Transcript: "Success won't happen on my watch": How a 100-year-old company innovates | Shay Cohen (Tnuva)

Opening: Shay returns from Kiryat Shmona

Eyal David: [00:01] Hey, this is Eyal, you're on Product Builder. We're about to start the episode, but before that, hit Follow on Spotify or Subscribe on YouTube and help us reach more ears. Let's go. Shay, how's it going? Very good, my friend. So glad you came. I'm really happy to be here. Want to tell us in a couple of words where you just came from? I just got back from Kiryat Shmona.

Shay Cohen: [00:32] From a meeting with the CEO of the Israel Innovation Authority, Dror Bin, and his whole management team, in what you'd call a field visit to a live-fire zone, an area that's currently going through intense fighting, let's not say war. And honestly, I went to give strength and came out strengthened. Meeting the Innovation Authority, which is by far, in my view, one of the highest-quality, most seriously managed authorities in our country, and also our portfolio, the portfolio CEOs and the incubator's management team, gave me a ton of energy. If in such a significant wartime we can create foodtech innovation and food security in Kiryat Shmona, anything is possible.

Who Shay Cohen is and what Tnuva is today

Eyal David: [01:34] Amazing. So we ran through that quickly, you told me about it a few minutes before we came in, and it really filled me up to hear that's what you did. So maybe tell us a bit about yourself, who you are and what, and why.

Shay Cohen: [01:46] I'll tell you about myself briefly. I'm the Chief Innovation Officer of the Tnuva Group and I manage the group's corporate venture capital fund. Broadly, my job is to make sure we don't miss the future in anything related to technological innovation. And I'll say honestly, this is the job of my life. I'm pretty much addicted to what I do. I also manage the group's venture capital funds and its portfolio, I manage the open innovation platforms, and I do growth deals for fun every now and then when the organization needs me.

Eyal David: [02:29] So you actually see a huge number of things, that's what you're saying. Now you say it's the job of your life, so how many years have you been doing it? Every time I say it I'm both embarrassed and proud. Okay, you know those things you're torn about.

Shay Cohen: [02:44] I've been in the role eight and a half years. Of course the role grew, evolved, intensified. It took on many forms. But I've been in the group eight and a half years and every day I wake up more addicted to what I do. Why? Because what is success in your eyes? It really isn't about success or failure, it's the combination with a sense of mission. Working, in essence, on managing opportunities and risks in something that can affect all of our lives. In the end we all wake up in the morning and we all eat three meals a day and we all want to eat better, smarter, healthier, and doing that at Israel's leading food company sounds very, very traditional, but it isn't. I mean, there's something about this group, which is celebrating 100 years this year, which is very, very identified with dairy, but it's also the largest alternative protein company in Israel and it has the largest food division in Israel: Sunfrost, Maama Of, Ma'adanot, Tirat Zvi, Adom Adom, Tnuva Fish, and in the past also eggs and Olivia. You understand you're part of a huge food group where every move you make,

Eyal David: [04:18] ends up affecting the plate. That we... that we consume, you said three times a day, I took that from earlier too, so at least people told me at least three times a day. I was going to say, so let's tune the ear for a second. You said you see a huge number of things and you're active in many areas. We haven't talked about it yet, but in a moment tell us which areas you're active in and what interests you, but tell us how much money you manage, what it actually looks like.

The scale: 4.5 million products a day

Shay Cohen: [04:48] Give you an order of magnitude. Basically, our funds, we have indirect and direct, have made investments to date on the order of tens of millions of dollars. We're part of a syndicate that won the franchise to operate the foodtech incubator in Kiryat Shmona. That fund alone has made investments of a hundred, up to a hundred million shekels. But there we're an equal partner among four partners. And of course we have our direct investment fund, which invests from the balance sheet, which has already invested

The fund: orders of magnitude and what it invests in

Eyal David: [05:23] tens of millions of shekels at the high end. So you told me in our conversation that Tnuva isn't a regular VC, that you have slightly different motives. You touched on that for a second. We're a classic corporate venture capital fund

