Earlier this year, a Chilean engineer called Rodrigo Osorio Moya posted an extraordinary claim on LinkedIn: The Not Company (more commonly known as NotCo), a $1.5 billion plant-based food replacement company and Chile’s biggest unicorn, had stolen from U.S. rivals Just Mayo and Ripple. “[NotCo] has literally transcribed industrial patents that do not belong to them,” Osorio said later on in an interview with Rest of World.
Foodtech professionals consulted by Rest of World said that Osorio’s claim didn’t provide compelling enough evidence to demonstrate plagiarism, but the engineer clearly had a bone to pick with NotCo.
Last year, NotCo had sued Osorio’s sustainable energy company, Braintech, over its site’s domain: notenergy.cl. The foodtech argued that it had exclusive rights to the prefix “not,” and therefore “Notenergy” was NotCo’s property. In July 2020, NotCo lost the case.
Rather than letting the dispute go, Osorio looked to join forces with one of Chile’s powerful dairy lobbies, Aproval, to wage a legal war of sorts against NotCo. Aproval is suing NotCo for maligning cow’s milk in the marketing of its flagship product, NotMilk.
Both Osorio’s claims of intellectual theft and Aproval’s case against NotCo are symptoms of the tech company’s success — and its aggressive marketing campaigns, which has rubbed some locals the wrong way. A “manifesto” posted on the NotCo website reads: “Eating animal products damages the planet. This is a fact. Our mission is simple: to remove animals from the food industry.” In a country with a proud ranching tradition and where 160,000 jobs (or about 2% of Chile’s workforce) directly depend on the dairy industry, those are fighting words.
NotCo has made just a tiny dent in Chilean dairy sales — just 3% of total market share in 2020 — but Aproval, and the dairy farmers it represents, are taking up legal arms. The union wants to “protect the milk market against acts of confusion,” José Coz, a defense attorney for the dairy farmers, told Rest of World.
“[NotCo] weaves a yarn about how they’re the innovators, the disruptors, because according to them, the food industry is trending toward vegetables!” said Coz. “While, of course, we are described as dinosaurs who stand in the way of progress.”
|Company name:||The Not Company (NotCo)|
|Key investors:||Kaszek Ventures, Endeavor Catalyst, Future Positive, L Catterton, The Craftory, General Catalyst, IndieBio, Humboldt Capital, Maya Capital|
|Total investment raised:||$360 million|
|Current valuation:||$1.5 billion|
The legal battle threatens to take the gloss off the company’s remarkable growth story. The six-year-old foodtech has ridden a self-generated wave of hype to bring in big name investors. It is undergoing a fast global expansion, and its products are already in U.S. supermarkets. But back home, the way it positions itself has left a sour taste for some.
The global market for plant-based food replacements, expected to reach a worth of $74.2 billion by 2027, is booming. The competition is vast — from U.S. foodtech startups like Ripple and Just Mayo to established corporate giants like Danone. Even within Latin America, competition is fierce. Brazil’s Fazenda Futuro, which makes meat replacement products, was founded in 2019 and has been valued at approximately $134 million.
NotCo, founded in Santiago, Chile, was started by Matías Muchnick, now the company’s CEO, in 2015. Muchnick teamed up with Karim Pichara and Pablo Zamora, NotCo’s chief technology officer and senior scientific advisor, respectively, with the ambitious aim of using biotechnology to disrupt several animal product industries — dairy, eggs, and meat — at once.
By 2018, the startup secured $3 million in a seed round led by Kaszek Ventures, an established Latin American venture capital firm now synonymous with the region’s unicorns. Then, in March 2019, Muchnick got a call from Bezos Expeditions, an investment firm that manages the funds of Amazon. The subsequent $30 million investment was used to take NotCo’s first tentative steps outside of Chile into the neighboring (and larger) Argentine and Brazilian markets. By September 2020, NotCo had landed a series C round worth $85 million.
