The Cereal Companies of Your Childhood Are All in the Venture Capital Game
When General Mills established a business development group called 301 Inc. in 2012, innovation in the food world looked a bit different than it does today. As John Haugen, vice president and general manager for 301, said in an interview for the General Mills blog, “We put Progresso soup in K-Cups so that customers could quickly make delicious soup with their home brewers, and we developed Pillsbury Pancake Batter, which put pancakes in the refrigerated section of the grocery.” The group also worked on a subscription-based snack delivery service, an idea currently in vogue within the food-tech start-up world, but ideas aligned with small, more nimble companies appear to be the exception to 301’s early efforts at disrupting food.
That changed last fall, when 301 was retooled as a venture capital group that, instead of developing new products for General Mills, was to invest in start-ups working on more radical reimaginings of the food system than moving pancake batter from aisle to aisle. Beyond Meat, the plant-based protein company, was an early recipient of funding from 301, which is named for the address of one of the original Pillsbury mills in Minneapolis.
On Monday, Kellogg announced the launch of its own V.C. group, eighteen94 capital (or 1894), which takes its name from the year the Kellogg brothers started selling their first cereal. Campbell’s became the sole investor in an independent V.C. fund last year, called Acre Venture Partners. With the names of these investment groups rooted in corporate lore, the message is clear: Big food companies are hoping to do with money in today’s finance-driven economy what they did more than a century ago with mills and grain in a more agrarian economy.
“We believe we can help accelerate the growth of these businesses by nurturing the skills and agility of the founders and providing them not only access to capital, but also the breadth of capabilities we have built as a food company over the last 150 years,” Haugen said on the Taste of General Mills blog. (301 is in a quiet period ahead of announcing earnings and would not grant anyone an interview.)
Driven by flashy companies such as Hampton Creek and Soylent and high-profile investments from the likes of Bill Gates, the food-tech start-up scene is hot right now. Last year, according to CB Insights, such companies raised a global record of $5.7 billion. In addition to those seeking to disrupt eggs and the very act of cooking and eating itself (respectively), there are ones offering meal-kit delivery services like Blue Apron’s, online retail platforms, and snack and meal-delivery subscription services.
“As consumer preferences move toward more diverse tastes and trends, the pace of innovation in the packaged foods industry continues to intensify,” Simon Burton, the managing director of 1894, wrote in an email to TakePart. “By investing directly in the most promising ventures, Kellogg can benefit from game-changing ideas and trends. Along with greater visibility to emerging trends, 1894 is a great addition to our existing capabilities by enabling us to take action with greater speed and agility.”
Burton said it’s too early to discuss any specific investments the group plans to make, but he did say that, broadly speaking, 1894 will focus on “early stage” start-ups developing products that Kellogg might itself sell “and in companies that have developed new consumer-driven technologies that could lead to long-term, mutual growth opportunities.”
As for what that means, exactly, Burton elaborated by saying, “We will invest in companies pursuing next-generation innovation, bolstering access to cutting-edge ideas and trends. This includes small, upstart businesses pioneering new ingredients, foods, packaging and enabling technology.”
Such investments could be in companies like Beyond Meat or Hampton Creek—ones that, in addition to selling a lot of products and potentially making a lot of money for their V.C. investors, are developing foods that wildly undercut the environmental footprint of the meat-based products they mimic. While eggless mayo, apparently the medium of choice food-tech innovators, can only carry so much weight in the effort to limit the resources put into and pollution that comes out of poultry farms, Just Mayo maker Hampton Creek promises to release 43 plant-based products this year alone. Beyond Meat is encroaching on grocery space that animal protein dominates by definition: Its new veggie burgers will be stocked in the butcher case at some Whole Foods locations.
At the end of the day, however, it all comes back to the bottom line and not the potential greater good brought about by eggless sandwich spread, “bleeding” fake meat, or next-generation meal replacements. As Burton said, “Start-ups are doing amazing things, and these businesses will increase our access to game-changing ideas and trends that could become significant sources of return for us.”