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How Hampton Creek sold investors on fake mayo
- tmaly 10y agoTo me its just a shady way to do growth hacking. I have family members with an egg allergy, so I am grateful that they were able to get the word out on this product.
- jonknee 10y ago> To me its just a shady way to do growth hacking. Or in other words, fraud.
- Alex3917 10y agoThe growth hacking part isn't fraud. Grocery stores demand slotting fees to get products on the shelves, so if you can get your product on the shelf by spending less money on secret purchases than you otherwise would on slotting fees then that's just smart business. Representing these purchases as legitimate sales to investors would definitely be fraud though.
- brianwawok 10y agoIs that part allowed though? I guess it depends if the terms of the contract with the store itself prohibit the activity, as it doesn't sound to violate any obvious laws (outside of reporting it as sales).
- tedmiston 10y agoIt is allowed to some degree e.g. secret shoppers. Sometimes these programs involve being reimbursed by a third party.
- brianwawok 10y agoEvery messaging board (ala Reddit), and Dating site (ala plenty of fish) I know of.. started with some founders "seeding the pool". To me it kind of makes sense, as you can't just open an empty 2 way marketplace and hope that it all works out. Ideally in the reddit way, there were actual discussions going on (except between 3 people not the 100 the usernames would success). Is this also fraud, or just the fact of starting a 2 way marketplace? Now for this story.. I cannot see a way to justify counting most of your sales as things you bought yourself. That sounds like a not valid way to do business, and I would be very surprised if it were legal to report those as sales.
- jonknee 10y ago> Now for this story.. I cannot see a way to justify counting most of your sales as things you bought yourself. That sounds like a not valid way to do business, and I would be very surprised if it were legal to report those as sales. Yes, as I said, fraud.
- Bahamut 10y agoI know of pretty much no message board that started that way - most aren't for profit even. This is just fraud.
- zck 10y ago> Ideally in the reddit way, there were actual discussions going on (except between 3 people not the 100 the usernames would success). Comments weren't in the initial release of reddit, and wouldn't be added until the end of 2005^1. In the stories I've heard, the usernames were just for submitting stories, and the site was getting enough submissions on its own by the time comments were added. [1] December 12, 2005. https://www.reddit.com/r/reddit.com/comments/17913/reddit_now_supports_comments/c51 https://www.reddit.com/r/reddit.com/comments/17913/reddit_no.... Reddit's first post was in June: https://www.reddit.com/r/reddit.com/comments/87/the_downing_street_memo/ https://www.reddit.com/r/reddit.com/comments/87/the_downing_... .
- tedmiston 10y agoIs it different when they are creating data (threads / comments) vs purchasing their own product though?
- deleted 10y ago[deleted]
- tmaly 10y agoWas there anything wrong with my characterization of what they did? Did I get down voted for using the word shady when fraud should have been used?
- Naritai 10y agoAttempting to speak for the rest of the group: You sound like the Wells Fargo CEO, who was criticized for using the term 'unethical' for actions that were clearly 'illegal'. That is, he used words for clearly illegal actions that somehow implied that maybe it was ok, maybe not, depending on how you look at it. You did the same thing - took fraudulent actions, admitted that maybe it wasn't the best thing ('shady'), then started talking about what a great company it was and how you are glad it exists. That is definitely underplaying the situation.
- tedmiston 10y agoI upvoted your sinking post because: the point is valid, "growth hacking", and its implications affect large numbers of startups. I'm not sure if the egg allergy point is relevant to this particular news post, but it doesn't necessarily detract either. Personally, I don't see why you were downvoted. We're supposed to up/downvote when comments add/don't add value to the intellectual discussion. Sometimes people seem to vote by whether they agree/disagree with you instead. I think we generate a better discussion when people vote the first way.
- chollida1 10y ago> As buybacks surged in 2014, Hampton Creek expensed about $1.4 million under this unusual category over five months, compared with $1.9 million of net sales in the period. Hmm..... I actually had to take a course in business ethics and the first rule we were taught was, if you wouldn't feel comfortable getting on the phone and telling your share holders what you are doing then its probably wrong. > Javier Colón was an operations manager at Hampton Creek from 2012 until Tetrick fired him in 2013. They sparred, Colón says, over Tetrick’s attempts to change some employment contracts without the workers’ consent If you've ever been responsible for a Pnl unit, much less an entire company, then you'll understand the crushing pressure you are under to make numbers. Sooner or later you'll have to decide if committing outright fraud is worth it. I'm guessing that the management had good intentions when they started out. And the fraud started small, just buy a few cases to juice the quarters numbers, and it slowly spirals out of control. Once you compromise your ethics, its hard to put hte genie back in the bottle.
