Big Businesses and Little Start Ups

The food and beverage industry craves innovation. Every category analysis talks about the need for new products. Yet we know for many food conglomerates innovation often means brand extensions or new packaging concepts and Cadbury and Heinz could be well recognised in this space.

The results of zero based budgeting in certain quarters has also hampered the development of truly innovative products. So how do large companies fill their innovation pipeline? More and more we are seeing larger companies looking to food entrepreneurs. Rather than creating products and incurring the cost of that they wait for the suitable smaller companies to emerge and pay what might be viewed as well above market price. This is a tempting strategy as not only can it boost profits while taking acquisition cost onto their balance sheets but it allows them to acquire true innovate or authentic brands. Coca Cola acquired Innocent drinks in full in 2013 while AN InBev acquired 6 craft breweries since 2011.

General Mills is another example of a large food company looking to food entrepreneurs for their innovation pipeline. Despite being one of the largest US manufacturing companies the company was reporting a series of sales declines was only reverted with the acquisition of Annies, an organic brand. As some brands struggle to remain relevant to a fast changing consumers looking for less processed, more authentic foods that meet their new diet needs and healthy lifestyles the acquisition of smaller food companies is seen as part of the solution.

Furthering this trend Kellogs just recently launched a venture capital fund with $100m to invest into innovative startups with a focus on ingredients and packaging. The “eighteen94 capital’ fund will take a minority shareholding in a range of startups and leverage the supports that exist from a giant like Kellogg’s such as packaging, marketing and distribution.

Food Works 2016 is currently working with 9 startup food companies. For further information on the programme go to www.foodworksireland.ie

Source: Bord Bia - Big Businesses and Little Start Ups