Complex Made Simple

Exclusive: Blendhub wants 500 million SMEs become big players in the food value chain

Blendhub founder Henrik Stamm Kristensen had a dream 35 years ago. This seasoned visionary in agri-food products keeps finding new formulas to make his dream last longer but now the globe is waking up to his idea.

There is a $5trn Agri-food value chain, a $2.5trn global packaged food marketplace, and a $1trn processed food arena Major global food brands produced less than 20% of the world’s food Food production localization allows prices to decrease by up to 25%, and supply chains to get optimized

You heard right. 500 million SMEs and that’s just one dream. Zero world hunger challenge by 2030 is another. 

If anyone can do it, this company and businessman behind it can.

No matter how outrageous these aims appear, I wouldn’t bet against Blendhub and its founder Henrik Stamm Kristensen, a Dane based in Spain with a lifelong experience in the agri-food sector.

His dreams took shape 35 years ago and there is no stopping this man’s powder keg of ideas, literally. 

2% is all he needed to make his recipe for success cooking. 

We will explain. Here’s his story, over two parts

Early growth ingredients 

“When I was young, I wanted to cook,” Henrik starts in a video conference, “And I began messing around with ingredients.” 

Little did he know this would launch the biggest, most ambitious food project in recent history.

In 1985, he was 21. Instead of gobbling burgers and ordering takeaways like people his age would do, Henrik went experimenting with citrus peel and seaweed byproducts, among others, and seeing how they could be converted into high value ingredients like Pectin used in dairy and fruit industries.

Actually, for 12 years, he got paid for doing things like that and in the process he learned the entire value chain in the food industry, from seed to mouth.

“I understood there was no waste in the food line and that was intriguing for me. How do we use all raw materials that come from plants and animals and turn that into recipes?” 

Read: Truebell reveals top five food trends for 2020

Eureka: Stage 1

Henrik’s mind works like this: “What should I disrupt now. ‘Para bien. Para bien Del Hombre’?”

For good. For man’s good.

In 1997, he flew the nest and started his own food company. 

He knew he was looking at a $5trn Agri-food value chain, a $2.5trn global packaged food marketplace, and a $1trn processed food arena.  

But his first task was to “Kill the Black Box”: All the recipes we put into our mouths while being completely oblivious to what it is or where it is coming from. 

“How do we make recipes more understandable and more traceable for the final consumer?” he asked himself.

Easier asked than performed.   

“Dreams on their own are nice but when you start a new business and look at the entire value chain, you need to make money, and in 1997 it was not yet the big boom of private equity and SMEs,” Henrik recalled. 

Eureka: Stage 2

Undeterred, he made another bold statement, as if obliterating black boxes wasn’t challenging enough on its own, at a time when people were not so health and nutrition aware as most of us are today. 

“When I looked at the entire world of food, a second chord struck. Everyone was looking at major brands like Pepsi, Nestle, or the Alamrai’s of this world and saying they are big food producers, but I said they were actually small. They produced less than 20% of the world’s food.”

Small, right!

Regardless, a new idea and ideal were simultaneously born: How to empower 500 million SMEs responsible for 80% of the world’s food, including farmers and active players along the value chain, with tools and tech, enough to make them as powerful and visible to the final consumer as big power brands?

“That was the second founding principle but we needed to create cash flow and we started formulating recipes and selecting ingredients for industry B2B,” Henrik explained.

An explosive idea: Powder

Fact is there are 3 ways to supply food. There are powders, the single biggest food product in the world. Around 40% of the world’s food is at some point powder-based, according to Henrik. 

The second way is liquid, or beverages, which also contain powder.

The 3rd way is solid food. 

“The reason we decided to focus on recipes with ingredients in powder is that is it the most sustainable way to supply food and nutrition as most have a 2-year shelf life,” Henrik pointed out. 

With this fact, Henrik digitally seasons his favorite Hashtag #Fresh-to-powder-to-fresh, anywhere he has a chance to do it. 

Flour is a familiar powdered product that has spawned so many byproducts.

Read: Food and flowers top the list as UAE’s online ‘delivery’ searches grow faster than the UK, India

“Most of the things that are turned into Flour are coming from seeds and fruits, dried and turned into a powder as an ingredient,” Henrik explained. 

“Recipe-making begins when you sit with these ingredients and start formulating new flavors, and you select different ingredients based on calorie content, protein, flavors, colors, texture and others, all having a functionality inside the blended recipe.” 

Today, it’s not just homemakers churning up recipes for the family.  “Everyone is doing recipes. For example, if you are a flour producer of wheat, you are selling a commodity that can be traded and speculated, and are trying to move up the value chain by converting that into, for example, a bread recipe, which gives it a higher value.” 

The end result is the many products we see on supermarket shelves carrying fantasy, sing song names for generations to remember.

The 2% strategy 

“We are not a farmer. Not an ingredients producer. Not a FMCG company. Not a brand promoter. Not a distribution chain,” Henrik said in listing the ‘nots’ of his business. 

So what are they? 

“We saw ourselves localized in the middle of the value chain. We started making formulations for the food industry B2B. We were making money formulating minority ingredients,” he said.

