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Orgain’s Clean Proteins Drive Sales, PE Interest

After Andrew Abraham was diagnosed with an aggressive form of muscle cancer at the age of 17, he overnight went from thinking about tennis practice to surgery.

Thin from treatment, the nutritional shakes he drank to help him gain weight made him feel worse. The teenager started reading books about nutrition and started making his own shakes from organic products.

After he recuperated, he earned a medical degree to become a doctor like his father. While practicing at Kaiser Permanente, he couldn’t stop thinking about healthier nutritional shakes for his patients.

Thus in 2009, he started Orgain Inc., a fast-growing Irvine-based company where sales are exploding to “well over” $300 million this year, up 50% from 2018. Its products are now in 30,000 stores, including Costco. Orgain currently has 75 employees, including 40 at its headquarters.

“I felt that I could have a greater impact and help more people doing this” than as a doctor, Abraham said. “I still keep my medical license active [so] I can still practice.”

Orgain is one of several nutraceutical companies with operations in Orange County including Metagenics Inc., ChromaDex Inc. and International Vitamin Corp. (see story, page 63). Even nutraceutical giant Herbalife Nutrition Ltd. has a manufacturing facility in Lake Forest.

“Orange County represents health and wellness so it’s a great area for leading nutritional and nutraceutical companies to set up and attract great talent,” Abraham said.

PE Deal

Investors are increasingly taking notice in the sector. This month, Butterfly Equity, a Los Angeles-based private equity firm specializing in the food industry, said it reached a deal to buy a majority stake in Orgain.

Toronto-based Ontario Teachers’ Pension Plan, which has some $200 billion in assets and is Canada’s largest single-profession pension plan, also has become a new minority investor.

Terms of the deal were undisclosed. Butterfly’s team said it has invested some $5 billion in equity capital to firms over the years; other investments it has made include El Segundo’s Lemonade Restaurant Group.

Abraham will retain a “significant minority ownership position” in the business going forward and will continue in the CEO role, the company said.

No Bad Stuff

Why would a doctor give up being the one thing he trained to do and start a nutrition company?

Cancer.

It struck Dr. Abraham unexpectedly as a rare type of muscle cancer known as rhabdomyosarcoma—a tumor—at the age of 17 and waist-deep in his senior year of high school. The treatment was chemotherapy and it made ordinary food unappetizing; he began losing weight dramatically.

Abraham’s doctor recommended Ensure at the time—only for him to read the label and discover that the ingredients included things “you’d never want to knowingly ingest,” he told the Business Journal.

“I asked my doctor, ‘Why would you recommend this? These ingredients aren’t good for you.’”

The doctor told him, “‘this is pretty much all we’ve got and you need calories. There are no other options.’”

During his chemotherapy treatment, he developed his own shakes, which made him feel better within 10 days.

“I was like ‘whoa, what’s going on here?’” he said. “I wanted to create a nutritional product that was actually healthy.”

He comes from a family of physicians—his father being one of them. His father also didn’t understand why he would give up being a doctor.

A few years after initiating Orgain, Abraham’s father himself was diagnosed with cancer. Abraham said his father was dependent on Orgain to stay alive.

“It was kind of full circle,” Abraham said.

Cancer patients were Abraham’s initial target demographic for Orgain, “but it’s not” the only group of people interested in these shakes, he said.

“It’s athletes and people into fitness.”

The Clean Stuff

Orgain’s edge is healthy nutrition with a board-certified, licensed physician redefining the concept of “clean” protein—protein free of all the “bad stuff.”

That bad stuff refers to heavy metals and toxins from the water and soil, as well as pesticides and other food borne illnesses such as listeria or salmonella. According to the World Health Organization, about 600 million people fall ill annually due to contaminated food. This year alone, the Food and Drug Administration has recalled 297 products from U.S. shelves due to contamination.

In the beginning, Abraham would answer phones and talk directly to consumers in the manner of a bedside doctor that he was. He even created an alter ego “Mike” to give the impression that the company was bigger than it actually was.

Orgain doesn’t manufacture any of its products, instead relying on an outsourced model. Abraham sources his product from organic, non-GMO, antibiotic-free, and hormone-free sources that are also free of other containments.

According to the company, it is the No. 1 “ready to drink” brand shake by sales. The lifestyle line of products also includes protein powder mixes designed for a ketogenic diet or boosting collagen.

Its website sells nutritional shakes for about $2 each or through a subscription service.

The company started working with Costco about six years ago.

“It’s now the best-selling protein powder at Costco and the number one selling plant powder in the U.S.,” he said. “Costco represents a meaningful portion of our business but the brand has expanded well into other channels and is much better diversified today.”

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