“Lawsuits happen, I’m not too concerned about it,” Drori says. No Shit – yes they do – 350 of them!

The quote seems to be a bit more than callous and certainly inflammatory.

FAST COMPANY – BYAMY FARLEY AND ELIZABETH SEGRAN

Daily Harvest’s toxic year: How the $1 billion food startup’s quest for a new ingredient sent customers to the ER

The CEO speaks for the first time about the tara flour that sickened hundreds, led to lawsuits, and revealed big problems in U.S. food safety.

The emails first came in a trickle, then an avalanche. Last summer, Rachel Drori, founder and CEO of the vegan food-subscription company Daily Harvest, fielded 470 messages from customers describing the horrific symptoms they experienced after eating the brand’s latest product, French Lentil + Leek Crumbles—a kind of ground-beef substitute that the company began rolling out in April 2022. “Toss in a tortilla. Crumble on top of a flatbread. Serve in a lettuce wrap,” Daily Harvest had urged subscribers who received the roughly 28,000packages of Crumbles the company shipped out.

In New Orleans, James Puissegur developed extreme abdominal pain that lasted a week. In Napa Valley, Tyler Street developed muscle and joint pain, mental fogginess, and yellowness in his eyes, before bloodwork found he had liver dysfunction. In upstate New York, Breanne Peni experienced fever and nausea that took her to the emergency room; doctors determined she required surgery to remove her gallbladder. 

These customers weren’t alone: In total, according to an October report from an organization advising the Food and Drug Administration, 393 people reported adverse reactions to the Crumbles and 133 people ended up in hospitals. Many of them experienced “symptoms consistent with toxin poisoning, directly impacting the liver,” according to the report. Thirty-nine of the sickened people have had their gallbladders removed. Many were young and health-conscious—exactly the kind of customer Daily Harvest appeals to with its plant-based smoothies and harvest bowls. “We’re committed to a better food system, one that prioritizes human and planetary health,” the company promises on its website. 

“We started this business with the very distinct mission to help people,” Drori tells Fast Company in her first interview since the crisis. “When you find out somebody gets sick [from your food], it’s a lot to take in.” In a matter of weeks, Daily Harvest—which notched a reported $250 million in revenue in 2020 but is still working toward sustained profitability—was plunged into a crisis that threatened to destroy the then-7-year-old company. Daily Harvest, which has raised at least $120 million from backers that include Lightspeed Venture Partners, VMG Partners, and Lone Pine Capital, as well as celebrities like Gwyneth Paltrow and Bobby Flay, was valued at more than $1 billion after its $77 million Series D funding round in 2021.

Over the past year, Drori has spent much of her time managing Daily Harvest’s response to this crisis. On June 17, 2022, seven weeks after the Crumbles first appeared on the brand’s website, Daily Harvest initiated a recall. Growth stalled and sales plummeted. According to data provided to Fast Company by research firm Earnest Analytics, Daily Harvest’s subscriber accounts declined 38% from June 2022 to May 2023, and its subscription revenue dropped 33%. (Daily Harvest disputes these figures but declined to provide updated ones.) Since August, the company has gone through two rounds of layoffs. Then there are the lawsuits: More than 300 people are suing Daily Harvest and its suppliers for damages that could exceed $75 million, according to court documents.

After nearly three months of investigation by Daily Harvest, the FDA, and other agencies, the probable cause of the illnesses finally became apparent: tara flour, an ingredient made from the seed of a legume grown in South America. While tara gum, a different product made from the same plant, has been used as a thickener in foods like ice cream, tara flour has not been widely used in North America or anywhere else, say food safety experts. Nonetheless, Daily Harvest decided to incorporate it into its Crumbles product. “We were looking for a source of protein with a very specific criteria,” Drori says. “We didn’t want it to be hyper-processed or based on nuts, soy, or wheat. We were introduced to tara by a few suppliers [to meet] our specific needs.”

Most food safety issues involve contamination by a bacteria like E. coli, a pesticide, or a known allergen, such as peanuts or gluten. Daily Harvest’s recall was unusual, food safety experts say, because it involved an ingredient that the brand incorporated intentionally—and one that was virtually unknown. “I’m not aware of any instances of a novel ingredient sickening so many people,” says Brian Ronholm, the former deputy undersecretary of food safety at the U.S. Department of Agriculture and the current head of food policy at Consumer Reports.

