Two companies on this year's Inner City 100 are all about school lunch. Here's why business is booming in this space.
It’s been nearly four years since First Lady Michelle Obama sent shockwaves through the education world with the announcement of new school lunch regulations. Called the “Healthy, Hunger-Free Act,” schools around the country had to respond to drastic changes to what could and couldn’t be served in school cafeterias.
The new meal requirements, according to a White House release, were the “first time in more than fifteen years” that the government had raised standards for the meals consumed by some 33 million students on a daily basis. At implementation, the requirements included a cap of 850 calories for lunch meals, a call to increase the variety of vegetables available, and the mandatory use of whole grains.
Remember, for many kids, lunch is not the only meal they consume on school grounds. The school cafeteria is also their go-to destination for breakfast and even dinner, too.
Demand for healthy food that can be delivered at scale has led to the birth of a raft of rapidly growing school lunch businesses in America’s urban core. Two such companies, Oakland-based Revolution Foods and Detroit-based Edibles Rex, have been cooking up food for students ahead of the government’s regulations.
These small businesses appear well-positioned to meet the Obama administration’s guidelines in a healthy, kid-friendly way. Major industry players, meanwhile, are comparatively unwieldy. There are three powerhouse food companies that serve schools. They are Aramark, Compass Group, and Sodex, according to an article published by the Cornell Policy Review. “With a combined annual revenue of about $43 billion in 2009, the school lunch sector is highly concentrated and dominated by these three giant multinational companies,” writes Robyn Ziperstein.
Tammy Tedesco is the CEO of Edibles Rex which is No. 95 on this year’s Inner City 100 list, a ranking of the fastest growing inner city businesses in the United States, with a 60% five-year growth rate and 2013 revenue of nearly $4.5 million. The company recently won a $250,000 grant from Chase to support its continued growth. That money will help it begin manufacturing products for sale. Tedesco says that Edibles has experienced such impressive revenue increases on account of its participation in the government’s school lunch program (they also cater to corporate clients). “It’s getting more participation every year.”
Tedesco considers her company’s growth ironic. Many Americans have faced economic struggles over the past several years, and more parents, especially those who live in inner cities, are feeling the squeeze. As a result, the schools that Edibles Rex caters to tend to serve students who quality for free and reduced-cost lunch. “We’re not in the affluent neighborhoods. We’re in the inner city and we’re feeding children in the underserved communities,” she said. “Ninety percent are eligible for the after-school lunch program.”
“The trends over the years have followed what the government has set the tone for,” said Tedesco. “We’re pretty excited about those changes.” But at the same time, she admitted, it has been difficult for “school districts to work with the government and meet the new requirements,” including pushback from organizations like School Nutrition Association, which claims that the new regulations will be burdensome to school budgets.
Nevertheless, Tedesco is optimistic about her company’s future. She said receiving the grant from Chase was a “proud moment for me.” She added, “That was validation for the work we do. Sometimes it’s a thankless job.”
With children sometimes up in arms about trying new, healthier foods offered by school lunch businesses, taste-tasting and education have become essentially important. For Tedesco, that help comes through Project Healthy Schools at the University of Michigan. Melanie Adams, a wellness coordinator with the decade-old program, said “it’s really just having someone that is a healthy role model talking with the students, and encouraging them to try something new.” That, in turn, helps children accept new tastes.
The program is currently in 52 schools around Michigan. Although the organization doesn’t have plans to go national, it may be a boon to the food service industry if it catches fire. After Michelle Obama’s announcement, Adams said there was “kind of a disconnect between the large policies that have been implemented which, long-term, I think will be great” and with the schools. To fix that, she believes there needs to be better communication and education.
Easier said than done, it seems.
Kirsten Tobey of Revolution Foods also says that her company is committed to “building healthy eaters.” Revolution also offers education programs and taste-testing for children. At No. 19 on the Inner City 100 list with a five-year growth rate of 479% and 2013 revenues of over $76 million, the company provides more than 200,000 meals to school districts across the U.S. every day.
Like Tedesco, she’s been pleased with the steps taken by the Obama administration. “From a public health standpoint, we’re really happy to see the standards are rising across the country.” But she added that “health food is [only] effective if kids are eating it.”
Like Edibles Rex, Revolution Foods has also expanded into the retail market in recent years.
Tobey says she is committed to making sure the meals aren’t just “the standard, run-of-the-mill” offerings from 20 years ago. “We make sure every meal is culturally relevant,” she said, which is “out of respect for the kids we serve.” Examples she cited include designing more meals with Asian flavor profiles and having dishes such as gumbo and jumbalaya available.
The First Lady’s guidelines come as a reinforcement of trends Tobey has seen over her years in the food business. “I think there’s a lot of momentum in the public discourse about food and nutrition focusing on quality of ignredients, the focus on real food. If you look 10 years ago, there was a lot more buzz on local and organic. There’s a real trend on focusing on food that’s made from real ingredients, food that’s recognizable, foods that’s made in a home-prepared way.”