- sethbannon 10y agoFrom the image at the front of Josh Tetrick with mayo on his face, this seems like a hit piece designed more to take down Josh and Hampton Creek than to inform the public. There are legitimate conversations to be had about how Hampton Creek runs its business, but this piece doesn't sit well with me.
- jonknee 10y ago> There are legitimate conversations to be had about how Hampton Creek runs its business, but this piece doesn't sit well with me. What part of the piece is not legitimate?
- Goronmon 10y agoI assume he thinks it's mean to point out when someone does something wrong.
- beavisthegenius 10y agoHe's committing fraud. He should be taken down. That being said, it seems like Partovi told everyone he could about the janky finances but everyone ignored him. Caveat emptor.
- applecore 10y agoIf you prefer, the investigation follows a much more staid article[1] from early August that reveals the company hired a network of contractors to secretly buy back their own product from stores. [1]: http://www.bloomberg.com/news/articles/2016-08-04/food-startup-ran-undercover-project-to-buy-up-its-own-products http://www.bloomberg.com/news/articles/2016-08-04/food-start...
- tedmiston 10y agotl;dr - That sounds of dubious legality, or at least ethics. > "Expense reports reviewed by Bloomberg show contractors bought back jars of Just Mayo from Safeway stores. Former workers say Hampton Creek also purchased its own products at Kroger, Costco, Walmart, Target, and Whole Foods locations across the country." > “We need you in Safeway buying Just Mayo and our new flavored mayos,” Caroline Love, Hampton Creek’s then director of corporate partnership, ... "...This will ensure we stay on the shelf to put an end to Hellmann’s factory-farmed egg mayo, and spread the word to customers that Just Mayo is their new preferred brand. :)"
- justratsinacoat 10y ago"Business ethics" means "keep the shareholders happy"? This explains so much...
- tptacek 10y agoNo, that's not what he said. In fact, a pretty good rule of thumb regarding the principle of charity on message boards: if you have to write "X means Y? That explains so much.", there's a good chance you're being pointlessly uncharitable.
- justratsinacoat 10y agoEh, if you say so. Determining "the shareholders" to be the ultimate authority, the fear of whose disapproval drives you to not make "bad" decisions (which, the comment elaborates, eventually means committing fraud to "juice the quarters numbers"; to whom are these numbers being eventually presented, to delight or disappointment?). But upon further reflection upon our interaction, you must be right. Thanks for sharing your experience.
- tptacek 10y agoNo, he was implying that the reaction of shareholders is an acid test of ethics: that if you can't even tell your shareholders about something iffy, it's very unlikely that it's ethical. But he didn't say or imply that the opinion of shareholders completely disposed of the question.
- justratsinacoat 10y ago>But he didn't [...] imply that the opinion of shareholders completely disposed of the question Quite so! What he said was 'their having committed fraud to bump up the numbers, y'know, as you do, was to please shareholders at quarterly meetings'. "Business ethics", at this level, revolves around the shareholders, and the comment telegraphs this: as you say, shareholder reaction is the acid test for appropriate behaviour. Nor, indeed, does the opinion of shareholders dispose of the question. Yet, it is fear of shareholder disapproval that drives both the cover-up of fraud (potential jailtime probably helps with this) and the instantiation of said fraud in order to keep numbers up in order to placate shareholders. But, again, you're right. I'll keep my original comment up, but I should have put ""Business ethics" is all about shareholders, eh? This explains so much...".
- robertcorey 10y agoWow! This is incredible stuff. As a vegan I was incredibly surprised to see just mayo appear in mainstream grocery stores in my area. This also might explain the post's I've seen on r/vegan of just mayo products discounted to 50% - 75%
- tptacek 10y agoIf you have a stick blender (which you should have, because they are cheap and useful), mayonnaise is incredibly easy to make. Vegan mayonnaise isn't much more difficult: soy milk works as an emulsifier, and can be boosted with a little dijon (which I put in normal mayo anyways, because it's good). I'll use Kewpie mayo for things that want it, but otherwise: store bought mayo is kind of gross, isn't it?
- robertcorey 10y agoI don't actually use it, just have my finger on the pulse of the vegan processed food scene, but thanks for the tip!
- Alex3917 10y agoDo you like it more than Vegenaise? To me Vegenaise tastes almost exactly like regular mayo, whereas Hampton Creek tastes distinctly... different.