The 2% strategy was key. If you take the Doritos from Frito Lays, the product is 98% flour, but the 2% on top is a special mix, the spices that people like, and the colors. 

“When I started my formulation adventure, we focused on the part related to texture. The 2% of texture formulation. So we went to Almarai, Coca Cola, Spanish meat and cheese industries and offered the 2% of their recipes. It was the right formula and the business was ready for takeoff.” 

Eureka stage 3  

That 2% needed a factory that blends and that packs and does quality control. 

“Back in 2004, and for all of our recipes, independently of where we had to sell it in the Middle East, Spain or Latin American, we had to source ingredients from different parts of the world and bring them to our factory in Spain,” recounted Henrik. 

“That was our make or break eureka moment, because that factory which took us 3 years and cost Euro 15 million to build, just didn’t make sense to continue operating as is, not when you have to take ingredients from all over the world, and send final recipes back to the world, losing time and money, and facing nightmarish logistics, costs and tariffs.”

From here, the idea of making a portable factory was born and signaled the shift for a totally new direction and strategy for Blendhub.

Read: 4th Industrial Revolution to spur UAE efforts to become food security leader by 2051

Hubs and the Nespresso factor 

No. Blendhub did not go into the coffee business.

What the company did do is duplicate its Spanish factory model, creating in 2005-2006 business hubs.

“We started building this portable factory concept. I call it My Nespresso Machine, which is worth nothing if you don’t have the capsules, which are the recipes, and the cup where you pour coffee in!”, Henrik clarified.

First the Black Box and now Nespresso Machines: It’s Henrik’s style to stress ‘visualization power’.

He will need it later.   

“Suddenly, at end 2009, we were standing with a ‘machine’ that was amazing, that we could now send anywhere in the world, but our customers, beyond those in proximity to Spain’s factory, needed local recipes closer to the ingredient suppliers in these countries, and needed them closer to the final consumers,” Henrik said. 

Destination: World

Blendhub patented its portable hub factory in 2010, covering 70 countries, owning the patent until 2030. 

“The first place we decided to deploy one was India. One of the main ingredients that we shipped for beverages in the Middle East, was coming from India. It made sense. 

The immediate result is that, from an economic perspective, prices decreased by up to 25%, and supply chains got much more optimized. We saw the economic impact of localization.”  

Since 2011, Blendhub localized 7 production hubs on 4 continents, using global replication models similar to what big chain companies like McDonald’s do when they open a new store anywhere in the world in less than 3 months. 

“But we deployed the hubs with our own capital so now we come to the acceleration model of seeking investors, and this after understanding all the needs for hardware, machines, and software to control the hubs, from long distance, and deploy new food products to industry and consumers, faster, safer and cheaper,” Henrik said. 

From Product to Service model…and EBITDA

To accelerate the business and give access SMEs access to the business model, Blendhub had to transform: Less recipes with ingredients and more service provider oriented, helping anyone become successful. 

“We have 500 million SMEs. If we keep this all for ourselves, in the end, we will not help them. We have now created a licensing model where people can be local investors,” Henrik said. 

Any investor looking to start what can only be described as a franchise opportunity, needs to offer a production facility or space for one, reaching 40% capacity where the production hub can be built, for deployment anywhere in the world in less than 6 months.

“The 60% remaining that the investor is not using or not financing, we will be operating and lending it to any number of SMEs who want to move up the food value chain,” Henrik explained. 

The license agreement for production hub deployment includes the hardware and software, so no CAPEX, and also the operation, so no OPEX, but Blendhub maintains operation control of the plant.

“In return, the business partner is committing EURO 1 million in year 1, allowing us to produce their brand and they gain access to a network of hubs.

Blendhub is looking for a 5-year agreement and for each EURO 1 million yearly over that period, Blendhub is giving the 40% capacity the equivalent of 2000 metric tons of blended, packed and quality controlled recipes. What it comes down to is a fee of EURO 50 cents per kilo.

The revenue sharing model is gaining traction with multiple global stakeholders in the food value chain.

“The last 5 years, revenue was coming from our own recipes but that is a product model. Our historic revenue is coming from selling products. Our future revenue is coming from selling services,” Henrik clarified.  

“When we change that model, the revenues go down but your EBITDA goes up. This year we will invoice 35 million Euros, but with the new service model we are expecting at end 2023 to invoice EURO 150 million euros, but it will be at a higher EBITDA than the 35 million today.”

Quality control: Cloud and Blockchain 

Blendhub has invested heavily in data and intelligence teams and now has production in 4 continents to deal with. 

“How do we ensure that all the ingredients that are coming from upstream suppliers, are living up to the quality specs?” Henrik asked.

“We have quality control in a click, creating big libraries of all ingredients we are using from all over the world, and we are now in certification conversations to create new digital fingerprints in the cloud.”  

“Blockchain is next and this will help certify products with a smart contract to help customers and partners use the tech and create a complete traceability and security about all ingredients we are using all over the world,” Henrik concluded.

Expect more Blendhub-bub in the near future.