
How Hampton Creek sold investors on fake mayo - pc
https://www.bloomberg.com/features/2016-hampton-creek-just-mayo/?
======
tptacek
_Hampton Creek had a huge cost advantage, the company said in a pitch deck
provided to potential investors. Its plant-based egg equivalent cost about
half as much as a real egg. In the case of Just Mayo, that meant Hampton Creek
could easily undercut Unilever’s Hellmann’s and Best Foods brands and grab a
significant share of the $2 billion U.S. mayonnaise market._

Does this ring false to anyone else? Are Hellman's costs dominated by their
industrial inputs? Also: famously, you can make a _cubic shitload_ of
mayonnaise from a single egg (I'll find the Cooking Issues cite somewhere).
Commercial mayonnaise is almost entirely oil and gets its flavor mostly from
acid, salt, and sugar, not from the egg. Does halving the cost of those eggs
really give a competitor that much of an edge?

~~~
SandersAK
This was my thought exactly. In America very little of the big name mayo uses
egg as a primary ingredient.

I can see how JustMayo could be a category winner for the whole foods niche
tho and that could be really profitable.

~~~
jonknee
> In America very little of the big name mayo uses egg as a primary
> ingredient.

Egg is a very small part of mayonnaise if you buy a large American brand or if
you make it yourself at home. It's mostly oil.

------
chollida1
> As buybacks surged in 2014, Hampton Creek expensed about $1.4 million under
> this unusual category over five months, compared with $1.9 million of net
> sales in the period.

Hmm.....

I actually had to take a course in business ethics and the first rule we were
taught was, if you wouldn't feel comfortable getting on the phone and telling
your share holders what you are doing then its probably wrong.

> Javier Colón was an operations manager at Hampton Creek from 2012 until
> Tetrick fired him in 2013. They sparred, Colón says, over Tetrick’s attempts
> to change some employment contracts without the workers’ consent

If you've ever been responsible for a Pnl unit, much less an entire company,
then you'll understand the crushing pressure you are under to make numbers.
Sooner or later you'll have to decide if committing outright fraud is worth
it.

I'm guessing that the management had good intentions when they started out.
And the fraud started small, just buy a few cases to juice the quarters
numbers, and it slowly spirals out of control.

Once you compromise your ethics, its hard to put hte genie back in the bottle.

------
sethbannon
From the image at the front of Josh Tetrick with mayo on his face, this seems
like a hit piece designed more to take down Josh and Hampton Creek than to
inform the public. There are legitimate conversations to be had about how
Hampton Creek runs its business, but this piece doesn't sit well with me.

~~~
applecore
If you prefer, the investigation follows a much more staid article[1] from
early August that reveals the company hired a network of contractors to
secretly buy back their own product from stores.

[1]: [http://www.bloomberg.com/news/articles/2016-08-04/food-
start...](http://www.bloomberg.com/news/articles/2016-08-04/food-startup-ran-
undercover-project-to-buy-up-its-own-products)

~~~
tedmiston
tl;dr - That sounds of dubious legality, or at least _ethics_.

> "Expense reports reviewed by Bloomberg show contractors bought back jars of
> Just Mayo from Safeway stores. Former workers say Hampton Creek also
> purchased its own products at Kroger, Costco, Walmart, Target, and Whole
> Foods locations across the country."

> “We need you in Safeway buying Just Mayo and our new flavored mayos,”
> Caroline Love, Hampton Creek’s then director of corporate partnership, ...
> "...This will ensure we stay on the shelf to put an end to Hellmann’s
> factory-farmed egg mayo, and spread the word to customers that Just Mayo is
> their new preferred brand. :)"

------
debacle
Isn't this the company that was also being investigated because their product
isn't technically mayo?

~~~
sp332
The FDA regulates what gets to be called "mayonaise", and the investigation
was about whether they were allowed to use the word "mayo" for something that
didn't have egg in it. They settled by putting "egg-free" on the front label
in reasonably large text.

~~~
debacle
I think that's fair, but I remember the stump piece that was trying to paint
the FDA as obstructionist, it felt very dishonest.

------
robertcorey
Wow! This is incredible stuff. As a vegan I was incredibly surprised to see
just mayo appear in mainstream grocery stores in my area.

This also might explain the post's I've seen on r/vegan of just mayo products
discounted to 50% - 75%

~~~
tptacek
If you have a stick blender (which you should have, because they are cheap and
useful), mayonnaise is incredibly easy to make. Vegan mayonnaise isn't much
more difficult: soy milk works as an emulsifier, and can be boosted with a
little dijon (which I put in normal mayo anyways, because it's good).

I'll use Kewpie mayo for things that want it, but otherwise: store bought mayo
is kind of gross, isn't it?

