Kencko Foods

At $85 million, Kencko Foods is reasonably priced for a company bringing in $31 million in 2022 gross revenue. Daily Harvest, one of the closest competitors in the market, was valued at $1.1 billion following a Series D round led by Lone Pine Capital and Lightspeed Venture Partners. It is not out of the question for Kencko to grow 10x and reach an $850 valuation given the current market demand and growth of proxy companies. 

Kencko Foods’ offering straddles a few different markets. The primary product offering is smoothies, but you could argue that the company also competes in the meal kit delivery space with the bowls (and some consider smoothies to be meals), as well as the supplement or snack space with the gumdrops. The U.S. fruit-based smoothie market sits around $1 billion, but the meal kit delivery market comes in at around $8.2 billion for 2023. Kencko’s true addressable market is somewhere in between those figures. 

One of the largest market drivers is the growing popularity of meal delivery services. Meal kits are becoming more of a norm as we settle into a post-pandemic lifestyle of returning to the office while trying to stay healthy. People have less time to cook and will often choose convenience, especially throughout the work week.

Kencko Foods was founded by Tomás Froes, a serial entrepreneur in the food sector. Froes’ last venture, a frozen dessert company based in China, was acquired by Dr. Oetker, a frozen foods line. Froes holds a master’s in management from Babson College. He has built out a robust leadership team, filling the chief financial officer, chief commercial officer, vice president of brand, vice president of product, vice president of supply chain, director of nutrition, and director of social and environmental responsibility roles with seasoned professionals. His ability to recruit and retain top talent so early on and in such niche but crucial roles for a consumer goods and food company speaks volumes about Froes’ leadership — as well as the company’s health and potential.

Daily Harvest, a $1 billion smoothie delivery company, is probably Kencko Foods’ closest major competitor. The incumbent has a clear focus on convenience and prioritizes fruits and vegetables. The bowl and smoothie offerings line up with Kencko. That said, Kencko’s smoothies come in freeze-dried dry packets as opposed to frozen, ready-to-blend cups. In this sense, Kencko stands out for convenience, portability, and shelf life. 

Kencko also comes out on top when it comes to price. Daily Harvest’s smoothie prices vary based on quantity, but roughly come out to $8.49 compared to Kencko’s $2.49. Of course, frozen foods from Daily Harvest will have a long shelf life, but they are less portable than a packet of dried ingredients that take up far less space. Kencko also indirectly competes with ready-made smoothies and smoothie shops like Jamba Juice, but the product value is so distinct that I believe the market demand seldom overlaps. 

If you start to include the bowls, which are still in development, and fruit gummies, competition also expands to meal kits and supplements, but seeing as the two are more secondary, add-on offerings, I would not be as concerned with established competitors in the space. Kencko boldly stands out amongst competitors in its core product offering of smoothies for portability, convenience, price, quality, and shelf stability. 

Kencko Foods founder Tomás Froes projects $62.3 million in revenue for 2023 and reports that the company is on track to reach profitability this year. This would be double the $31 million Kencko generated in 2022. These are bold projections, but Tomás did share that Kencko has signed an exclusive partnership with a large retail brand that will go live with a national launch very soon. If all goes well, it should significantly expand Kencko’s product reach, as thus far all revenues have been through e-commerce. Tomás has also secured more than $25 million in venture funding to date, indicating that firms see massive upside potential in the company. It should be noted, however, that Tomás refused to provide some updated financials, specifically the cash on hand and the burn rate. 

There are a few reservations I have about Kencko Foods. The addressable market is hard to estimate, but each individual market Kencko plays in is relatively small. Smoothies and meal kit delivery in the U.S. both come in under $10 billion. Certainly neither market is winner-take-all, but that leaves a lot of room for competition. None of the markets are expected to see massive growth anytime soon. Meal delivery has a slightly higher annual growth rate than the smoothie market, at 16.2% and 9.4%, respectively, but Kencko probably falls more in line with the U.S. smoothie market. Neither market has massive potential that could be shaped by government regulation, popular trends, or any other universal driver. 

The product is also not particularly defensible, and though it stands out significantly for both quality and price, there are a number of both direct and indirect competitors, especially when it comes to smoothies. Unfortunately, with food products, much of the quality is also up to individual preference. There are going to be some customers who don’t like the taste or texture, but with a 61% repeat customer rate, it seems that the majority of Kencko consumers are pleased with their purchases. 

Kencko Foods has a product offering that stands out significantly in a market that is difficult to widely disrupt: smoothies. Kencko’s freeze-dried food packets are significantly cheaper and far more convenient than other smoothies, have a long shelf life, and are portable. The products are all compostable, and in freeze-drying ingredients and improving shelf life, the company wastes less fresh produce. Saving space (freeze-dried packets can fit around 60 drinks in the same space as around six bottles would) and reducing waste drives Kencko’s affordability and eliminates traditionally inefficient logistics. This focus on sustainability also qualifies Kencko as a benefit corporation. 

Kencko has had stellar traction to date, with more than $30 million in revenue and more than $25 million in venture backing. The leadership team is robust, with in-house supply chain, brand, and nutrition experts. Founder Tomás Froes is also a proven entrepreneur with an acquisition in the food and beverage industry.

Kencko’s potential to expand beyond e-commerce is a hugely bullish indicator. The company’s exclusive partnership with a large retail brand is expected to double revenues and turn the company profitable in 2023. Should the team hit these goals, investors who get in at the $85 million cap this round have the potential to see massive returns.

Kencko Foods is disrupting the legacy health foods industry with an exciting new smoothie offering that is affordable, shelf-stable, nutritious, and does not require a blender. Founder Tomás Froes already has plenty of global experience as an entrepreneur in the food space, including an exit by acquisition. The company is on track to reach profitability this year with $62.3 million in projected revenue for 2023. Froes has also already secured millions in venture backing. 

What really makes this company impressive is that this is just the beginning. Kencko will launch nationwide in a major retailer in the near future. Getting in at this round before traction and value skyrocket is a strong play at Kencko’s current $85 million valuation. Neither smoothies nor ready-made meals are a winner-take-all market, and Kencko could easily provide 5x to 7x returns in the next few years to compete with large incumbents like Huel and Daily Harvest. That’s why Kencko Foods is a Top Deal.

Report written by KingsCrowd Investment Research Manager Olivia Strobl on April 5, 2023.