Shay Cohen: [05:36] that in the end wants its portfolio to generate financial returns, but in essence, in essence, what we're looking for are technologies that will be game changers for our existing and future growth engines. What does that mean? It means that if today Tnuva's main growth engines are Alternative, the largest alternative protein brand in Israel, then my goal is to invest in startups that will bring next generation products or ingredients to Alternative, and the same in sports nutrition. Of course the holy grail is to find that startup, or that technology, that will ultimately give me a significant competitive advantage in creating the group's future growth engine. Broadly, like everyone, we want to make money, we want to make multiples, but in our decision-making we're driven more by creating competitive advantages in commercialization, and our whole thesis is built on that. At the end of the day, we see ourselves as a beta site for these companies, we see ourselves as a future commercialization arm for these companies. In the end I need to be the facilitator who takes that technology and translates it

Financial investor vs. strategic investor

Eyal David: [07:04] either into a process or into a product and commercializes it. Quick note before we continue: click the link to the Product Builder WhatsApp group in the episode description and join the community. There you can continue the discussion, ask questions, and be the first to get updates on new Tachles episodes. We're waiting for you there, and now back to the episode. So what you're saying, if for a second, if I'm an entrepreneur coming to you, I can show a very nice deck with a graph going up and to the right, but what you'll probably also be interested in is where it interfaces with Tnuva,

Shay Cohen: [07:36] how Tnuva stays relevant as a result, how Tnuva can bring it inside and amplify it much more. Yes, so in the end the checklist is the same checklist as any financial investor: the size of the opportunity, the quality of the team, how fundable or unfundable the team is, can I be a force multiplier? Will other players like me also want to invest? Of course, in the end everything has to be analyzed comparatively. You have to analyze all the alternative protein companies comparatively and pick the right technology with the right team that will know how to raise the right money and attack the opportunity correctly. We're like everyone, except we also know how to be very, very sophisticated in understanding that company's cycle, understanding the entrepreneur's maturity, understanding the business model, understanding how long it will take to commercialize, how long it will take to get to market, how long regulation will take. These are things strategic investors put much more emphasis on than financial investors, because we live and breathe and do this day to day.

Why Israel is the perfect beta site

Eyal David: [08:54] And actually, what I understand, the numbers you described, so usually entrepreneurs come to you really at the very beginning? Yes, we also think our competitive advantage

Shay Cohen: [09:04] is exactly at the Early Stage, at that seam between Pre-Seed and A, because the force multipliers we can provide are very, very significant. I think Tnuva has today the most significant R&D Innovation Center in Israel. It doesn't only touch dairy and alternative protein, it also touches hardcore food, and the beta site and the force multipliers in product development, regulation, production lines, implementation on the lines, that's something that's very hard to compete with.

Eyal David: [09:45] So actually, if we're talking about competition, that's Strauss and who else? Lay it out for us.

Shay Cohen: [09:51] Look, I think all the big players in Israel, from Nestlé, Osem and Strauss to Unilever, are playing, but also many global players like Mondelez and other players that don't have a production presence here, let's call it, understand the qualities of the Israeli ecosystem and try to play here. We offer a value proposition that's much, much more significant, and that's the ability to commercialize in the Israeli market. What about those qualities of the Israeli market? The advantage of being small. Think about it: if I'm a classic foodtech company that just developed next generation egg substitutes, and I try to commercialize that technology, that product, in New York, the penetration costs are incomparably higher. Here in Israel we have a small Western market of ten million people. In terms of size, both the number of consumers and geographically, it's not a big market. And as a beta-site market it's a significant advantage for a new player approaching the shelf. I can offer that to the startup without limiting it in the rest of the world.

