Investing in innovation
A prominent trend in the food and beverage industry this past year was the emergence of venture capital funds targeted specifically at the sector. General Mills, Kellogg Co. and Campbell Soup Co. are among companies that have established venture capital funds to invest in and help build promising new food and beverage start-ups.
It’s one way in which the industry is adapting to changes in the marketplace. The largest food manufacturers in the United States have ceded market share to small and medium-size competitors while growing revenue at a fraction of the rate — 1.8% compared with 11% to 15%, according to a report published by A.T. Kearney and The Hartman Group. The high cost of acquisitions is driving top companies to create seed funds in order to get on the ground floor of food and beverage start-ups. Such initiatives position companies to take advantage of consumer trends with a lower entry cost.
“We are seeing companies invest a lot earlier into smaller firms,” said Randy Burt, a partner with A.T. Kearney.
Investments made by 301 INC, the business development and venturing unit of General Mills, have included Beyond Meat, a maker of plant-based meat substitutes; Good Culture, a cottage cheese brand; Tio Gazpacho, a maker of ready-to-drink soups; Kite Hill, a maker of non-dairy cheeses and yogurts; and Rhythm Superfoods, which makes kale chips and beet chips.
Kellogg’s eighteen94 capital, launched last June, made its first investment in January in Kuli Kuli, an Oakland, Calif., maker of nutrition bars, powders and beverages featuring African “superfood” moringa. Rich in protein, potassium, calcium and vitamin A, moringa is a complete plant protein with all nine essential amino acids. Products include Moringa Superfood Bars in crunchy almond, dark chocolate and black cherry varieties; Moringa Green Energy Shots in coconut lime, ginger lemon and raspberry flavors; Pure Moringa Vegetable Powder and Organic Moringa Tea.
“By investing in Kuli Kuli and helping them grow, we’re backing a new superfood category, one in which we see the potential for ongoing high-growth,” said Simon Burton, managing director of eighteen94 capital and now a member of the Kuli Kuli board of directors. “We love the company’s strong management team, great products and the authenticity of their social mission.”
Last October, the Campbell Soup Co. became the sole investor in Habit, a San Francisco-based personalized meal delivery start-up. Habit develops nutrition recommendations and delivers personalized meals based on an individual’s biology, metabolism and personal goals, while offering one-on-one wellness and nutrition coaching. The team includes nutrition scientists, health advisers, researchers, technologists, registered dietitians, chefs, food scientists and business leaders.
The founder and c.e.o. of Habit is Neil Grimmer, who previously co-founded and led Plum Organics, a baby food brand acquired by Campbell Soup in 2013.
“The entire food industry is being transformed by the fusion of food, well-being and technology,” said Denise Morrison, president and c.e.o. of Campbell Soup. “Habit is well positioned in this wired for well-being space and poised to lead the personalized nutrition category. Campbell’s investment is part of our broader efforts to define the future of food, which requires fresh thinking, new models of innovation, smart external development and venture investing to create an ecosystem of innovative partners.”