But this crisis may be a harbinger of what’s to come as direct-to-consumer food startups, flush with venture dollars, release products that fall through the large regulatory cracks of the FDA. This could be especially true for companies that make novel ingredients a selling point, and that may not have the same in-house testing facilities and procedures as larger consumer packaged goods companies. “Established food companies are not just going to run into the market with an unknown ingredient. They examine any ingredient 10 different ways,” says Mansour Samadpour, CEO of IEH Laboratories and Consulting Group, one of the largest food safety testing companies in the U.S. “Now you have a lot of nonprofessionals forming online companies, going after exotic ingredients, and convincing people to fund them.” 

A year later, Drori is ready to turn the page on the recall. She says that customers are still loyal to the brand, and the company will soon launch in a national grocery chain. She also notes that Daily Harvest has changed its procedures since the Crumbles rollout and subsequent recall. “We’ve augmented our sourcing strategy based on this experience,” she says. “We’re not going to use an ingredient if it has not been widely and safely used in the United States.” 

But Daily Harvest’s troubles should be a watershed for consumers, as they reveal how unregulated food companies are in the U.S., and how easy it is for unsafe ingredients to make it onto our dinner plates.

Ashley Stewart was a vegan in a food desert. The then-33-year-old social worker was starting a new job last May in Ganado, Arizona, in the Navajo Nation. She was stumped, however, on how she could maintain the vegan diet that her doctor had recommended she follow to help with the symptoms of her premenstrual dysphoric disorder, a severe form of premenstrual syndrome. Grocery options were limited in Ganado, a town of fewer than 1,000 people. 

Then Stewart discovered Daily Harvest, which promised to deliver frozen, plant-based meals on a regular basis. A few weeks into her subscription, she received a package of French Lentil + Leek Crumbles. She cooked them as directed and, over the course of a couple of days, ate several servings.

Stewart assumed, at first, that she wasn’t feeling well because she was still assimilating to her new job and to living in a new climate. She had moved to the desert from Atlanta. Despite feeling off, she went to work. “I felt like I was cold, but I was sweaty,” she says. “I’m a therapist, and while holding sessions, I could barely focus or remember what the person was saying. Then I lost my appetite and my abdominal pain became so severe that I barely made it to my apartment. On the walk back, I almost passed out.” 

Stewart’s pain escalated throughout the day, and she ended up in the small emergency room in Ganado. When the doctors there determined they didn’t have the tools to handle her case, they put her on the waiting list to be transferred to another hospital. The next morning, still waiting, she decided to take matters into her own hands. In pain and scared, she got released from care by her doctor and booked a plane ticket to Ohio, where she has family. There, she went through a battery of tests and treatments: She had a liver biopsy; multiple ERCPs, a kind of endoscopy that looks at the liver, gallbladder, and bile ducts; and endured two stent placements and removals to help clear any blockage in her ducts.

Nothing helped.

“I had to keep advocating for myself, saying I’m getting worse,” she says. “I could barely walk at that point, for constipation. My urine was orange-red. My skin was on fire from a rash. I was making myself bleed because my skin was itching so badly. I was kind of losing consciousness.” A doctor told her she had cholestasis of the liver—basically a blockage of her bile ducts—and she needed her gallbladder removed.

It wasn’t until an acquaintance mentioned a Reddit post about a Daily Harvest user who was experiencing similar medical symptoms that Stewart realized the scale of the problem. In May and early June, hundreds of other customers had become ill with symptoms that included diarrhea, nausea, fatigue, body aches, fever, elevated liver enzymes, jaundice, and even liver damage. Many had made multiple trips to the ER and specialists, as doctors tried to identify the underlying problem. Stewart wasn’t the only person whose symptoms continued after her gallbladder was removed. Customers had been coalescing on Reddit and social media—sharing symptoms and possible causes. (Some of the first to get sick, in fact, were influencers to whom Daily Harvest had gifted the Crumbles in advance of the product’s release.) Many of them found Daily Harvest’s response to their initial reports of illness slow-footed and muted.

