You need to read how this entrepreneur turned garbage into delicious snacks

Businesses are started to solve problems, and Claire Schlemme chose a big one.

Schlemme is the founder of Renewal Mill, which recycles an untapped ore of goods: food waste. And it doesn't make compost — it's part of the growing upcycled food movement, with products from companies including Barnana, Imperfect Foods, and ReGrained increasingly finding their way into the cupboards, fridges, and freezers of the discerning customer.

Upcycled foods use byproducts that are typically tossed to create new culinary concoctions — in the case of Renewal Mill, turning soybean pulp into baking mixes and cookies. It also works with manufacturers to reduce their food waste.

THIS IS NIMBLE, A SERIES WHERE BUSINESS OWNERS OPEN UP THEIR BOOKS AND LIVES TO INVERSE, WITH HELPFUL TIPS ON HOW TO KEEP GOING.

Food waste is a tremendous problem across the world, with the USDA estimating up to 40 percent of the U.S. food supply goes to waste, an equivalent of hundreds of billions of dollars. The upcycled food movement wants to change that.

For Schlemme, it started when she founded Mother Juice, an organic juice company, in 2016. As the company took off, she became appalled at the amount of pulp thrown out each day. She figured there had to be a better way to do things.

That suspicion was seemingly confirmed by a chance meeting with the owner of a large artisanal tofu company who also had a problem with pulp waste, at a much larger scale. So that same year, Schlemme partnered with Caroline Cotto to form Renewal Mill. Initially funded by grants for its first two years in business, the company has since received investment from accelerator Techstars and $2.5 million in a seed funding round led by HG Ventures in 2019.

Despite this fundraising, running a business with the aim of solving food waste is a huge challenge, which Schlemme, who also serves as Renewal Mill’s CEO, discusses in the Q&A below. It has been edited for length and clarity.

Can you give us a rough overview of your revenues versus typical business operating expenses?

Renewal Mill is a public benefit corporation with a mission to make sure 100 percent of the food we produce is kept in the supply chain. We believe that you can care for people and the planet, and still make a profit.

At our current rate of operating expenses, we’re still two to three years from being cash flow positive. That said, 2020 was our best year yet. While still relatively modest, we doubled our 2019 revenue, launched five new SKUs, got placement at more than 200 grocery stores and more than 25 online platforms, and made our first monthly recurring revenue sales. All this despite the global pandemic, a serious shift in our CPG channel strategy, and an extremely lean operating budget.

How do you track your money?

We track our money using QuickBooks online, and then we utilize an outsourced CFO service called MyStartupCFO. As a small team, their help is invaluable. Because Renewal Mill is a split business model, both ingredients for businesses and consumer products, QuickBooks helps us keep everything straight for both sides of the company.

What number do you look at to determine whether your business is doing well (for example, revenues, returning customers, inbound inquiries)?

As I mentioned, Renewal Mill is spreading the love of upcycled food in two ways. On one side, we’re a B2B ingredients company supplying premium, nutritious, sustainable ingredients to emerging brands and Fortune 500 food companies. On the other side, we use our ingredients in a line of vegan, gluten-free consumer packaged goods (CPG) baking products that we sell via retail and e-commerce.

For the ingredient side of the business, we track health by number of inbound inquiries about our ingredients and by the number of samples that go out the door to R&D teams. For brick-and-mortar CPG sales, we track velocity, or how quickly the products move on shelves, and for e-commerce, we track returning customers to make sure our products are selling repeatedly. But, let’s be real, like any company, all of the metrics feed into the overarching revenue metric we’re constantly tracking to determine if our business is doing well.

In what situations do you dial back spending or increase it?

The more clarity we have around the ROI of a certain project or spend, the more willing we are to increase spending. Our team is not afraid of a “spaghetti at the wall” approach. We’re constantly trying tons of little experiments, whether that’s in advertising spending, paid influencer marketing, or new product development. But we always start small. If we see success when we “micro-test,” the ROI is there and we increase the spend we put behind the idea. If the ROI is absent, then we dial spending back or cut the idea altogether.

In tough times, what’s the first expense you reduce or eliminate?

Oof, this is a tough one. Because our budget is so tight, everything we spend on feels important to the success of the business. When push comes to shove, we reduce or eliminate spending on paid brand awareness marketing. Instead, we double down on our own organic efforts and try to leverage word of mouth and free PR with the hope that once people try them, the products will speak for themselves.

