Krave Jerky Founder Jon Sebastiani Launches Incubator For New Food Brands

Jon Sebastiani knows what it’s like to shake up a moribund food category. In two years, the former vintner grew his startup, KRAVE Jerky, into a $35 million business, selling dried meat in gourmet flavors like Black Cherry Barbecue and Chili Lime.

Then, Sebastiani achieved the kind of success most food entrepreneurs can only dream of:  the Hershey Company agreed to buy KRAVE for about $220 million last year.

Today, Sebastiani, 45,  formerly the managing partner of Wines.com and the president of Viansa Winery, announced his next act. He's launching an incubator called Sonoma Brands, named after his California hometown, to develop new consumer packaged foods brands. (Under his agreement with the Pennsylvania chocolate company, he oversaw the transition to corporate ownership through the end of 2015, but KRAVE remains headquartered in Sonoma.)

Sonoma Brands, whose limited partner is the private equity fund Velocity Made Good (VMG) Partners, plans to launch three to five new food Consumer Packaged Goods (CPG) products of its own this year. It will also provide mentorship and investments of at least $500,000 to several early-stage companies, Sebastiani told me in a telephone chat from Hawaii, where he was vacationing last week. What follows are edited excerpts of our conversation.

Robin D. Schatz: Did you always intend to move on after Hershey bought your company?

Jon Sebastiani: When I first met Michelle Buck, the president of Hershey , I was asked the question, ‘What’s next for Jon?’

I know I’m agile and very nimble-minded, a small-company person who really enjoys the magic of starting a new brand in a nascent or stale category and really driving that innovation and disruption. That's my true love.

And so I shared with her from the get-go that my ultimate desire was to not just start a new company, but to set up a structure where we would incubate our own brands in multiple categories and, in addition, invest in other early-stage brands.

Schatz: What will you be looking for in these early-stage companies you invest in and how will you help them?

 Sebastiani: Given the massive trends toward more artisanal brands in virtually every category, we're looking for innovation and newness. We have just an explosion of fantastic entrepreneurs. Clearly, we're going to go through our own filtration process: First and foremost, are they in a category we can understand and where we can add value.

I'm not a venture finance guy, though I have an MBA from Columbia. I'm an entrepreneur. The real intent for me is to be a mentor and really help from an operational standpoint. Our intention is to help them along with an exit in a five to seven-year time window.

Schatz: Do you worry that there's too much money chasing too few deals in the food space?

Sebastiani: I think there's a lot of capital out there, and any time anyone reads about a deal like KRAVE it attracts more capital. Having been an entrepreneur and having been through the capital raising process, what's incredibly important is that the capital comes with value, and that we truly partner with the brands.

Schatz: What's the biggest challenge facing new food brands?

Sebastiani: One of the realities today is that in the CPG space there is simply an explosion of brands and concepts. So there is a very steep hill from concept to accessing the marketplace, getting from startup to an early form of distribution is very difficult, whether your channel is the grocery space or in the club space.

There is some science to building that winning story to get into distribution. Coming out of KRAVE into Sonoma brands and having relationships with many of the larger players and brokers that help facilitate distribution, we're going to have an added advantage.

Schatz: What has your experience with KRAVE taught you?

Sebastiani: When you look at the retail landscape, these buyers are excruciatingly busy. To get noticed, to get that brand on the shelf, you need to have a very unique selling story. In Krave's case, we chose a category that was extremely dormant. Nobody cared about jerky. I can vividly remember coming out of the wine business, which is a very glamorous industry and announcing to my peers that I was entering the jerky space. People clearly thought I had lost my mind, and it  took two years to build not only Krave's selling story but the category's story.

 Schatz: Why is category so critical?

Sebastiani:   The wine industry is a great example If  you live in Napa Valley, to release another Napa Valley cabernet, it's excruciatingly difficult to differentiate yourself. As you think about a new brand or company, ask: Is the category ready for a new entry and how can you be different enough and catch the interest of a buyer. Category is very important.

Schatz: What excites you most about starting a new food brand?

Sebastiani: The real love for me is the first moment of the brand hitting the store shelves and seeing consumers' interactions. I have built my career on being as different as I can possibly be. I'm not afraid of being the one guy out there in the red jacket.

Schatz: Can you give me a little hint about what you’re dreaming up for Sonoma Brands this year?

Sebastiani: We plan to have our first brand launch in the first quarter, in the better-for-you consumable space, and we have another brand that will follow, probably in early Q2. It’s a better-for-you option in the indulgence space, the sweets category.

I’m a marathon runner and I’m doing IRONMAN in the Spring. So I'm very aware of what I eat, but I still have a sweet tooth. So I think there are tons of opportunities to simply provide better-for-you options. It's a huge category, and I understand that’s a bland statement, but we have a product that we believe is going to provide a very interesting, very exciting, different option. It's a very fun product. The category is as a stale as jerky was, and we're going to add life to it.

Schatz: Now you've piqued my interest.

Sebastiani: (laughter) Let's book a call in March.