Eyal David: [11:17] That is priceless. The thing is, just, if I compare us for a second to Denmark or a country of that size, what actually, just sharpen the difference here for me,

Shay Cohen: [11:26] that in the end, in the whole food market and in consumer goods in general, you have to succeed in your home market. You can't just go and adapt a product. A lot of startups try to adapt to the United States, but imagine what it means to launch a product in the United States versus launching a product. Let me be precise: there's something special about the Israeli market that can actually predict globalization, so to speak, more than other markets, just to understand where we live. We live in one of the most complex and wonderful places in the universe. You should know that 20% of the population is either vegan or vegetarian, those are crazy numbers. Maybe I exaggerated a bit. But still, we're a market that knows how to adopt innovation. There's very high curiosity and openness among end consumers. And beyond that, in the end, as an investor, it's also Israel's leading food company. If we bring that startup a production beta site, a supply chain, deep consumer understanding, our most significant assets, our brands, and obviously also the management team, there are significant force multipliers here that go beyond money, beyond the investment. And in that respect, think about it, we, Tnuva runs a huge conglomerate of companies that not everyone understands. We're very, very identified with dairy products, but Tnuva produces between 4.5 and 5 million products a day. It's a very, very significant part of Israel's food security. No matter what happens, COVID, the Houthis and supply chains and wars, you go to the supermarket and the products you love will always be there, and that's by far the base of Maslow, let's call it that. And that value proposition is something smart, experienced entrepreneurs jump on.

The collapse of foodtech venture capital

Eyal David: [13:29] That's something that really, now you mentioned all the blows we've had here in the last few years, but it's something that really, let's put it this way, pre-COVID it really was something that, like today, the food security that I really show up and there are always eggs and there's always this, so it's something that got sharper over time, right?

Shay Cohen: [13:45] Look, I think the last 5-6 years were, how should we define them, exceptional. And globally we see more and more focus on this issue called food security and supply chains. We see how the Russia-Ukraine war can create a situation where suddenly there's a flour shortage and flour prices go up, or commodity prices rise massively. And on the other hand we saw that as a result of a certain collapse of foodtech investment in venture capital, this vertical that's supposed to provide food security, or at least increase food security, and the venture capital valuation side, collapsed. So let's dive into that a bit, let's say I'll dive into... how is it possible that on one hand the world wants more security, and on the other hand the very technologies that are supposed to provide or increase that security can't raise money? And I think this is our role as the responsible adult: to step in and be a seal of quality for the good startups, and to go to financial players and tell them, you need to invest in this. This is the right thing, come join us, we'll be your risk reduction, we'll commercialize in Israel, the startup will go abroad, and in that respect we basically need to build our future partners and the competitors of the Tnuvas outside Israel.

Eyal David: [15:34] Excellent. I want you to tell us a bit, since you've already dived in, about what you actually invest in, what it looks like. But a second before that, tell us a bit, you touched on the fact that there are all kinds of fluctuations and trends in the food market. You talked a bit about the foodtech side and investments there, you talked a bit about the pita shortage in Egypt because of the war in Europe, in Russia. Tell us a bit about trends like that, what it looks like, and then tell us what you invest in.

50/50: foodtech vs. smart industry

Shay Cohen: [16:03] Look, anyone you ask about foodtech in the last ten years will tell you alternative protein. But this world is much, much broader than alternative protein. There are whole worlds of technologies touching sugar and salt reduction, functional products for sensitive populations and older populations, fortification, innovative production methods, cellular agriculture. Okay, how do you now produce cells that form tissue that let you produce meat substitutes of various kinds, and it's really endless. But beyond that, we're an operational manufacturing company that wakes up every morning and produces four and a half million products at 30 logistics and production sites. I mean, as a manufacturer I'm constantly required to become more efficient. We're constantly required to produce more, and if I need to sketch a rough split: 50% we invest in technologies that are next generation foodtech products, and 50% we invest across the whole smart industry world, where our focus for the year ahead is the whole AI and robotics area. We predict that... the revolution that happened there, of robots that can actually learn, and the significant cost reduction that happened there, can completely change the factory environment, from maintenance to the workforce on the line doing either quality control or some kind of packaging. We also see that since COVID there are more and more, fewer and fewer people who want to work in logistics, manufacturing or operations.