“We issued an immediate voluntary recall out of an abundance of caution, and we did it immediately after hearing about a small number of complaints of gastrointestinal issues,” Drori says. The company’s initial correspondence to customers on June 17, however, simply noted that “a small number of customers have reported gastrointestinal discomfort” after consuming the Crumbles. The company reminded users of the importance of cooking lentils properly, then told them to “please dispose of any French Lentil + Leek Crumbles you have received and do not eat them.” 

Bill Marler, a food safety lawyer based in Seattle, is representing more than 300 people, including Stewart, who were sickened by the product. In his three decades in the business, he says, this is the first case he’s seen of a new ingredient causing such an outbreak. “This was a very odd situation,” he says. “My phone [was] ringing off the hook from people all over the country with identical symptoms, which revolved around liver dysfunction, after having consumed the same product.” When Marler began getting calls from customers of Toronto-based meal-delivery service Revive Superfoods with similar symptoms, it quickly became clear that Revive’s smoothies had also been using tara flour. 

While tara flour is almost certainly the culprit, it remains unclear whythe ingredient leads to these symptoms. In March 2023, the journal Chemical Research in Toxicology published a study suggesting that tara flour has high levels of nonprotein amino acids known as baikiain, which can cause adverse effects, particularly in individuals with a specific genetic makeup. Samadpour of IEH Laboratories says this study is a step in the right direction, but it does not provide definitive answers. “There are many amino acids that the body will react to if you give it a tremendous amount,” he says. “It’s going to take toxicologists a long time to figure this out.” (Marler used IEH’s lab facilities to conduct tests last year to try to determine the cause of the Daily Harvest outbreak.) 

This medical mystery exacerbated the maelstrom that swirled around the company last summer. Customers spoke out on social media and to the press, expressing frustration at what they saw as a lack of transparency from Daily Harvest around the severity of the illness and what was causing it. According to Joe Gilgoff, who headed up the company’s customer care division from 2019 until this April and who managed all of the inbound customer support channels, Daily Harvest was offering the public as much information as possible. With each email—for a stretch in June, Daily Harvest sent updates to customers nearly every other day—the company received more reports of customers falling violently ill, revealing the scope of the problem.

“If we had known what we [learned] after that first communication, I think it’s fair to say that we would have worded things differently,” Gilgoff acknowledges, though he maintains that the company was moving with as much urgency as possible. “From the moment we realized there was an issue and, soon after, sent that first communication, there was a several-month period where lots of us in the company were living and breathing this issue—and desperately thinking about everybody’s health and wanting everyone to be okay.”

Drori and her team hadn’t heard of tara flour until they were introduced to it by several of their suppliers. How it ended up in the Crumbles reveals a lot about how weak food safety laws are in the U.S., as well as what Daily Harvest could have done to better protect customers.

In Daily Harvest’s test kitchen, in-house recipe developers had been churning out a steady stream of new products beyond the brand’s original menu of smoothies, soups, and bowls, expanding into flatbreads and plant-based ice-creams and milk alternatives. Drori’s next quest was to develop a new protein-heavy product that could substitute for ground meat. “We wanted to create something for the center of the plate,” she says.

The company already had another crumble product in the works that used nut-based protein. But given the prevalence of nut allergies among customers, the R&D team worked with Smirk’s, a supplier of organic, non-GMO ingredients, to find an alternative. Drori says that Smirk’s recommended Tara flour, which comes from a legume. Drori was attracted to the idea of offering ingredients from a variety of plant sources. “Biodiversity counts,” she says. “The more variety, the more nutrients.”

When Daily Harvest rolled out its French Lentil + Leek Crumbles—its first foray into the increasingly crowded meat-alternative industry—it specifically positioned the product as healthier than “lab-based” meats. “As consumers demand more plant-based options, we’ve seen an explosion of products that meet their call for sustainability, but they often miss the mark on health and nutrition,” Drori said in a press release at the time.

