Coffee Grounds Turned Cocoa Alternative: A New Frontier with Kawa Project

[Disclosure: AgFunderNews’ parent company AgFunder is an investor in Kawa Project]

Spent coffee grounds have found various applications, ranging from soil amendments to substrates for mushroom cultivation. Recently, however, the question arises: Can these grounds serve as viable cocoa alternatives?

AgFunderNews (AFN) spoke with Kawa Project founder Aaron Feigelman (AF) to explore the motivations behind firms wanting to replace cocoa, the flavor similarities between coffee and cocoa, and the scale required for Kawa Project’s operations to be economically viable.

Understanding Kawa Project’s Offering

AFN: What is Kawa Project doing?

AF: Kawa Project produces a substitute for industrial cocoa powder through an upcycling process that transforms used coffee grounds. This approach offers a more stable supply chain with less price volatility, competitive pricing compared to traditional cocoa, and enhanced nutritional benefits.

Processing Techniques Involved

AFN: What processing is involved?

AF: We begin by stabilizing and drying the spent coffee grounds to achieve a very low moisture content. Then, we extract components to reduce the coffee-forward notes while retaining the sour and roasted flavors found in both coffee and cocoa. Finally, we mill it to achieve a fine particle size, akin to cocoa powder.

Flavor Profiles Compared

AFN: How close do you get to the flavor profile of cocoa?

AF: Post-extraction and refining, especially for alkalized varieties, our product closely resembles cocoa, particularly in culinary applications. Although raw consumption may reveal some differences, especially regarding fat content, studies—like those from UC Davis—indicate that it is challenging to detect differences in baked goods like cocoa-free brownies.

Cocoa Replacement Percentages

AFN: Typically, what percentage of cocoa are companies looking to replace?

AF: It varies. Some clients aim for a full 100% cocoa-free product, especially middlemen wanting to market a cocoa-free narrative. In contrast, end-users, particularly bakeries or snack brands, often look for mixed solutions to mitigate supply chain volatility.

Economics at Scale

AFN: Do the economics of your alternatives only make sense at massive scale?

AF: For smaller clients like bakeries, a production scale below one million pounds can be feasible, often utilizing co-manufacturing. However, to partner with larger companies, establishing a dedicated facility is essential, with production exceeding one million pounds.

Cost Competitiveness with Cocoa

AFN: Do you need to match or undercut cocoa prices?

AF: Ideally, being slightly cheaper is best. However, due to the volatility in cocoa prices, we can often sell at comparable rates, providing stable pricing supported by stable input costs.

Long-Term Interest in Alternatives

AFN: Do potential customers lose interest when cocoa prices drop?

AF: Yes, it’s a challenge. Companies committed to long-term planning, looking 3–10 years ahead, continue to express interest. Those focused only on immediate returns tend to show less interest.

Current Waste Management of Spent Coffee Grounds

AFN: What do companies currently do with spent coffee grounds?

AF: It varies by region and company type. For ready-to-drink coffee brands, spent grounds are often seen as a cost center, leading them to engage waste haulers or compost services, which can be costly. However, some companies, especially in instant coffee markets in Asia and South America, choose to incinerate spent grounds for waste management.

Funding Challenges for Startups

AFN: How challenging has it been to raise money for your startup?

AF: Raising capital has been tough. However, we’ve discovered that conducting paid pilot projects with coffee factories keen on exploring their waste streams can provide cash and valuable insights. A pilot with Nabeiro Group in Portugal proved beneficial for both parties.

Further Reading

• California Cultured bets on $3k reusable plastic bioreactors to transform economics of cultured cocoa
• Prefer raises $4.2m, launches soluble bean-free coffee and cocoa powders
• Compound Foods launches ingredient platform to future proof coffee and cocoa
• Food Brewer nets funding from Lindt and Sparkalis for cocoa grown via plant cell culture
• Mez Foods turns to mesquite as skyrocketing cocoa prices drive interest in choc alternatives