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Byte Foods

Byte Foods Brings Freshness to Bay Area Workplaces

Smart vending machines

For the many people that spend a considerable amount of time away from home, finding fresh food can be a challenge. For the many organizations that found on-campus cafes and catering too expensive, employees often resort to traditional vending machines – packed with chips and sodas for last minute cravings. Byte Foods, a San-Rafael based startup, hopes to improve that experience. Through its proprietary smart vending technology, customers can purchase fresh, healthy food, in commercial spaces (workplace, hospital, university, gym, etc.) completely unattended at any time of the day.

Instead of usual salty snacks and sugary soft drinks, Byte’s solution supports fresh food – meals, salads, sandwiches, snacks, etc. from local suppliers and beverages such as Kombucha, coconut water, and Blue Bottle iced brewed coffee. Similiar to Amazon Go, but scaled down to fit in an office, customers just swipe a credit card to unlock the glass door, and the machine uses RFID technology to automatically recognize any items removed from the fridge. Each kiosk is connected to the internet through wifi or cellular.

That allows Byte to adjust the product mix and customize pricing dynamically – for instance offering discounts for popular items or those they want to sell quickly. All unsold items from Byte fridges that have not expired are donated to San Rafael based, which reallocates thousands of Byte meals each month to local families in need.

Founders’ journey

Byte Foods is the founders’ second foray into food entrepreneurship. In Fall 2014, the founders, Megan Mokri (Berkeley-Haas MBA graduate) and Lee Mokri, bootstrapped a health-conscious meal-delivery startup named 180Eats. By partnering with a former executive chef from Google, the company quickly expanded and served ~2000 customers in Marin country. While the service was well received, the founders soon recognized the underlying economics – specifically on-demand delivery directly to customers was not sustainable.

CEO and Founder, Megan Mokri

Co-Founder, Lee Mokri

VP of Engineering,Art Tkachenko

As luck would have it, in 2015 the Mokris came across Pantry – the startup that created the initial technology behind the internet connected smart fridges that Byte currently uses. After successfully piloting the technology, Byte soon became their biggest customer, before acquiring Pantry six months later. The company now has 40 employees, most of which are based in San Rafael. Pantry’s original founder, Art Tkachenko, is now Byte’s VP of Engineering.

State of business

Today there are more than 500 fridges deployed across Bay Area, Sacramento and across the US. While most of the subscribers are workplaces – Autodesk, Cisco, and Tesla for instance, through word of mouth alone Byte attracted interest from verticals such as hospitals and apartment buildings. At a low monthly subscription cost, Byte boosts office productivity, improves employee health and builds a happier workplace. Its service also allows companies to use subsidies as means to incentivize and reward employees. Among Byte’s subscribers, the average employee participation rate is 72%. As more employees embrace Byte, so do the employers themselves.

The primary focus of the founders today is to further improve the scalability of the business model. Although delivering on predictable commercial routes at a fixed schedule is much easier than delivering to customers directly on demand, there are nonetheless several challenges – fulfillment, logistics, production for instance, as the business continue to scale. As such, to facilitate expansion into other metropolitan areas, Byte started to outsource key fulfillment and logistics capabilities to providers with a national footprint.

Similarly, over the last six months, the company moved the assembly of the smart fridges upstream and increased production capacity notably. In short, Byte is acquiring the capability to quickly expand into additional markets, by developing strategic partnerships as well as a complete understanding of the food delivery supply chain.

There are also substantial interests from major players in the industry – such as Sodexo, Compass Group, large grocers and meal-kit providers in licensing Byte Foods’ proprietary technology platform. Though still early, the Mokris believe this will become another major revenue driver over time.

Customer Using Byte Foods “Vending Machine”

Competitive Landscape

Using vending machines as distribution points, the Mokris believe Byte Foods is addressing an underserved demand – the need for affordable, fresh food at commercial spaces. While there are undoubtedly many food options outside of the office, many people don’t have the luxury of time to go out and the breakroom a few steps away often presents the quickest and the most convenient solution.

Not to mention the convenience that comes from 24/7 availability – particularly for smaller officers or employees that work through the night. While Byte’s service is more convenient, it remains to be seen whether similar always-available stores, Amazon Go, for instance, will become viable alternatives as they roll out in the Bay Area.

On-demand delivery services – Uber Eats, Door Dash, Postmates to name a few, present another option for those with higher willingness to pay and time to wait for the delivery. However, the underlying delivery economics – scheduled, batched during off hours vs. on-demand, individual order, during the day, will strongly favor Byte and enable it to offer similar services without requiring a minimum order amount. (Amazon Prime Now, for instance, charges extra convenience fees for orders below $35). The waiting time for delivery could also be a concern given the last-minute nature of such cravings.

Looking ahead, Byte is poised to capture a greater market share of the vending machine as the broader industry moves toward cashless payments, fresher foods, and dynamic, real-time pricing. While there are companies with similar concepts – such as Farmer’s Fridge in Chicago, so far Byte is the only company to successfully combine the fresh food/beverage supply network, logistics and delivery capability with proprietary smart fridge technology. This unique combination, along with the upside of technology licensing revenue, will position Byte well going into the future.

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