The $1B+ Food Tech Moat: How Apeel Pivoted Its Operating Model to Scale with Jenny Du

[00:00:00] Jenny, again, welcome. And thank you for accepting to have this interview. And it's less of an interview, more of a discussion. It's it's morning time, in your zone. You're based in California, right?

[00:00:12] Yes, sir

[00:00:13] Yeah, and I'm based in Dubai, so I'm having my afternoon coffee, so,

[00:00:18] we'll just jump into it. As I mentioned earlier, we, I know we've known each other for a few years now and since the Stanford, program, so, so this is probably the second time where we're having a more, a one-to-one discussion to understand.

[00:00:35] I'm actually more curious 'cause you're the SVP of, operations for, Apeel sciences. Right. And you've done a recent, Ted Talk as well, this is probably not the first, appearance for you. You've done many of these, podcasts and appearances, so I'd like to learn more about you and I understand that you went from research career path to, um, an operational career path. So maybe we could start from there. Where did you start? How did you get into what you're doing now?

[00:01:07] Yeah, sure. and first of all, thank you for the opportunity. I feel like every one of these is different.

[00:01:13] Yeah.

[00:01:13] And they are all kinda special and there's something unique in each of the encounters. So always appreciate the chance to connect.

[00:01:21] Just to highlight one, one more thing as well. So most of our audience, they're, uh, we're targeting corporate experts who move into the startup world.

[00:01:32] Yeah.

[00:01:32] So this is, it's, it's very much what you've done and succeeded at as well, so, Yeah.

[00:01:39] Thanks. It's gonna say we're still figuring it out and I don't know if I've ever really been in the corporate side, but I can at least share, you a view of what the startup side, I guess has been like so that folks have some perspective. But yeah, first of all, I did my undergraduate in engineering chemistry.

[00:01:57] That's for places where that might not be as common, a program, it's like a chemical engineering program, but with more chemistry program kinda combined together. And then, went into graduate school after that in chemistry, more kind of in a, an applied chemistry like research group. And, the research project though that I had at that time. Well, interesting. Some, a new field had caught my eye. So the new field that had caught my eye was that of organic photovoltaics. So materials that would allow for like flexible solar, for example, applications. And I had no background in that area, so that's what ultimately drew me to the University of California, Santa Barbara. had done my previous schooling at Queen University back in Canada where I'm from. But interestingly, I saw a group that, had core expertise in this growing organic photovoltaic domain. I'd moved out to California and upon my arrival, my principal investigator said, Hey, I've got a different project for you. And in fact, that was a more like microbial fuel cells, kind of like an app, you know, research, in application. So. All of that is more just to say that like my path, thus, even up until that point was pretty unpredictable. Always doing like the Black Sheep Project in the research group. But, another benefit I guess to that was that that's where I met my lab mates, James Rogers and Louis Perez. And James had, the concept for Apeel sciences, he had pitched it at a UCSB new venture competition. And, I have the pleasure of being his first employee. and that was upon wrapping up my postdoctoral research and, he and Lou were finishing their graduate degrees at, around that same time. And so James, myself and Lou are the first three people at the company. Um, For the first two years, we just had an idea on paper. We'll probably talk a little bit more about what that idea is, but to answer your question, we started literally in the garage of the house that he was renting at. And at some point you're sort of like, oh, if you just need test materials, test research chemicals to kinda explore your chemistry,nobody's gonna send that to your house, which is a good thing. And so you decide we need, a proper office and a lab to work out of. And at some point you don't realize that you are, you start to take on these other responsibilities that are effectively facilities safety, a little bit of almost like purchasing meats, receiving. you need an NDA to have a conversation with someone. You're wearing a little bit in learning the legal hat. And then our team, you know, at that point we were adding more technical staff as well, and about two years in, James, who was our CEO also at the time, pulled me aside and said, you've got a new job title.