What’s an expense you can’t spare?

It’s not sexy, but it’s true: production. We’ve seen months when our bank account was scarily low, but through it all, we’ve always found the money to keep production of our ingredients and our CPG products going. We know that you have to spend money to make money, and nowhere in your business is that more true than in the production of your core products. We’re constantly re-evaluating COGS (cost of goods sold) to lower these costs, but we don’t stop spending on packaging, ingredients, labor, and the logistics that get our product to customers.

Where do you draw the line between business expenses and investing in your business?

This too comes back to having some understanding of ROI. We’re constantly investing in the business, and know that investment involves a healthy amount of risk. Especially on the ingredient side of the business — the sales cycle can be really long, like two to three years. We’ve had to make decisions to spend on trade shows and onsite sales visits in the immediate term that might not see any return for years. But, we fully understand that with no risk, there is no reward, so we’re perhaps more liberal than some on investing in the business.

For example, when we started this company in 2016, upcycled food was pretty unheard of and consumer perception was mediocre at best. In the past five years, we’ve been at the forefront of leading this explosive trend that now includes the likes of Dole, Mondelez, Nestle, Whole Foods, and others. Much of that success is a direct result of investing in our business rather than focusing strictly on business expenses.

What’s an unusual expense that you believe adds value to your company?

Renewal Mill pays to be “plastic neutral” certified through rePurpose Global, which essentially means we are paying to partially fund a project that removes plastic from the environment. This is perhaps an unusual expense, but it matters to us as a sustainable brand because we aren’t yet able to use compostable or 100 percent reusable packaging.

The shelf life of our product is a year, and we need our bags to have resealable tops so that folks can keep them in their pantry for continued use. Because we haven’t been able to find a compostable packaging solution that fits these needs yet, plastic neutral certification is the best interim solution to be kind to our planet while selling our products.

What was the biggest expense that ended up paying the biggest dividends?

Honestly, our rebrand. We’re super scrappy and designed our old logo and branding on PowerPoint. We taught ourselves the basics of packaging design and put together minimum viable product packaging to get our products on shelves because we assumed taste meant more than packaging design. While it’s true that taste is king, it’s also true that people buy with their eyes, and beautifully designed packaging and branding make a huge difference when it comes to success in the CPG space.

Since launching our rebrand in early 2020, we’ve onboarded more new retail customers in one quarter than we did in the last two quarters combined. We shared more about our rebrand and the vision behind our packaging here.

What's a line item on your budget that makes your business uniquely your business?

An easy one at last! The line item that makes our business uniquely ours is the production of okara flour, a high fiber, gluten-free flour made from the soybean pulp leftover when you make soy milk. It’s our flagship ingredient and how we got our start. We first came face to face with food waste when I co-founded Boston’s first organic juice company, Mother Juice, but we really started our upcycling journey when we learned that okara was being produced in massive quantities at tofu companies across the country.

Renewal Mill is one of the only U.S.-based suppliers of okara flour, and our biggest capital expense to date has been for production of the ingredient. While okara definitely defines our business to date, we’re careful to not let folks label us as the “okara company.” We’re building a full portfolio of upcycled ingredients sourced from byproducts across the food supply chain, and are building a product line based on each of these hero ingredients.

What personal sacrifices have you made on behalf of your business?

Entrepreneurship is not for the faint of heart. Both myself and my co-founder have made major personal sacrifices to grow this business because we believe in a waste-free future. Personally, I’m building this business for my son, so that he and his generation will have a healthy planet and a sustainable food system during their lifetime.

Being a single mom and an entrepreneur doesn’t come without sacrifice, both to family time and to the business. I’ve also had to make the hard decision not to take a salary for significant periods of time while growing this business, which goes back to the investing question. My lack of salary is an investment in Renewal Mill and what I know we can grow it to be. This sacrifice means living apart from my team and being lucky enough to rely on the generosity and safety net of friends and family that not everyone is afforded.

Inverse analysis — If your business is founded with a mission, you must stick to that mission, no matter how low your bank balance gets. If your products and services serve a need, be nimble and experiment to see what works. Hopefully, something sticks and your business will be on its way to success.