Retailers that offer food at their locations, such as coffee shops, restaurants, grocery stores, and cafeterias, rely on food distribution companies within the supply chain. There are various types of distributors, including wholesalers, cash and carry, specialty, and broadline. Historically reliant on pencil-and-paper and phone ordering, this industry is now adopting digital solutions to optimize its complex operations. Pepper, an e-commerce SaaS platform, enables independent food distributors to create their own branded online storefronts, simplifying the purchasing process for their customers through a user-friendly interface. The platform’s capabilities extend beyond simple ordering; it includes an expanding set of integrated features like dynamic pricing, payment processing, CRMs for sales representatives, content libraries, and a marketing suite for promotions. There are approximately 25,000 independent food distributors in the United States, each at different stages of digital adoption necessary for 21st-century competitiveness. Pepper facilitates this transition with an accessible SaaS subscription model, empowering businesses to enhance their operations without needing costly internal proprietary systems. Since its Series A funding round in 2021, Pepper has attracted over 200 independent distributors as customers and has seen a 20-fold increase in revenue. This growth underscores the platform’s value proposition and its role in the digital evolution of the food distribution industry.
AlleyWatch caught up with Pepper CEO and Cofounder Bowie Cheung to learn more about the business, the company’s strategic plans, latest round of funding, which brings the company’s total funding to $60M, and much, much more…
Who were your investors and how much did you raise?
We’re excited to announce the successful close of a $30M Series B led by ICONIQ Growth. Other major investors who participated were Harmony Partners, Index Ventures, Greylock, and Imaginary.
Tell us about the product or service that Pepper offers.
We are the most trusted eCommerce platform for independent food distributors. Our platform enables food distributors to offer an Amazon-like shopping experience for their customers, with one critical difference – a white-labeled experience that puts the distributor’s brand identity front and center.
Over the past 24 months, we’ve significantly expanded the capabilities of the core eCommerce product line, while also introducing complementary product lines –
- We are a full-stack payment processor. The experience is embedded in eCommerce, making it easier for operators to pay and for distributors to get paid.
- We’ve reimagined what modern CRM & Copilot software needs to look like for sales reps to work at their full potential, leveraging the latest Gen AI technologies.
- We’ve also built an ads platform that enables distributors to run marketing campaigns with their suppliers, to promote existing products or create demand for new ones.
What inspired the start of Pepper?
Independent distributors are the backbone of the food industry.
There’s a saying that independent restaurants are the heart and soul of this industry. Well, independent restaurants are, generally, not well serviced by the Big Box Broadliners – Sysco, USF, PFG – so if you enjoy the diversity and vibrancy that non-chain restaurants bring to your community, then you understand the importance of independent distribution.
There are 25,000 independent distributors in the United States, but they’ve been severely underserved by the modern technology community. We built Pepper to change that – our goal is to be the most trusted modern technology partner for independent food distribution.
How is Pepper different?
Pepper’s goal is to be the most trusted technology partner for independent food distributors.
Unlike our competitors, who provide technology to distributors through a marketplace model, i.e. where a distributor is one-of-many in the marketplace’s branded app, Pepper’s technology is white-labeled, which puts the distributor’s brand front and center for their customers.
Our capabilities are also unmatched when it comes to our ability to integrate with food distributor ERP systems and customize the Pepper experience to suit the specific operational and strategic needs of a given distributor.
What market does Pepper target and how big is it?
There are over 25,000 food distributors in the United States, collectively representing approximately one trillion dollars in wholesale revenue. It’s one of the largest and most critical industries in the world.
What’s your business model?
Our customers are billed monthly SaaS fees, which can vary depending on the scale and complexity of their operation.
How are you preparing for a potential economic slowdown?
By continuing to focus on providing amazing ROI and customer service to our clients. On average, our clients see their same-store sales grow >20% after adopting Pepper. It’s even more important in a downturn that we can help distributors tap into this growth opportunity.
What was the funding process like?
It was a relatively short process; we were lucky to partner with great, deeply respected firms that we felt shared our vision.
What are the biggest challenges that you faced while raising capital?
Food distribution is an industry that almost everyone has heard of, but very few people who aren’t already in it understand it.
When you’re building a software company that serves one of these industries, educating potential new investors on the culture and dynamics can be a lot of fun but also takes time. Fortunately, we found a group of partners that “got it” right away and, I think, enjoyed the process of getting into the details with us.
What factors about your business led your investors to write the check?
We’re solving a critical business problem for food distributors, a very large segment of businesses that are absolutely critical to our way of life.
Also, our business has grown tremendously over the last few years, helped by the fact that we’ve never had an active customer churn from our platform. Our ACVs tend to grow significantly over time, as our existing customers expand their use of Pepper with additional products and services, like payment processing and advertising.
What are the milestones you plan to achieve in the next six months?
We have a lot going on, but I’d say we’re most excited to see through the launch of some exciting new products that we’ve been working on in the areas of sales rep enablement, manufacturer marketing and insights, and rich product content management.
We have a lot going on, but I’d say we’re most excited to see through the launch of some exciting new products that we’ve been working on in the areas of sales rep enablement, manufacturer marketing and insights, and rich product content management.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Don’t get distracted. Stay laser-focused on doing amazing work for your customers. That’s the most important thing you can control and eventually, the numbers will speak for themselves.
Where do you see the company going now over the near term?
Our long-term goal is to continue developing innovative technologies and services that support the independent food distributor – and by way of doing that, create a more robust, vibrant, and sustainable food system that not only meets today’s demands but also anticipates tomorrow’s challenges.
What’s your favorite restaurant in the city?
The Meatball Shop in Hell’s Kitchen.