[00:05:13] Like, congratulations, you're like head of operations. I just remember looking at him like, what is that? I. It's not something I'd ever heard of, even as a title. You know, All we kinda knew was like the science and engineering track and almost like researcher type of, and technical job titles and had zero exposure to really, and when you look, now that you know that a technical role is. Just one of really broad spectrum of roles and new roles that are almost being created in new fields as the work evolves, but I just, yeah. So he told me your head of operations. I looked at him blankly. I then went online. Uh, I probably wish chat GPT, you know, existed at that time. So I googled heavily, what does this mean? And then you learn a pretty amorphous definition. It's almost like. Operations is what sort of everyone else doesn't take lay claim to. And it can have a pretty wide variety of definitions, but that's how I technically started down that track. And even the scope of operations evolved based on what the company then needed at that time. And so at some point it became, we've got a proof of concept here that works. We need regulatory approval. So then suddenly a regulatory affairs function, emerges within the organization. We might need a supply chain for this. A supply chain function suddenly emerges. We need to do this in a food safe and a compliant way.

[00:06:51] So then a compliance and quality function emerges. And so operations, for what it was, for what it became through organizational changes, has evolved actually through all of those stages.

[00:07:05] Excellent. if I say, what's the biggest, challenge that you faced? You mentioned a bit about, learning something new. But what about gaining credibility? Have you had those self-doubt? How did you deal with it? What about your peers and colleagues? How did you support each other? How did you overcome all of that?

[00:07:25] Yeah. great question. I question myself every day, but it's probably what also keeps me honest and hungry, if that makes sense. honest and humble. I know you've kind of like lived this too, and I think, in talking to others, you hear it from others as well. Like you're always walking a bit of a tight wire between. Where you feel like you've built a competency and proficiency, but stretching into something you don't know. Um, 'cause if you only stay where you're comfortable, you can have results. But if you're seeking, I think growth and, uh, then you have to sort of expose yourself to things that make you uncomfortable, that you need to. Struggle a little bit more to figure out if that makes sense. For me, I've really benefited from both. Uh, I think especially at the beginning, like all of us at the company, were in that same boat, fresh outta school. The first several folks that we hired were technical team members who we really trusted to be in the trenches with us from both the values and, um, competency perspective. And so I think we were all living that together, but at some point you do need to seek out some more specific guidance. And so, mentorship actually outside of the company was so important for that. So I think one of the things that's been helpful to me is I have no problem admitting what I don't know and asking for help, than just being curious about it.

[00:09:05] So many people have been very generous, either for a short time or a long time in an interaction together over, whatever, a single meeting or maybe a relationship that has evolved over many years. Peers, just like you that I've, and, and others that we've met through our external courses that we've maybe had a chance to do for professional development. Like, it's been really great to sometimes just put yourself out there a little bit and see what, most people are quite willing to share. Um, Happy to share and help and offer a perspective. And then, you have to go through yourself, the work of sifting through that, deciding what you might use now and do those things stay relevant or how those may change over time.

[00:09:47] But, that's been really important, is this. Seeking and not just senior junior mentorship, but peer to peer mentorship. I also learn a lot from my own team members. We also had, over time, really a great benefit of hiring in then folks with, more specific skillset, and then learning, from them as well too.

[00:10:09] So. Yeah, I think that's maybe my little bit long-winded answer to the question about, how do you figure this out? it's uncomfortable almost at all times. Um, often facing something new, but, this is a team sport at the end of the day. And to think about your team as, more than just what's within the walls of your organization or your virtual walls of the organization.

[00:10:34] But, um, really extending that to, what could be viewed as your realm of personal advisors, almost personal and professional advisors. Yeah.

[00:10:43] Yeah. Yeah. This brings another question as well, because as the beauty of what you've been doing is you started from the beginning, you've been employee number one. Right. So as you started hiring more people that are probably more experienced than you in specific areas, more knowledgeable than you in specific areas, of course the right thing to do is to stay humble. say, we're learning. This is a problem solving, exercise. But also that itself brings challenges, right? People who

[00:11:14] Hmm.

[00:11:15] sometimes. Full of themselves. They will doubt you. They will bring their, corporate mindset and playing politics and to, impact the culture, negatively. How do you deal with such situation?

