ImpactAlpha, July 22 – There are impact investments and then there are impact investments. The recent financing of Native American Natural Foods is an example of the latter, with the inclusion of a host of terms that ensures the company stays Native-owned and that it continues to foster community health, security and opportunity.
NANF got started in 2005 on the Pine Ridge Indian Reservation in South Dakota with a mission to build a health food brand with both deep cultural ties and strong community impact. Fifteen years later, the B Corp and maker of the popular Tanka buffalo snacks has raised its first institutional funding round, backed by the Libra Social Investment Fund, Clearinghouse CDFI and Highlands Associates, with support from Candide Group.
“For us, the question of fundraising was always about how to do it in a way that is authentic to our Native values and culture and fulfills our mission. It takes longer to do something when you’re trying to be mindful of so many pieces,” NANF CEO Dawn Sherman tells ImpactAlpha. “The terms fit with the fabric of who we are.”
That fabric was spun up by founders Mark Tilsen and Lakota tribal member Karlene Hunter, who envisioned a company that could restore buffalo to Native lands, provide livelihoods to their community and bolster local food security and health, all while reflecting Native culture and values. The company was the first to launch a commercial buffalo protein bar, made from a traditional Lakota recipe of cured meat and berries, called wasna. The original intent was to steer Native communities hard hit by poverty, food insecurity and chronic disease back to familiar, healthy foods. Amid changing consumer trends and growing demand for healthy snack options, Tanka bars garnered broader appeal.
“We were the originators of an entirely new food category. How many people get to say they did that?” remarks Sherman, who has been with NANF since 2012 and at the helm of the company for the past two years.
The product line expanded. Tanka bars and snacks made it onto the shelves of Whole Foods, Costco and R.E.I. At its peak in 2015, NANF was doing $5 million in annual sales.
Then the competitors flooded in.
Texas-based EPIC developed a knock-off version of the Tanka bar, while California-based Country Archer and Krave began popularizing other types of healthy cured-meat snacks. NANF was out-spent on marketing 10-to-one, Sherman estimates. Krave got acquired by Hershey in 2015. EPIC got acquired by General Mills the following year. Country Archer has raised tens of millions of dollars in venture capital funding, including a $12 million Series C round in February this year.
NANF, meanwhile, couldn’t find the investor funding or working capital to compete. It scraped together some funding through a crowdfunding campaign, but it wasn’t enough to sustain the operation. Its production gradually slowed, until Tanka bars all but disappeared from retail shelves.
“It was tough to watch these other brands use Native imagery—teepees, arrow heads—and mimic our story. It was deliberate cultural appropriation,” Sherman reflects. “But then they were outspending us on marketing. All of these big brands started flowing in. They got instant distribution, and we just couldn’t compete against that.”
Levels of impact
In some ways, the acquisition of NANF’s competitors by corporate food giants could be considered impact investments. Amplifying access to healthy snacks in a country where more than 40% of adults are obese and chronic diseases like diabetes and heart disease are rampant certainly has positive impact.
But for NANF, a corporate buy-out has never been an option; such an acquisition would only jeopardize the company’s social mission, Sherman says. “Our story, who we are and what we’ve accomplished would be diluted, because those things get pushed down in an industry model that depends on volume.”
“My passion is to shake that up,” she adds. “Everyone should be able to access healthy food. It shouldn’t be dependent on this grow-sell business model that pushes little brands down.”
NANF’s institutional funding round puts the company back on a path to have that kind of impact, for Native-owned businesses and communities in particular.
With support from Candide Group, the company raised several million dollars in equity funding from Libra Social Investment Fund, a donor advised fund, and California-based Highlands Associates, as well as Native-focused community development financial institution Clearinghouse CDFI, a prior investor that converted its previous shares and debt in the new round. The deal terms upheld the company’s existing employee-ownership scheme, and included a commitment to ensuring that at least 51% of any dividends or sale proceeds go to Native owners and a plan to sell back the equity shares either to the company or a third party Native buyer, Candide’s Aner Ben-Ami tells ImpactAlpha.
“In short, it required working outside the box and intentionally structuring an investment that benefits Native communities and prioritizes Native ownership over the longer term, which is not what your typical private equity investors would be able or willing to do,” he says—especially not for a Native-owned company, where “there is practically no equity capital available at all.”
There is also much more than financial support involved, adds Sherman. Niman Ranch, a sustainable meat brand with over 750 independent farmers and ranchers, has pledged to support NANF’s growth strategy as a technical advisor and hands-on partner, including contributing senior staff to work directly with NANF.
“The financial independence of the Native owned and operated TANKA goes to the heart of our mission to support sustainable agriculture and resilient rural communities,” said Niman’s Chris Oliviero in a statement.
“I’ve never heard of a large brand that comes in wanting to help a small company grow without the intent of acquiring them,” remarks Sherman. “All of the pieces that we’ve brought together, and the partners we’ve brought in, they really support our whole mission and are helping to build the ecosystem.”
Goals for growth
NANF’s immediate focus is to revive sales and retail relationships, with the aim of getting back to 2015 sales volumes. In the next five years, Sherman says she hopes to see the company doing about $20 million in sales.
But the company can only grow as fast as its producers can produce, and the Native ranchers and growers it sources from also need investment and technical assistance. To that end, NANF is launching a resilient agriculture fund to support and expand its circle of producers.
“Our biggest goal is to close the supply-chain loop in this Native food ecosystem we have built,” says Sherman. “Then we can bring in more products, and lend our support to some of the other 500 small Native food brands, and drive all of that impact back.”