Revolution Foods. Transforming the way America eats.

Named by Fast Company as one of the most innovative companies in 2015, Revolution Foods is setting a precedent for social impact for-profit enterprises in the US. The now famous social enterprise was founded in 2006 with the mission to “transform the way America eats” [2] and is now delivering over one million meals a week to nearly one thousand low-income K-12 schools across America.[3]

Proof of Revolution Foods´ success shows in their revenue increase from $1M in their first year to approximately $100M in 2014 [4]. Additionally, they have received funding from notable investors in the impact investing world such as the W.L. Kellogg Foundation, Catamount Ventures and DBL Partners.

So, what exactly are they revolutionizing?

Revolution Foods is disrupting the $25B dollar school lunch market in the U.S. [3] by securing accounts that previously belonged to large processing centers that send frozen, packed foods across the country which are then reheated at schools. Some of these providers have typically put more emphasis on producing low-cost meals than they have on their health and quality attributes. [5]

In order to deliver on the promise of a better alternative, Revolution Foods focuses on the following value proposition:

  • Food that is beneficial to children: They deliver “real”, fresh, healthy and hand-prepared meals to public and charter schools in low-income areas of the country. The meals have no artificial colors, flavors or preservatives, no high fructose corn syrup, no nitrates or nitrites, no fillers and are made with 50% locally sourced ingredients that “promote growth and development” [2]
  • Food that is low cost and low price: In order to compete, they have to comply with regulations which put a ceiling of $3 on the price per meal [5]. Because of its for-profit nature, Rev Foods faces the pressure to produce a meal that costs less than $3.
  • Food that kids actually want to eat [6]

The company is actually capturing two types of value: economic and social. The meals are intended to promote health and combat childhood obesity. Financially, even though the company has not yet turned a profit, its promise to investors is that it will yield market-rate returns and is preparing for it by reinvesting its capital to fund accelerated growth [5].

 

actionPic-revFoods        Rev-foods3039619-inline-i-1-most-innovative-companies-2015-revfoods

This seems like a lot, how do they do it?

Revolution Foods is first strategy driven, the operational strategy supports its mission in several ways:

19-revolution-foods

Revolution Foods operates from a centralized kitchen in each of several geographic regions it serves. Food is prepared daily in each of the kitchens. In order to keep costs down, Revolution Foods’ responsibility ends at delivery – food is served in schools by school personnel.

The same day it is prepared, food is delivered fresh in company-owned trucks that are outfitted to keep the meal cold or hot as necessary. The meals delivered are served fresh to kids either on the same or next day. Food truck drivers have an important role in maintaining the integrity of the food until it reaches the school. The company regards them as “field food safety experts” (legacy) and provides them with extensive training on food safety. [7]

Ingredients are sourced locally approximately 50% of the time. Additionally, by managing other meal products such as lunchables sold in retail establishments, Revolution Foods can potentially achieve bargaining power with larger suppliers.

A substantial effort is put forth in providing meals that kids in schools enjoy eating. Data is used periodically to understand which meals have not been eaten on a given day and chefs visit classrooms to do tasting with kids before engineering certain menus. Additionally, meals also cater to regional tastes and presentation is designed to be appealing to children. [1]

Human resources also plays an important part in the operational strategy. The company enjoys low turnover rates and strives to select employees that are aligned to the mission, like parents of students. Furthermore, according to the Benefit Corporation Nonprofit, over 21% of Revolution Foods Employees are hired from underserved communities and 50% are women. [8]

A winner setting a precedent

Revolution Foods has managed to successfully enter a difficult market by fighting a pressure on costs and prices, designing a complex and responsive distribution system and delivering on its promise to provide fresh and healthy meals to low income kids in America. I believe that without its well thought operational strategy, the success story would be much different.

This alignment of business and operational strategy has been particularly important for Revolution Foods as a social enterprise striving to deliver social value while being self-sustainable. As social enterprises continue to grow they must look at this success story and think about what decisions they need to make to achieve alignment in their own context.

Sources

[1] http://www.fastcompany.com/3039619/most-innovative-companies-2015/revolution-foods

[2] http://revolutionfoods.com/about/

[3] http://casefoundation.org/wp-content/uploads/2014/11/ShortGuideToImpactInvesting-2014.pdf

[4] http://www.entrepreneur.com/article/238277

[5] http://www.economist.com/news/united-states/21577098-new-company-trying-make-school-meals-healthier-biting-commentary

[5] http://www.inc.com/articles/201107/revolution-foods-innovating-schools-one-lunch-at-a-time.html

[6] https://sharedvalue.org/sites/default/files/resource-files/SharedValueinAction_RevFoods_12-2013.pdf

[7] https://legacy.daydots.com/article.asp?HKEY=004&strPRODH=001&ArticleCID=55&ArticleID=5

[8] http://www.bcorporation.net/community/revolution-foods

Previous:

Meritage Midstream: Stable infrastructure development in an unstable energy environment

Next:

Maple: A Restaurant without a Restaurant

3 thoughts on “Revolution Foods. Transforming the way America eats.

  1. thanks for the great article! I wonder what their price point is because making nutritious and great tasting food costs more with the current America’s agriculture supply chain. If they are at the higher end of the market, are they truly making a difference or just purely answering a need for better food at richer schools?

    1. Thanks for your comment! They have to comply with the $3 per meal that the meal refund programs mandate; so they’re explicitly targeting lower income school (although they do have products catered for higher income – which subsidize school meals)

  2. It is great to hear that a firm like Revolution Foods is attempting to create value by providing healthy meals to young people. You pointed out that “the company has not yet turned a profit”, so I am concerned if this business will be sustained in the future. Will it be possible for Revolution Foods to capture enough value to make the business sustainable? In my understanding of the food industry, healthier foods tend to cost more than unhealthy foods (e.g., fruits and vegetables are more expensive than a burger from McDonald’s). As a result, Revolution Foods will face significant pressure on profit margins due to the price ceiling on food. Since they cannot increase prices, Revolution Foods will be forced to reduce costs. It appears that increasing the scale of the business provides an opportunity to reduce costs. Currently Revolution Foods is focused on delivering meals to low income kids in America. Are they looking at opportunities to reach kids at all income levels? By serving a larger customer base, Revolution Foods should be able to secure low prices as they purchase larger volumes of food. The larger volumes of food will lead to lower food costs, and as a result, it should increase profit margins.

Leave a comment