Food Giants Fund Start-Ups To Co-Opt Competition

Multinational food conglomerates are launching funding operations to invest in—or buy outright—startups with a natural or healthful focus, to capture the credibility of these craft brands.

Big US food companies such as Campbell Soup, General Mills, Kellogg and Tyson Foods are setting up in-house venture capital operations to buy start-ups, as health-conscious consumers demand change. These companies are searching for the organic, healthy products and sustainable ingredients favored by millennials, who are less loyal to top brands. Consumer packaged goods giants such as Unilever and Coca-Cola also are opening their own capital venture arms to invest in early-stage companies and more easily integrate new products that are disrupting the food and beverage market.

Since 2015, Campbell Soup, General Mills, Kellogg and Tyson Foods all have become active in the start-up world, says Zoe Leavitt, a tech-industry analyst at research firm CB Insights. “Big food companies can leverage relationships with start-ups to branch into new product areas, experiment with new ways to get products in front of consumers and capture some of the credibility associated with smaller craft brands,” Leavitt says.

Cereal maker Kellogg’s new venture capital fund, eighteen94 (1894) capital, led a $4.25 million Series A funding round in January for Kuli Kuli, a California-based company that makes products based on the plant protein moringa. Kellogg wants to invest $100 million through the fund.

Through 301 Inc., General Mills has backed makers of vegetable-based products including Rhythm Superfoods and Beyond Meat, and it invested in Farmhouse Culture, which focuses on probiotics. Campbell Soup has used Acre Venture Partners to make investments in technology and distribution channels, rather than actual food products, Leavitt said.

Colorado-based venture capital firm Boulder Food Group (BFG), which has led nine investments in organic and non-GMO food and beverage companies since its inception in 2014, is not afraid of Big Food.

“Even though there is more competition, our opportunity today is bigger than ever since the dollars shifting away from legacy brands to young upstart brands have become so significant in absolute terms,” says BFG founder and managing director Tom Spier.