Ricky Silver, who joined Daily Harvest in 2018 after working at Vita Coco and PepsiCo and who became chief supply chain officer in 2020, says the company followed internal safety checks to evaluate the tara flour before using it. He says Daily Harvest’s in-house food safety and quality assurance team gathered documentation about things like whether the supplier’s facility was registered by the FDA; whether tara flour posed a risk for allergens, chemicals, or contamination by foreign materials; and whether the ingredient was “Generally Recognized As Safe” (GRAS), an FDA designation created in 1958 for food additives with a long history of safe use in food.

The GRAS designation allows food companies to bypass the traditional premarket approval process for ingredients. They just need to show that there is consensus among scientific experts that the substance is safe for its intended use. That can take the form of scientific studies or evidence that the food has been widely eaten, over many years, without incident. Companies can voluntarily notify the FDA of this status and submit supporting documentation. Or they can simply keep that documentation to themselves, a route that Maricel Maffini, a food policy and food safety expert who has studied FDA regulation, calls “secret GRAS.” While this kind of self-certification is legal—and companies more frequently employ it than they do submit documentation to the FDA—experts say it puts consumers at risk.

There is no evidence that the FDA received GRAS documentation for tara flour or any part of the tara plant before Daily Harvest’s Crumbles hit the market. Instead, Silver says that Daily Harvest’s supplier, Smirk’s, confirmed that tara flour was GRAS. “The supplier shared with us documentation and positioned [tara flour] as Generally Recognized as Safe,” he says. Daily Harvest declined to provide this documentation to Fast Company, citing the ongoing litigation. The company is suing both Smirk’s and its Peruvian supplier, Molinos Asociados. (Smirk’s declined a request for an interview or comment, also citing the lawsuits; Molinos did not respond to multiple requests for comment.)

It seems, in other words, that Daily Harvest relied on the assurance of its supplier that the ingredient was GRAS. “How can you call something ‘generally recognized’ when nobody knows about it?” Maffini asks. “Who is representing the scientific community in that determination? The employee of the company that is selling the product?” (In a statement, Daily Harvest told Fast Company that its process for confirming the safety of the ingredient was “consistent with the way many ingredients and uses are declared to be GRAS today under FDA guidelines.”)

Silver also notes that “this flour comes from a portion of the [tara] pod. It was being consumed as a part of the staple of the diets of the local population [in Peru] and was being sold more widely than that.” He says that health issues associated with tara flour “may not have been reported, given that it is a genetic predisposition.” But Maffini says there is little trace of tara flour being used widely either within the U.S. or abroad. “I couldn’t find evidence that it was used among the native people of Peru. If it is something that native peoples use, it’s usually recorded someplace,” she says.

“It definitely didn’t appear as a novel ingredient when we decided to use it,” Drori says. “There were multiple established reputable suppliers in the U.S. that had it in their catalog. In hindsight, we learned that while it was offered by many [suppliers], it’s unclear how much it had actually been used.”

Food safety experts say that the FDA’s system for verifying the safety of new ingredients is fundamentally broken. “The FDA doesn’t have the resources to check all ingredients that are being put into [products], so it leaves it up to companies,” says Marion Nestle, a molecular biologist, nutritionist, and public health advocate. “This has been a scandal for decades.” She says the problem could be exacerbated by “all these startup companies that are looking for new, exciting ingredients,” particularly ones focused on extracting proteins, since proteins are often responsible for food allergies. Maffini, meanwhile, points out that makers of dietary supplements frequently take advantage of the GRAS loophole.

As a result, many food safety issues are caught only after people get sick. Ronholm from Consumer Reports says that food companies’ main incentive to ensure the safety of their ingredients is the threat that they will be sued if something goes wrong—and that their reputation will take a hit. Some food safety experts say more established food companies would not have been willing to put an untested ingredient like tara flour into one of their products. 

“A larger company would not touch anything that wasn’t in the clear,” says Samadpour of IEH Laboratories. “They don’t want to be pioneers. And if they wanted to use it, they would apply for GRAS status themselves.” When it comes to trusting a supplier with GRAS documentation, he says, “You know how people say, ‘Trust but verify’? I tell my clients, ‘Don’t trust and definitely verify.’”

