Innovating Schools, One Lunch at a Time
Childhood obesity, which has been linked to cardiovascular disease, diabetes, breathing problems, some cancers, and poor self-esteem, is a particularly painful epidemic in our country. Cases of childhood obesity have tripled over the last 20 years, and according to the Center for Disease Control, approximately 17 percent of all children in the U.S. are obese.
A number of efforts are trying to stem the tide. First Lady Michelle Obama's "Let's Move!" initiative hopes to solve childhood obesity within a generation by emphasizing pro-active solutions for eating right and staying active, but one socially responsible company is zeroing in on one of the main sources of poor nutrition: school lunches. Too many schools cannot afford to provide quality food for their students, so Kristin Richmond and Kirsten Tobey, two former grad students from Berkeley's Haas School of Business, are bringing healthy and wholesome menus to schools around the country with their start-up, Revolution Foods.
Since launching in 2006, Revolution Foods, based in Oakland, Calif., has provided low-income schools and students with unprecedented access to delicious and nutritious food. The company has already served about 400 schools in Northern and Southern California, Colo., and Washington, D.C., with plans to expand to Houston and Newark, New Jersey.
We caught up with the two co-founders behind this socially responsible culinary revolution—Richmond, the company's CEO, and Tobey, the CIO—to discuss how they built their program from the ground up, the challenges of operating within a strict budget, and how the company balances social responsiblity with practicality.
Why did you choose to revolutionize school food?
Kristin Richmond: We both had a huge passion for food. It's sort of like when all of your dreams come together, when you love a couple of things—for me, it was education reform, building better schools, creating access for students and primarily underserved communities—and then it was also food. I grew up on a cattle ranch in Texas, so it's been something that's been apart of me since day one. Food, where food comes from, and the importance of that.
Growing up, my mother always gave us vegetables, always gave us fruit and a balanced meal, and while it was always super simple, we were just taught to eat in a balanced fashion. It really impacted our strength and how well we were growing and how much energy we had to do our homework—all of those things. I grew up believing that, and then my experience working in schools, I saw these huge differences. I started a school in Kenya, and in Kenya, it's a different problem: It's malnourishment, but without food period. The ones that came with lunches had a certain level of focus at the school when I was teaching them, and ones that came with a slice of bread with margarine on top could barely keep their eyes open at the end of the school day.
Kirsten Tobey: I'd also done a lot of work in college working with kids to teach them nutrition education through gardening and connecting kids with where food comes from. We just saw this huge gap that there are a lot of amazing entrepreneurs working on teacher recruitment and academic success and college readiness and so many different things, but we didn't see anybody doing anything about food. I think we both felt this real disconnect out in the world between what we know is good for kids and making the connection to school food. If you can provide really good food for kids at school, you actually really do impact their academic success and their ability to learn and their ability to pay attention in class.
Richmond: We'd both been in education from different angles—Kirsten was a teacher, and I was primarily in operations and school building and talent—but both of us had had the same story where we had spent time in schools and kept hearing these teachers saying, "I'm teaching my kids one thing about how to take care of their bodies and how important it is to fuel their bodies and their minds, and how that correlates to test scores and focus in class and energy on the basketball court, whatever it might be. But then I go down to the lunch room and I just feed them junk food—I'm feeding them Hot Pockets and Cheetos as my meal every day at school, and I feel like a hypocrite."
For Kirsten and for me, we believe that the inputs into your students' bodies and minds equal the outputs of a great education opportunity for students. For us, it was an amazing chance to transform that access for students, and frankly, it really wasn't being done on a scalable level, particularly in low-income schools. That's what really catalyzed our movement.
How difficult was it to get the program up and running?
Tobey: It took a lot of work. We decided in order to get the program up and running, what we really needed to do was secure the financing. We focused a lot of our efforts during the second year on looking for investors who were intersted in helping us start this up, because it's a pretty capital-intensive business. In order to get things up and running, we needed to have a truck, we needed to have a culiinary center where we could prepare the meals, and we had to hire a team of people to help us with the cooking and packing and delivery of the meals.
Richmond: There was just so many pieces. We had to find school partners—which wasn't the hard part, that was the easy part because we had so many schools that wanted this change—but then we had to find supply chain partners, which was quite challenging and remains challenging because we're constantly striving for high quality and low cost.
Tobey: We started up a pilot program [in Oakland, Calif.] in order to help demonstrate what we were trying to do, but also to have something to show investors. We actually partnered with the regional leadership team of Whole Foods at the time. In the pilot stage, we didn't have any facilities to work out of, so Whole Foods actually made the meals for us. We would go out, pick up the meals, bring them to a lighthouse community/charter school here in Oakland, and serve the meals to the kids ourselves.
We found it was a great pilot program, but what we really wanted to do was decide our own menus and make the food exactly how we wanted to. So we raised a C round of funding from a capital fund called the Bay Area Equity Fund—they're now called DBL Investors. We had this very small pilot program and a business plan and they said, "We're going to give you the capital that it's going to take." In the first year, we ended up serving 1,000 meals per day to a handful of schools here in the Bay Area.
How has your company grown since launching?
Tobey: We started with just the two of us. In our first full year, we had six employees, and now we have just about 500. From a revenue level, we were at about a half million dollars in our first year and we're hoping to finish this year close to the $30 million mark. We've grown quite a bit revenue-wise, and then we've grown from about 1,000 meals a day in our first year to this year, where we were serving about 70,000 meals per day. This coming school year, we're slated to do 100,000 school meals per day.
Why did you start to sell your own line of products?