- tedmiston 10y agoI've tried the Just Mayo product a few times (on the premise of novelty), and honestly I'm a fan. I don't know if it would replace Miracle Whip on a sandwich for me, but it works just fine mixed in tuna salad. I would probably only buy it regularly if it were decently cheaper than "real mayo". * *I know Miracle Whip is not technically real mayo, but I prefer the taste of it, and it's been my mayo of choice for years.
- throwaway0346 10y agoI find that unsurprising given that you have been accused of similar tactics in the past and have also had a scathing "hit piece" written about you as well.[1] [1] https://newrepublic.com/article/119350/amicus-app-how-tech-investors-are-failing-due-diligence https://newrepublic.com/article/119350/amicus-app-how-tech-i...
- deleted 10y ago[deleted]
- deleted 10y ago[deleted]
- CPLX 10y agoWell that was an interesting read.
- sethbannon 10y agoIf your point is that I'm sensitive to journalists looking for takedowns given that I feel I was the target of one, you're absolutely right. But how is your comment relevant to the article originally posted? And why the throwaway account? For those curious, the article above was published after I wrote a blog post on my mistakes here: http://sethbannon.com/mistakes-you-should-never-make http://sethbannon.com/mistakes-you-should-never-make
- tedmiston 10y agoI don't understand how this is relevant.
- gurvinder98 10y agoWhy would you engage in an ad hominem attack anonymously? Are you a neckbeard of some sort?
- sctb 10y agoMaking personal attacks from throwaway accounts is not what this site is for. We detached this subthread from https://news.ycombinator.com/item?id=12557164 https://news.ycombinator.com/item?id=12557164 and marked it off-topic.
- tptacek 10y agoHampton Creek had a huge cost advantage, the company said in a pitch deck provided to potential investors. Its plant-based egg equivalent cost about half as much as a real egg. In the case of Just Mayo, that meant Hampton Creek could easily undercut Unilever’s Hellmann’s and Best Foods brands and grab a significant share of the $2 billion U.S. mayonnaise market. Does this ring false to anyone else? Are Hellman's costs dominated by their industrial inputs? Also: famously, you can make a cubic shitload of mayonnaise from a single egg (I'll find the Cooking Issues cite somewhere). Commercial mayonnaise is almost entirely oil and gets its flavor mostly from acid, salt, and sugar, not from the egg. Does halving the cost of those eggs really give a competitor that much of an edge?
- SandersAK 10y agoThis was my thought exactly. In America very little of the big name mayo uses egg as a primary ingredient. I can see how JustMayo could be a category winner for the whole foods niche tho and that could be really profitable.
- jonknee 10y ago> In America very little of the big name mayo uses egg as a primary ingredient. Egg is a very small part of mayonnaise if you buy a large American brand or if you make it yourself at home. It's mostly oil.
- xutopia 10y agoI make mayo on a regular basis and with a single egg I've been able to make 2 liters of mayo (and roughly same volume of mustard which also acts as a binder). Industrial mayonnaise is not made with a simple whisk and elbow grease but with high speed methods that allows for much more water and oil to be part of the mayo. When I make mayo water is not even an ingredient whereas Hellmans has it as the second ingredient. The only water I get is from lemon juice or vinegar. So yeah something smells fishy with their claims.
- tedmiston 10y agoDo you think this is intentionally deceptive or just uninformed?
- debacle 10y agoIsn't this the company that was also being investigated because their product isn't technically mayo?
- sp332 10y agoThe FDA regulates what gets to be called "mayonaise", and the investigation was about whether they were allowed to use the word "mayo" for something that didn't have egg in it. They settled by putting "egg-free" on the front label in reasonably large text.
- debacle 10y agoI think that's fair, but I remember the stump piece that was trying to paint the FDA as obstructionist, it felt very dishonest.
- ajoy39 10y agoI don't think they're being investigated for that, but they did buy there own product off store shelfs to create the illusion of high demand, helping them get in more stores http://www.bloomberg.com/news/articles/2016-08-04/food-startup-ran-undercover-project-to-buy-up-its-own-products http://www.bloomberg.com/news/articles/2016-08-04/food-start...
- ebbv 10y agoThey did get sued because of that but they got away with it somehow.
- M_Grey 10y agoWhat on earth is it with oil related foodstuffs that seems to always inspire such fraud? Remember http://www.businessinsider.com/the-great-salad-oil-scandal-of-1963-2013-11 http://www.businessinsider.com/the-great-salad-oil-scandal-o... ?