Ronholm concurs. “The system allows for companies to cut corners if they want to move quicker in the evaluation of new foods,” he says. “Smaller, more innovative companies might do this to cut costs or to push products out to market much faster.” At the same time, he notes that larger companies tend to be unwilling to pull ingredients when evidence of their harmful effects becomes available. (Daily Harvest says that its sourcing practices at the time “were consistent with those employed by many other companies, and deemed to be industry best practices.”)

More troubling, the startup ecosystem seems to encourage this kind of risk-taking. “Look at the last five years,” says Darin Detwiler, a professor in Northeastern University’s regulatory affairs of food and food industries degree program. “There’s been the rise of third-party delivery, ghost kitchens, all the apps. And now you can buy things directly from manufacturers, with new ingredients. There’s always going to be someone who’s trying to differentiate themselves and be a disruptor. That’s fine, as long as you’re looking out for the most vulnerable consumer. If you’re looking out for them, you are also looking out for the average healthy consumer.”

Silver says the experience with its Crumbles product has prompted Daily Harvest to change its ingredient sourcing process. Now, he contends, the company won’t just look at whether an ingredient has been declared safe but also at whether it is widely used in the U.S. in the specific way that Daily Harvest plans to use it. 

“We’re taking a wider view of the ingredients we’re using today and anything new we would bring into the system,” he says. In a follow-up statement, Daily Harvest told Fast Company that since the recall it has enhanced its protocol for reviewing all new ingredients. It will look for them in the FDA’s GRAS database, among other places, and will “identify a minimum of two peer-reviewed publications that provide evidence to support the safe use of the ingredient” and tap “external expertise for review and determination of GRAS status.”

Had Daily Harvest taken such steps with tara flour, the ingredient would likely not have made it into the company’s French Lentil + Leek Crumbles.

Drori says the company was able to move quickly on its recall because, as a direct-to-consumer brand, it had a relationship with its customers. “Because we have the benefit of a direct line to our customers who had [the product] in their freezers, we knew every single person who’d purchased it. That made it really easy to just be like, ‘Hey, you know, let’s not consume it. Let’s dispose of it immediately and, like, move on with our lives.’ We take food safety just incredibly seriously.”

Now, a year later, Drori is confident that her company will survive this challenge and keep growing. Daily Harvest recently introduced a variety of grains to its 100-plus product portfolio, its first food launch since the Crumbles. And it will soon announce a deal to make its products available at a national grocery store chain; it expects to be in more than 1,100 stores by the end of August. Meanwhile, its revenue per customer has exceeded 2021 levels, and average order value is up double digits year over year—signs, the company says, of the trust its customers have in the brand. 

Carle Stenmark, a general partner at VMG partners who has been on the Daily Harvest board since 2017, shares Drori’s optimism. “Recalls, unfortunately, are not all that uncommon,” especially at large consumer packaged goods companies, he says. “Our consumers still trust the brand. And, for the most part, the track record is extremely positive, especially when you’re dealing with leafy greens and fresh fruits and vegetables.” He also says that the company has enough runway to weather whatever comes of the lawsuits.

“Lawsuits happen, I’m not too concerned about it,” Drori says. “Our mission is bigger than that: It’s to help people eat more fruits and vegetables every day and to challenge the status quo of the food system.”

As much as Drori and Daily Harvest would like to put the recall in the past, moving on is impossible for customers like Ashley Stewart, who is still struggling a year later. “I have top-to-bottom chronic pain,” she says, noting that she is doing aquatic therapy to rebuild her muscles and visits an acupuncturist and chiropractor every two or three weeks for the pain. “I can’t walk. I can’t run. I can’t exercise. [Before getting sick] I was working out every day, doing yoga. I was a very healthy individual. I’m only just now able to be up for eight hours in a day.” 

And she has another lingering symptom: “I have a fear of food. I’m afraid to eat.”

Republished with permission from Bill Marler and Marler Clark. Copyright (c) Marler Clark LLP, PS. All rights reserved.

Source: https://www.marlerblog.com/case-news/lawsuits-happen-im-not-too-concerned-about-it-drori-says-no-shit-yes-they-do-350-of-them/