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Leon Kaye headshot

In Silicon Valley, Even a Vegan Food Company Can be a Unicorn

By Leon Kaye

When we think of bad corporate behavior, we tend to assume the usual suspects: energy companies, as in Enron 15 years ago or ExxonMobil’s current SEC investigation; banks, thanks to the 2008–2009 financial crisis and the current Wells Fargo “fake accounts” scandal; or big conglomerates, such as Tyco, with business models we don’t really understand and CEOs who prey on oblivious investors.

Surely a food company that is on a mission to end animal torture, improve public health and save the environment would refrain from such shenanigans. But as last week’s Bloomberg investigation revealed, Hampton Creek and its founder and CEO, Josh Tetrick, have been accused of cooking the books, over-inflating data about products’ environmental footprint and, in the end, possibly defrauding investors.

And all of this was apparently done to boost the valuation of the company behind Just Mayo in yet another quest to become a Silicon Valley “unicorn,” following the lead of privately-owned companies including tech superstars Uber, Airbnb, Snapchat and Pinterest.

This is a spectacular fall from grace for Tetrick, who became a hero to the animal welfare, vegan and sustainability crowds with his Just Mayo and Just Cookie Dough products. With his chiseled good looks, irresistibly muscular frame and bravado, Tetrick had the cajones and persona these movements arguably needed. Brash testosterone-laden energy gave these campaigns a massive bicep flex and gregarious chest bump. It has always easy to lampoon animal rights activists and vegans -- as in, you know, the people who work in your neighborhood health food store . . . that always looked unhealthy. But Tetrick scored some serious street cred to the noble cause of moving society away from a diet centered on animal protein. And who would argue with this guy, as he embraced science and technology while wowing investors in order to end animal cruelty? Plus, he was a college football player, proving veganism and animal rights activism did not have to be defensive and shrill.

One thing that is very clear is that Tetrick believed in himself, as he often told stories that Bloomberg suggested were usually exaggerated. For example, he was on the West Virginia University football team, but unlike the bios he gave to the press over the years, he was actually on the practice squad, which rarely suited up in uniforms or traveled, wrote Bloomberg reporters Olivia Zaleski, Peter Waldman and Ellen Huet. He said he worked with poor people in Africa for three or seven years, depending on who asked him. And his life story’s fudging is where the cracks in the façade started.

Zeleski, Waldman and Huet picked apart Hampton Creek’s success, and they didn’t walk on eggshells. And as if they could not dig in their knives keep enough, the story's lede is an entertaining GIF, on which readers can click on a mouse in order to wipe the vegan mayo off Tetrick’s face.

It turns out the copious amount of research to find a plant-based alternative was allegedly more of a sideshow to leave investors thunderstruck than an effort to discover the perfect molecular structure to replicate an egg yolk. The 1.4 trillion gallons of water saved by the company as of March 2015 was actually a smaller amount after a sustainability consultant crunched the numbers, the reporters found.

The dubious science, however, did not get in the way of the products’ taste and quality. If any plant-based product really tasted like the “real thing,” it was the company’s cookie dough and mayonnaise. And Hampton Creek won more fans after its inspirational role as David against the Goliath of Unilever, which complained to the feds about the fake spread daring to pass itself off as “mayo.” Meanwhile, the American Egg Board was in full freak-out mode over Tetrick’s success, making the CEO even more of a hero to those of us who want to do something about animal cruelty and the poultry industry’s impact on the environment. Undaunted, Hampton Creek kept scoring wins, as Target and Walmart agreed to sell more of its products. Even 7-Eleven offered Just Mayo as a condiment for its famous hot dogs.

But that momentum, the reporters charge, was built upon Tetrick’s skill in badgering investors into not missing out on the latest Silicon Valley can’t-miss opportunity. But most hilarious, if it were not so egregious, was Hampton Creek’s undercover buyback scheme, which sounds like a delicious plot served up by a sitcom such as "Arrested Development" or "The Office." As widely reported, the company hired contractors, who were instructed to buy heaps of products at chains such as Whole Foods and Safeway. Some products were “tested” at home; the rest could be given away to friends, food banks or the mailman. Many of these hapless secret shoppers were reportedly overwhelmed with the task and ended up throwing much of the product away, which at a minimum sabotaged the company’s claim that it was being good for the environment.

As a result, Hampton Creek’s “quality assurance” directive appeared to inflate sales figures; it under-reported those expenses; and, in turn, the Securities and Exchange Commission launched an inquiry into the company. Most likely this would have all been on the down-low, if it were not for Bloomberg’s research and “triangulation,” which reconciled the company’s financial statements, public statements and emails.

The result will be more schadenfreude directed to Silicon Valley types, as Hampton Creek’s investors included the controversial Donald Trump lapdog Peter Thiel and Khosla Ventures. The winner of this saga will be the Hollywood writer who should have no problem finding gold in this story. The losers, of course, are Tetrick and Hampton Creek, saboteurs of a perfectly fine portfolio of products undone in the obsession to inflate sales numbers and another startup’s valuation.

Image credit: Hampton Creek

Leon Kaye headshot

Leon Kaye has written for 3p since 2010 and become executive editor in 2018. His previous work includes writing for the Guardian as well as other online and print publications. In addition, he's worked in sales executive roles within technology and financial research companies, as well as for a public relations firm, for which he consulted with one of the globe’s leading sustainability initiatives. Currently living in Central California, he’s traveled to 70-plus countries and has lived and worked in South Korea, the United Arab Emirates and Uruguay.

Leon’s an alum of Fresno State, the University of Maryland, Baltimore County and the University of Southern California's Marshall Business School. He enjoys traveling abroad as well as exploring California’s Central Coast and the Sierra Nevadas.

Read more stories by Leon Kaye