Big Food Companies Invest in Small Startups to Meet Consumer Demand - The Minute
The change in consumer tastes toward food that is fresher, more natural, and healthier is causing big food companies to place bets on small food companies to help change their traditional product lines. Kellogg’s and General Mills are among the companies that have launched venture capital funds to invest in startups that are contributing new products, recipe ideas, and marketing innovations to their ranges. Campbell Soup and Tyson Foods have dedicated $125 million and $150 million, respectively, to their in-house venture funds, according to the Wall Street Journal.
Last year, VC funds accounted for sixty-six food and beverage-related deals, up twenty percent from 2015. About one-fifth of those deals were made by big food companies, according to Dow Jones Venturesource. The investments play out as win-win deals. Large food corporations buy into a culture of entrepreneurship and innovation as well as acquiring new product ideas. Small companies and startups get access to corporate-scale technical and operations resources, from production to distribution.
The principal driver of this growing practice is the bottom line. Sales for traditional processed foods are trending flat downwards while sales for newer, more natural foods are recording double-digit sales increases. I’m John Howell for 3BL Media.