Eyal David: [18:09] Wait, AI is coming, we'll see what they keep saying. I'm joking. But actually, so you're saying around efficiency? Yes, around this whole topic, in the end

Shay Cohen: [18:20] all the big data models that will later be translated into what's called AI or GenAI are critical for us, in operations and manufacturing, quality control, planning and increasing efficiency. It's not just increasing efficiency, it's the whole factory environment. And on the other hand, you, we, in product, by efficiency I meant the bottom line that actually has a dollar sign, and we can say okay, robots, that's obvious, but it's also quality, it's also repeatability. It's also quality in the end: when you buy your yellow cheese you want the profile of

Eyal David: [19:00] its stretch inside the toast not to change and the taste not to change. That matters a lot. Give us an example. So are there really startups in this area that measure the compounds in cheese and can tell what it looks like?

Shay Cohen: [19:13] I'll give you a slightly different example. You know, in the end everything we produce goes into the human body. Our responsibility here as a food manufacturer for safety and quality is critical. And today there are lots of startups working on rapid testing, how you run a lot of fast tests on products you've already produced, to reach consistency and also a state where you're one hundred percent sure the products are safe. And that's also related to the development of various kinds of models. I heard about this, for example, with avocados.

Eyal David: [20:01] What's that? There are huge quantities of avocados leaving the country, it's now become the thing we export most, right, of produce, or something like that. So they can now say, you're shipping it by boat, so it's going to arrive in X time at other places, so you can now go over all your avocados and actually decide how I arrange

Shay Cohen: [20:21] them in the most effective way. Absolutely, crazy, and there's huge value in being able to reach faster testing, especially in products like ours, which are chilled products and short shelf-life products. I mean, every such day obviously has value. So it's efficiency, it's quality, it's repeatability, and ultimately it's also dealing with the labor market. In the end, like any industrial player, we need to employ enough people to meet our demand, and that's not always simple. We see huge, huge changes in the labor market in the last five years, it's a global phenomenon. We believe physical AI will be part of those solutions. So it's mainly people who don't want to work in these jobs, is that what you're describing? Yes, I think we all experienced this after COVID. We all asked ourselves what we want to be when we grow up, right? And we saw huge changes in the labor market, from workplaces that became fully hybrid to people who changed their professions. I think there are a lot of difficulties for industrial manufacturers like us to keep recruiting the workforce needed to meet demand, and physical AI, we hope, will be part of the solution. And today we hope to come out very soon with a beta-site program for deploying startups in this specific area.

Eyal David: [22:06] Do you have some, if you can share, some vision, some goal you've set for yourselves, by such-and-such year we'll be like this?

Shay Cohen: [22:16] Just out of modesty, okay? In this forum. With a good answer, so you'll save us editing too. But if I manage to deploy two startups a year at our sites and be their force multiplier, because in the end what I'll give them is retraining and data and engineers who'll explain to them what works and what doesn't, and I'll also shorten that robot's learning time and reduce faults, remote fault handling, and actually turn that robot into something that can be replicated at lower cost. I think the startup won, Israeli industry won, it'll be deployed in more factories here, we're more productive, all the chains. Well, I hope we succeed, that sounds good. And you can tell us a bit, if I have a few percent in the startup, all the better.

Energy, supply chain and infrastructure

Eyal David: [23:12] A bit, yes, a bit. So tell us a bit, you also talked to me earlier about energy, for example, things like that. Tell us what other things you're seeing.

Shay Cohen: [23:22] Look, Tnuva is a company that sells all its products as chilled or frozen products. We're a massive infrastructure company. It needs our energy, it needs our water, it needs our steam, and it goes up from year to year, obviously, like any operational company, and we're constantly thinking about optimization solutions for energy management. Optimization solutions in the supply chain world. How can I create a smarter, automated supply chain for product picking? Now every day we produce four and a half million products, products transferred.

Eyal David: [24:04] Just lay it out in my head, what are they mainly, are they milk cartons for the most part, what's the bulk of it, out of the four and a half. No, no, no, you have

Shay Cohen: [24:12] thousands of products we produce every day. Okay, from white cheese and cottage cheese. Totally, I'm just curious, the Israeli consumer represents. From the Sunfrost bag and the Tirat Zvi sausage and the Maama Of schnitzels and the Tnuva Fish frozen fish and the Olivia spreads and Rico pasta, to all the dairy products you know, from white cheese, cottage and so on. And think that all of this goes into planning, all the production sites produce, all the goods, all the finished products have to pass quality testing, from there they're shipped to our logistics centers. All those five million products are picked according to those customers' orders and they go out through our distribution and supply chain to 14,000 customers every day.