[00:11:31] What got you to stay focused, not get sucked into, and protect, also Apeel sciences culture. What's your trick?

[00:11:40] Yeah, great question. It actually was a big draw for why I wanted to join at such an early stage. Just speaking to culture for a brief second, I think that, what was I looking for? I'm a science and engineering nerd, so I was happy that the field that we're in, there's meaningful work.

[00:11:59] First of all, we're here to bring forward plant-based solutions to help fresh fruits and vegetables. last longer to reduce food waste. We believe that's a platform that can be extended to other problems, where nature-based solutions taking materials and mechanisms from nature can help. We happen to be starting in food now, but we think that there are other challenges in the world that would benefit from that lens. There's a science and engineering aspect to this problem. And then the third really important criteria was like, wow, to build a culture from scratch, Uh, and so what's been important, through that, and we've definitely been, tested on it. And I think there's different ways that we could have handled that over time, but. it was really, we defined what our values were very early on actually in the company. We were probably like 10 or 12 people and at first came up because when we were hiring at the very beginning, and I had mentioned, we had hired, um, the first few team members were really team members we already knew and trusted, from our time at the university. We started to have to expand the network, beyond those, we immediately knew and trusted. and so we were doing these interviews and we're like, what are we all getting at? We were all digging, we're asking these questions and we said, let's try to articulate what that really is. and it was actually then a very early, work to define the values. We've refined them over time. But only almost to just simplify them more. They haven't actually materially changed. We've added maybe one since then to just reflect it, a stage and a longer term view of the company as well. But, that's made a big difference just to call that out, give them a name, and then, it does take, courage though to not just have those be words on a wall. how do you really live them in your every day? So they were built into performance, like evaluations right from the get go. It's not just then the results that you would be achieving. 'cause that's important too.

[00:14:16] But how you got there and how you got there with others is really important. and so you'd have to model the values also to be rewarded from a, an advancement or a growth opportunity perspective. we probed for those and we even made sure that there was a, a section or a person as part of an interview group who would, uh, probe for those things, specifically, rather than just the functional expertise and the experience there. and we don't always get it right. but I think, are we acting swiftly to course correct for that? Um, we do values shout outs, so that again, we want to bring forward stories about what does this look like. and I think what's been also, this is so simple but helpful, is if you just put out the word like leadership. There can be many different interpretations of what leadership means. So what's a tagline or a short description that puts a little bit more of a color? Is it repeatable to other people? Can you even fit it into a sentence in everyday conversation? So for us that's, writing the first draft, we say, sometimes there's this ambiguous situation and it's not that somebody has the right answer, but they can kindstick their neck out a little bit. Put a proposal forward that gets the wheel turning and gets others to join in. And maybe it takes it in a different direction, but Hey, thank you so much for writing the first draft. Like we, we put it into words if we can, and that's been like really helpful too. So those are, they're all small things.

[00:15:58] I feel like a lot of things, what I've learned is, you can have a complex or a complicated picture. of what this could look like. But at the end of the day, they're pretty simple principles. They're hard though to do because it's, they're hard to do consistently. and that's probably the more complicated like aspect of it.

[00:16:18] Conceptually simple but,

[00:16:19] Yeah.

[00:16:19] difficult in practice. Yeah.

[00:16:21] I could see the passion in what you do because are benefiting the world, right? you are benefiting humanity, your project is focused on sustainability of, of food, eliminating waste. So maybe you could share with us as well. what are you guys doing?

[00:16:38]

[00:16:38] Yeah, we'd love to learn more about that.

[00:16:41] sure. Um, I'll start with the problem and as we had faced it or had learned about it, which is what triggered then for us the desire to pursue Apeel Sciences. So first of all, it's estimated that a third of the food that we produce worldwide is lost or wasted before it ever has a chance to be eaten. and for a category like fresh fruits and vegetables, which for us we feel like, wow, more people should actually be eating them. they're so important for, good health and longevity, for that category, they're even more perishable. And so sometimes the waste can be as high as like half. What's also really crazy is, you're not just thinking about the waste of the food that, you know, the food itself that doesn't get eaten, but we spend a lot. In, you land use, water, fertilizer, labor, energy packaging, all of that. And so when you throw food away, you throw away all of those inputs that really had, um,

[00:17:41] you're talking about waste throughout the whole supply chain or before it. actually reaches the table or the supermarket?