Tobey: We knew we wanted to expand and achieve scale. We always had a mission that we wanted at least 80 percent of our meals to go to low-income kids and kids that qualify for free lunches at school. It's a very low margin; we can't raise prices just to make sure that we have a comfortable margin, there's really a ceiling on the price that we can charge to schools. In developing this business model, we realized that one of the things we could do is to have other business lines that supported the school meal program. One of the things we looked at was this idea of selling a retail product—essentially a higher margin product line—and we ended up partnering with another company called the Nest Collective to create that product line.
Richmond: That happened pretty early on. In our first year, Whole Foods approached us and said, "We really believe in this mission, and we really believe that consumers would believe in this mission." I think they saw a trend of consumers wanting to focus on buying things that made a difference. That was the real premise behind the launch, so we launched it in our second year. Since then, the product line has grown tremendously. Now, we've got distribution at Toys R Us, Babies R Us, Whole Foods, and Target (in pilot form). We have lots of distribution and the product line's expanding pretty rapidly.
Tobey: I'm a mom and I pack my kids' lunches every day because there isn't a program at my daughter's preschool, and it's just incredible to have handy things to throw into the lunchbox without having to think about it.
How do you go about pitching to schools?
Tobey: A lot of schools come to us through word of mouth. They hear about what we're doing through other schools and from the NewSchools Venture Fund, one of our investors that funds several charter school organizations and other school support organizations.
For schools that we're going out to and pitching the idea to, it's a pretty logical conversation to have. If you give kids a healthy breakfast and a healthy lunch, kids aren't tired in the afternoon, they don't fall asleep in class, and they're not having sugar highs and lows throughout the day. We see a lot of behavioral and academic positive impacts as a result of the program.
How do you choose which schools or regions to target?
Tobey: We chose the Bay Area because that's where we lived and that's the area that we knew the most. It seemed pretty logical. With Denver, we were actually pulled in by a group of foundations and community leaders who were trying to solve the school lunch program locally and they couldn't find anybody within Denver who could provide healthy meals in schools. We knew there was a huge need in D.C., that there were a lot of schools that have a very low income population of kids who had no access to healthy meals, and the same is true in many cities across the U.S., which is part of why we're going into Houston and Newark. It's a combination of there being a real need and a lack of access for low-income schools.
Richmond: It's really a function of community. Even though we're national, we're still really grassroots in our approach. Everything starts with community need, parent activism, and school leaders reaching out. As we get a little older, we're also looking for partnerships with groups that can help us access facilities financing. We're a big job creation engine, so we create a lot of jobs through our program. Newark, for instance, was an example of an area that was really interested in attracting Revolution Foods for the job creation aspect. We're getting a little more sophisticated in that new market process, but it really comes down to community need and community support.
Have you ever turned down any schools because you just don't have the finances?
Richmond: Yes, we have turned down regions. I get outreach all the time that we're not able to meet as quickly as we'd like to, so we're also figuring out ways to scale our model more quickly.
We'd obviously like to get out to everybody, but at the same time, we also don't want to compromise our viability, because then we won't be able to get out to anyone. It's trying to be realistic, yet as aggressive as possible. We're always guided by our desire to impact as many kids as possible, and that's a really powerful incentive. That drives us more than anything else, in terms of our desire to grow and be impactful.
What's been your greatest obstacle so far in pushing this initiative?
Richmond: I think there's always a financial reality of cost. We've got schools that are undergoing a lot of fiscal pressure with their budget, we've got commodity prices that are rising—fuel's rising, dairy's rising—and we're trying to make this super high-quality high-integrity program fit in a budget that keeps getting smaller.
Tobey: The National School Lunch Program's reimbursement rate is a challenge, and we're working with under $3 per meal to put a healthy meal together for kids. It's not an easy equation; it's not impossible, but it requires a lot of work, a lot of culinary talent, a lot of great relationships within our supply chain. We're seeing some good momentum with the Obama administration and the recent passage of the Child Nutrition Reauthorization Act. We're seeing some momentum at the policy level to bring a higher level of reimbursement to low-income kids, but it's not enough to really make a huge difference to make this accessible to every single school. Most of the schools we work with are schools that don't have a big existing kitchen and food service infrastructure.
Richmond: It's like the best and worst of times. People know this is the way school food should be going, they know that health and wellness for kids is the right thing to do. They know that the cost of obesity and what's happening to our country right now—the fact that it's going to consume 25 percent of the national healthcare budget in the next couple of years. The fiscal realities of what we do are complex and challenging, but I think we've managed to do a great job.
Are you profitable at the moment?
Richmond: Right now, we have made a conscious decision to invest everything into growth, into scale, and adding on more regions and serving more students. Overall, as a company, we're not profitable yet, although our per market unit economics are meeting budget expectations.
Tobey: If you look at some of the larger regions that we're serving on an operating basis, those regions are covering their costs. I wouldn't say they're grossly profitable, but the business model is working as a sustainable business.
What are your plans for the future of Revolution Foods?
Tobey: We plan to add some new products to the food line, and we also have plans to make some of the packaged products more accessible to schools directly. Right now, we sell a lot through retail but we see that there's huge need within school programs to have access to healthier packaged products. We plan to grow our core meal program, both by increasing the number of meals that we're serving within our existing regions, and also we're looking at new regions to possibly grow into.
Richmond: We're definitely going to be expanding our product line and we're definitely going to be furthering our nutrition education platform. But right now, I think we're just focusing on the demand out there for healthier meals for kids. We're at this inflection point where we're going from a start-up to trying to build a very long-term polished model. We're just heads down on that right now, and I'd say our overall vision is to continue to transform the way we feed our kids. We've seen catalytic impact, we've seen systems starting to shift, and we want to continue to see that and be on the cutting edge of that momentum.
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