Eyal David: [25:09] Which can actually be a huge supermarket and it can be the small grocery near home. Totally. I was trying here to actually help those entrepreneurs who'll approach you, maybe they want to focus on something as a start, to understand which products you change more, produce more during the. So look, we have two distribution systems, one chilled, one frozen, but it's a challenge, you have a challenge here all the time to keep up the chain, meet demand, produce enough products, plan it correctly, and it's required here

Shay Cohen: [25:38] all the time to create smarter, more efficient and more effective infrastructure relative to growth. And the more the business grows, the bigger the challenge.

Eyal David: [25:53] Yes. I assume that for you too, you move hand in hand with the population growth here, right, which we also haven't talked about, by the way.

Shay Cohen: [26:01] Not entirely. When you feed a country, then when fewer people travel abroad.

Eyal David: [26:08] Because there's a war. No, in the context of the Israeli ecosystem, it's another trend here, that the population here is growing like crazy.

Shay Cohen: [26:17] I don't know if like crazy, but it's growing, it grows by a few percent every year and we need to take care of that, we need to take care of solutions, and that's why the solutions we look at are solutions for years ahead. Okay? I could give a whole lecture here, Tnuva is also a producer of price-controlled products. Alright? I could give a whole lecture about our responsibility to buy the eighth carton line for milk, okay? That will produce price-controlled products. I mean, think about it, it's a giant company that constantly needs to invest in more production lines and more infrastructure and more distribution, and any technological solution that gives us force multipliers in these areas of energy management, operational management, maintenance, control, product quality and supply chain is, for us, a huge force multiplier. We'll do everything to be the best beta site for that startup, and I say that without cynicism.

A real example: electric refrigeration for trucks

Eyal David: [27:19] So maybe tell us a bit what it looks like. Say I've now started presenting a product to you, we decided to move forward, what does it look like? I'm trying to think in the head of a big company.

Shay Cohen: [27:30] I'll tell you a real-life story. A few weeks ago we met an amazing company that makes electric refrigeration systems for all kinds of vans and trucks to keep the temperature uniform along the supply chain. Because we're in a very hot country, our challenge is that every time we do a delivery, we open the truck door, close the truck door, and the temperature goes up. We're always looking for more significant solutions to keep the temperature inside the box. And we entered a joint development process for an electric system of this kind together with that player, where our goal in the end is also to create a greener solution that makes less noise and saves fuel, but cools the box no matter how many times the door was opened and closed and the temperature changed. Exactly, exactly. It sounds simple, okay, it's not a simple challenge at all.

Eyal David: [28:42] And that's something where if I go in with you now, is it a fast run? What does it look like? There are so many stages along the way, everything is regulated, everything is controlled, there are so many... But it's important to say, if I didn't do this with you, we talked about regulation earlier, right?

Shay Cohen: [28:55] That's something that was there anyway. I think you can do it without us, but the margin of error has a very high economic cost. So it's better to do it with us. Tell me, and do you have, you mentioned various areas you invest in? We're constantly looking for the next generation product in dairy alternatives, in sports nutrition and everything related. You mentioned athletes several times, and it also seems to me like something that's already on the shelves and has been running for a long time, no? I think it's become that everyone counts the amount of protein they consume per day. Do you count?

Eyal David: [29:35] No, I know I need to eat about 30 per meal and... but. By the way, the one who did that for me was Claude, during the war it also sorted out my menu. But it took root, it took root in our culture, how much protein I need per meal. But that's a point, just, I'm in Portugal quite a lot, so in Portugal when you go to the supermarket you're exposed to much more sports nutrition that isn't only protein.

