A millennial founder who landed 6-figures in investments breaks down his plan to build an applesauce empire

• Ethan Holmes is the CEO and founder of Holmes Mouthwatering Applesauce.
• He is one of the few Black-owned applesauce brands in the country.
• To Insider, he breaks down his plans to expand throughout the nation.
• See more stories on Insider's business page.

Since he was 15 years old, Ethan Holmes has had one dream: to build an applesauce empire.

In college, he would map out his plans on the walls of his dorm room. "Anytime I could get my hands on $20, I'd buy fruit just to make applesauce," Holmes, now 27, told Insider.

He attended Hiram College and dropped out in 2015 to launch his company. He invested $20,000 to launch Holmes Mouthwatering Applesauce, which has since expanded into more than 300 stores across the Midwest, including Whole Foods, Kroger, and Acme Fresh. Last year, the company saw more than 150% increase in sales, according to documents viewed by Insider, and next, he's preparing to test-launch into more than 200 Walmart stores next year.

"We're trying to be the Ben & Jerry's of applesauce," he said. "Nobody has been able to shape up applesauce the way ice cream has been."

The next phase of building his empire? Launch pouches and an organic line, and add new flavors: pomegranate and ginger cinnamon. To Insider, Holmes breaks down what attracted investors to his company, and how he hopes to expand Holmes Mouthwatering throughout the nation. Plus, his story highlights a macro opportunity for Black entrepreneurs entering "sleepy categories" such as applesauce to help secure overall sector dominance.

Investors were attracted to him entering a 'sleepy category'

In 2018, the global applesauce market was valued at over $900 million, and in the US, one name rules them all: Motts. Other big names include Musselman's, and Gogo Squeez.

Holmes said investors were drawn to his company because he uses fresh fruit and doesn't use artificial preservatives. Making Holmes' applesauce accessible to the masses is a big deal – minority neighborhoods are more likely to be classified as "food deserts," meaning fresh, healthy food is out of reach.

One in every five Black households is located in a food desert, acccording to a recent report on the economic state of Black America by management consulting firm McKinsey. Additionally, counties with above-average Black populations had fewer grocery stores, meaning less access to fresh food.

For CNN Business, the Reinvestment Fund found within the 50 largest US metro areas, on average, about 18% of mostly Black neighborhoods have limited access to supermarkets, compared to just nearly 8% of predominantly white neighborhoods.

For his efforts so far, Holmes Mouthwatering says it has received over six figures worth of investments and was accepted into Chobani's Incubator program for food startups last year. He also participated in an entrepreneurial boot camp founded by Gary Hirshberg, former CEO of yogurt producer Stonyfield Farm, and the company also secured a five-figure investment from Hirshberg himself. Securing key investments from incubator programs helped Holmes expand rapidly these past five years. Holmes said investors have been so attracted to the company because applesauce is deemed a "sleepy category" – as in, the market hasn't been disrupted for a while.

Zoe Feldman, director of the Chobani Incubator, told Insider the program was attracted to Holmes' "dynamic presence" while Findaway Adventures Managing Partner Rober Craven called him "the epitome" of an impact-minded founder. "When we met him and came to understand his personal mission and fall in love with his product, we knew right away we had to invest," Craven told Insider.

Producing quality products quickly is often the main roadblock faced by Black-owned businesses, Wayne Williams, assistant professor at Fox School of Business, told Insider, adding that accelerator programs can help these businesses secure and fulfill key distributions.

Last year, Holmes ramped up production again and says his next big foray will be into fruit snacks, as well as distribution in Canada and Europe.

Enter, the new age of Black entrepreneurship

Talks of the Roaring 20s returning might not mean just a recall to jazz and booze. The 1920s was also hailed as the Golden Age of Black Business and a century later, once again, Black entrepreneurship is thriving.

Holmes remembers what it took to get into Heinens, his first grocery store. He called the buyer three times a week before the buyer agreed to sample his applesauce. Of the more than 40,000 supermarkets in the US, less than 10 are owned by Black people, and within these chains, only 1% of suppliers are Black.

Companies such as Holmes' are becoming increasingly important as more Black entrepreneurs gain footing in industries long dominated by white-owned establishments. In the same way the tiny strokes of a painter make the overall portrait, the importance of specificity in ownership is what will eventually help secure market dominance in a given industry. Examining an industry from selling, manufacturing, production, and distribution reveals business opportunities that Black entrepreneurs have been fighting to sustain for centuries.

For example, Holmes uses more than 600 pounds of apples to make 100 gallons of applesauce. In 2017, the National Census of Architecture found there are 3.4 million farmers in the US and only 1.3% are Black. Holmes' Mouthwatering manufactures its own products out of Cleveland, sourcing apples from various local orchards including Bauman Orchards, and Patterson's. Another opportunity for Black entrepreneurship is in the distribution of fresh produce. Black ownership of farmland peaked in 1910 and since then, mostly due to systemic discrimination African Americans have lost over 12 million acres. Any of these steps in the process could be "sleepy" categories, in need of disruption.

In the early days of his company, Holmes used to drive four hours to a Mennonite community on the Kentucky border just to receive help making his applesauce. "They said 'hey this is some really good applesauce,'' he recalled. "As if they were surprised a Black man made it." Now, he's making plans on how to expand into Target.