Twin Cities-based Local Crate looks to expand meal-kit business with seed funding

With its twist on meal kits that includes using ingredients sourced from the region and recipes designed by local chefs, Twin Cities-based Local Crate is looking to expand its reach to stores and beyond Minnesota now that it has completed a $1.4 million round of seed funding.

The startup — which launched in 2015 and has a production facility in St. Paul — was part of the Techstars' retail accelerator at Target headquarters last summer.

In recent days, it has rolled out delivery of its meal kits to Illinois, with plans to do the same in Wisconsin and Iowa in coming weeks, said co-founder and CEO Frank Jackman.

Local Crate also plans to set up shop in a couple other major markets around the U.S. by the end of the year, he said.

"We know we can go head-to-head with the national players," he said, adding that his company uses about 80 percent less packaging than many of his competitors and offers fresher ingredients because it does same-day and next-day delivery.

In addition, retail is going to be a big focus for Local Crate in 2018, he said.

During its time in the Techstars program, the company created a version of its home-delivery meal kits to be sold in stores. Those store-sold meal kits were tested in about 10 Target stores around the Twin Cities last fall. The pilot recently ended, but Local Crate's products are still being sold at the Wedge and Linden Hills co-ops.

The meal-kit space has been heating up in recent months, especially as more retailers jump on board. Walmart is rolling out meal kits to 2,000 stores this year. Blue Apron has said it will start selling its products in yet-to-be-named retailers. Kroger has been rolling them out to more markets, and Albertsons, another grocery chain, bought meal-kit company Plated last year.

But Jackman isn't sweating the increased competition.

"I think it validates the need for meal kits at the retail level," he said.

As it gears up for this next stage, Local Crate, which now has about 20 employees, has been beefing up its team. It has made a couple of executive hires in recent weeks including Erin Newkirk, who has worked at General Mills and Bright Health, as its chief marketing officer, and James Collins, who previously worked at CobornsDelivers, as its vice president of operations.

The company plans to do even more hiring as it expands to new markets.

"Consumers are hungry for a local food authority that not only provides fresh, delicious and convenient meals, but also gives back to their community by supporting local farmers, makers, and hunger relief efforts," Brett Brohl, managing director of the Syndicate Fund, said in a statement.

"Local Crate has an experienced leadership team with substantial food, technology, and marketing expertise, as well as a differentiated model that has it poised for rapid growth."

Some critics have wondered if the meal-kit space is oversaturated and might be a passing fad. Blue Apron's struggles since it went public last year have raised eyebrows. But Jackman noted that HelloFresh, another major meal-kit purveyor, has had better success since it went public.

"Everyone likes to focus on bad news," he said. "But overall, the meal-kit space has been doing well. We're food people. We're building a food business by making sure the food stands up to consumers' needs."