. "All of us are spending a lot of money to grow our businesses and gain market share. Justin's has grown triple digits year-over-year for three years. But we're understaffed and we're underpaid. That's what you have to do if you want to build a sustainable business that's attractive [to investors]."