~~~
robertcorey
I don't actually use it, just have my finger on the pulse of the vegan
processed food scene, but thanks for the tip!

------
M_Grey
What on earth is it with oil related foodstuffs that seems to always inspire
such fraud? Remember [http://www.businessinsider.com/the-great-salad-oil-
scandal-o...](http://www.businessinsider.com/the-great-salad-oil-scandal-
of-1963-2013-11) ?

------
throwaway0346
I find that unsurprising given that you have been accused of similar tactics
in the past and have also had a scathing "hit piece" written about you as
well.[1]

[1] [https://newrepublic.com/article/119350/amicus-app-how-
tech-i...](https://newrepublic.com/article/119350/amicus-app-how-tech-
investors-are-failing-due-diligence)

~~~
sctb
Making personal attacks from throwaway accounts is not what this site is for.
We detached this subthread from
[https://news.ycombinator.com/item?id=12557164](https://news.ycombinator.com/item?id=12557164)
and marked it off-topic.

------
justratsinacoat
"Business ethics" means "keep the shareholders happy"? This explains so
much...

~~~
tptacek
No, that's not what he said. In fact, a pretty good rule of thumb regarding
the principle of charity on message boards: if you have to write "X means Y?
That explains so much.", there's a good chance you're being pointlessly
uncharitable.

~~~
justratsinacoat
Eh, if you say so. Determining "the shareholders" to be the ultimate
authority, the fear of whose disapproval drives you to not make "bad"
decisions (which, the comment elaborates, eventually means committing fraud to
"juice the quarters numbers"; to whom are these numbers being eventually
presented, to delight or disappointment?).

But upon further reflection upon our interaction, you must be right. Thanks
for sharing your experience.

~~~
tptacek
No, he was implying that the reaction of shareholders is an _acid test_ of
ethics: that if you can't even tell your shareholders about something iffy,
it's very unlikely that it's ethical. But he didn't say or imply that the
opinion of shareholders completely disposed of the question.

~~~
justratsinacoat
>But he didn't [...] imply that the opinion of shareholders completely
disposed of the question

Quite so! What he said was 'their having committed fraud to bump up the
numbers, y'know, as you do, was to please shareholders at quarterly meetings'.

"Business ethics", at this level, revolves around the shareholders, and the
comment telegraphs this: as you say, shareholder reaction is the acid test for
appropriate behaviour. Nor, indeed, does the opinion of shareholders dispose
of the question. Yet, it is fear of shareholder disapproval that drives both
the cover-up of fraud (potential jailtime probably helps with this) _and_ the
instantiation of said fraud in order to keep numbers up in order to placate
shareholders.

But, again, you're right. I'll keep my original comment up, but I should have
put ""Business ethics" is all about shareholders, eh? This explains so
much...".

~~~
kolinko
>Quite so! What he said was 'their having committed fraud to bump up the
numbers, y'know, as you do, was to please shareholders at quarterly
meetings'."

Check the thread history, he said exactly the opposite:

> > > if you wouldn't feel comfortable getting on the phone and telling your
> share holders what you are doing then its probably wrong.

------
tmaly
To me its just a shady way to do growth hacking.

I have family members with an egg allergy, so I am grateful that they were
able to get the word out on this product.

~~~
jonknee
> To me its just a shady way to do growth hacking.

Or in other words, fraud.

~~~
brianwawok
Every messaging board (ala Reddit), and Dating site (ala plenty of fish) I
know of.. started with some founders "seeding the pool". To me it kind of
makes sense, as you can't just open an empty 2 way marketplace and hope that
it all works out. Ideally in the reddit way, there were actual discussions
going on (except between 3 people not the 100 the usernames would success). Is
this also fraud, or just the fact of starting a 2 way marketplace?

Now for this story.. I cannot see a way to justify counting most of your sales
as things you bought yourself. That sounds like a not valid way to do
business, and I would be very surprised if it were legal to report those as
sales.

~~~
zck
> Ideally in the reddit way, there were actual discussions going on (except
> between 3 people not the 100 the usernames would success).

Comments weren't in the initial release of reddit, and wouldn't be added until
the end of 2005^1. In the stories I've heard, the usernames were just for
submitting stories, and the site was getting enough submissions on its own by
the time comments were added.

[1] December 12, 2005.
[https://www.reddit.com/r/reddit.com/comments/17913/reddit_no...](https://www.reddit.com/r/reddit.com/comments/17913/reddit_now_supports_comments/c51).
Reddit's first post was in June:
[https://www.reddit.com/r/reddit.com/comments/87/the_downing_...](https://www.reddit.com/r/reddit.com/comments/87/the_downing_street_memo/)
.