Shay Cohen: [29:56] That has a lot around it, which we don't really have here. So I think there are dedicated distribution channels, you find it in pharmacies, you find it, but not in the online supermarket, right. Our brand GO addresses that. We constantly, every year, develop a new category in alternative protein and in sports nutrition, every year. Recently, for example, we launched a functional product for athletes fortified with creatine. Every year we also launch products with higher protein percentages, I mean right now we've reached 40 and 46 grams of protein per serving, some for cooking and some for direct consumption. We work on accessibility, I mean the simplest access today to protein-enriched products is in the fridge. It's in the dairy fridge. I think our R&D does amazing work on this. But there's no doubt protein consumption is only rising worldwide, everyone's looking for protein-enriched products. Soon it'll be protein and fiber, that's the future.

Protein, sports nutrition and the GO brand

Eyal David: [31:05] It sounds like it's going to a place, we talked about it a bit earlier, to a place that's very functional in its nutrition, right? Totally, totally. I think functional nutrition

Shay Cohen: [31:15] is no longer a nice to have, it's a real consumer need. If in the past such products were niche, today there's an expectation from the big food companies, and certainly from us, that you consume the product you love and get it with maximum value, accessible in price and in quality and in taste, but healthy. At a minimum it needs to do you good, it needs to be good for you, and in that respect we're working all the time.

Eyal David: [31:48] How nice. So explain to me, because I want to know. Let's take a minute with protein and sports nutrition as an example. Because my question is this, actually, a question that came up here from the community: how do you see the big players really managing to innovate, if we take that example? Yes.

Functional nutrition: why consumers want products that do them good

Shay Cohen: [32:03] How did a cycle like that look inside Tnuva? Just, ten years back I don't remember you having something like that. No, why, I don't know. I remember I used to travel to Thailand and suddenly there was protein and such in the fridge and it was something that didn't exist here, and I remember it wasn't really around. No, we didn't have it a decade ago either, but sometimes consumers are exposed to these things depending on whether you're among the early adopters, or I wasn't, okay, not late. But in the end, in our mindset we're like the Lakers in their great days, okay, in our mindset we're constantly thinking like category builders, and we don't only want to bring the consumer the next big thing that'll be the tastiest at the most accessible price, but also have it reach the maximum audiences. And that thinking is what drives us: what does the consumer want, when will they eat it, why will they eat it, where will they eat it, and how can I make it accessible to them in the best way that suits them. And we run lots of experiments, not all of them succeed. We're constantly obsessive about the consumer's needs. It's not innovation for innovation's sake, it's not innovation for the sake of implementation, it's understanding the consumer's needs for a clear competitive advantage, because in our world first mover advantage decides everything. I can't describe to you the number of people working on what I told you. I'm like a very, very small cog in a chain of hundreds of people for whom this is what they do day to day, thinking as category builders about the next thing. I'm in external innovation, startups from outside, I need to make sure that arena is covered, but inside the organization there are hundreds of people working on this.

How the big players really manage to innovate

Eyal David: [33:57] Okay, I loved that you brought the Lakers in here. But actually, if so, they're also having not-bad days now. 3-0. But if for a second, yes, yes, I'll anchor that. So if you now bring an innovation from outside, yes, it'll always actually be according to the catalog of what the company is looking for, right, but if you now bring something.

Shay Cohen: [34:16] Look, in the end I need to rally the organization. Okay, it's not just writing the check. If I really want to be a startup's strategic partner, I have to rally the organization. It's like creating a partnership that's both external and internal. When the magic happens it's easy, okay, when there's that product everyone supports, you know it's feasible at scale, it meets that need, you can also build a category around it. That's easy.

Eyal David: [34:46] The difficulty starts when opinions are divided. That's what I'm trying to understand here, how do you actually bring something in now and rally, you called it, actually how do you grab it and run.

Shay Cohen: [34:57] Look, it's half art, half also acknowledging the fact that not all the knowledge is with you. When you believe in something all the way, you try to build a business and meaningful rationale for it and we'll try to validate it. But there's also so much knowledge with us, so much experience, 100 years of a food company. Many times I believe in things and I hear my colleagues and our managers say no, it won't work, and you know what I do? I go to that company, that startup, and I reflect it back to them. I reflect it back both to give them value, not just to tell them yes, no, maybe this way, but also to give them value and sharpen them. I think that's also part of our role as a big food company.