NotCo claimed that its foundational technology was an algorithm called Giuseppe, named after Giuseppe Arcimboldo, a 16th century Italian artist famous for painting people with faces made of fruits and vegetables. The company said that its machines could replicate the taste, look, and nutritional value of meat and dairy thanks to Giuseppe’s algorithm, which identified chemical compounds found in animal products and suggested matching plant molecules. Once Giuseppe identified a recipe based on those matches, it was then reviewed by a team of scientists and three in-house chefs who provided “human feedback.”
The company’s early success was driven, in part, by its innovative marketing strategies. NotCo advertisements flooded Santiago residents’ devices, occupying online spaces and targeting digital natives with emotional messaging on Instagram, Facebook, and YouTube.
Some adverts barely featured any food at all. “We’re animalists, ecologists, naturalists, but are we really making a difference?” one YouTube video ad asked. “Do the right thing” flashed across the screen, superimposed on images of artists in warehouses, bicycles overtaking cars stuck in traffic, and protesters wearing gas masks.
“NotCo has really cool consumer communications. Big things are coming their way,” João Melhado, research and policy director at Endeavor Chile, a nonprofit dedicated to networking, supporting, and funding startup founders, told Rest of World. “For now, these are niche products. But there’s a whole lot of room to grow, because NotCo bases its model on sustainability, which is the issue of the century.”
But where some saw a success story, some observers chafed at NotCo’s claims and brand positioning. Although the company was bringing in large funding rounds — based, ostensibly, on the power of its tech — NotCo didn’t actually have a patent for Giuseppe either in Chile or any of the company’s other markets until its sixth year. Still, the investments kept coming.
VCs who bet on the company said that they felt NotCo had built enough of a reputation that the regulatory hurdles wouldn’t pose an existential threat. The patent issue “would be more of a strategic consideration, post-closure [of the investment],” one investor told Rest of World, speaking on condition of anonymity.
NotCo’s U.S. patent for Giuseppe was finally approved in February 2021.
Around the same time, Aproval launched a case against NotCo about its alleged misuse of the word “milk.” “Upon traveling to Santiago, our members found themselves faced with NotCo’s massive [anti-milk] advertising campaign,” said José Luis Delgado, CEO of Aproval, explaining why the dairy union decided to engage NotCo in court over claims of unfair competition.
“When Uber came to Chile, they didn’t launch by branding themselves as NotTaxi,” said Delgado. “NotCo appeared in the market with an aggressive strategy based, not on its core audience, but on smearing the good name of cow’s milk. The real kind.”
NotMilk, the union would go on to say in court, “exploits the reputational capital of milk, even though it is a vegetable-based drink.”
In response, the foodtech has indicated that NotCo “has not displayed conduct of any kind that would meet the general definition of disloyal competition,” because the brand name NotMilk “suggests, in fact, that the product is not about milk.” NotCo’s statement concluded that “it would seem Aproval does not trust consumers nor their capacity to choose.”
As of this article’s publication, there was no verdict as to whether the producers of dairy cow milk had suffered damages as a result of the NotMilk brand.
“It isn’t fair to claim that the entire sector is conservative,” Marco Rosas, director of innovation at Chile’s INACAP Technological University, told Rest of World. He suggested that what the farmers were actually missing was the marketing prowess that NotCo had mastered. In dairy farming, “the final product is pretty much always the same, with or without technology,” Rosas said. “But there are producers who are transforming dairies into highly technological operations.”
One of these farmers is Edmundo Henríquez, a partner and former CEO of Aproval. He is the first man in Chile to run a robotic dairy farm and is developing a way to produce lactose-free milk straight from the udder. “Change isn’t easy when you come from a longstanding family tradition. Change comes hard to us;” he admits, “The cows do adapt, though.”Even if NotCo loses in court, the damage to the foodtech would be limited. The company would be forced to remove its products from the dairy section and would have to change its colorful packaging in the Chilean market. But, with bigger markets in its sights, that is unlikely to faze NotCo’s management. It would be a simple case of mala leche, as they call disputes in bad blood in these parts — bad milk.