[00:17:49] all of the above. So waste happens at every step of the supply chain. And our belief was like, this is a product that has these fresh fruits and vegetables have value. Um, there must be value in, in giving it also then more time, to this perishable product. but the waste does happen and handling and packaging and all this stuff happens all along the way.

[00:18:10] So if you've had to expend any of those resources at any stage. At any later stage, you know that that product is discarded, then it's definitely a waste of those resources. And what's really incredible is if you add up, like the way to summarize it is if global food waste was a country, it's the third highest emitter of greenhouse gas is after China and the US. So it really adds up but it's also a place where we believe that there's like a lot of preventable, avoidable.

[00:18:41] That's an That's an argument for vegans as well, right? I was one of those people, unfortunately.

[00:18:52] Yeah, but I think, uh, you know, we don't sort of, we don't endorse sort of one, one specific way or another, but I think everyone can stand to eat more plants thanwhole plants that are good for health. but anyway, so for us that we, once you hear something of that magnitude, and I think especially where we are in central California, um, we're surrounded by, you know, we're really lucky to be surrounded by fields and orchards with this fresh produce. Um, and so it's really quite, like visceral to imagine like when you look at a field that like 50% of this may not make it, that's like really crazy to consider. And so we just started, James really asked some really basic questions like, what causes produced to spoil? And you realize it can be environmentally driven, like water loss and oxidation. 'cause this is really when you. Fresh produce is like a living plant, and you pick it off the tree, you've separated it from this nutrient source almost. And so what it has is what it has to burn before it decays. and so it's breathing, it's respiring, and then separately it can be like attacked by like mold and pests, So it's a biological stressor. And so for us, coming from a background in materials and chemistry, looking at things like. Like film formation. we really thought like maybe there's something we can do on that material side to handle these abiotic stressors rather than the biotic stressors. And also just started asking questions like, how is produce protected today? It's surprisingly a pretty limited set compared to like pre-harvest technology has, agricultural technology has seen a lot of. Um, growth and investment, but post harvest, it's like refrigeration, post harvest, pesticides, um, that have been pretty, legacy for a long time. Packaging, plastic packaging. But that has problems. we've got a single use plastic in a microplastics problem. and waxes are used, but we've found that they really add shine, but they don't do a lot to extend life as maybe as much as they could. So we looked at what are plant peel like, what are plants like?

[00:21:13] How do plants protect themselves? And that really led us to be like, oh, like they have a skin, they have a peel, these plant cuticles. What are those made of? And so the more that we dug into that is how we got to the kinds of materials, these fatty acids that, um. We felt like could help, if you reapply them in a thin layer on the surface of fresh fruits and vegetables to basically reinforce the existing natural peel, can you get, improved retention of water and reduced oxidation in order to extend the life and quality of fresh produce?

[00:21:50] So that's it. Like the long version of the problem that we learned about. Then asking a series of really almost very beginner questions. 'cause we don't come for, from food or ag or plant biology to then thinking about, what might be an interesting, uh, material to look at and try and then test that out as a proof of concept to to bring forward.

[00:22:18] how many. I mean, how are you applying it into the market? how does it

[00:22:21] Yeah.

[00:22:21] this?

[00:22:23] Yeah, great question. Um, so fresh produce after it's harvested, they usually come into the centralized, you can think of a, an aggregation facility called packing houses. Um, some growers may have their own packing houses, but they may also, um, receive fruit from others who are purely growers, not packers. So inside these warehouses, they're already handling vol, fresh fruits and vegetables at scale. They may be, sorted. I imagine like apples or citrus or something, they're sorted by color, size, any surface defects that may also be present. and in order to do that, they're already also, for example, washing, maybe waxing and doing other things.