The art of rallying an organization around a startup

Eyal David: [35:44] Totally, and then you need to fix it and actually come back inside. Okay, not everyone listens to us, that's another matter. That's a thing. But I have another question. When we talked about risks earlier, you said one of the things I do is assess risks, right, did you call it that? Also. So do you assess risks in terms of where Tnuva will be and what it needs when you go for it, or do you also look at what the chance of succeeding at something like this is at all?

Shay Cohen: [36:12] First of all I look at the company as a financial investor. We start from the assumption that I won't be able to fund the company throughout its whole life. I look at it as the next investor. What will the fundable milestone be? Will this investor, if this entrepreneur now goes to my competitor, will he be so good that they'll have invested in him before me? I look at valuations, I look at a thousand and one things that every financial investor examines when examining an investment: market size, comparative analysis of the technology, intellectual property, regulation. We look a lot at regulation. Regulation for us is a big issue, it can be the difference between a five-year cycle and a 15-year cycle. It's not simple. And after we've finished the whole financial assessment, then we actually move on to the strategic side. I can tell you honestly that our vertical, as venture capital, took a hit in recent years. A lot of generic money went into startups at unrealistic valuations, and that money very quickly understood there was no feasibility for follow-on rounds for these companies. And today one of the things I ask myself is: can I be a beta site for that startup? What kind of beta site can I be? How much do I shorten its time to market? In Israel, how do I help it create a better product? How do I actually give it from my experience so that it succeeds, so that we succeed together? And that's part of our insights from recent years. We understand you need to go through all the financial, comparative, technological and regulatory checks.

The bubble: why investors poured so much money into foodtech

Eyal David: [38:06] In the end we have to be a beta site for those startups. Because that connects strongly to what you said earlier, that you're like the curator who actually gives the stamp of approval, because you understood it's hard to bring money into this area today, and then if you go in, you can pull in more money.

Shay Cohen: [38:21] Right, if I'm a strategic seal of quality, it'll be easier for the startup to raise money from financial investors.

Eyal David: [38:29] Why was there such a bubble, in your opinion? Like why, I don't know if it's a bubble, but why did we put, it sounds to me like the SaaS thing that's happening now, but why did so much money actually go in? Because there was a lot of money in the world after COVID.

Shay Cohen: [38:39] I think that... I think investors saw growth. They saw very, very high growth rates. Oatly and players like Beyond that also managed to reach the capital markets at very high valuations based on their growth. And a lot of investors thought that the simplicity, the simplicity of now creating some substitute product based on that model would lead to success. In the end it's a super complex world, it has barriers to entry, regulation but also capex. In the end you need production lines, you need a supply chain, you need, you need brands, you need. Who said I'll even put it in my cart, right? Exactly, and in the end you need to win the consumer, consumer by consumer, and after they try it there also needs to be a repeat purchase. That's not such a simple thing. And I think that today, after the cooling-off, there's a very important evolution foodtech has gone through in venture capital, and we're in a more correct ballpark of valuations. We're with more and more smart, experienced investors, both financial and strategic. And I think that was healthy. I think it was healthy for this industry. I think the food industry will benefit from it more. Our ability today to be a real strategic partner to those startups is higher.

Eyal David: [40:16] Excellent. Okay, I have a few questions that people also asked here about regulation and AI. Yes. Are you looking for things in those areas?

Shay Cohen: [40:24] Yes, we're also training agents, and we also want to see any startup that tracks regulatory developments in Israel, the United States and Europe. The Israeli regulator mainly follows the European regulator,

Eyal David: [40:44] and that's super important to us. Super important to us. Excellent, yes, that makes a lot of sense. Yes, you talked a bit about vegan products, so really your focus now, you talked a lot about protein, has the spotlight on vegan products actually dimmed a bit? Not at all.

