For University of Minnesota students, lessons move out of the classroom and into the co-op

The latest product to spring from a University of Minnesota course sits on the grocery store shelf — between the cream cheese and the ricotta.

Santé, a yogurt spread, is more business than class project. In fact, students say, Entrepreneurship in Action in the Carlson School of Management is not really a class. "It's an incubator," said Wendy Hanson, a senior.

Over two semesters, seniors pitch business ideas and pick a few. Teams then vet, launch and operate them, with the help of loans of up to $15,000. It took this year's class just three months to get Santé into several local co-ops.

"We're able to fast-cycle innovation, get something in the stores and see if it works," said Andrew Fuller, a senior and Santé Food's chief executive officer.

Each May, the students decide: Will they continue the businesses past the class? If a few students do, they buy the business from the school, agreeing to pay off the loan and, usually, a 5 percent royalty for three years.

The course's syllabus, which the instructors like to call a "handbook," starts by encouraging students to take risks. The team that created Santé took a big one — they ignored the syllabus' first restriction. Don't start a business that involves preparing or handling food, it says.

"To maximize their learning, they need to get their product into the market quickly," said John Stavig, the course's instructor. Because of strict regulations, Stavig didn't think food would fit with that timeline, he said.

Until this class.

The students were brainstorming ideas last fall when one mentioned his mother's recipe for a thick, Lebanese yogurt spread. They tried it, loved it and went to work trying to re-create it.

"If you look at the market now for spreads and dips, they're extremely fat-laden," Fuller said. Two tablespoons of Santé contains no fat and 3 grams of protein. "Why not create a product that you can eat every day?"

They met with Carl Schroe­der, of the Schroeder Milk family, to tap his nearly 30 years in the food and beverage industry. (Schroeder Co. Inc. was sold to Agropur Inc. in 2008, and Schroeder left in 2010.) "My first thought was, 'Wow, this is a very ambitious goal,' " given the regulations, Schroe­der said, "not to mention competition in the marketplace."

Schroeder said he was impressed with how Santé "functions very much like a business would," yet has greater flexibility. "Bigger businesses would get stuck in, 'We need to do some R&D,' " he said. The question is whether Santé can be manufactured at a commercial scale without running low on cash, he said. "That's where a lot of these ideas go forward or they don't."

The class relies on experts and businesses offering their advice but has become more careful about those relationships. In 2011, the Entrepreneurship in Action students who created Toepener — a device that allows someone to open a bathroom door with a foot — were accused by a Missouri start-up of copying its product, StepNpull.

It turned out that a student in the group had e-mailed StepNpull, saying he had "stumbled" across its product, never disclosing that he was part of the Toepener team.

Since then, Stavig has led a class discussion about how students represent themselves and the course. Fuller said his team has acted with the assumption that it's a business that will live on.

"You could probably get away with that in a class project, but in a business, you need to have that integrity," Fuller said.

'Slow and steady'

The teams come up with business plans. Professors visit to talk about concepts like pricing. But much of the class happens outside the classroom.

"Sitting back and doing a [strengths and weaknesses] analysis is interesting," said Stavig, director of the Gary S. Holmes Center for Entrepreneurship. "But I think you learn a hell of a lot more going out and getting it into market, getting feedback from the customers and seeing if you can sell it."

The students had researched the growth of Greek yogurt and the market for spreads, but the conversations with grocery managers were what convinced them that Santé could sell.

"It definitely does fill a niche," said Scott Heard, cheese manager at Seward Co-op in Minneapolis. "For people who are watching their fat intake, this product fits their bill."

Heard was surprised how quickly the team "got their ducks in a row" — Fuller had to pass a food manager licensing course — and came up with pretty packaging. Sales of Santé, which retails for $5.49 for an 8-ounce package, have been "slow and steady, which is typical with a new product like this," Heard said. But sampling works.

"A lot of people, especially co-op customers, are really looking to hear that story," he said.

On a recent Friday afternoon, three students spread Santé on cookies and crackers, displaying them on a booth just inside the Linden Hills Co-op's doors.

Hanson peppered customers with nutrition facts ("Only 15 calories in two tablespoons!"), asked for feedback ("What do you think? What's it missing?") and suggested accompaniments ("I personally like that one with kettle chips.").

Jenny Bender of Minneapolis approached with her 6-year-old son. "That's a strawberry dip, buddy," she said. "You might like it."

Hanson made her pitch: "We get the strawberries from a little Mennonite family that has a business in Wisconsin. The dairy's from Wisconsin, as well. So we try to do local."

Bender nodded, chewing.

"We'll support it," she said, tossing one in her cart.

Jenna Ross • 612-673-7168