In a post on the Taste of General Mills blog, 301 Inc vice president and general manager John Haugen said building disruptive new brands in-house was costly and time-consuming, and that making minority investments in fast-growing companies at an early stage in their development (rather than waiting until they are much bigger and buying them out-right) made sense strategically.
He did not disclose who the venturing arm has invested in yet – aside from Beyond Meat – and said that deals may be structured so General Mills could buy the startup down the road (as Coca-Cola has done with brands such as Zico and Honest Tea) but that this was not a requirement.
301 Inc was originally set up as business development team within General Mills given the freedom to operate “as a team of entrepreneurs within the walls of the company”, developing initiatives such as the nibblr subscription snacking service, putting Progresso soup in K-cups, and creating Pillsbury Pancake Batter, which put pancakes in the refrigerated section of grocery stores.
We learned it takes a lot of time to effectively incubate a new business
While this kind of work will continue, the division will now operate as a venturing arm “with the resources and expertise that emerging food brands need to grow and thrive”, said Haugen.
“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.”
Asked what prompted the strategic shift, he said: “Under our prev ious model, we were primarily building our own businesses. We learned it takes a lot of time to effectively incubate a new business. And frankly, companies like General Mills may not have the patience to stick with a business for five to seven years before it achieves the level of scale to become a sustaining business within their own walls.”
As for hot investment opportunities, Haugen said he saw potential in a variety of areas including plant-based proteins, dairy-free, wellness, fresh, minimally processed foods, and “proactive nutrition, [things] like probiotics, protein, new grains”.
M&A strategy shift
Speaking to FoodNavigator-USA after the Bon Appetech conference earlier this month, Ryan Caldbeck, co-founder and CEO of equity-based crowdfunding expert CircleUp, said he expected more large CPG firms to take minority investments in fast-growing companies at an earlier stage in their development.
As many big food companies are struggling to generate growth from legacy brands, and pumping all available cash into "marketing brands that haven't changed for 40 years" rather than developing new ones in-house, they are increasingly buying in innovation from smaller, sexier brands in fast-growing parts of the market, he said.
However, if the strategy until relatively recently was M&A - simply buying successful companies outright (KRAVE, So Delicious, Gardein, Dave’s Killer Bread) - strategics are increasingly considering minority investments, or placing a larger number of smaller bets at an earlier stage, he said.
For example, Dr Pepper recently invested $15m in Bai Brands; Coca-Cola invested $90m in Suja, and WhiteWave Foods invested $3m in Daily Greens.
"It's moved from buying to investing," he added.
Time to buy some growth?2014:
- GENERAL MILLS pays $820m for Annie’s
- WHITEWAVE pays $195m for So Delicious
- PINNACLE FOODS pays $154m for Gardein
- UNILEVER buys Talenti
- COCA-COLA invests in Monster + Keurig
- Arlon Group, Greenmont Capital Partners, invest $25.5m in Door to Door Organics
- HERSHEY buys KRAVE Jerky
- MONDELEZ buys Enjoy Life Foods
- WHITEWAVE invests $3m in Daily Greens, buys Wallaby Yogurt for $125m
- DPSG buys $15m stake in Bai Brands
- CONAGRA FOODS buys Blake’s All Natural Foods
- HORMEL FOODS buys Applegate for $775m
- FLOWERS FOODS $275m for Dave’s Killer Bread, $120m for Alpine Valley
- COCA-COLA pays $90m for 30% stake in Suja Juice
- PEETS COFFEE & TEA buys Stumptown (cold brew coffee)
- VARIOUS VC funds invest $108m in Impossible Foods (plant-burgers)
- MONDE NISSIN buys Quorn (vegan protein) for $838m