SEC to Hampton Creek: That’s not what we meant by ‘hold the mayo’

Up to its neck in a condiment container of PR troubles, Bay Area fake-mayonnaise maker Hampton Creek is now under the scrutiny of federal investigators who want to know: What mayo did you buy and why did you buy it?

While the opening of an inquiry by the U.S. Securities and Exchange Commission into the company’s controversial buyback program won’t necessarily lead to criminal charges, the SEC probe is another embarrassing chapter for the brash Silicon Valley maker of vegan mayonnaise, an outfit that prides itself as an industry disrupter, a sort of Uber for the food-tech space.

But did the San Francisco-based foodie operation cross the line when it bought its own product from stores but didn’t disclose it?

Bloomberg has been all over this case since Day One, first reporting that Hampton Creek was cranking up its buyback program in 2014. CEO Josh Tetrick told the news agency in a statement that “we’re aware of the informal inquiry and we’ll be sharing the facts, as opposed to the inaccuracies reported by Bloomberg.”

As issue, say the Bloomberg reports, is whether Hampton Creek  improperly included bottom-line revenue from mayo buys made with the mayo-maker’s own money, according to people who spoke with Bloomberg but asked that their names not be revealed.

The SEC is getting into the act because even though Hampton Creek is a private company the feds can still poke around since the startup has raised money from outside investors. Lots of money, according to Bloomberg, from lots of high-profile valley types:

Hampton Creek has raised more than $220 million and Tetrick, the firm’s founder and chief executive officer, told employees last week that he expects to raise another round of financing by early next month that will value the company at $1.1 billion, a person who attended the meeting told Bloomberg. In late 2014, Hampton Creek raised $90 million from venture capital heavyweights Founders Fund, Horizon’s Ventures and Khosla Ventures as well as Salesforce.com Inc. co-founder Marc Benioff and Facebook co-founder Eduardo Saverin.

All along, Hampton Creek has fought back, asserting to Bloomberg that the buybacks were perfectly legit and were done as part of the firm’s quality-control efforts, “designed to understand the product from a customer’s perspective.”

As my colleague Ethan Baron wrote here recently,  the company maintained that the buybacks were “done mostly to check on the quality of the faux mayonnaise, which currently sells at Whole Foods for $5.99 per 16-ounce jar, or at Walmart for $3.48 for 30 ounces.”

“Assessing the product from the customer perspective, more than anything, gets us out of the bubble of typical manufacturing,” Tetrick said. “We’ll continue doing it.”

Bloomberg also quoted company exec Melanie Myers echoing her boss and saying it was all about quality control and that “we also thought it might give us a little momentum out of the gate.”

A former contractor showed Bloomberg receipts reflecting purchase of more than 140 jars of Just Mayo in a day, according to the news outlet. Another contractor said Hampton Creek instructed workers to hit more than a dozen stores in less than a week, and recalled buying at least 20 jars in a single store, Bloomberg reported.

And if you’re really curious about the product in play here, check out this video “Vegan Food Review” by a young woman who raves about Hampton Creek’s Just Mayo, stating that “this mayo has been taking the Internet by storm”:

 

 

Photo: Mayonnaise (Flickr creative commons/Stacy Spensley)

 

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