Shay Cohen: [41:03] Not at all. I personally think the alternative dairy area is one of our growth engines. Every time we launch a new category the area grows, and it kept growing. I think in the meat substitutes world everyone expected to reach the place dairy alternatives are at, and there are still problems there related to product quality. Even though I recently tasted some amazing products like Chunk and other Israeli companies. I believe, I believe that this category will also succeed. Right now I can eat it in a bun with a lot of sauce, so a bit of another question. But do you eat tofu at home? Yes. I have a daughter, yes. So notice that tofu consumption in general, in Israel and worldwide, is rising consistently. Why? That's why, yes. Because your expectation is that it won't be like meat. You say, what tofu, expectation setting, I control the taste, it's great protein, I can make a stir-fry with it and I can make something else with it. Look, it's all a matter of expectations, we.

Vegan, meat substitutes and why tofu consumption is rising

Fiber: is it the next protein?

Eyal David: [42:22] That's true. I want to ask about fiber. They say that it's also, this is a question that came in: fiber is the next protein. What do you think about that?

Shay Cohen: [42:31] In my opinion, you touched on it for a second, that it'll rise. In my opinion protein is the next protein and... but you need fiber to digest the protein. And the combination of protein and fiber is going to be, but also in this world of fiber it's going toward specialization, there will be prebiotic fibers and other fibers. In the end, in the end, we understand that in everyday nutrition the combination of protein and fiber is super significant nutritionally.

Eyal David: [43:05] Yes, makes sense. Okay, here's a last question. Why do most innovation processes in organizations fail? I think you touched on it a bit throughout the conversation, but feel like tightening it up?

Shay Cohen: [43:20] There are so many reasons. Let's pick the sexiest reason. Okay. In the end, the cycle, the patience required. In the end, how soon do you expect success, right? We bought, or entered, the dairy alternatives area 25 years ago. Tnuva acquired a small factory that produced soy drinks, very, very small, out of our sense of responsibility for people who are lactose intolerant and for consumers looking for a kosher solution after eating meat. Today we're at a point where it's a significant alternative for the consumer that's part of their variety. People consume dairy products but will also drink oat milk. I think that over the last 25 years there were moments when that very, very significant and differentiating growth engine, which also made Tnuva one of the companies that are a global case study for having developed their alternative, wasn't so successful business-wise. It took time to mature. So success is a matter of expectations, a matter of tolerance, a matter of maturity. Many things need to happen for something to succeed in our industry: very high consumer adoption, product quality, and our product quality in this area improved by thousands of percent. And also the scale of investment you need to reach that success. It's a bit chicken and egg, right, because if I don't have enough market to adopt the product, there won't be a push to push it, and I also won't have feedback to improve it. Right, so right, and then in the end people like me, in roles like mine, need to come and say honestly to their managers: success may not be on my watch. Let's manage expectations about the cycle, about the length of time. So the next question is why would we do it? Because we're in food security, because it's important, because in the end it's our future, we still need to eat three meals a day. Which actually closes the whole loop from the beginning, we've also got a title for the episode, totally. Cool.

Why most innovation processes in organizations fail

Eyal David: [45:49] Honestly, we didn't get to talk a bit about your career journey, which is also very interesting, so... Really? Yes, it interested me a lot. We talked about Tami, I also that

Shay Cohen: [45:57] Tami for you. Yes, we talked about a lot of things. I met with her recently, she's an amazing entrepreneur, what she did is

Eyal David: [46:06] For those who don't know, Tami is basically around, you're probably invited to birthday parties now and then and then you need to bring something gluten-free, right, that's where I know it from. So actually, just, but there's actually a journey here I wanted to talk about a bit. We'll do it maybe next time. Next time, promise. Shay, it was really fun, really interesting, I enjoyed it a lot. Yalla. Bye for now, thank you very much. Bye bye. Hey friends, thanks for listening. If you found this podcast valuable, you can subscribe and follow us, of course, for more episodes on Spotify, Apple Podcasts or any other app. Of course, if you didn't find us on some app, I'd be happy if you wrote to us. We'd really love five stars on every platform and for you to follow us so more listeners can discover us and find the podcast. You can also find previous episodes on every app or on the YouTube channel, we have links in the description. So until next time, yalla, be efficient, and bye bye.