Rhythm Superfoods closes $3m financing round led by Gen Mills' 301 INC arm and CircleUp; plans new beet chip launch

By Elaine Watson

- Last updated on GMT

Rhythm Superfoods' new line of beet chips is launching at the Winter Fancy Food Show
Rhythm Superfoods' new line of beet chips is launching at the Winter Fancy Food Show

Related tags General mills Snack food Meal

Snackfood firm Rhythm Superfoods has closed a $3m Series C financing round filled through the CircleUp platform, with 301 INC - General Mills' new business development and venturing unit - as the lead investor. 

It has also unveiled plans to launch a new dehydrated beet snack at the Winter Fancy Food Show.

The $3m cash injection will allow the Austin-based firm to increase distribution beyond its current 5,000 stores, but will also give it access to the resources and expertise of General Mills, which launched a multi-million dollar capital fund (via 301 INC) through the CircleUp platform to seed emerging consumer food brands late last year.

301 INC general manager John Haugen said: "Rhythm Superfoods is a remarkable, breakthrough brand with a truly differentiated product offering in the snack category. We're thrilled to help them scale their vision and amplify their existing efforts with an investment of not only capital, but the tremendous resources that General Mills can offer. We look forward to helping this exceptional brand reach new heights."

Scott Jensen: "Kinetic growth"

Scott Jensen
Scott Jensen: "We've been experiencing kinetic growth'

Speaking to FoodNavigator-USA after closing the deal, Rhythm co-founder and CEO Scott Jensen said that the cash would help support a new dehydrated crunchy beet snack range launching at the Winter Fancy Foods Show this weekend, plus the recently-introduced broccoli bites and roasted kale snacks.

However, he also anticipated that Rhythm woud benefit from General Mills' expertise in R&D, food safety and supply chain management.

While Rhythm's snacks have secured shelf-space in conventional chains such as Kroger, Publix and Stop & Shop, as well as natural chains such as Whole Foods, there were still opportunities to boost distribution, said Jensen. "We just launched in Target a week ago, in the produce department."

Sales growth at the company, which has helped to create the 'superfood' snack category and made kale a household name, has been "kinetic​" over the past four years, and is predicted to surge by "close to 100%​" in 2015-16, he said.

"There is a whole new breed of packaged whole fruit and vegetable snacks such as our beet chips, Dang Foods (coconut), and Peeled Snacks that don't really fit in the salty snacks aisle, and are often in smaller bags with a premium price, and retailers are not always clear about where to put them. But we do really well when we have been stocked in the produce department."

Despite the meteoric growth, however, not everything Jensen has touched has turned to gold, notably a line of baked superfood chips, which were launched in 2014 but struggled to make an impact in the salty snacks aisle, which is dominated by some huge players, he said. "We pulled those from the market about six months ago."

Making more, smaller bets earlier

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.

While this kind of work will continue, the division now operates as a venturing arm as well, said Haugen in a post ​on the Taste of General Mills blog last fall.

“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.”

Hot investment opportunities

Explaining the strategic shift, he said: “Under our previous model, we were primarily building our own businesses. We learned it takes a lot of time to effectively incubate a new business.

301 Inc, which takes its name from the address of the original Pillsbury A Mill in Minneapolis, is “seeking businesses that have demonstrated early success in the marketplace, have a remarkable product offering and a strong, expandable brand”, says VP John Haugen.

"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”.

Since 2012, CircleUp has helped 120+ companies raise more than $135m. Companies that have raised money on the CircleUp platform average an 86% year-over-year revenue increase following their raise, said the firm.

Click HERE​ to read more about 301 Inc.

Click HERE​ to read more about CircleUp, which connects CPG entrepreneurs to accredited investors via its online marketplace and has helped scores of promising consumer brands raise growth capital, from Smári Organics​ to Peeled Snacks​, Barnana​, tarte Asian Yogurt​ and World Peas. 

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