[00:23:08] So inside these facilities, imagine these conveyors with. A lot of fruit that's already flowing. So we replaced the waxing step that would happen inside of these packing houses, for example.

[00:23:20] Yeah.

[00:23:21] and then they go through the normal supply chain. They get, into the trucks and then the trucks will go into distribution centers. just trying to imagine the complexity of your operations. So there is a bit of an r and d activity That's taking place. There is a bit of commercialization, sales, business development, compliance.

[00:23:39] Yeah.

[00:23:40] How big is your team now you mentioned,

[00:23:43] Yeah. Like worldwide, we're about 150 people.

[00:23:47] and it's a complex operation to be able to. Handle all of this. So from going from starting with 12 people to 150,

[00:23:57] what were the key milestones that you feel like, you know what, when we achieve this was a major shift for us operationally. We needed to step up our game to become scalable.

[00:24:09] Yeah. So interesting. just to kind of paint a picture of the rest of the operations we end up, you know, part of it is the manufacturer and compliance of a food ingredient. And so in a way that's its own, uh, set of operations and requirements. And then separately there's a whole like, field deployment. And so you can imagine a technical field, staff and customer support, you know, um, in that way. So it's almost sort of two, uh, two, two in one. For us, I think what's interesting is actually version one for us was quite. important to break into the market, but very complicated and difficult to scale economically.

[00:24:56] So we've actually had a couple of major shifts that the very beginning when we approached the packing houses, um, they typically are the recipients of a lot of price pressure already from the retailer side. and so they were I don't know if I like, want or need produce that lasts longer.

[00:25:16] that sounds like an added input, which is an added cost. And also the more that people throw away, like the more they have to come back and buy again. And so we were like, oh man, this may be a tricky. We were, I guess that was, we were very surprised that was like the original reception of the concept for the technology. so we actually approach retailers. we went to our customer's customer, we were where else in the, if we are giving time to produce along the whole chain, where else is that accrued or where else is that realized? And so we believe that especially for some categories, there was maybe more benefit to the retailer and to the end consumer than there was immediately for the suppliers.

[00:26:01] especially those who have a pretty strong like corporate social responsibility, commitment, or position. Um, were really great starting like partners and, uh, because they had a desire preference, to try the product, then they could ask their supply chain, to, to give us basically room in the packing houses to apply the product.

[00:26:25] And then version one it works great. we might have had challenges in, like preparing it in a way that would stay. So the product is, um, technically like a powder, but it has to be dispersed into water. Um, and one of the mixing, to get that to work like. would be no food safety issue, but maybe there was a solution stability, you didn't want it to separate quickly over time. But you know, we had a short solution shelf life for our version one of the products. So we also had these suppliers who were a bit, or the packing houses that were maybe a bit reluctant to adopt the products.

[00:27:01] So we had a very hands-on, like almost mix onsite mix just in time to oversee the application of the product so that it was very hands-off the customer, but that's also a lot of cost and complexity for us to maintain versus being able to drop solution off in a ready to use format that the packing houses can use themselves just like they might use any other agricultural input they're using today, like waxes or anything else. So version one was like, can we show proof of concept, get actually a footprint of. Yeah, in the market or put a, get a foot in the door to just show the industry that at scale, that the product really works. But there was a business model and an operating model that was very heavy handed white glove to get that opportunity, but difficult to sustain.

[00:27:58] So. made it just also very hard and complicated to work with us. So we've since changed to simplify our business model, the operations. and in doing all of that, you also reduced like the cost and complexity to, to support all of that as well in the business processes. So those have been probably two like really major changes and we're kind of, you know, in the, uh, coming off of that. or working our way through this, like simplification of the business model and the operating model, uh, like part of the curve right now. and then I think other important milestones have also been like, like a global footprint. So fresh produce does move all around the world.

