Why I Invested in Pepper
Investment information
Investment date: August 2021
Stage: Series a
What It Is
Pepper is an e-commerce platform for independent food distributors and manufacturers, providing a streamlined marketplace solution that bolsters revenue and profitability for sellers and buyers alike. It aims to modernize a process that has traditionally relied on phone calls and paper records, where restaurants must transact with dozens of independent distributors on a weekly basis by centralizing the buying experience into a single e-commerce platform. Not only does Pepper save tremendous time for food buyers, it reduces costs from time waste, while increasing sales for its supplier clients.
Pepper currently charges a 2.5% take rate on all transactions through its sales platform, but plans to layer on additional tools and services that will allow it to further monetize the growing GMV flowing through the system. Long-term, the founders view the Pepper as being on a path towards becoming an all-in-one sales enablement and operations solution platform for the food distribution industry.
Investment Thesis
Pepper is already disrupting the trillion dollar food distribution market, which is expected to grow 7.3% per year for the next decade, nearly doubling in size during that time. Pepper’s tech enabled solutions replace the often analog processes that have traditionally powered restaurants, grocery stores, and other retail outlets to transact with the dozens of independent food distributors they require on a weekly basis. With labor and other costs expected to rise, Pepper’s ability to increase sales, reduce waste, and streamline processes to drive profitability will make it essential to independent food producers in perpetuity.
Pepper’s growth and traction have been remarkable, especially given the company’s short time in operation. In just 10 months, Pepper has secured over $1 billion in GMV and onboarded more than 20,000 buyers, demonstrating clear demand for its platform. More impressively, the company has maintained a 90% monthly buyer retention rate, showcasing the stickiness of its product. Recent momentum has been strong, with over 1,000 active buyers in the last 30 days and a 25% month-over-month growth rate since January. With its current $190K ARR and an opportunity to accelerate it to as high as $20M ARR by the end of 2023, Pepper has already established itself as a major player in modernizing restaurant supply chains.
Despite the growing number of companies looking to digitize B2B foodservice transactions, Pepper is uniquely positioned to win in this market. By deeply integrating with suppliers rather than displacing them, the company has built a model that enhances—not disrupts—existing relationships, making adoption seamless for both sides of the marketplace. As its take rate expands from 2.5% to over 7% in the next three years, Pepper will unlock substantial revenue potential while continuing to drive efficiencies across the ecosystem. With its strong early traction, high retention, and scalable growth model, Pepper is not just reshaping restaurant procurement—it’s on track to become the industry standard.
WYNTBs (“What You Need to Believes”)
Restaurants and premium grocery markets have a persistent, growing need to acquire high quality food products from independent producers and manufacturers
Pepper’s moat will continue to gain strength health of its marketplace continues to increase through scale, exclusivity, and unique, data-enabled solutions
Pepper will continue to layer additional attractive products onto its platform, raising its blended take rate from customers to above 8%
As Pepper’s product offering and operational scale increases, it will be able to move up market to higher volume producers, dramatically increasing the GMV of transactions through its system
An economic and growth flywheel opportunity exists, wherein acquisition and retention of producers and purchasers leads to increasingly quick growth cycles
The investment has an attractive return profile, despite the admittedly high revenue multiple
Outlook
Long-term, Pepper has the potential to become a dominant force in the restaurant supply space, fundamentally reshaping how independent restaurants and suppliers connect. The company’s deep focus on digitizing and streamlining the historically fragmented and inefficient food supply chain positions it perfectly to capitalize on broader industry shifts toward automation and operational efficiency. With a model that drives increasing engagement from both buyers and suppliers, Pepper is building a self-reinforcing network effect that will accelerate its growth while improving unit economics.
As Pepper scales, its platform will become an indispensable operating system for the industry, enabling suppliers to optimize their businesses while giving restaurants seamless access to the products they need. The company’s ability to harness data and insights across transactions will unlock new monetization opportunities, from dynamic pricing to embedded financial services. With restaurants under continued pressure to control costs and streamline operations, Pepper will only grow more essential as the backbone of foodservice procurement.