How Sweetgreen Got to $1 Billion

The rumors started a few weeks back: Sweetgreen, the chain that dishes out kale caesar salads and quinoa-filled bowls to sad desk lunch crowds, was worth $1 billion. With the average Sweetgreen salad bowl clocking in between $9 and $14, that’s a lot of, er, green. “I mean, it’s insane,” says restaurant investor Elaine Chon-Baker of Mokja Ventures of the brand’s “unicorn” status — a distinction given to privately held start-up companies that reach a $1 billion market value. “These unicorn valuations are happening so often, everyone just shakes their head at it. It reminds me of what happened with the dot com bust in 2001.”

With investors chasing the next Shake Shack, companies like Sweetgreen (which has 90 locations) and Joe & the Juice (with nearly 300 locations and plans for a $1.5 billion IPO in 2019) seem to be rushing into high valuations just to drum up buzz. But how did Sweetgreen, a relatively small chain known for serving vegetables in oddly shaped bowls, become the first real restaurant unicorn?

Sweetgreen started life 11 years ago as a small restaurant in D.C. founded by three recent Georgetown University graduates, Nicolas Jammet, Nathaniel Ru, and Jonathan Neman. To date, Sweetgreen has collected $325 million from investors including Revolution Growth and Shake Shack founder Danny Meyer. The salad chain’s finances are not public, but it is turning a profit. “The business is very healthy economically,” Jammet told Eater in early October, before the most recent raise. Sweetgreen’s $1 billion valuation comes after Fidelity Investments, one of the world’s largest asset management companies, poured another $200 million into the chain’s bank account.

Sweetgreen wasn’t the first concept to offer a customizable salad menu, but it was the first to understand how to cultivate loyalty — by reaching its target audience outside of the restaurant. Four years into its run, with only a handful of locations open on the East Coast, the brand launched a music festival: Sweetlife kicked off in 2011 with the Strokes, Girl Talk, and Lupe Fiasco headlining. Phoenix, Lana Del Rey, and the Weeknd hit the fest in subsequent years, generating an enormous amount of attention — on social media and in real life — for what was otherwise just another farm-to-table concept in an ocean of farm-to-table concepts. (Sweetlife ended its marquee run in 2016, but continues to host smaller shows.)

In between its annual festivals, the group collected over $100 million in venture capitalist funding, expanded to the West Coast and Chicago, partnered with high-profile chefs for seasonal menu items, solidified its partnerships with independent farmers, and launched an order-ahead app. A sign of its influence? Sweetgreen has over 170,000 followers on Instagram. By contrast, the internationally reaching Shake Shack has over 500,000 fans on Instagram while competitors like Chopt (44k) and Just Salad (21k) don’t have nearly the same level of engagement.

“Sweetgreen understands the power of great storytelling: the story of how they started, the story of each menu item,” Chon-Baker says. “A lot of great concepts have really great stories behind them. Apple. McDonald’s. Shake Shack. These companies have amazing branding and marketing.” The key element is consistency, and Chon-Baker notes that Sweetgreen’s social media presence has been “a huge driver… People are always looking for visual cues. [Social media] really created this pattern of looking at food as art or food as an image versus just food as nourishment.”

A large part of Sweetgreen’s image is about selling the idea of nourishment. The company has long projected an image of health, wellness, and sustainable farm and labor practices. Its marketing language uses phrases like “real food should be convenient and accessible to everyone,” “food from scratch, using fresh ingredients and produce delivered that morning.” Its stated mission is to “build healthier communities by connecting people to real food.” Lofty, but not flimsy, it’s real enough to appeal to Sweetgreen’s core audience: young professionals with disposable income who are likely to ask a lot of questions about where their food comes from, and why. Perhaps no other fast-casual brand on the market is so well-aligned with its consumers.