[00:28:43] There's, it's seasonal as well, There are times when, yes, the northern hemisphere can grow that category, but then you have to switch to the southern hemisphere. If consumers like us are gonna have year round access to a certain category. And so that actually required or pushed us to be a global company probably much sooner than anyone would have wanted to be. You know you, if you haven't quite figured it out and you're in one market yet, are you ready to already have to sort of replicate this? And then deal with some of the challenges of operating a distance from each other, cross-culturally, et cetera, et cetera. But, at the same time, that's been a lot of fun.

[00:29:26] Amazing. Amazing. What about the human, side of it? Capacity side of it, because that's also another challenging part. At least from my point of view, because we're all discussing tech, software, stuff like that. But then when it comes to a scientific product like this,

[00:29:45] a bit different, right?

[00:29:46] How you had to, like custom design, tailor design something that's specific to your business model. That means there are lots of risks, pitfalls that you could, you have to be open to and quickly rectify. feel free to share any examples, any advice you have.

[00:30:06] we're still working through it a little bit because, you're right, it's compared to, let's say maybe like a software product or service. and you hear about the, you know, move fast and break things and you wanna iterate quickly. That's very difficult to do with a regulated product food. and so how do you manage this balance between, so one, food safety is always primary, but then you're also going to introduce this product into your customer's operations and, if it doesn't work or it creates an operational challenge for them, it's very painful and it's immediately felt, and at a very, like a large scale, you don't wanna be like ruining for example, or having a performance issue with imagine like container loads of fruit or vegetable. Like, it, it's very, it's very material. yeah, I mean, for us, I think we've had to experiment a lot with, the same principles still apply.

[00:31:09] Like you may have some assumptions as to what's needed for your product to work when it's in your own hands, but the most valuable learning still do come when you put it into the field or into the wild for your customers, um, to see it in that environment and to get their feedback, which is more important than your own. and so yeah, I think we've had to do a combination of, you know. We would say actually try to establish a product lifecycle with some clear, gates or milestones along the way has been quite valuable. Um, and also, you're nottotally still married to the process that you won't be flexible with it, but use it as a reference point and a framework. So for us, for example, When we were developing this, formulation that would be more, solution stable so that we could actually drop off solution to provide to customers. Um, we have to do it in the lab scale, shows some consistency. Suddenly we're putting a certain amount into these, 1000 liter totes and we're simulating, we're putting them on trucks and we're just sending them around, to make sure that the solution remains stable. And you, have to have, we have a small pilot line that we have established in our own facility to also test this not just on, you know, 12 pieces of fruit on the lab bench, but you run a full pallet's maybe worth that we can purchase from somebody and then test in our own backyard. But then you need a partner. and in this case, fortunately, some customers who are willing to, who have a good relationship with you, who have trust, who are willing to give you some time on the line to really deploy the product and see, how it behaves.

[00:33:01] So, um, and perform. So it's, there's a whole sort of, these are important scale up phases almost, if that makes

[00:33:10] sense. You're piloting at larger scale, with the right balance of urgency and aggressiveness without being reckless.

[00:33:20] Yeah, it's not really linear as many of us would think. You know, it's it's a bit, you have to really, be open.

[00:33:29] yeah.

[00:33:30] At every front, especially partnering

[00:33:33] up with customers. And I really appreciate the level of complexity that you guys are going through because we're not used to hearing these kind of, business models and the journeys, so it's refreshing to see.

[00:33:46] It's not as easy, especially we keep hearing the stories of, startups and. Silicon Valley and, and developed, startup ecosystems where, things are a bit more predictable. The environment is a bit more forgiving, but even though you're based in California, the environment is not as forgiving because it's a new industry.

[00:34:07] It's a new technology. it's amazing. Thank you for sharing all of this. Jenny. I have still more questions, but I'm conscious of the time limitation as well. So we'll end it, to this point,

[00:34:19] If someone wants to learn more about you, what's the best way?

[00:34:23] Yeah, probably. so our company's website, just ww dot appeal, that's A-P-E-E-L.

[00:34:31] the caption so you don't have

[00:34:33] to spell it.

[00:34:34] and probably on my LinkedIn. Yeah,

[00:34:37] excellent. Amazing.

[00:34:38] Thank you very much.