This alignment coincided recently with a cult-like gathering at chef Dan Barber’s four-star Blue Hill at Stone Barns. Over 100 Sweetgreen fans and partners were invited to what one guest called “a wedding, but celebrating a very special squash.” There was a photographer, there was a Spotify playlist, there were several toasts, there was a live band. The four-course meal honored Sweetgreen’s triumphs in promoting sustainable farming practices, and its new collaboration with Barber’s Row 7 seed company, which develops seeds for produce with an emphasis on flavor. Last year, Sweetgreen bought Row 7 seeds for a squash called Koginut, which looks a little like if a butternut and acorn squash had a baby. Sweetgreen then gifted the seeds to its farming partners across the country — including SoCal chef-favorite Weiser Family Farms — asked them to grow it, and promised to buy the resulting produce. As of this month, Koginut squash is on Sweetgreen’s menu nationwide, served roasted with fennel, pears, basil, goat cheese, walnuts, wild rice, and a lemon-balsamic dressing for $11.

Sweetgreen/Official

“This is a major first for us,” Jammet says of the Koginut partnership. “It’s a first for Row 7, and for our farmers, and we’re going to see how it sells, but we have a good feeling about it,” he told Eater just before the launch. Halfway through into its first month on the menu, Sweetgreen’s demographic of upwardly mobile and influential fans are literally eating it up.

“They use this phrase a lot: ‘Democratizing food,’ which is so unique in the food space,” says restaurant consultant Judge Graham. “They’ve built almost more of a social, political, cultural brand versus a fast-food occasion.”

But even that’s not enough to get Sweetgreen to $1 billion, says Jenifer Ekstein, a senior consultant at Vivaldi. “What holds so much potential is turning a fast-casual restaurant into a food platform,” she says. “Sweetgreen looks beyond just the food they serve — it’s about how they can create an entire food ecosystem that reaches their customers in ways personalized to them.”

“They’re doing something that a fast-food company has never really been done before,” Graham says. “How they’re approaching their customers, how they’re selling it, how they’re using technology, how they’re positioning it… It’s almost a tech company.”

Sweetgreen’s app, which 1 million people across the U.S. use, brings in a full 50 percent of the chain’s business today, and that’s only expected to grow. The company also pioneered use of blockchain technology for its supply chain, which means it has systems in place that trace each fruit and vegetable from farm to consumer. With its new influx of cash, it plans on growing its Outpost concept, in which deliveries to office buildings are free. It also plans to expand into new markets, drawing more users to its app.

And that means one thing: data. “With their technology infrastructure they are able to collect mountains of data,” Ekstein says. That data is valuable for the company’s marketing, menu development, and expansion purposes, but it might become even more valuable in the future. (Jammet promises the company is only using the data for good.) “We are big believers in leveraging data to create a better experience for the customer, the team member, everything,” he says. “We like to make a lot of our decisions on the foundation of data... it’s always art and science. The data we collect informs how our menu evolves, it informs the efficiency of our SKUs and eventually what we buy from our farmers. For the past year and a half, we’ve been testing this larger blockchain of food.” This, Jammet says, has become a “massively powerful” tool for food safety, for “traceability.” (See also: Chipotle.)

Ekstein believes that because Sweetgreen started small and “took calculated, purposeful steps to create a strong brand,” they can “ultimately disrupt the long stagnant food industry.” But that $1 billion valuation is just a number.

Graham says when small companies throw around big numbers it’s a sign that “they’re positioning to get sold. 100%. That’s what my gut tells me.” In an interesting twist, he says that “the fact that they’re so technology and delivery focused, and they have this cultural spin, this would be such a perfect brand for somebody like Amazon to purchase.”

Whether or not Jeff Bezos would put down $1 billion of his pocket change to get into the restaurant business remains to be seen. Sale or no sale, Chon-Baker doubts salad alone will be enough to propel the company forward. It’s a good thing Sweetgreen also plans to use some of its new cash to expand its menu — and maybe they’ll tone down the whole farm-to-table schtick. “I mean, of course it’s ‘farm-to-table,’” Chon-Baker says with a laugh. “It’s lettuce.”